-----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, ME3sq0ZbDaMuAXwAjON5IIAXIvZEFxAkKwr7kqfUaCTenrf0yTLQr8K0HJqgSSz8 Iccpiosrf8b+myTYuX23WA== 0000711642-02-000293.txt : 20021113 0000711642-02-000293.hdr.sgml : 20021113 20021113162436 ACCESSION NUMBER: 0000711642-02-000293 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20020930 FILED AS OF DATE: 20021113 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CENTURY PROPERTIES FUND XIX CENTRAL INDEX KEY: 0000705752 STANDARD INDUSTRIAL CLASSIFICATION: REAL ESTATE [6500] IRS NUMBER: 942887133 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10QSB SEC ACT: 1934 Act SEC FILE NUMBER: 000-11935 FILM NUMBER: 02820323 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 cpf19.txt CPF19 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Form 10-QSB (Mark One) [X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 2002 [ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _________to _________ Commission file number 0-11935 CENTURY PROPERTIES FUND XIX (Exact name of small business issuer as specified in its charter) California 94-2887133 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 55 Beattie Place, PO Box 1089 Greenville, South Carolina 29602 (Address of principal executive offices) (864) 239-1000 (Issuer's telephone number) PART I - FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS CENTURY PROPERTIES FUND XIX CONSOLIDATED BALANCE SHEET (Unaudited) (in thousands, except unit data) September 30, 2002
Assets Cash and cash equivalents $ 2,160 Receivables and deposits 1,375 Restricted escrows 23 Other assets 635 Investment properties: Land $ 11,635 Buildings and related personal property 91,210 102,845 Less accumulated depreciation (54,978) 47,867 $ 52,060 Liabilities and Partners' Deficit Liabilities Accounts payable $ 289 Tenant security deposits payable 276 Accrued property taxes 1,045 Due to former affiliate 361 Other liabilities 1,476 Mortgage notes payable 58,679 Partners' Deficit: General partner $ (9,825) Limited partners (89,292 units issued and outstanding) (241) (10,066) $ 52,060 See Accompanying Notes to Consolidated Financial Statements
CENTURY PROPERTIES FUND XIX CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) (in thousands, except per unit data)
Three Months Nine Months Ended September 30, Ended September 30, 2002 2001 2002 2001 (Restated) (Restated) Revenues: Rental income $ 3,633 $ 3,999 $11,628 $12,320 Other income 360 290 1,029 947 Gain on casualty 443 -- 443 156 Total revenues 4,436 4,289 13,100 13,423 Expenses: Operating 1,421 1,626 4,300 4,491 General and administrative 112 140 367 386 Depreciation 885 861 2,689 2,596 Interest 1,591 1,236 3,744 3,878 Property tax 348 336 1,042 1,040 Total expenses 4,357 4,199 12,142 12,391 Net income $ 79 $ 90 $ 958 $ 1,032 Net income allocated to general partner $ 9 $ 11 $ 113 $ 122 Net income allocated to limited partners 70 79 845 910 $ 79 $ 90 $ 958 $ 1,032 Net income per limited partnership unit $ 0.78 $ 0.88 $ 9.46 $ 10.19 Distributions per limited partnership unit $ -- $ 17.59 $ 18.38 $ 39.37 See Accompanying Notes to Consolidated Financial Statements
CENTURY PROPERTIES FUND XIX CONSOLIDATED STATEMENT OF PARTNERS' (DEFICIT) CAPITAL (Unaudited) (in thousands, except unit data)
Limited Partnership General Limited Units Partner Partners Total Original capital contributions 89,292 $ -- $89,292 $ 89,292 Partners' (deficit) capital at December 31, 2001 89,292 $(9,718) $ 555 $ (9,163) Distributions paid to partners -- (220) (1,641) (1,861) Net income for the nine months ended September 30, 2002 -- 113 845 958 Partners' deficit at September 30, 2002 89,292 $(9,825) $ (241) $(10,066) See Accompanying Notes to Consolidated Financial Statements
CENTURY PROPERTIES FUND XIX CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (in thousands)
Nine Months Ended September 30, 2002 2001 Cash flows from operating activities: Net income $ 958 $ 1,032 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation 2,689 2,596 Amortization of loan costs and discount 65 73 Casualty gain (443) (156) Loss on early extinguishment of debt -- 39 Contingent interest on mortgage note encumbering McMillan Place 420 250 Change in accounts: Receivables and deposits (361) (195) Other assets (156) (82) Accounts payable 19 55 Tenant security deposits payable (24) (12) Accrued property taxes 417 511 Due to former affiliate 91 -- Other liabilities (51) (207) Net cash provided by operating activities 3,624 3,904 Cash flows from investing activities: Property improvements and replacements (1,426) (1,523) Net insurance proceeds received 754 223 Net withdrawals from (deposits to) restricted escrows 146 (26) Net cash used in investing activities (526) (1,326) Cash flows from financing activities: Proceeds from long term borrowing -- 4,650 Repayment of mortgage note payable -- (3,250) Loan costs paid -- (185) Payments on mortgage notes payable (722) (775) Distributions to partners (1,861) (3,864) Net cash used in financing activities (2,583) (3,424) Net increase (decrease) in cash and cash equivalents 515 (846) Cash and cash equivalents at beginning of period 1,645 2,172 Cash and cash equivalents at end of period $ 2,160 $ 1,326 Supplemental disclosure of cash flow information: Cash paid for interest $ 3,198 $ 3,517 At December 31, 2001 and September 30, 2002, accounts payable and property improvements and replacements were adjusted by approximately $325,000 for each period. See Accompanying Notes to Consolidated Financial Statements
