-----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, LlYrRud6v6sokSsKsRIj/nOBsoYRSvyh9Hm4l33CSZQd9biQiNXULIReCkSI+3VR S4vlnXByQsIZtVduhFbraA== 0000950148-98-000928.txt : 19980416 0000950148-98-000928.hdr.sgml : 19980416 ACCESSION NUMBER: 0000950148-98-000928 CONFORMED SUBMISSION TYPE: 10-K405 PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19971231 FILED AS OF DATE: 19980415 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: CENTURY HILLCRESTE APARTMENT INVESTORS L P CENTRAL INDEX KEY: 0000835596 STANDARD INDUSTRIAL CLASSIFICATION: OPERATORS OF APARTMENT BUILDINGS [6513] IRS NUMBER: 954166241 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K405 SEC ACT: SEC FILE NUMBER: 033-22857 FILM NUMBER: 98594245 BUSINESS ADDRESS: STREET 1: 9090 WILSHIRE BLVD STE 201 CITY: BEVERLY HILLS STATE: CA ZIP: 90211 BUSINESS PHONE: 3102782191 MAIL ADDRESS: STREET 1: 9090 WILSHIRE BLVD STREET 2: STE 201 CITY: BEVERLY HILLS STATE: CA ZIP: 90211 10-K405 1 FORM 10-K405 1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the Fiscal Year Ended December 31, 1997 Commission File Number 033-22857 CENTURY HILLCRESTE APARTMENT INVESTORS, L.P. A CALIFORNIA LIMITED PARTNERSHIP I.R.S. Employer Identification No. 95-4166241 9090 WILSHIRE BOULEVARD, SUITE 201, BEVERLY HILLS, CALIFORNIA 90211 Registrant's Telephone Number, Including Area Code (310) 278-2191 Securities Registered Pursuant to Section 12(b) or 12(g) of the Act: NONE Indicate by check mark whether the registrant (1) has filed all reports required to be filed with the Commission by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding twelve months (or 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 --- --- Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [X] 2 PART I. ITEM 1. BUSINESS: Century HillCreste Apartment Investors, L.P. (the "Partnership") is a California limited partnership formed on June 6, 1988, with National Partnership Investments Corp. ("NAPICO", or the "Managing General Partner") and HillCreste Properties Inc. (the "Non-Managing General Partner") as the General Partners (collectively, the "General Partners"). The business of the Partnership is conducted primarily by the Managing General Partner as the Partnership has no employees of its own. The Partnership issued 7,258,000 depository units (each depository unit being entitled to the beneficial interest of a limited partnership interest) on October 26, 1988 to investors (the "Limited Partners") for a total amount raised of $72,580,000, through a public offering. Concurrent with the issuance of the depository units, the Partnership purchased a 315-unit luxury apartment complex in the Century City area of Los Angeles (the "Property") from an affiliate of the Managing General Partner for a purchase price of $68,548,000. In order to complete the purchase of the Property, the seller, an affiliate of the Managing General Partner (the "Seller" or the "Special Limited Partner") purchased a 10 percent special limited partnership interest in the Partnership for $6,855,000. The Partnership Agreement provides that the 10 percent special limited partnership interest is subordinate to the other Limited Partners' specified priority return in the case of distributions of net cash flow from operations, plus the other Limited Partners' return of capital in the case of net sales or refinancing distribution proceeds. NAPICO is a wholly owned subsidiary of Casden Investment Corporation ("CIC"), which is wholly owned by Alan I. Casden. The current members of NAPICO's Board of Directors are Charles H. Boxenbaum, Bruce E. Nelson, Alan I. Casden and Henry C. Casden. DA Group Holdings Inc. owns all of the stock of HillCreste Properties, Inc. Mayer Management Inc., an affiliate of the Managing General Partner, managed the Property from the date of its purchase through December 31, 1995. For the period through January 31, 1995, Mayer Management Inc. was paid a fee of 5 percent of the collected revenues of the Property for its management services and, for the period from February 1, 1995 through December 31, 1995, the fee payable to Mayer Management Inc. was reduced to 3 percent of the Property's revenues. On January 1, 1996, property management was transferred to an unaffiliated property management agent, who manages the Property for a fee of 3 percent of rental revenues. The management fee paid to the applicable property manager was $177,002, $177,320, and $181,375 in 1997, 1996 and 1995, respectively. The Partnership is subject to all of the risks incident to ownership of real estate and interests therein, many of which relate to the lack of liquidity for this type of investment. These risks include, without limitation, changes in general economic conditions, adverse local market conditions due to over-building or a decrease in employment or neighborhood values, changes in supply or demand of competing properties in the area, changes in interest rates and the availability and terms of permanent mortgage funds which may render the sale or refinancing of the Property difficult or unattractive, changes in real estate and zoning laws, increases in real property tax rates, federal or local economic or rent controls, and the occurrence of uninsured losses, such as earthquakes, floods or riots (however, the