-----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, QNDscnKeO9J7Xab3soQCowNuKcTaNy/isZn4iipav59VnrNynFvVvVnOjR7ldmgo V+kerzxNw4OhBKA/YBcO5A== 0000711642-98-000044.txt : 19981118 0000711642-98-000044.hdr.sgml : 19981118 ACCESSION NUMBER: 0000711642-98-000044 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19980930 FILED AS OF DATE: 19981116 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CENTURY PENSION INCOME FUND XXIII CENTRAL INDEX KEY: 0000764543 STANDARD INDUSTRIAL CLASSIFICATION: REAL ESTATE [6500] IRS NUMBER: 942963120 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 002-96389 FILM NUMBER: 98751489 BUSINESS ADDRESS: STREET 1: 1873 SOUTH BELLAIRE STREET 17TH FLOOR CITY: DENVER STATE: CO ZIP: 80222 BUSINESS PHONE: 3037578101 MAIL ADDRESS: STREET 1: 1873 SOUTH BELLAIRE STREET 17TH FLOOR CITY: DENVER STATE: CO ZIP: 80222 10-Q 1 FORM 10-Q--QUARTERLY REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q (Mark One) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 1998 or [ ] 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 0-14528 CENTURY PENSION INCOME FUND XXIII (Exact name of registrant as specified in its charter) California 94-2963120 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 55 Beattie Place P.O. Box 1089 Greenville, South Carolina 29602 (Address of principal executive offices) (864) 239-1000 (Registrant's telephone number) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 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 PENSION INCOME FUND XXIII CONSOLIDATED BALANCE SHEETS (in thousands, except unit data) September 30, December 31, 1998 1997 (Unaudited) (Note) Assets Cash and cash equivalents $ 10,798 $ 9,366 Receivables and deposits, net of allowance for uncollectible amounts of $438 (1998) and $322 (1997) 1,546 1,118 Other assets 315 332 Mortgage loan receivable 1,137 1,137 Deferred charges 1,183 1,533 Investment properties: Land 15,970 15,970 Buildings and related personal property 63,080 62,629 79,050 78,599 Less accumulated depreciation (24,187) (22,358) 54,863 56,241 $ 69,842 $ 69,727 Liabilities and Partners' Deficit Liabilities Accounts payable $ 86 $ 34 Tenant security deposit liabilities 351 367 Accrued property taxes 681 258 Accrued interest - promissory notes 524 1,048 Accrued interest - notes payable 189 165 Other liabilities 194 274 Notes payable 6,856 6,856 Non-recourse promissory notes: Principal 41,939 41,939 Deferred interest payable 36,651 34,576 Minority interest in consolidated joint ventures 7,863 7,429 Partners' Deficit General partner's (1,372) (1,284) Limited partners' (95,789 units issued and outstanding at September 30, 1998 and December 31, 1997) (24,120) (21,935) (25,492) (23,219) $ 69,842 $ 69,727 Note: The balance sheet at December 31, 1997, has been derived from the audited financial statements at that date but does not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. See Accompanying Notes to Consolidated Financial Statements b) CENTURY PENSION INCOME FUND XXIII CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) (in thousands, except unit data) Three Months Ended Nine Months Ended September 30, September 30, 1998 1997 1998 1997 Revenues: Rental income $ 2,776 $ 2,554 $ 8,338 $ 7,878 Interest income on mortgage loans 6 20 47 61 Other income 174 149 457 416 Total revenues 2,956 2,723 8,842 8,355 Expenses: Operating 830 880 2,368 2,454 General and administrative 268 281 764 792 Depreciation 615 578 1,829 1,784 Interest on notes payable 206 207 620 846 Interest to promissory note holders 1,216 1,216 3,647 3,647 Amortization of deferred charges 100 105 316 315 Property taxes 356 350 1,094 1,168 Total expenses 3,591 3,617 10,638 11,006 Loss before minority interest in joint ventures' operations and extraordinary gain on foreclosure (635) (894) (1,796) (2,651) Minority interest in joint ventures' operations (192) (41) (434) (218) Loss before extraordinary gain (827) (935) (2,230) (2,869) Extraordinary gain on foreclosure -- -- -- 5,337 Net (loss) income $ (827) $ (935) $ (2,230) $ 2,468 Net (loss) income allocated to general partner $ (17) $ (18) $ (45) $ 1,010 Net (loss) income allocated to limited partners (810) (917) (2,185) 1,458 $ (827) $ (935) $ (2,230) $ 2,468 Net (loss) income per limited partnership unit: Loss before extraordinary gain $ (8.46) $ (9.58) $ (22.81) $ (29.36) Extraordinary gain on foreclosure -- -- -- 44.58 Net (loss) income per limited partnership unit $ (8.46) $ (9.58) $ (22.81) $ 15.22 See Accompanying Notes to Consolidated Financial Statements c) CENTURY PENSION INCOME FUND XXIII CONSOLIDATED STATEMENTS OF CHANGES IN PARTNERS' DEFICIT (Unaudited) (in thousands, except unit