CENTURY PROPERTIES FUND XIX NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) Note A - Basis of Presentation The accompanying unaudited consolidated financial statements of Century Properties Fund XIX (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. The general partner of the Partnership is Fox Partners II, a California general partnership. The general partners of Fox Partners II are Fox Capital Management Corporation ("FCMC" or the "Managing General Partner"), a California corporation, Fox Realty Investors ("FRI"), a California general partnership, and Fox Partners 83, a California general partnership. 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 and nine month periods ended September 30, 2002 are not necessarily indicative of the results that may be expected for the fiscal year ending December 31, 2002. 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 fiscal year ended December 31, 2001. Effective April 1, 2002, the Partnership adopted Statement of Financial Accounting Standards ("SFAS") No. 145, "Rescission of FASB Statements No. 4,44 and 64". SFAS No. 4 "Reporting Gains and Losses from Extinguishment of Debt," required that all gains and losses from extinguishment of debt be aggregated and, if material, classified as an extraordinary item. SFAS No. 145 rescinds SFAS No. 4, and accordingly, gains and losses from extinguishment of debt should only be classified as extraordinary if they are unusual in nature and occur infrequently. Neither of these criteria applies to the Partnership. As a result, the accompanying statements of operations have been restated to reflect the loss on early extinguishment of debt at Sunrunner Apartments (see "Note C") in operations as interest expense rather than as an extraordinary item. Note B - Casualty In February 2000, one of the Partnership's investment properties, McMillan Place Apartments, incurred damages to its buildings as a result of a hail storm. As a result of the damage, approximately $142,000 of fixed assets and approximately $75,000 of accumulated depreciation were written off resulting in a net write off of approximately $67,000. The property received approximately $223,000 in proceeds from the insurance company to repair the damaged units during 2001. For financial statement purposes, a casualty gain of approximately $156,000 was recognized during 2001 as a result of the difference between the proceeds received and the net book value of the buildings which were damaged. In May 2001, one of the Partnership's investment properties, Vinings Peak Apartments, incurred damages to ten units as a result of a fire. As a result of the damage, approximately $528,000 of fixed assets and approximately $316,000 of accumulated depreciation were written off resulting in a net write off of approximately $212,000. The property received approximately $461,000 in proceeds from the insurance company to repair the damaged units during 2002. For financial statement purposes, a casualty gain of approximately $249,000 was recognized during 2002 as a result of the difference between the proceeds received and the net book value of the buildings which were damaged. In May 2002, one of the Partnership's investment properties, Sandspoint Apartments, incurred damages to twenty-four units as a result of a fire. As a result of the damage, approximately $228,000 of fixed assets and approximately $129,000 of accumulated depreciation were written off resulting in a net write off of approximately $99,000. The property received approximately $293,000 in proceeds from the insurance company to repair the damaged units during 2002. For financial statement purposes, a casualty gain of approximately $194,000 was recognized during 2002 as a result of the difference between the proceeds received and the net book value of the buildings which were damaged. Note C - Refinancing of Mortgage Note Payable On August 31, 2001 the Partnership refinanced the mortgage note payable for Sunrunner Apartments. The refinancing of Sunrunner Apartments replaced mortgage indebtedness of approximately $3,250,000 with a new mortgage of $4,650,000. The mortgage was refinanced at a rate of 7.06% compared to the prior rate of 7.33%. Payments of approximately $36,000 are due on the first day of each month until the note matures in September 2021. At the closing, a repair escrow of $125,000 was established and is held by the lender. Capitalized loan costs incurred on the refinancing were approximately $185,000. The Partnership wrote off unamortized loan costs resulting in a loss on early extinguishment of debt of approximately $39,000. Note D - Transactions with Affiliated Parties The Registrant 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 (i) certain payments to affiliates for services and (ii) reimbursement of certain expenses incurred by affiliates on behalf of the Partnership. During the nine months ended September 30, 2002 and 2001, affiliates of the Managing General Partner were entitled to receive 5% of gross receipts from all of the Registrant's properties as compensation for providing property management services. The Registrant paid to such affiliates approximately $651,000 and $684,000 for the nine months ended September 30, 2002 and 2001, respectively, which is included in operating expenses. An affiliate of the Managing General Partner received reimbursement of accountable administrative expenses amounting to approximately $131,000 and $125,000 for the nine months ended September 30, 2002 and 2001, respectively, which is included in general and administrative expenses. Pursuant to the Partnership Agreement, for managing the affairs of the Partnership, the general partner is entitled to receive a Partnership management fee equal to 10% of the Partnership's adjusted cash from operations as distributed. Approximately $186,000 and $277,000 in Partnership management fees were paid along with the distributions from operations during the nine months ended September 30, 2002 and 2001, respectively, and are included in general partner distributions. The Partnership paid an affiliate of the Managing General Partner approximately $47,000 for loan costs associated with the refinancing of Sunrunner Apartments (see "Note C") which are capitalized and included in other assets on the consolidated balance sheet. 