Property is partially insured for losses from earthquakes), or other factors beyond the control of the General Partners. The lack of liquidity of real estate investments generally will impair the ability of the Partnership to respond promptly to changing circumstances. In addition, these risks are magnified as the Partnership has only one rental property and is not able to spread these risks over different geographic regions. The Property suffered substantial damage as a result of the January 17, 1994 Northridge Earthquake. The repair work required as a result of the earthquake damage was completed in 1995. Additionally, certain improvements were made to the Property, including the privatization of certain streets and alleys providing access to the Property and the installation of security fencing with controlled entrances. See Item 7 below for more detailed information. The Partnership's principal objectives are to (i) provide quarterly cash distributions, (ii) preserve and protect capital, and (iii) achieve long-term appreciation in the value of the Property for distribution upon sale. In addition, although the 3 Partnership acquired the Property for an all-cash purchase price, the Partnership may seek to obtain mortgage financing for the Property. Such financing, if accomplished, could permit the Partnership to distribute to the Limited Partners a substantial portion of their invested capital. There can be no assurance that any of these objectives will be achieved. On April 25, 1996, Everest Century Investors, LLC commenced a tender offer for up to 355,650 of the Partnership's outstanding units for $2.75 per unit. Following the tender offer, certain other investors contacted the Limited Partners and offered to purchase units at prices up to $4.25 per unit. The Partnership has not made any recommendation with regard to the tender offers. In December 1996, Everest HillCreste Investors, LLC ("Everest"), an affiliate of Everest Century Investors, LLC, commenced a proxy solicitation of the Limited Partners seeking to obtain sufficient votes in order to (a) authorize Everest to notify the General Partners on behalf of Limited Partners to call for a special meeting of the Limited Partners, and (b) adopt a resolution at such meeting approving Everest's proposal to purchase the Property for $40 million subject to certain material conditions. On January 9, 1997, the Managing General Partner advised the limited partners that the proposed purchase price was less than the Property's appraised value of $46.9 million as of February 1996, and that four other, non-binding purchase proposals had been received for prices ranging from $40.2 million to $44.7 million, each subject to various contingencies and conditions. The Managing General Partner also informed the limited partners that Casden Properties, an affiliate of the Managing General Partner and the Special Limited Partner of the Partnership, has under the terms of the Amended and Restated Agreement of Limited Partnership (the "Partnership Agreement"), a right of first refusal to acquire the Property for the proposed sales price and terms (the "Right of First Refusal"). Subsequently, Everest has increased its offer by $7 million to $47 million (the "Everest Proposal"). Additionally, the Partnership has since received (a) a report from an independent real estate appraisal firm that the Property's current market value is approximately $47 million and (b) a non-binding proposal from one of the four prior offerees proposing to increase its offer to purchase the Property to $47.4 million. The Managing General Partner makes no recommendation as to the Everest Proposal. The Managing General Partner has been informed that its affiliate, the Special Limited Partner, plans, subject to obtaining reasonable financing, to exercise the aforementioned Right of First Refusal in the event the Everest Proposal is approved. A real estate investment trust organized by an affiliate of NAPICO has advised the Partnership that it intends to make a proposal to purchase from the Partnership the real estate assets of the Partnership for $52,500,000. The Partnership received from an unrelated entity a proposal, dated March 26, 1998, to purchase the property owned by the Partnership for $54,500,000. 4 The following is a schedule of the occupancy status of the Property as of December 31, 1997: No. of Units Percentage of Name & Location Units Occupied Total Units --------------- ----- -------- ----------- HillCreste Apartments Los Angeles, California 315 312 99%