data) Limited Partnership General Limited Units Partner's Partners' Total Original capital contributions 95,789 $ 958 $ 47,894 $ 48,852 Partners' deficit at December 31, 1996 95,789 $(2,206) $(21,186) $(23,392) Distributions to general partner -- (43) -- (43) Net income for the nine months ended September 30, 1997 -- 1,010 1,458 2,468 Partners' deficit at September 30, 1997 95,789 $(1,239) $(19,728) $(20,967) Partners' deficit at December 31, 1997 95,789 $(1,284) $(21,935) $(23,219) Distributions to general partner -- (43) -- (43) Net loss for the nine months ended September 30, 1998 -- (45) (2,185) (2,230) Partners' deficit at September 30, 1998 95,789 $(1,372) $(24,120) $(25,492) See Accompanying Notes to Consolidated Financial Statements d) CENTURY PENSION INCOME FUND XXIII CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (in thousands) Nine Months Ended September 30, 1998 1997 Cash flows from operating activities: Net (loss) income $ (2,230) $ 2,468 Adjustments to reconcile net (loss) income to net cash provided by operating activities: Depreciation 1,829 1,784 Amortization of deferred charges and lease commissions 522 500 Minority interest in joint ventures' operations 434 218 Deferred interest on non-recourse promissory notes 2,075 2,075 Extraordinary gain on foreclosure -- (5,337) Casualty gain -- (37) Change in accounts: Receivables and deposits (428) (485) Other assets 17 (211) Deferred charges (172) (236) Accounts payable 52 (93) Tenant security deposit liabilities (16) (16) Accrued property taxes 423 392 Other liabilities (80) (23) Accrued interest on promissory notes (524) (524) Accrued interest on notes payable 24 249 Net cash provided by operating activities 1,926 724 Cash flows from investing activities: Property replacements and improvements (451) (347) Insurance proceeds -- 100 Net cash used in investing activities (451) (247) Cash flows from financing activities: Cash distributions to the general partner (43) (43) Net cash used in financing activities (43) (43) Net increase in cash and cash equivalents 1,432 434 Cash and cash equivalents at beginning of period 9,366 8,289 Cash and cash equivalents at end of period $ 10,798 $ 8,723 Supplemental disclosure of cash flow information: Cash paid for interest - notes payable $ 596 $ 596 Cash paid for interest - non-recourse promissory notes $ 2,097 $ 2,097 See Accompanying Notes to Consolidated Financial Statements SUPPLEMENTAL DISCLOSURES OF NON-CASH ACTIVITIES Foreclosure: During the nine months ended September 30, 1997, Sunnymead Towne Center was foreclosed upon by the lender resulting in an extraordinary gain of approximately $5,337,000. In connection with this foreclosure, approximately $67,000 in cash was transferred to the lender as partial settlement on the outstanding debt. This cash was previously classified as restricted cash on the Partnership's balance sheet. In addition, the following balance sheet accounts were adjusted by the non-cash amounts noted below (in thousands): Receivables and deposits $ (663) Other assets (27) Investment properties (5,714) Tenant security deposit liabilities 42 Accrued interest on notes payable 1,591 Other liabilities 8 Notes payable 10,100 Casualty Gain: The Partnership recorded a net casualty gain during the nine months ended September 30, 1997, resulting from a fire at The Enclaves which destroyed six apartment units. The damage resulted in a net gain of approximately $37,000. The following balance sheet accounts were adjusted by the non-cash amounts noted below (in thousands): Receivables and other assets $133 Building and related personal property 111 Other liabilities (111) e) CENTURY PENSION INCOME FUND XXIII NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) NOTE A - GOING CONCERN The accompanying consolidated financial statements have been prepared assuming Century Pension Income Fund XXIII (the "Partnership") will continue as a going concern, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. As discussed in "Item 2, Management's Discussion and Analysis or Plan of Operation," the Non-Recourse Promissory Notes (the "Notes") totaling approximately $79,627,000 (at maturity) in principal and deferred interest mature on February 15, 1999. Fox Capital Management Corporation ("FCMC" or the "Managing General Partner"), a California corporation and the managing general partner of the Partnership's general partner, believes that the Partnership's real properties may not have sufficient value to enable the Partnership to refinance the maturing debt or sell the properties for an amount equal to or in excess of the maturing Notes. The Managing General Partner has met with the indenture trustee with respect to the pending maturity. Any modification to the existing loan would require the consent of the holders of the Notes. If the Partnership is unable to refinance the existing indebtedness, obtain a loan extension, modify the Notes or a standstill agreement cannot be negotiated to enable the Partnership time to liquidate its properties, it is likely that the Partnership's properties will be lost 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. However, there can be no assurance that these courses of action will be successful or that the Partnership will have sufficient funds to meet its 1999 obligations. 