-----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, VMYTpvmNO0/1CANHMUXSMQogt99MQAxbJ6nYbhqdsX2dk4LSVJpzmnMql/C5tnyr pMExcMRrONE9J4cfNGg43w== 0000711642-99-000224.txt : 19990817 0000711642-99-000224.hdr.sgml : 19990817 ACCESSION NUMBER: 0000711642-99-000224 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19990630 FILED AS OF DATE: 19990816 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CENTURY PROPERTIES FUND XX CENTRAL INDEX KEY: 0000736909 STANDARD INDUSTRIAL CLASSIFICATION: REAL ESTATE [6500] IRS NUMBER: 942930770 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10QSB SEC ACT: SEC FILE NUMBER: 000-13408 FILM NUMBER: 99690385 BUSINESS ADDRESS: STREET 1: 1873 SOUTH BELLAIRE ST 17TH FLOOR CITY: DENVER STATE: CO ZIP: 80222 BUSINESS PHONE: 3037578101 MAIL ADDRESS: STREET 1: POST & HEYMANN STREET 2: 5665 NORTHSIDE DRIVE NW CITY: ATLANTA STATE: GA ZIP: 30328 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 0-13408 CENTURY PROPERTIES FUND XX (Exact name of small business issuer as specified in its charter) California 94-2930770 (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) 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 XX BALANCE SHEET (Unaudited) (in thousands, except unit data) June 30, 1999 Assets Cash and cash equivalents $ 9,985 Receivables and deposits 1,823 Other assets 1,225 Investment properties: Land $ 6,495 Buildings and related personal property 44,075 50,570 Less accumulated depreciation (20,511) 30,059 $ 43,092 Liabilities and Partners' Deficit Liabilities Accounts payable $ 48 Tenant security deposit liabilities 190 Accrued property taxes 324 Accrued interest-promissory notes 941 Other liabilities 72 Non-recourse promissory notes: Principal 31,386 Deferred interest payable 18,250 Partners' Deficit General partner's $ (1,500) Limited partners' (61,814 units issued and outstanding) (6,619) (8,119) $ 43,092 See Accompanying Notes to Financial Statements b) CENTURY PROPERTIES FUND XX STATEMENTS OF OPERATIONS (Unaudited) (in thousands, except unit data) Three Months Ended Six Months Ended June 30, June 30, 1999 1998 1999 1998 Revenues: Rental income $ 2,067 $ 1,998 $ 4,004 $ 3,893 Other income 153 148 412 283 Income from deficiency certificate settlement 91 -- 91 256 Total revenues 2,311 2,146 4,507 4,432 Expenses: Operating 651 680 1,376 1,374 General and administrative 154 236 457 424 Depreciation 434 415 859 824 Amortization of sales commissions and organizational costs -- 82 -- 163 Interest to promissory note holders 627 627 1,255 1,255 Property taxes 159 149 316 297 Total expenses 2,025 2,189 4,263 4,337 Net income (loss) $ 286 $ (43) $ 244 $ 95 Net income (loss) allocated to general partner (2%) $ 6 $ (1) $ 5 $ 2 Net income (loss) allocated to limited partners (98%) 280 (42) 239 93 $ 286 $ (43) $ 244 $ 95 Net income (loss) per limited partnership unit $ 4.53 $ (.68) $ 3.87 $ 1.50 See Accompanying Notes to Financial Statements c) CENTURY PROPERTIES FUND XX STATEMENT OF CHANGES IN PARTNERS' DEFICIT (Unaudited) (in thousands, except unit data) Limited Partnership General Limited Units Partner Partners Total Original capital contributions 61,814 $ -- $ 30,907 $ 30,907 Partners' deficit at December 31, 1998 61,814 $(1,505) $ (6,858) $ (8,363) Net income for the six months ended June 30, 1999 -- 5 239 244 Partners' deficit at June 30, 1999 61,814 $(1,500) $ (6,619) $ (8,119) See Accompanying Notes to Financial Statements d) CENTURY PROPERTIES FUND XX STATEMENTS OF CASH FLOWS (Unaudited) (in thousands) Six Months Ended June 30, 1999 1998 Cash flows from operating activities: Net income $ 244 $ 95 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation 859 824 Amortization of deferred charges 116 270 Deferred interest on non-recourse promissory notes 627 628 Rent abatement -- (300) Loss on disposal of property -- 26 Change in accounts: Receivables and deposits (1,012) (262) Other assets (113) 16 Accounts payable 8 (33) Tenant security deposit liabilities (2) 8 Accrued property taxes 43 261 Other liabilities (4) 7 Accrued interest promissory notes 627 -- Net cash provided by operating activities 1,393 1,540 Cash flows from investing activities: Property improvements and replacements (162) (221) Lease commissions paid (53) (204) Net cash used in investing activities (215) (425) Cash flows from financing activities: Distribution paid to general partner -- (13) Loan costs paid (390) -- Net cash used in financing activities (390) (13) Net increase in cash and cash equivalents 788 1,102 Cash and cash equivalents at beginning of period 9,197 7,314 Cash and cash equivalents at end of period $ 9,985 $ 8,416 Supplemental disclosure of cash flow information: Cash paid for interest $ -- $ 628 Supplemental disclosure of non cash investing information: Tenant improvements funded through rent abatement $ -- $ 300 See Accompanying Notes to Financial Statements e) CENTURY PROPERTIES FUND XX NOTES TO FINANCIAL STATEMENTS (Unaudited) NOTE A - GOING CONCERN The accompanying financial statements have been prepared assuming Century Properties Fund XX (the "Partnership" or "Registrant") will continue as a going concern, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. The Non-Recourse Promissory Notes (the "Notes") of approximately $50,577,000 in principal and current and deferred interest at June 30, 