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. Other than cash and cash equivalents, the line of credit is the Partnership's only unused source of liquidity. Beginning in 2001, the Partnership began insuring its properties up to certain limits through coverage provided by AIMCO which is generally self-insured for a portion of losses and liabilities related to workers compensation, property casualty and vehicle liability. The Partnership insures its properties above the AIMCO limits through insurance policies obtained by AIMCO from insurers unaffiliated with the Managing General Partner. During the nine months ended September 30, 2002 and 2001, the Partnership was charged by AIMCO and its affiliates approximately $187,000 and $203,000, respectively, for insurance coverage and fees associated with policy claims administration. 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. (the "Nuanes action") in the Superior Court of the State of California for the County of San Mateo. The plaintiffs named as defendants, among others, the Partnership, its Managing General Partner and several of their affiliated partnerships and corporate entities. The action 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, among other things, the acquisition of interests in certain Managing General Partner entities by Insignia Financial Group, Inc. ("Insignia") and entities which were, at one time, affiliates of Insignia; past tender offers by the Insignia affiliates to acquire limited partnership units; management of the partnerships by the Insignia affiliates; and the series of transactions which closed on October 1, 1998 and February 26, 1999 whereby Insignia and Insignia Properties Trust, respectively, were merged into AIMCO. The plaintiffs seek 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 filed demurrers to the amended complaint which were heard February 1999. Pending the ruling on such demurrers, settlement negotiations commenced. On November 2, 1999, the parties executed and filed a Stipulation of Settlement, settling claims, subject to court approval, on behalf of the Partnership and all limited partners who owned units as of November 3, 1999. Preliminary approval of the settlement was obtained on November 3, 1999 from the Court, at which time the Court set a final approval hearing for December 10, 1999. Prior to the December 10, 1999 hearing, the Court received various objections to the settlement, including a challenge to the Court's preliminary approval based upon the alleged lack of authority of prior lead counsel to enter the settlement. On December 14, 1999, the Managing General Partner and its affiliates terminated the proposed settlement. In February 2000, counsel for some of the named plaintiffs filed a motion to disqualify plaintiff's lead and liaison counsel who negotiated the settlement. On June 27, 2000, the Court entered an order disqualifying them from the case and an appeal was taken from the order on October 5, 2000. On December 4, 2000, the Court appointed the law firm of Lieff Cabraser Heimann & Bernstein LLP as new lead counsel for plaintiffs and the putative class. Plaintiffs filed a third amended complaint on January 19, 2001. On March 2, 2001, the Managing General Partner and its affiliates filed a demurrer to the third amended complaint. On May 14, 2001, the Court heard the demurrer to the third amended complaint. On July 10, 2001, the Court issued an order sustaining defendants' demurrer on certain grounds. On July 20, 2001, Plaintiffs filed a motion for reconsideration of the Court's July 10, 2001 order granting in part and denying in part defendants' demurrer. On September 7, 2001, Plaintiffs filed a fourth amended class and derivative action complaint. On September 12, 2001, the Court denied Plaintiffs' motion for reconsideration. On October 5, 2001, the Managing General Partner and affiliated defendants filed a demurrer to the fourth amended complaint, which was heard on December 11, 2001. On February 2, 2002, the Court served its order granting in part the demurrer. The Court has dismissed without leave to amend certain of the plaintiffs' claims. On February 11, 2002, plaintiffs filed a motion seeking to certify a putative class comprised of all non-affiliated persons who own or have owned units in the partnerships. The Managing General Partner and affiliated defendants oppose the motion. On April 29, 2002, the Court held a hearing on plaintiffs' motion for class certification and took the matter under submission after further briefing, as ordered by the court, was submitted by the parties. On July 10, 2002, the Court entered an order vacating the current trial date of January 13, 2003 (as well as the pre-trial and discovery cut-off dates) and stayed the case in its entirety through November 7, 2002 so that the parties can have an opportunity to discuss settlement. On October 30, 2002, the court entered an order extending the stay in effect through January 10, 2003. During the third quarter of 2001, a complaint (the "Heller action") was filed against the same defendants that are named in the Nuanes action, captioned Heller v. Insignia Financial Group. On or about August 6, 2001, plaintiffs filed a first amended complaint. The first amended complaint in the Heller action is brought as a purported derivative action, and asserts claims for among other things breach of fiduciary duty; unfair competition; conversion, unjust enrichment; and judicial dissolution. Plaintiffs in the Nuanes action filed a motion to consolidate the Heller action with the Nuanes action and stated that the Heller action was filed in order to preserve the derivative claims that were dismissed without leave to amend in the Nuanes action by the Court order dated July 10, 2001. On October 5, 2001, the Managing General Partner and affiliated defendants moved to strike the first amended complaint in its entirety for violating the Court's July 10, 2001 order granting in part and denying in part defendants' demurrer in the Nuanes