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-Q and Article 10 of Regulation S-X. 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 nine month periods ended September 30, 1998, are not necessarily indicative of the results that may be expected for the fiscal year ending December 31, 1998. For further information, refer to the financial statements and footnotes thereto included in the Partnership's annual report on Form 10-K for the year ended December 31, 1997. Certain reclassifications have been made to the 1997 information to conform to the 1998 presentation. NOTE C - TRANSACTIONS WITH AFFILIATED PARTIES The Partnership has no employees and is dependent on the Managing General Partner and its affiliates for the management and administration of all partnership activities. The Partnership Agreement provides for certain payments to affiliates for services and as reimbursement of certain expenses incurred by affiliates on behalf of the Partnership. The following transactions with the Managing General Partner and its affiliates were incurred during the nine months ended September 30, 1998 and 1997: 1998 1997 (in thousands) Property management fees (included in operating expense) $124 $111 Reimbursement for services of affiliates (included in general and administrative and operating 191 147 expenses) (1) Partnership management fee (included in general and administrative expenses) 111 111 (1) Included in "Reimbursements for services of affiliates" for the nine months ended September 30, 1998 is approximately $4,000 in reimbursements for construction oversight costs. There were no such costs for the same period in 1997. For the period from January 1, 1997, to August 31, 1997, the Partnership insured its properties under a master policy through an agency affiliated with the Managing General Partner with an insurer unaffiliated with the Managing General Partner. An affiliate of the Managing General Partner acquired, in the acquisition of a business, certain financial obligations from an insurance agency which was later acquired by the agent who placed the master policy. The agent assumed the financial obligations to the affiliate of the Managing General Partner which received payments on these obligations from the agent. The amount of the Partnership's insurance premiums accruing to the benefit of the affiliate of the Managing General Partner by virtue of the agent's obligations was not significant. In accordance with the Partnership Agreement (the "Agreement"), the General Partner was allocated its two percent continuing interest in the Partnership's net income or loss and taxable income or loss exclusive of gains or losses on any property dispositions. The extraordinary gain on the Sunnymead foreclosure recognized during the nine month period ended September 30, 1997 was allocated 20% to the General Partner and 80% to the limited partners per the terms of the Agreement. The partnership management fee is limited by the Agreement to ten percent of net cash available for distribution before interest payments to the Promissory Noteholders and the partnership management fee. The Managing General Partner received cash distributions totaling approximately $43,000 during each of the nine month periods ended September 30, 1998 and 1997. NOTE D - FORECLOSURE OF SUNNYMEAD TOWNE SHOPPING CENTER On March 27, 1997, the Sunnymead Towne Shopping Center ("Sunnymead") located in Moreno Valley, California, was foreclosed upon. Several significant tenants vacated Sunnymead in 1995 and 1996 and the Partnership recorded a provision for impairment of value. In 1996 the Partnership ceased making debt service payments and the property was placed in receivership in May of 1996. The Managing General Partner determined it was not in the Partnership's best interest to contest the foreclosure action as the value of the Sunnymead property was estimated at less than the debt. As a result of the foreclosure, the Partnership recorded a gain on foreclosure of approximately $5,337,000 during the nine month period