1999, matured on November 30, 1998 and are in default. Fox Capital Management Corporation ("FCMC" or the "Managing General Partner") has contacted the indenture trustee for the Nonrecourse Promissory Notes and certain holders of Nonrecourse Promissory Notes regarding this default. In connection with these conversations, the Managing General Partner has proposed that a forbearance agreement for a specific period be entered into pursuant to which the indenture trustee will agree not to exercise its rights with respect to the Partnership's properties while the Partnership markets its properties for sale. The Managing General Partner believes it is unlikely that the sale of the Partnership's assets will generate sufficient proceeds to pay off the Nonrecourse Promissory Notes in full. If the Partnership is unsuccessful in negotiating a forbearance or other agreement with the indenture trustee or if the Partnership cannot sell its properties for sufficient value, it is likely that the Partnership will lose its properties through foreclosure. These conditions raise substantial doubt about the Partnership's ability to continue as a going concern. The financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might be necessary should the Partnership be unable to continue as a going concern. NOTE B - BASIS OF PRESENTATION The accompanying unaudited financial statements of the Partnership have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-QSB and Item 310(b) of Regulation S-B. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. 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 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 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 information to conform to the 1999 presentation. NOTE C - TRANSFER OF CONTROL Pursuant to a series of transactions which closed on October 1, 1998 and February 26, 1999, Insignia Financial Group, Inc. and Insignia Properties Trust merged into Apartment Investment and Management Company, a publicly traded real estate investment trust ("AIMCO"), 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 D - 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 transactions with affiliates of the Managing General Partner were incurred during the six month periods ended June 30, 1999 and 1998: 1999 1998 (in thousands) Property management fees (included in operating expenses) $ 78 $ 76 Reimbursement for services of affiliates (included in investment properties and operating and general and administrative expenses) 87 106 Partnership management fees (included in general and administrative expenses) -- 35 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 Partnership's residential properties as compensation for providing property management services. The Partnership paid to such affiliates approximately $78,000 and $76,000 for the six months ended June 30, 1999 and 1998, respectively. For the Partnership's commercial properties, these services were provided by an unrelated party for the six month periods ended June 30, 1999 and 1998. Affiliates of the Managing General Partner received reimbursement of accountable administrative expenses amounting to approximately $87,000 and $106,000 for the six months ended June 30, 1999 and 1998, respectively. These amounts include approximately $1,000 of construction oversight costs for both the six month periods ended June 30, 1999 and 1998. In accordance with the partnership agreement, the general partner was allocated its two percent continuing interest in the Partnership's net loss. The general partner received two percent of total distributions including cash paid to the Promissory Note holders. In addition, the general partner is entitled to a partnership management incentive distribution, which together with the partnership management fee cannot exceed ten percent of cash available for distribution, as defined. No incentive distributions were made in 1999 and 1998; however, the General Partner received a partnership management fee of approximately $35,000 in 1998. On January 4, 1999, an affiliate of the Managing General Partner purchased 7,678 Notes from a noteholder for $450 per Note, or $3,455,100. On February 10, 1999, the Partnership purchased 2,844 Notes from a noteholder for $450 per Note, or $1,279,800. The Notes purchased by the Partnership will be cancelled. On March 9, 1999, the Partnership commenced a tender offer to acquire all of the outstanding Notes. This offer was subject to the Partnership receiving tenders for a minimum of two-thirds of the Notes. The purpose of this tender was to obtain a sufficient percentage of the Notes (two-thirds) in order for the Partnership to be able to vote to approve amendments to the trust indenture. The Partnership's offer was for all of the 98,697 outstanding Notes at $1,423.34 per $1,000 principal amount (the "Purchase Price"), net to the seller in cash. The Purchase Price represented 90% of the principal, current accrued interest and deferred interest at February 15, 1999, which equates to a total Purchase Price of approximately $44,672,000. The offer was ultimately terminated with the Partnership not receiving the minimum percentage. On June 16, 1999, AIMCO Properties, L.P., an affiliate of the Managing General Partner commenced a tender offer to purchase up to 27,811.85 (44.99% of the total outstanding units) units of limited partnership interest in the Partnership for a purchase price of $0.80 per unit. The offer expired on July 20, 1999. Pursuant to the offer, AIMCO Properties, L.P. acquired 2,930.00 units. As a result, AIMCO and its affiliates currently own 2,940 units of limited partnership interest in the Partnership representing 4.76% of the total outstanding units. It is possible that AIMCO or its affiliate 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 E - SEGMENT REPORTING Description of the types of products and services from which the reportable segment derives its revenues: The Partnership has two reportable segments: residential properties and commercial properties. The Partnership's residential property segment consists of two apartment complexes located in Florida and South Carolina. The Partnership rents apartment units to tenants for terms that are typically twelve months or less. The commercial property segment consists of five office complexes in Texas, North Carolina, Virginia and Kansas. The Partnership leases office space for terms that typically exceed one year. Measurement of segment profit or loss: The Partnership evaluates performance based on net income. The accounting policies of the reportable segments are the same as those described in the summary of significant accounting policies in the Partnership's Annual Report on Form 10-KSB for the year ended December 31, 1998. Factors management used to identify the enterprise's reportable segment: The Partnership's reportable segments consist of investment properties that offer different products and services. The reportable segments are each managed separately because they provide distinct services with different 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 segments. 1999 Residential Commercial Other Totals Rental income $ 1,455 $ 2,549 $ -- $ 4,004 Other income 57 7 348 412 Income from settlement -- -- 91 91 Interest expense -- -- 1,255 1,255 Depreciation 230 629 -- 859 General and administrative expense -- -- 457 457 Segment profit (loss) 583 934 (1,273) 244 Total assets 11,033 21,911 10,148 43,092 Capital expenditures for investment properties 120 39 -- 159 1998 Residential Commercial Other Totals Rental income $ 1,406 $ 2,487 $ -- $ 3,893 Other income 87 9 187 283 Income from settlement -- -- 256 256 Interest expense -- -- 1,255 1,255 Depreciation 232 592 -- 824 Amortization of deferred expense -- -- 163 163 General and administrative expense -- -- 424 424 Segment profit (loss) 519 975 (1,399) 95 Total assets 10,700 21,940 8,534 41,174 Capital expenditures for investment properties 66 155 -- 221 NOTE F - CONTINGENCY On January 24, 1990, a settlement agreement was executed by and between the Partnership and certain defendants in connection with legal proceedings at Commonwealth Centre. Lincoln Property Company ("Lincoln"), one of the defendants, provided the Partnership with a deficiency certificate totaling $1,250,000 pursuant to Lincoln's company-wide debt restructuring plan. Effective December 31, 1994, the obligators under this collateral pool agreement exercised their right to extend the maturity date of the deficiency certificates to December 31, 1997. The senior obligators have accepted an offer to settle the outstanding amounts due from Lincoln at a discounted rate. The Managing General Partner was obligated to accept the initial settlement which equated to approximately $256,000 during the three months ended March 31, 1998. The Partnership has not recorded a receivable on the financial statements due to the uncertainty of receiving any funds. The initial settlement related to the cash collateral pool, and the Partnership received further funds of approximately $45,000 during the remaining months of 1998 as well as approximately $91,000 during the six months ended June 30, 1999. It is anticipated this will be the final payment received by the Partnership. With receipt of this settlement, the Partnership has recorded income from the settlement in the financial statements. The current settlement relates to the cash available to distribute in the collateral pool. NOTE G - RENT ABATEMENT On January 1, 1998, a tenant of Linpro Park I entered into a five year lease agreement. The lease provided for a renovation allowance equal to $7.00 per square foot to reimburse the tenant for improvements made to accommodate the tenant. This allowance is for the twelve month period beginning January 1, 1998, and ending December 31, 1998. As of June 30, 1998, $300,000 of improvements have been completed. The allowance is reflected on the financial statements as a rent abatement and is included as rental income. NOTE H - LEGAL PROCEEDINGS In March 1998, several putative unit holders of limited partnership units of the Partnership commenced an action entitled Rosalie Nuanes, et al. v. Insignia Financial Group, Inc., et al. in the Superior Court of the State of California for the County of San Mateo. The plaintiffs named as defendants, among others, the Partnership, the Managing General Partner and several of their affiliated partnerships and corporate entities. The complaint purports to assert claims on behalf of a class of limited partners and derivatively on behalf of a number of limited partnerships (including the Partnership) which are named as nominal defendants, challenging the acquisition by Insignia 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 costs associated with this case, if any, will be material to the Partnership's overall operations. The Partnership is unaware of any other pending or outstanding litigation that is not of a routine nature arising in the ordinary course of business. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF 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 Partnership from time to time. The discussion of the Partnership'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 Partnership's business and results of operation. Accordingly, actual results could differ materially from those projected in the forward-looking statements as a result of a number of factors, including those identified herein. The Partnership's investment properties consist of two apartment complexes, three office buildings, and two business parks. 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 Commonwealth Centre (1) 89% 97% Dallas, TX Crabtree Office Center (2) 94% 100% Raleigh, North Carolina Linpro Park I (3) 100% 92% Reston, Virginia Metcalf 103 Office Park 96% 98% Overland Park, Kansas Highland Park Commerce Center (4) 91% 99% Charlotte, North Carolina Harbor Club Downs 95% 94% Palm Harbor, Florida The Corners Apartments (5) 94% 88% Spartanburg, South Carolina (1) The decrease in occupancy at Commonwealth Center is due to the loss of one tenant occupying 8,029 square feet, which represents approximately 7% of the total space. (2) The decrease in occupancy at Crabtree Office Center is due to the loss of two tenants in late 1998, these two spaces have subsequently been leased and the property is now at 100% occupancy. (3) The increase in occupancy at Linpro Park I is due to the addition of one tenant occupying the remaining available space. (4) The decrease in occupancy at Highland Park Commerce Center is due to the loss of two tenants occupying 7,654 square feet, which represents approximately 8% of the total space. (5) The increase in occupancy at The Corners Apartments is due to an increased marketing effort and a strong economy in the Spartanburg area. Results of Operations The Partnership's net income for the six months ended June 30, 1999, was approximately $244,000 as compared to net income of approximately $95,000 for the six months ended June 30, 1998. The Partnership's net income for the three months ended June 30, 1999, was approximately $286,000 as compared to a net loss of approximately $43,000 for the three months ended June 30, 1998. The increase in net income is attributable to an increase in total revenues and a decrease in total expenses. Total revenues increased due to an increase in rental and other income partially offset by a decrease in income from a deficiency certificate settlement (refer to "Item 1. Financial Statements, Note F _ Contingency" for further discussion). The increase in rental income is primarily due to increases in the average occupancy at Linpro Park I, The Corners Apartments and Harbor Club Downs Apartments and an increase in tenant reimbursements at Commonwealth Centre and Crabtree Office Center. The increase in other income is primarily due to a gain on the purchase of Nonrecourse Promissory Notes by the Partnership (refer to "Item 1. Financial Statements, Note D _ Transactions with Affiliated Parties"). Total expenses decreased due to a decrease in the amortization of sales commissions and organizational costs partially offset by increases in depreciation expense and general and administrative expenses. The decrease in the amortization of sales commissions and organizational costs is due to the assets becoming fully depreciated in the fourth quarter of 1998. The increase in depreciation expense is due to the depreciable capital improvements and replacements being placed into service during the last twelve months. The increase in general and administrative expenses is primarily due to an increase in legal costs related to negotiations in connection with the Nonrecourse Promissory Notes. Included in general and administrative expenses for the six months ended June 30, 1999 and 1998, are reimbursements to the Managing General Partner allowed under the Partnership Agreement associated with its management of the Partnership. In addition, costs associated with the quarterly and annual communications with investors and regulatory agencies and the annual audit required by the Partnership Agreement are also included. As part of the ongoing business plan of the Partnership, the Managing General Partner monitors the rental market environment of 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. Capital Resources and Liquidity At June 30, 1999, the Partnership had cash and cash equivalents of approximately $9,985,000 as compared to approximately $8,416,000 June 30, 1998. For the six months ended June 30, 1999, cash and cash equivalents increased approximately $788,000 from the Partnership's year ended December 31, 1998. The increase in cash and cash equivalents is due to approximately $1,390,000 of cash provided by operating activities partially offset by approximately $212,000 of cash used in investing activities and approximately $390,000 of cash used in financing activities. Cash used in