action, or alternatively, to strike certain portions of the complaint based on the statute of limitations. Other defendants in the action demurred to the fourth amended complaint, and, alternatively, moved to strike the complaint. On December 11, 2001, the court heard argument on the motions and took the matters under submission. On February 4, 2002, the Court served notice of its order granting defendants' motion to strike the Heller complaint as a violation of its July 10, 2001 order in the Nuanes action. On March 27, 2002, the plaintiffs filed a notice appealing the order striking the complaint. The parties are currently in the midst of briefing that appeal. The Managing General Partner does not anticipate that any costs, whether legal or settlement costs, associated with these cases 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 Private Securities Litigation Reform Act of 1995 provides a "safe harbor" for forward-looking statements in certain circumstances. The matters discussed in this report contain certain forward-looking statements, including, without limitation, statements regarding future financial performance and the effect of government regulations. The discussions of the Registrant's business and results of operations, including forward-looking statements pertaining to such matters, do not take into account the effects of any changes to the Registrant's business and results of operations. Actual results may differ materially from those described in the forward-looking statements and will be affected by a variety of risks and factors including, without limitation: national and local economic conditions; the terms of governmental regulations that affect the Registrant and interpretations of those regulations; the competitive environment in which the Registrant operates; financing risks, including the risk that cash flows from operations may be insufficient to meet required payments of principal and interest; real estate risks, including variations of real estate values and the general economic climate in local markets and competition for tenants in such markets; and possible environmental liabilities. Readers should carefully review the Registrant's financial statements and the notes thereto, as well as the risk factors described in the documents the Registrant files from time to time with the Securities and Exchange Commission. The Partnership's investment properties consist of eight apartment complexes. The following table sets forth the average occupancy of the properties for the nine months ended September 30, 2002 and 2001: Average Occupancy Property 2002 2001 Sunrunner Apartments 94% 96% St. Petersburg, Florida Misty Woods Apartments 89% 91% Charlotte, North Carolina McMillan Place Apartments (1) 94% 97% Dallas, Texas Vinings Peak Apartments (1) 88% 92% Atlanta, Georgia Wood Lake Apartments (1) 87% 91% Atlanta, Georgia Plantation Crossing 87% 88% Atlanta, Georgia Greenspoint Apartments 92% 93% Phoenix, Arizona Sandspoint Apartments (2) 88% 95% Phoenix, Arizona (1) The Managing General Partner attributes the decrease in occupancy at McMillan Place, Vinings Peak and Wood Lake Apartments to a competitive market with competing properties offering large concessions and a favorable home buying market with low interest rates. (2) The Managing General Partner attributes the decrease in occupancy at Sandspoint Apartments to a fire that damaged twenty-four units in April 2002. Results of Operations The Partnership's net income for the nine months ended September 30, 2002 and 2001 was approximately $958,000 and $1,032,000, respectively. The Partnership recognized a net income for the three months ended September 30, 2002 of approximately $79,000 compared to net income for the comparable period in 2001 of approximately $90,000. The decrease in the net income for the three months ended September 30, 2002 is due to an increase in total expenses, offset by a slight increase in total revenues. The decrease in net income for the nine months ended September 30, 2002 is due to a decrease in total revenues offset by a decrease in total expenses. Total revenues decreased for the nine months ended September 30, 2002 due to a decrease in rental income offset by a larger casualty gain recognized in 2002 than in 2001. Total revenues decreased for the three months ended September 30, 2002 due to a decrease in rental income offset by the recognition of a casualty gain. Rental income decreased for the three and nine months ended September 30, 2002 due to a decrease in occupancy at all of the investment properties offset by a decrease in concessions at all of the investment properties, except Sandspoint Apartments. In February 2000, one of the Partnership's investment properties, McMillan Place Apartments, incurred damages to its buildings as a result of a hail storm. As a result of the damage, approximately $142,000 of fixed assets and approximately $75,000 of accumulated depreciation were written off resulting in a net write off of approximately $67,000. The property received approximately $223,000 in proceeds from the insurance company to repair the damaged units during 2001. For financial statement purposes, a casualty gain of approximately $156,000 was recognized during 2001 as a result of the difference between the proceeds received and the net book value of the buildings which were damaged. In May 2001, one of the Partnership's investment properties, Vinings Peak Apartments, incurred damages to ten units as a result of a fire. As a result of the damage, approximately $528,000 of fixed assets and approximately $316,000 of accumulated depreciation were written off resulting in a net write off of approximately $212,000. The property received approximately $461,000 in proceeds from the insurance company to repair the damaged units during 2002. For financial statement purposes, a casualty gain of approximately $249,000 was recognized during 2002 as a result of the