ended September 30, 1997. Prior to the foreclosure, the outstanding debt on the property was a note payable with a principal balance of $10,100,000 and accrued interest of approximately $1,591,000. NOTE E - CASUALTY In the second quarter of 1998 there was a fire at The Enclaves which damaged five units. Damages were submitted to the insurance provider and reconstruction of the units, which began in the third quarter, has not yet been completed. For the nine months ended September 30, 1998, approximately $67,000 of insurance proceeds have been received. However, a final estimate for replacement costs and anticipated insurance proceeds had not been made by the insurer. The Partnership anticipates that the proceeds will approximate replacement cost, net of any deductible. NOTE F - TRANSFER OF CONTROL - SUBSEQUENT EVENT On October 1, 1998, Insignia Financial Group, Inc. completed its merger with and into Apartment Investment and Management Company ("AIMCO"), a publicly traded real estate investment trust, with AIMCO being the surviving corporation (the "Insignia Merger"). As a result of the Insignia Merger, AIMCO acquired control of the Managing General Partner. In addition, AIMCO also acquired approximately 51% of the outstanding common shares of beneficial interest of Insignia Properties Trust ("IPT"), the sole shareholder of the Managing General Partner. Also, effective October 1, 1998, IPT and AIMCO entered into an Agreement and plan of Merger pursuant to which IPT is to be merged with and into AIMCO or a subsidiary of AIMCO (the "IPT Merger"). The IPT Merger requires the approval of the holders of a majority of the outstanding IPT Shares. AIMCO has agreed to vote all of the IPT Shares owned by it in favor of the IPT Merger and has granted an irrevocable limited proxy to unaffiliated representatives of IPT to vote the IPT Shares acquired by AIMCO and its subsidiaries in favor of the IPT Merger. As a result of AIMCO's ownership and its agreement, the vote of no other holder of IPT is required to approve the merger. The Managing General Partner does not believe that this transaction will have a material effect on the affairs and operations of the Partnership. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION The Partnership's remaining investment properties consist of one apartment complex, four business parks and two shopping centers, as well as three business parks and a shopping center owned by two consolidated joint ventures between the Partnership and an affiliated partnership. The following table sets forth the average physical occupancy for the nine months ended September 30, 1998 and 1997: Average Occupancy Property 1998 1997 Commerce Plaza 100% 100% Tampa, Florida Regency Centre 93% 95% Lexington, Kentucky Highland Park Commerce 90% 89% Center - Phase II Charlotte, North Carolina Interrich Plaza 99% 64% Richardson, Texas Centre Stage Shopping Center 97% 99% Norcross, Georgia The Enclaves 94% 92% Atlanta, Georgia Medtronics 100% 100% Irvine, California CORAL PALM PLAZA JOINT VENTURE: Coral Palm Plaza 68% 72% Coral Springs, Florida MINNEAPOLIS BUSINESS PARKS JOINT VENTURE: Alpha Business Center 92% 90% Bloomington, Minnesota Plymouth Service Center 100% 100% Plymouth, Minnesota Westpoint Business Center 93% 96% Plymouth, Minnesota Occupancy at Interrich Plaza is currently at 99% due to the demand for warehouse space in the Dallas/Fort Worth area. Occupancy at Coral Palm Plaza decreased as a result of two tenants vacating the property during the fourth quarter of 1997. Occupancy at Westpoint Business Center decreased as a result of a tenant exercising a termination option. Results of Operations The Partnership's net loss for the nine months ended September 30, 1998 was approximately $2,230,000 compared to net income of approximately $2,468,000 for the nine months ended September 30, 1997. The Partnership's net loss for the three months ended September 30, 1998 and 1997 was approximately $827,000 and $935,000, respectively. This decrease in net income for the comparable nine month periods is primarily attributable to the extraordinary gain of approximately $5,337,000 on the foreclosure of Sunnymead Towne Shopping Center during the nine months ended September 30, 1997 (see "Item 1. Financial Statements, Note D"). The Partnership's loss before extraordinary gain for the three and nine month periods ended September 30, 1998 was approximately $827,000 and $2,230,000, respectively, compared to approximately $935,000 and $2,869,000, respectively, for the comparable period of 1997. The decrease in loss before the extraordinary gain was partly due to the foreclosure of Sunnymead. In addition, the