ITEM 2. PROPERTIES: The Partnership holds an interest in one real estate property. See Item 1 above and Schedule for additional information pertaining to this Property. ITEM 3. LEGAL PROCEEDINGS: The Managing General Partner, NAPICO, is a plaintiff or defendant in several lawsuits, which are unrelated to the Partnership. In addition, the Partnership is involved in the actions described below: Securities and Exchange Commission The Partnership, NAPICO, and several of NAPICO's officers, directors and affiliates consented to the entry, on June 25, 1997, of an administrative cease and desist order by the U.S. Securities and Exchange Commission (the "Commission"), without admitting or denying any of the findings made by the Commission. The order concerns, in part, the treatment of Partnership funds deposited between September 1991 and July 1993 in a master disbursement account used by the Partnership's previous property management company. The Commission found that those funds should have been recorded on the Partnership's books and reported in its financial statements as related party accounts receivable rather than as cash as done so by the Partnership's auditors. Although the Commission found that this misclassification of current assets violated federal securities laws, the Commission did not find that these violations were intentional nor did the Commission find that limited partners had suffered any loss or damage as a result of these violations. Moreover, the Commission's order does not impose any cost, burden or penalty on the Partnership and does not impact NAPICO's ability to serve as the Partnership's Managing General Partner. The events that gave rise to the Commission's order occurred in or before 1993. Subsequent corrective action by the Partnership and its general partners precludes any recurrence of the cash management issues described in the Commission's order. J/B Lawsuit On February 13, 1997, J/B Investment Partners ("J/B") filed an action in the Los Angeles Superior Court (the "J/B Lawsuit"), against the Managing General Partner and its directors, and Casden Properties and certain of its affiliates (collectively, the "Defendants"). By order dated November 25, 1997, the Los Angeles Superior Court dismissed the J/B Lawsuit with prejudice. No appeal has been taken. The J/B Lawsuit was styled as a class action brought against the Defendants on behalf of all limited partners of the Partnership, and a derivative action brought on behalf of the Partnership itself. The Partnership was named as a "nominal 5 defendant." The complaint in the J/B Lawsuit contained four causes of action: (a) breach of fiduciary duty; (b) breach of contract; (c) unjust enrichment; and (d) equitable relief. The alleged wrongdoing of the Defendants as set forth in the J/B Lawsuit related to the following issues: 1. J/B alleged misappropriation and misuse of Partnership funds which were the subject of a previous lawsuit (the "Prior Lawsuit") filed in the Los Angeles Superior Court in June 1995 by (the Non-Managing General Partner). The Managing General Partner vigorously denied these allegations, and without admission of any wrongdoing, the Prior Lawsuit was settled by a Memorandum of Understanding executed in August 1995, with final settlement documentation executed in April 1996, at which time the Prior Lawsuit was dismissed with prejudice as to all defendants. Additionally, J/B alleged that the Defendants wrongfully caused the Partnership to pay legal fees on behalf of the Managing General Partner or certain of its affiliates relating to a regulatory investigation discussed above. 2. J/B alleged that the Defendants failed to explore transactions that would maximize the value of the limited partners' investment in the Partnership, including the four unsolicited offers to purchase the Property, implementation of an auction process regarding the potential sale of the Property and obtaining financing with respect to the Property. 3. J/B alleged that the January 1997 letter from the Managing General Partner to the Limited Partners contained misleading statements about the original Everest proxy solicitation and about the Special Limited Partner's Right of First Refusal. Specifically, J/B contended that the January letter failed to disclose the Managing General Partner's advice and opinions regarding the response of the Limited Partners to the original Everest offer and contained misstatements about certain provisions of the Partnership Agreement pertaining to actions permitted or required to be taken by the Limited Partners of the Partnership. J/B stated that the Limited Partners were not authorized, by vote of a majority-in-interest or otherwise, to bind, compel, or require the Partnership to enter into any contract for the sale of the Property, including the proposed sales contract with Everest. In other words, J/B asserted that the Everest Proposal cannot be implemented as proposed because it is beyond the Limited Partners' authority under the Partnership Agreement. Consequently, J/B claimed that the conditions to the Special Limited Partner's Right of First Refusal to purchase the Property for a price and on terms equal to those contained in the Everest Proposal could not under the Partnership Agreement be fulfilled, and, therefore, no such Right of First Refusal could be exercised. J/B was seeking damages in the J/B Lawsuit in a unspecified amount and equitable relief, including, among other things, a declaration judgment as to whether or not there exists a Right of First Refusal. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS: As discussed above under Item 1, Everest commenced the solicitation of proxies in December 1996 regarding the sale of the property. The General Partners are unaware of the results of that solicitation, as amended, and to date no Special Meeting of the Limited Partners has been called. PART II. ITEM 5. MARKET FOR THE REGISTRANT'S PARTNERSHIP INTERESTS AND RELATED SECURITY HOLDER MATTERS: The Partnership's units are not traded on a public exchange. It is not anticipated that any public market will develop for the purchase and sale of any units. Depository units may be transferred only if certain requirements are satisfied. As of December 31, 1997, there were 6,670 registered holders of units in the Partnership. 6 ITEM 6. SELECTED FINANCIAL DATA:
Year Ended December 31, --------------------------------------------------------------------------------------- 1997 1996 1995 1994 1993 ----------- ----------- ----------- ----------- ----------- Rental revenues $ 5,960,474 $ 5,410,156 $ 5,394,552 $ 5,390,358 $ 5,109,914 Interest and other income 189,377 218,216 287,523 81,885 131,332 ----------- ----------- ----------- ----------- ----------- Total revenues $ 6,149,851 $ 5,628,372 $ 5,682,075 $ 5,472,243 $ 5,241,246 =========== =========== =========== =========== =========== Net income $ 3,010,909 $ 2,675,170 $ 2,498,336 $ 1,224,739 $ 1,848,761 =========== =========== =========== =========== =========== Net income per depository unit $ 0.41 $ 0.37 $ 0.34 $ 0.17 $ 0.25 =========== =========== =========== =========== =========== Rental property owned at cost less accumulated depreciation $34,013,326 $34,337,025 $34,772,331 $35,660,385 $36,424,447 =========== =========== =========== =========== =========== Total assets $38,311,564 $38,040,786 $37,684,178 $38,577,456 $41,344,209 =========== =========== =========== =========== ===========
7 ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS: CAPITAL RESOURCES AND LIQUIDITY The Partnership raised proceeds of $72,580,000 from the sale of depository units, pursuant to a public offering and received additional capital contributions from the General Partners of $1,050 and from the Special Limited Partner of $6,855,000. Currently, the only sources of Partnership income consist of income from rental operations at the Property and interest earned on Partnership reserves. In conjunction with the acquisition of the Property, the Partnership received a guarantee from the Special Limited Partner, (now an affiliate of the Managing General Partner), which guarantee agreement (the "Guarantee Agreement") required the Special Limited Partner to make payments as provided in the Guarantee Agreement, if and when necessary, in an amount sufficient to enable the Partnership to provide the Limited Partners with minimum distributions through December 1993. Through 1994 the special limited partner funded $13,130,998 pursuant to the Guarantee Agreement. Commencing in 1994, distributions to the partners are being made from cash flow from operations. Pursuant to a Memorandum of Understanding entered into on August 11, 1995, the Special Limited Partner agreed to pay to the Partnership the sum of $350,000 in two equal installments of $175,000 each; the first such $175,000 payment was made in August 1995 and the second payment was made in May 1996. These payments represent the amount of a real estate tax refund received in 1994 for overpayment of prior year taxes which had previously been offset against amounts receivable from the Special Limited Partner under the Guarantee Agreement. Approvals from the City of Los Angeles were obtained to "privatize" the streets and alleys providing access to the Property and to construct wrought iron security fencing with controlled entrances into the Property. The final resolution vacating the streets and alleys was approved on December 31, 1994. Landscaping, and the construction of the perimeter fencing and related improvements, including a guardhouse at the Ambassador Street entrance and a directory/trellis at the Peerless Street location is now complete at a cost to the partnership of $870,107. RESULTS OF OPERATIONS Occupancy averaged 95 percent for the year ended December 31, 1997, as compared to an average of 95 percent for the year ended December 31, 1996, and an average of 94 percent for 1995. The Property was 95 percent occupied as of December 31, 1997 and 1996, respectively. Rental income was generally consistent for 1996 and 1995. Rental income increased in 1997 as a result of the increase in occupancy and an increase in rental charges per unit. Included in the interest and other income is interest income earned on cash and cash equivalents of $176,000, $135,000 and $143,000 in 1997, 1996 and 1995, respectively. Interest income increased in 1997 as compared to 1996 as a result of the increase in cash and cash equivalents from $3,490,463 at December 31, 1996 to $4,100,537 at December 31, 1997. The Partnership has its cash and cash equivalents on deposit primarily with one money market mutual fund. 8 On January 17, 1994, the rental property sustained damage due to the Earthquake. In 1994, a total of $405,340 was spent to repair damage caused by the Earthquake. Substantially all of the repairs ($376,000) were performed on an emergency basis by Mayer Property Services, Inc., an affiliate of the Managing General Partner, and the Special Limited Partner upon the instruction and authorization of the building's property management company, Mayer Management, Inc. In 1995, the Partnership paid approximately $1,125,000 to an unaffiliated contractor to fully repair the remaining damage suffered by the Property as a result of the Earthquake. Based on a determination