difference between the proceeds received and the net book value of the buildings which were damaged. In May 2002, one of the Partnership's investment properties, Sandspoint Apartments, incurred damages to twenty-four units as a result of a fire. As a result of the damage, approximately $228,000 of fixed assets and approximately $129,000 of accumulated depreciation were written off resulting in a net write off of approximately $99,000. The property received approximately $293,000 in proceeds from the insurance company to repair the damaged units during 2002. For financial statement purposes, a casualty gain of approximately $194,000 was recognized during 2002 as a result of the difference between the proceeds received and the net book value of the buildings which were damaged. Total expenses decreased for the nine months ended September 30, 2002 due to a decrease in operating and interest expense. Operating expense for the nine months ended September 30, 2002 decreased due to decreases in advertising and property expenses at several of the investment properties. Advertising expense decreased due to decreases in periodicals and special promotions. Property expense decreased due to decreases in personnel salaries, especially at Vinings Peak Apartments. Interest expense decreased due to a decrease in the interest rate on the mortgage encumbering McMillian Place. On January 29, 1998, the Managing General Partner successfully negotiated a modification of the terms of the mortgage encumbering McMillian Place. The interest rate changed from 9.15% to a variable rate of 325 basis points plus the annualized yield on United States Treasury non-callable bonds (5.27% at November 1, 2001 which is one year from maturity). Total expenses increased for the three months ended September 30, 2002 due to an increase in interest expense offset by a decrease in operating expense. Operating expense for the three months ended September 30, 2002 decreased due to decreases in property expense. Property expense decreased due to decreases in personnel salaries. Interest expense increased due to additional interest required to be paid at maturity of the mortgage encumbering McMillan Place. The additional interest is equal to 50% of the increase in the appreciated fair market value of McMillan Place. Included in general and administrative expense at both September 30, 2002 and 2001 are 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 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 market conditions, there is no guarantee that the Managing General Partner will be able to sustain such a plan. Liquidity and Capital Resources At September 30, 2002, the Registrant had cash and cash equivalents of approximately $2,160,000 as compared to approximately $1,326,000 at September 30, 2001. For the nine months ended September 30, 2002, cash and cash equivalents increased approximately $515,000 from the Registrant's calendar year end due to approximately $2,583,000 and $526,000 of cash used in financing activities and investing activities, respectively, offset by approximately $3,624,000 of cash provided by operating activities. Net cash used in financing activities consisted of distributions to partners and, to a lesser extent, payments of principal made on the mortgages encumbering the Registrant's investment properties. Net cash used in investing activities consisted of capital improvements and replacements partially offset by insurance proceeds received and net withdrawals from restricted escrows maintained by the mortgage lenders. The Partnership invests its working capital reserves in interest bearing accounts. 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 Managing General Partner monitors developments in the area of legal and regulatory compliance and is studying new federal laws, including the Sarbanes-Oxley Act of 2002. The Sarbanes-Oxley Act of 2002 mandates or suggests additional compliance measures with regard to governance, disclosure, audit and other areas. In light of these changes, the Partnership expects that it will incur higher expenses related to compliance, including increased legal and audit fees. Capital improvements planned for each of the Registrant's properties are detailed below. Sunrunner Apartments During the nine months ended September 30, 2002, the Partnership completed approximately $47,000 of capital improvements consisting primarily of floor covering and HVAC replacements and structural improvements. These improvements were funded from replacement reserves. Approximately $76,000 has been budgeted for 2002 capital improvements at Sunrunner Apartments consisting primarily of floor covering, appliance, air conditioning unit and water heater replacements. Additional improvements may be considered and will depend on the physical condition of the property as well as anticipated cash flow generated by the property. Misty Woods Apartments During the nine months ended September 30, 2002, the Partnership completed approximately $91,000 of capital improvements consisting primarily of perimeter fencing, floor covering and appliance replacement, wall coverings, and office computers. These improvements were funded from operating cash flow and replacement reserves. Approximately $93,000 has been budgeted for 2002 capital improvements at Misty Woods Apartments consisting primarily of floor covering and appliance replacements. Additional improvements may be considered and will depend on the physical condition of the property as well as replacement reserves and anticipated cash flow generated by the property. McMillan Place Apartments During the nine months ended September 30, 2002, the Partnership completed approximately $84,000 of capital improvements consisting primarily of floor covering replacements, interior decoration, office computers, and water heaters. These improvements were funded from operating cash flow. Approximately $140,000 has been budgeted for 2002 capital