decrease in interest expense is primarily attributable to the absence of interest related to the Sunnymead mortgage. The Partnership realized a net loss from the operations of Sunnymead of approximately $174,000 in 1997. In addition, the Partnership realized an increase in rental income from several of its remaining investment properties due to increases in occupancy as stated above. Rental income also increased at Commerce Plaza, Regency Center and Coral Palm Plaza. The increase at Commerce Plaza is due to rental rate increases. The increase at Regency Center is primarily due to increased percentage rents and increased average rental rates. The increase at Coral Palm is primarily attributable to a decrease in the bad debt write offs required. Operating expenses decreased primarily due to the exterior painting projects and higher snow removal costs at Coral Palm Plaza, Alpha Business Center, Plymouth Service Center and Westpoint Business Center in 1997, with no similar projects in 1998, as well as the absence of Sunnymead operating expenses in 1998. Property tax expense decreased primarily due to a decrease in the 1997 taxes assessed by the taxing authority for the Enclaves Apartments property and to the absence of any Sunnymead tax liability in 1998. Included in operating expense for the nine months ended September 30, 1998 is approximately $76,000 of major repairs and maintenance comprised primarily of landscaping costs. Included in operating expense for the nine months ended September 30, 1997 is approximately $142,000 of major repairs and maintenance comprised primarily of exterior painting and landscaping costs. 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 expense. As part of this plan, the Managing General Partner attempts to protect the Partnership from the burden of inflation-related increases in expenses by increasing rents and maintaining a high overall occupancy level. However, due to changing market conditions, which can result in the use of rental concessions and rental reductions to offset softening market conditions, there is no guarantee that the Managing General Partner will be able to sustain such a plan. Liquidity and Capital Resources At September 30, 1998, the Partnership had cash and cash equivalents of approximately $10,798,000 compared to approximately $8,723,000 at September 30, 1997. The net increase in cash and cash equivalents for the nine months ended September 30, 1998 was approximately $1,432,000 compared to a net increase of approximately $434,000 at September 30, 1997. Net cash provided by operating activities increased partially due to the decrease in net loss exclusive of extraordinary gain as discussed above. Also contributing to the increase were decreases in receivables and deposits and other assets and decreases in cash payments for accounts payable due to the timing of receipts and payments. Partially offsetting these items was a decrease in accrued interest on notes payable due to timing of interest payments to the Promissory Noteholders. Net cash used in investing activities increased due to increased property improvements and replacements in 1998 and a lack of insurance proceeds received, as in 1997 for the casualty at The Enclaves. Net cash used in financing activities was consistent for both periods. The Partnership's Enclaves property is secured by mortgage indebtedness of approximately $6,856,000; which requires interest only payments with a balloon payment due in 2001. In addition, in order to finance the purchase of its properties, the Partnership sold Nonrecourse Pension Investor Notes with an aggregate original principal amount of $41,939,000 (the "Notes"). Pursuant to the terms of the Notes, the Partnership was required to pay interest at a rate of 5% per annum on the Notes, and accrue the additional 5% (1986 Notes) and 7% (1985 Notes) per annum due on the Notes. The Notes are secured by all of the Partnership's properties. The Notes, which have a balance of principal and accrued interest of approximately $78,590,000 mature on February 15, 1999. The Managing General Partner believes that the Partnership's real properties may not have sufficient value to enable the Partnership to refinance the maturing debt or sell the properties for an amount equal to or in excess of the maturing Notes. The Managing General Partner has met with the indenture trustee with respect to the pending maturity. Any modification to the existing loan would require the consent of the holders of the Notes. If the Partnership is unable to refinance the existing indebtedness, obtain a loan extension, modify the Notes or a standstill agreement cannot be negotiated to