investing activities consists of property improvements and replacements and lease commissions. Cash used in financing activities consists of loan costs associated with refinancing the promissory notes of the Partnership. The Partnership invests its working capital in a money market account. In order to finance the purchase of its properties, the Partnership sold Nonrecourse Pension Investor Notes with an aggregate original principal amount of $49,348,500 (the "Notes"). Pursuant to the terms of the Notes, the Partnership was required to pay interest at a rate of 4% per annum on the Notes, and accrue the additional 4% per annum due on the Notes. The Notes are secured by all of the Partnership's properties. The Notes, which had a balance of principal and current and deferred interest of approximately $50,577,000 at June 30, 1999, matured on November 30, 1998. As a result, the Partnership is currently in default under the Nonrecourse Promissory Notes. The Managing General Partner has contacted the indenture trustee for the Notes and certain holders of Notes regarding this default. In connection with these conversations, the Managing General Partner has proposed that a forbearance agreement for a specific period be entered into pursuant to which the indenture trustee will agree not to exercise its rights with respect to the Partnership's properties while the Partnership markets its properties for sale. There can be no assurance, however, that a forbearance agreement will be entered into or, if entered into, that the Partnership can sell its properties or as to the net sales proceeds generated. The Managing General Partner believes it is unlikely that the sale of the Partnership's assets will generate sufficient proceeds to pay off the Nonrecourse Promissory Notes in full. In addition to attempting to negotiate a forbearance agreement, on March 9, 1999, the Partnership commenced a tender offer to acquire all of the outstanding Notes. This offer was subject to the Partnership receiving tenders for a minimum of two-thirds of the Notes. The purpose of this tender was to obtain a sufficient percentage of the Notes (two-thirds) in order for the Partnership to be able to vote to approve amendments to the trust indenture. The Partnership's offer was for all of the 98,697 outstanding Notes at $1,423.34 per $1,000 principal amount (the "Purchase Price"), net to the seller in cash. The Purchase Price represented 90% of the principal, current accrued interest and deferred interest at February 15, 1999, which equates to a total Purchase Price of approximately $44,672,000. The offer was ultimately terminated with the Partnership not receiving the minimum percentage. As a result, if the Partnership is unsuccessful in negotiating a forbearance or other agreement with the indenture trustee or if the Partnership cannot sell its properties for sufficient value, the Partnership may seek to file for bankruptcy. In addition, it is possible that the Partnership will lose its properties through foreclosure. In either event, it is possible that the noteholders will not receive the total amount due on the Notes or the amount offered in the Partnership's offer discussed above. If the properties are foreclosed upon, the Partnership would be dissolved, any available cash would be distributed and limited partners would lose their investment in the Partnership. If the Partnership is unsuccessful in negotiating a forbearance or other agreement with the indenture trustee or if the Partnership cannot sell its properties for sufficient value, it is likely that the Partnership will lose its properties through foreclosure. If the properties are foreclosed upon, the Partnership would be dissolved, any available cash would be distributed and limited partners would lose their investment in the Partnership. If the Partnership is successful in obtaining the forbearance agreement, the sufficiency of existing liquid assets to meet future liquidity and capital expenditure requirements is directly related to the level of capital expenditures required at the properties to adequately maintain the physical assets and other operating needs of the Registrant and to comply with Federal, state, and local legal and regulatory requirements. Capital improvements planned for each of the Partnership's properties are detailed below. Commonwealth Center During the six months ended June 30, 1999 the Partnership completed approximately $31,000 of capital improvement projects at Commonwealth Center, consisting of building improvements. 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 $168,000 of capital improvements over the next few years. The Partnership has budget, but is not limited to, capital improvements of approximately $38,000 for 1999 at this property which include certain of the required improvements consist of tenant improvements. Crabtree Office Center During the six months ended June 30, 1999, the Partnership completed approximately $6,000 of capital improvement projects at Crabtree Office Center, consisting of tenant improvements. These improvements were funded by operating cash flows. 