improvements at McMillian Place Apartments consisting primarily of floor covering replacements, interior decoration, and exterior painting. Additional improvements may be considered and will depend on the physical condition of the property as well as anticipated cash flow generated by the property. Vinings Peak Apartments During the nine months ended September 30, 2002, the Partnership completed approximately $125,000 of budgeted and unbudgeted capital improvements consisting primarily of structural improvements, plumbing fixtures, floor covering replacements, office computers, air conditioning upgrades, wall coverings and construction related to a 2001 casualty. These improvements were funded from operating cash flow and insurance proceeds. Approximately $102,000 has been budgeted for 2002 capital improvements at Vinings Peak Apartments consisting primarily of floor covering replacements. Additional improvements may be considered and will depend on the physical condition of the property as well as anticipated cash flow generated by the property. Plantation Crossing Apartments During the nine months ended September 30, 2002, the Partnership completed approximately $83,000 of budgeted and unbudgeted capital improvements consisting primarily of office computers, swimming pool upgrades, and floor covering and appliance replacements. These improvements were funded from operating cash flow. Approximately $81,000 has been budgeted for 2002 capital improvements at Plantation Crossing consisting primarily of swimming pool upgrades, wall coverings, resurfacing, and floor covering and appliance replacements. Additional improvements may be considered and will depend on the physical condition of the property as well as anticipated cash flow generated by the property. Wood Lake Apartments During the nine months ended September 30, 2002, the Partnership completed approximately $55,000 of capital improvements consisting primarily of air conditioning and water heater replacements, wall coverings, and appliance and floor covering replacements. These improvements were funded from operating cash flow. Approximately $77,000 has been budgeted for 2002 capital improvements at Wood Lake Apartments consisting primarily of floor covering replacements. Additional improvements may be considered and will depend on the physical condition of the property as well as anticipated cash flow generated by the property. Greenspoint Apartments During the nine months ended September 30, 2002, the Partnership completed approximately $148,000 of capital improvements consisting primarily of structural and plumbing improvements, floor covering and appliance replacements, and major landscaping. These improvements were funded from operating cash flow. Approximately $161,000 has been budgeted for 2002 capital improvements at Greenspoint Apartments consisting primarily of floor covering, exterior painting, major landscaping, air conditioning unit replacements, and plumbing improvements. Additional improvements may be considered and will depend on the physical condition of the property as well as anticipated cash flow generated by the property. Sands Point Apartments During the nine months ended September 30, 2002, the Partnership completed approximately $468,000 of capital improvements (including nonbudgeted additions due to a casualty) consisting primarily of plumbing improvements, air conditioning unit replacements, structural upgrades, floor covering and appliance replacements, and construction related to a 2002 casualty. These improvements were funded from operating cash flow and insurance proceeds. Approximately $163,000 has been budgeted for 2002 capital improvements at Sands Point Apartments consisting primarily of floor covering replacements, air conditioning unit replacements, signage, plumbing fixtures, drapes and miniblinds. Additional improvements may be considered and will depend on the physical condition of the property as well as anticipated cash flow generated by the property. 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. On August 31, 2001 the Partnership refinanced the mortgage note payable for Sunrunner Apartments. The refinancing of Sunrunner Apartments replaced mortgage indebtedness of approximately $3,250,000 with a new mortgage of $4,650,000. The mortgage was refinanced at a rate of 7.06% compared to the prior rate of 7.33%. Payments of approximately $36,000 are due on the first day of each month until the note matures in September 2021. At the closing, a repair escrow of $125,000 was established and is held by the lender. Capitalized loan costs incurred on the refinancing were approximately $185,000. The Partnership wrote off unamortized loan costs resulting in a loss on early extinguishment of debt of approximately $39,000. 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 $58,679,000, net of discount, is amortized over varying periods with required balloon payments ranging from October 2002, for McMillian Place, to September 2021. The Managing General Partner will attempt to refinance such indebtedness and/or sell the properties prior to such maturity dates. If the properties cannot be refinanced or sold for a sufficient amount, the Registrant will risk losing such properties through foreclosure. Pursuant to the Partnership Agreement, the term of the Partnership is scheduled to expire on December 31, 2007. Accordingly, prior to such date the Partnership will need to either sell its investment properties or extend the term of the Partnership. The Partnership distributed the following amounts during the nine months ended September 30, 2002 and 2001 (in thousands except per unit data):
Nine Months Per Limited Nine Months Per Limited Ended Partnership Ended Partnership September 30, 2002 Unit September 30, 2001 Unit Operations $1,861 $18.38 $2,769 $27.35 Refinancing (1) -- -- 1,095 12.02 $1,861 $18.38 $3,864 $39.37 (1) From August 2001 refinancing of Sunrunner Apartments.