enable the Partnership time to liquidate its properties, it is likely that the Partnership's properties will be lost 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. It is expected that the Partnership would recognize a gain for tax purposes if the properties were foreclosed upon. In light of the pending maturity of the Notes, no distributions were made to the limited partners for the nine months ended September 30, 1998 or 1997. Cash distributions of approximately $43,000 were paid to the General Partner during each of the nine month periods ended September 30, 1998 and 1997. Transfer of Control - Subsequent Event On October 1, 1998, Insignia Financial Group, Inc. completed its merger with and into Apartment Investment and Management Company ("AIMCO"), a publicly traded real estate investment trust, with AIMCO being the surviving corporation (the "Insignia Merger"). As a result of the Insignia Merger, AIMCO acquired control of the Managing General Partner. In addition, AIMCO also acquired approximately 51% of the outstanding common shares of beneficial interest of Insignia Properties Trust ("IPT"), the sole shareholder of the Managing General Partner. Also, effective October 1, 1998, IPT and AIMCO entered into an Agreement and plan of Merger pursuant to which IPT is to be merged with and into AIMCO or a subsidiary of AIMCO (the "IPT Merger"). The IPT Merger requires the approval of the holders of a majority of the outstanding IPT Shares. AIMCO has agreed to vote all of the IPT Shares owned by it in favor of the IPT Merger and has granted an irrevocable limited proxy to unaffiliated representatives of IPT to vote the IPT Shares acquired by AIMCO and its subsidiaries in favor of the IPT Merger. As a result of AIMCO's ownership and its agreement, the vote of no other holder of IPT is required to approve the merger. The Managing General Partner does not believe that this transaction will have a material effect on the affairs and operations of the Partnership. Year 2000 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 to define the applicable year. The Partnership is dependent upon the Managing General Partner and its affiliates for management and administrative services ("Managing Agent"). Any 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. 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 are not completed timely, the Year 2000 Issue could have a material impact on the operations of the Managing Agent and the Partnership. Status of Progress in Becoming Year 2000 Compliant The Managing Agent's plan to resolve the Year 2000 Issue involves the following four phases: assessment, remediation, testing and implementation. To date, the Managing Agent has fully completed its assessment of all information systems that could be significantly affected by the Year 2000, and has begun the remediation, testing and implementation phase on both hardware and software systems. Assessments are continuing in regards to embedded systems in operating equipment. The Managing Agent anticipates having all phases complete by June 1, 1999. In addition to the areas the Partnership is relying on the Managing Agent to verify compliance with, the Partnership has certain operating equipment, primarily at the property sites, which needed to be evaluated for Year 2000 compliance. The focus of the Managing General Partner was to the security systems, elevators, heating-ventilation-air-conditioning systems, telephone systems and switches, and sprinkler systems. The Managing General Partner is currently engaged in the identification of all non-compliant operational systems, and is in the process of estimating the costs associated with any potential modifications or replacements needed to such systems in order for them to be Year 2000 compliant. It is not expected that such costs would have a material adverse affect upon the operations of the Partnership. Risk Associated with the Year 2000 The Managing General Partner believes that the Managing Agent has an effective program in place to resolve the Year 2000 issue in a timely manner and has appropriate contingency plans in place for critical applications that could affect the Partnership's operations. To date, the Managing General Partner is not aware of any external agent with a Year 2000 issue that would materially impact the Partnership's results of operations, liquidity or capital resources. However, the Managing General Partner has no means of ensuring that external agents will be Year 2000 compliant. The Managing General Partner does not believe that the inability of external agents to complete their Year 2000 resolution 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. Other