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 $112,000 of capital improvements over the next few years. The Partnership has budget, but is not limited to, capital improvements of approximately $95,000 for 1999 at this property which include certain of the required improvements consist of tenant improvements. Highland Park Commerce Center During the six months ended June 30, 1999, the Partnership did not complete any capital improvement projects at Highland Park. 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 $141,000 of capital improvements over the next few years. The Partnership has budget, but is not limited to, capital improvements of approximately $100,000 for 1999 at this property which include certain of the required improvements consist of tenant improvements. Linpro Park I During the six months ended June 30, 1999, the Partnership did not complete any capital improvement projects at Linpro Office building. 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 $439,000 of capital improvements over the next few years. The Partnership has budget, but is not limited to, capital improvements of approximately $33,000 for 1999 at this property which include certain of the required improvements consist of parking lot repairs. Metcalf 103 Office Park During the six months ended June 30, 1999, the Partnership completed approximately $23,000 of capital improvement projects at Metcalf 103 Office Park, consisting of tenant improvements. These improvements were funded by operating cash flows. 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 $79,000 of capital improvements over the next few years. The Partnership has budget, but is not limited to, capital improvements of approximately $21,000 for 1999 at this property which include certain of the required improvements consist of tenant improvements. Harbor Club Downs During the six months ended June 30, 1999, the Partnership completed approximately $59,000 of capital improvement projects at Harbor Club Downs, consisting primarily of floor covering replacements, landscaping and HVAC upgrades. These improvements were funded by operating cash flows. 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 $503,000 of capital improvements over the next few years. The Partnership has budget, but is not limited to, capital improvements of approximately $439,000 for 1999 at this property which include certain of the required improvements consist of floor covering replacements, roof repairs, parking lot repairs and landscaping. The Corners Apartments During the six months ended June 30, 1999, the Partnership completed approximately $60,000 of capital improvement projects at The Corners consisting primarily of balconies, landscaping and floor coverings. These improvements were funded from operating cash flows. 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 $388,000 of capital improvements over the next few years. The Partnership has budget, but is not limited to, capital improvements of approximately $73,000 for 1999 at this property which include certain of the required improvements consist of floor covering replacements and landscaping. 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. No distributions were made during the six months ended June 30, 1999 or 1998. Future cash distributions will depend on the Partnership's ability to cure its current default on the notes and the terms of any financing obtained for the tender offer. If the Partnership is successful in curing its default, future distributions will also depend upon the levels of net cash generated from operations, the availability of cash reserves, and the timing of the debt maturity, refinancing, and/or property sales. There can be no assurance, however, that the Partnership will generate sufficient funds from operations after required capital improvements to permit distributions to its partners in 1999 or subsequent periods. Tender Offer On June 16, 1999, AIMCO Properties, L.P., an affiliate of the Managing General Partner commenced a tender offer to purchase up to 27,811.85 (44.99% of the total outstanding units) units of limited partnership interest in the Partnership for a purchase price of $0.80 per unit. The offer expired on July 20, 1999. Pursuant to the offer, AIMCO Properties, L.P. acquired 2,930.00 units. As a result, AIMCO and its affiliates currently own 2,940 units of limited partnership interest in the Partnership representing 4.76% of the total outstanding units. It is possible that AIMCO or its affiliate 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 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 costs associated with this case, if any, will be material to the Partnership's overall operations. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K a) Exhibit 27, Financial Data Schedule, is filed as an exhibit to this report. b) Reports on Form 8-K: None 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 XX By: Fox Partners III 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 16, 1999 EX-27 2
5 This schedule contains summary financial information extracted from Century Properties Fund XX 1999 Second Quarter 10-QSB and is qualified in its entirety by reference to such 10-QSB filing. 0000736909 CENTURY PROPERTIES FUND XX 1,000 6-MOS DEC-31-1999 JUN-30-1999 9,985 0 0 0 0 0 50,570 10,511 43,092 0 31,386 0 0 0 (8,119) 43,092 0 4,507 0 0 0 0 1,255 0 0 0 0 0 0 244 3.87 0 Registrant has an unclassified balance sheet. Multiplier is 1.
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