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 cash available for distribution is reviewed on a monthly basis. There can be no assurance, however, that the Partnership will generate sufficient funds from operations after required capital expenditures to permit further distributions to its partners during the remainder of 2002 or subsequent periods. In addition to its indirect ownership of the general partner interest in the Partnership, AIMCO and its affiliates owned 52,080.66 limited partnership units in the Partnership representing 58.33% of the outstanding units at September 30, 2002. A number of these units were acquired pursuant to tender offers made by AIMCO or its affiliates. It is possible that AIMCO or its affiliates will acquire additional units of limited partnership interest in the Partnership in exchange for cash or a combination of cash and units in the operating partnership of AIMCO either through private purchases or tender offers. Under the Partnership Agreement, unitholders holding a majority of the Units are entitled to take action with respect to a variety of matters which would include voting on certain amendments to the Partnership Agreement and voting to remove the Managing General Partner. As a result of its ownership of 58.33% of the outstanding units, AIMCO is in a position to influence all such voting decisions with respect to the Registrant. Although the Managing General Partner owes fiduciary duties to the limited partners of the Partnership, the Managing General Partner also owes fiduciary duties to AIMCO as its sole stockholder. As a result, the duties of the Managing General Partner, as managing general partner, to the Partnership and its limited partners may come into conflict with the duties of the Managing General Partner to AIMCO, as its sole stockholder. However, IPLP, an affiliate of the Managing General Partner, is required to vote 25,228.66 of its Units: (i) against any proposal to increase the fees and other compensation payable by the Partnership to the Managing General Partner and any of its affiliates; and (ii) on all other matters submitted by it or its affiliates, in proportion to the votes cast by non tendering unit holders. Except for the foregoing, no other limitations are imposed on IPLP's or AIMCO's right to vote its Units. Critical Accounting Policies and Estimates The consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States which require the Partnership to make estimates and assumptions. The Partnership believes that of its significant accounting policies, the following may involve a higher degree of judgment and complexity. Impairment of Long-Lived Assets Investment properties are recorded at cost, less accumulated depreciation, unless considered impaired. If events or circumstances indicate that the carrying amount of a property may be impaired, the Partnership will make an assessment of its recoverability by estimating the undiscounted future cash flows, excluding interest charges, of the property. If the carrying amount exceeds the aggregate future cash flows, the Partnership would recognize an impairment loss to the extent the carrying amount exceeds the fair value of the property. Real property investments are subject to varying degrees of risk. Several factors may adversely affect the economic performance and value of the Partnership's investment properties. These factors include changes in the national, regional and local economic climate; local conditions, such as an oversupply of multifamily properties; competition from other available multifamily property owners and changes in market rental rates. Any adverse changes in these factors could cause an impairment in the Partnership's assets. Revenue Recognition The Partnership generally leases apartment units for twelve-month terms or less. Rental income attributable to leases is recognized monthly as it is earned. The Partnership will offer rental concessions during particularly slow months or in response to heavy competition from other similar complexes in the area. Concessions are charged to income as incurred. ITEM 3. CONTROLS AND PROCEDURES The principal executive officer and principal financial officer of the Managing General Partner, who are the equivalent of the Partnership's principal executive officer and principal financial officer, respectively, have, within 90 days of the filing date of this quarterly report, evaluated the effectiveness of the Partnership's disclosure controls and procedures (as defined in Exchange Act Rules (13a-14(c) and (15d-14(c)) and have determined that such disclosure controls and procedures are adequate. There have been no significant changes in the Partnership's internal controls or in other factors that could significantly affect the Partnership's internal controls since the date of evaluation. The Partnership does not believe any significant deficiencies or material weaknesses exist in the Partnership's internal controls. Accordingly, no corrective actions have been taken. 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. (the "Nuanes action") in the Superior Court of the State of California for the County of San Mateo. The plaintiffs named as defendants, among others, the Partnership, its Managing General Partner and several of their affiliated partnerships and corporate entities. The action 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, among other things, the acquisition of interests in certain Managing General Partner entities by Insignia Financial Group, Inc. ("Insignia") and entities which were, at one time, affiliates of Insignia; past tender offers by the Insignia affiliates to acquire limited partnership units; management of the partnerships by the Insignia affiliates; and the series of transactions which closed on October 1, 1998 and February 26, 1999 whereby Insignia and Insignia Properties Trust, respectively, were merged into AIMCO. The plaintiffs seek 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 filed demurrers to the amended complaint which were heard February 1999. Pending the ruling on such demurrers, settlement negotiations commenced. On November 2, 1999, the parties executed and filed a Stipulation of Settlement, settling claims, subject to court approval, on behalf of the Partnership and all limited partners who owned units as of November 3, 1999. Preliminary approval of the settlement was obtained on November 3, 1999 from the Court, at which time the Court set a final approval hearing for December 10, 1999. Prior to the December 10, 1999 hearing, the Court received various objections to the settlement, including a challenge to the Court's preliminary approval based upon the alleged lack of authority of prior lead counsel to enter the settlement. On December 14, 1999, the Managing General Partner and its affiliates terminated the proposed settlement. In February 2000, counsel for some of the named plaintiffs filed a motion to disqualify plaintiff's lead and liaison counsel who negotiated the settlement. On June 27, 2000, the Court entered an order disqualifying them from the case and an appeal was taken from the order on October 5, 2000. On December 4, 2000, the Court appointed the law firm of Lieff Cabraser Heimann & Bernstein LLP as new lead counsel for plaintiffs and the putative class. Plaintiffs filed a third