Certain items discussed in this quarterly report may constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 (the "Reform Act") and as such may involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of the Partnership to be materially different from future results, performance or achievements expressed or implied by such forward- looking statements. Such forward-looking statements speak only as of the date of this quarterly report. The Partnership expressly disclaims any obligation or undertaking to release publicly any updates or revisions to any forward-looking statements contained herein to reflect any change in the Partnership's expectations with regard thereto or any change in events, conditions or circumstances on which any such statement is based. 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 NUANCES, 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 Affiliate") of interests in certain general partner entities, past tender offers by Insignia Affiliates to acquire limited partnership units, the management of partnerships by Insignia Affiliates, as well as a recently announced agreement between Insignia and 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 have filed an amended complaint. The Managing General Partner has filed demurrers to the amended complaint which are scheduled to be heard on January 8, 1999. The Managing General Partner believes the action to be without merit, and intends to vigorously defend it. On July 30, 1998 certain entities claiming to own limited partnership interests in certain limited partnerships whose general partners were, at the time, affiliates of Insignia filed a complaint in the Superior Court of the State of California, County of Los Angeles. The action, entitled EVEREST PROPERTIES LLC V. INSIGNIA FINANCIAL GROUP, INC., involves 44 real estate limited partnerships (including the Partnership) in which the plaintiffs allegedly own interests and which Insignia Affiliates allegedly manage or control (the "Subject Partnerships"). The complaint names as defendants Insignia, several Insignia Affiliates alleged to be managing partners of the Subject Partnerships, the Partnership and the Managing General Partner. Plaintiffs allege that they have requested from, but have been denied by each of the Subject Partnerships, lists of their respective limited partners for the purpose of making tender offers to purchase up to 4.9% of the limited partner units of each of the Subject Partnerships. The complaint also alleges that certain of the defendants made tender offers to purchase limited partner units in many of the Subject Partnerships, with the alleged result that plaintiffs have been deprived of the benefits they would have realized from ownership of the additional units. The plaintiffs assert eleven causes of action, including breach of contract, unfair business practices, and violations of the partnership statutes of the states in which the Subject Partnerships are organized. Plaintiffs seek compensatory, punitive and treble damages. The Managing General Partner filed an answer to the complaint on September 15, 1998. The Managing General Partner believes the claims to be without merit and intends to defend the action vigorously. The Partnership is unaware of any other pending or outstanding litigation that is not of a routine nature. The Managing General Partner believes that all such other matters are adequately covered by insurance and will be resolved without a material adverse effect upon the business, financial condition, results of operations, or liquidity of the Partnership. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K a) Exhibits: Exhibit 27, Financial Data Schedule, is filed as an exhibit to this report. b) Reports on Form 8-K: None filed during the quarter ended September 30, 1998. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. CENTURY PENSION INCOME FUND XXIII By: FOX PARTNERS V, Its General Partner By: FOX CAPITAL MANAGEMENT CORPORATION, Its Managing General Partner By: /s/Patrick Foye Patrick Foye Executive Vice President By: /s/Timothy R. Garrick Timothy R. Garrick Vice President - Accounting (Duly Authorized Officer) Date: November 16, 1998 EX-27 2
5 This schedule contains summary financial information extracted from Century Pension Fund XXIII 1998 Third Quarter 10-Q filing. 0000764543 CENTURY PENSION INCOME FUND XXIII 1,000 9-MOS DEC-31-1998 SEP-30-1998 10,798 0 1,546 0 0 0 79,050 (24,187) 69,842 0 78,590 0 0 0 (24,120) 69,842 0 8,842 0 0 10,638 0 4,267 0 0 0 0 0 0 (2,230) (22.81) 0 Registrant has an unclassified balance sheet. Multiplier is 1.
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