amended complaint on January 19, 2001. On March 2, 2001, the Managing General Partner and its affiliates filed a demurrer to the third amended complaint. On May 14, 2001, the Court heard the demurrer to the third amended complaint. On July 10, 2001, the Court issued an order sustaining defendants' demurrer on certain grounds. On July 20, 2001, Plaintiffs filed a motion for reconsideration of the Court's July 10, 2001 order granting in part and denying in part defendants' demurrer. On September 7, 2001, Plaintiffs filed a fourth amended class and derivative action complaint. On September 12, 2001, the Court denied Plaintiffs' motion for reconsideration. On October 5, 2001, the Managing General Partner and affiliated defendants filed a demurrer to the fourth amended complaint, which was heard on December 11, 2001. On February 2, 2002, the Court served its order granting in part the demurrer. The Court has dismissed without leave to amend certain of the plaintiffs' claims. On February 11, 2002, plaintiffs filed a motion seeking to certify a putative class comprised of all non-affiliated persons who own or have owned units in the partnerships. The Managing General Partner and affiliated defendants oppose the motion. On April 29, 2002, the Court held a hearing on plaintiffs' motion for class certification and took the matter under submission after further briefing, as ordered by the court, was submitted by the parties. On July 10, 2002, the Court entered an order vacating the current trial date of January 13, 2003 (as well as the pre-trial and discovery cut-off dates) and stayed the case in its entirety through November 7, 2002 so that the parties can have an opportunity to discuss settlement. On October 30, 2002, the court entered an order extending the stay in effect through January 10, 2003. During the third quarter of 2001, a complaint (the "Heller action") was filed against the same defendants that are named in the Nuanes action, captioned Heller v. Insignia Financial Group. On or about August 6, 2001, plaintiffs filed a first amended complaint. The first amended complaint in the Heller action is brought as a purported derivative action, and asserts claims for among other things breach of fiduciary duty; unfair competition; conversion, unjust enrichment; and judicial dissolution. Plaintiffs in the Nuanes action filed a motion to consolidate the Heller action with the Nuanes action and stated that the Heller action was filed in order to preserve the derivative claims that were dismissed without leave to amend in the Nuanes action by the Court order dated July 10, 2001. On October 5, 2001, the Managing General Partner and affiliated defendants moved to strike the first amended complaint in its entirety for violating the Court's July 10, 2001 order granting in part and denying in part defendants' demurrer in the Nuanes action, or alternatively, to strike certain portions of the complaint based on the statute of limitations. Other defendants in the action demurred to the fourth amended complaint, and, alternatively, moved to strike the complaint. On December 11, 2001, the court heard argument on the motions and took the matters under submission. On February 4, 2002, the Court served notice of its order granting defendants' motion to strike the Heller complaint as a violation of its July 10, 2001 order in the Nuanes action. On March 27, 2002, the plaintiffs filed a notice appealing the order striking the complaint. The parties are currently in the midst of briefing that appeal. The Managing General Partner does not anticipate that any costs, whether legal or settlement costs, associated with these cases will be material to the Partnership's overall operations. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K a) Exhibits: Exhibit 3, Agreement of Limited Partnership, incorporated by reference to Exhibit A to the Prospectus of the Partnership dated September 20, 1983, as amended on June 13, 1989, and as thereafter supplemented, contained in the Registrant's Registration Statement on Form S-11 (Reg. No. 2-79007). Exhibit 99, Certification of Chief Executive Officer and Chief Financial Officer. b) Reports on Form 8-K: None filed during the quarter ended September 30, 2002. 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 XIX By: FOX PARTNERS II 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/Thomas C. Novosel Thomas C. Novosel Senior Vice President and Chief Accounting Officer Date: November 13, 2002 CERTIFICATION I, Patrick J. Foye, certify that: 1. I have reviewed this quarterly report on Form 10-QSB of Century Properties Fund XIX; 2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report; 3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report; 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have: a) Designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared; b) Evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and c) Presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions): a) All significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and 6. The registrant's other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. Date: November 13, 2002 _______________________ Patrick J. Foye Executive Vice President of Fox Capital Management Corporation, equivalent of the chief executive officer of the Partnership CERTIFICATION I, Paul J. McAuliffe, certify that: 1. I have reviewed this quarterly report on Form 10-QSB of Century Properties Fund XIX; 2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report; 3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report; 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have: a) Designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared; b) Evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and c) Presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions): a) All significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and 6. The registrant's other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. Date: November 13, 2002 _______________________ Paul J. McAuliffe Executive Vice President and Chief Financial Officer of Fox Capital Management Corporation, equivalent of the chief financial officer of the Partnership Exhibit 99 Certification of CEO and CFO Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 In connection with the Quarterly Report on Form 10-QSB of Century Properties Fund XIX (the "Partnership"), for the quarterly period ended September 30, 2002 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), Patrick J. Foye, as the equivalent of the chief executive officer of the Partnership, and Paul J. McAuliffe, as the equivalent of the chief financial officer of the Partnership, each hereby certifies, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to the best of his knowledge: (1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Partnership. /s/ Patrick J. Foye Name: Patrick J. Foye Date: November 13, 2002 /s/ Paul J. McAuliffe Name: Paul J. McAuliffe Date: November 13, 2002 This certification accompanies the Report pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and shall not, except to the extent required by the Sarbanes-Oxley Act of 2002, be deemed filed by the Partnership for purposes of Section 18 of the Securities Exchange Act of 1934, as amended. -----END PRIVACY-ENHANCED MESSAGE-----