by the building's insurance carrier that the loss suffered by the Property as a result of the Earthquake was $1,537,718, the Partnership received in August 1994 a net insurance settlement in the amount of $355,448. This amount was determined by reducing the gross amount of the Property's loss by: (a) the deductible provided for in the policy in the amount of $1,071,808; (b) the $34,095 paid to the independent public adjuster that processed the building's claim; and (c) the insurance company's holdback of $76,367. The Partnership recorded a provision for earthquake loss of $36,662 and $1,141,615 in 1995 and 1994, respectively. Since the investigation and recommendation of the staff of the Securities and Exchange Commission (the "Commission") (see "Legal Proceedings," Item 3, for further discussion) concerned the Partnership's financial statements and Commission filings, a portion of the legal fees incurred by NAPICO in responding to the staff has been allocated to and charged to the Partnership by NAPICO. These fees were $2,583 and $120,431 for 1996 and 1995, respectively, and are included in general and administrative expenses. In addition, $150,000 in professional fees was estimated and accrued in 1995 related to the Memorandum of Understanding. Legal fees primarily account for the decrease in general and administrative expenses in 1996, compared to 1995. Included in general and administrative expenses for 1997 is $350,000 in expense reimbursements to the Non-Managing General Partner. In accordance with the Partnership Agreement, partnership expense reimbursements, not to exceed $50,000 annually, are payable to the Non-Managing General Partner. The expense reimbursements for 1991 through 1996 in the amount of $300,000, which were previously disputed, were expensed and paid in 1997. In addition, $50,000 has been paid and expensed for the year ended December 31, 1997. This accounts for the increase in general and administrative expenses in 1997 as compared to 1996. The Partnership has assessed the potential impact of the Year 2000 computer systems issue on its operations. The Partnership believes that no significant actions are required to be taken by the Partnership to address the issue and that the impact of the Year 2000 computer systems issue will not materially affect the Partnership's future operating results or financial condition. A real estate investment trust ("REIT") organized by an affiliate of NAPICO has advised the Partnership that it intends to make a proposal to purchase the property by the Partnership. The REIT proposes to purchase such property for cash, which it plans to raise in connection with a private placement of its equity securities. The purchase is subject to, among other things, (i) consummation of such private placement by the REIT; (ii) the consent of the limited partners to the sale of the property; and (iii) the consummation of a minimum number of purchase transactions with other Casden affiliated partnerships. A proxy is contemplated to be sent to the limited partners setting forth the terms and conditions of the purchase of the property for investment by the Partnership, together with certain amendments to the Partnership Agreement and other disclosures of various conflicts of interest in connection with the transaction. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA: The Financial Statements and Supplementary Data are listed under Item 14. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE: Not applicable. 9 CENTURY HILLCRESTE APARTMENT INVESTORS, L.P. (a California Limited Partnership) FINANCIAL STATEMENTS, FINANCIAL STATEMENT SCHEDULES AND INDEPENDENT PUBLIC ACCOUNTANTS' REPORTS DECEMBER 31, 1997 10 REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To the Partners of Century HillCreste Apartment Investors, L.P. (A California limited partnership) We have audited the accompanying balance sheets of Century HillCreste Apartment Investors, L.P. (a Calfornia limited partnership) as of December 31, 1997 and 1996, and the related statements of income, partners' capital (deficiency) and cash flows for each of the three years in the period ended December 31, 1997. Our audits also included the financial statement schedule listed in the index at Item 14. These financial statements and financial statement schedule are the responsibility of the management of the Partnership. Our responsibility is to express an opinion on these financial statements and financial statement schedule based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Century HillCreste Apartment Investors, L.P. as of December 31, 1997 and 1996, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 1997 in conformity with generally accepted accounting principles. Also, in our opinion, such financial statement schedule, when considered in relation to the basic financial statements taken as a whole, presents fairly in all material respects the information set forth therein. DELOITTE & TOUCHE LLP Los Angeles, California April 6, 1998 11 CENTURY HILLCRESTE APARTMENTS INVESTORS, L.P. (A CALIFORNIA LIMITED PARTNERSHIP) BALANCE SHEETS DECEMBER 31, 1997 AND 1996 ASSETS
1997 1996 ----------- ----------- RENTAL PROPERTY (Notes 1, 2 and 3) $34,013,326 $34,337,025 CASH AND CASH EQUIVALENTS (Note 1) 4,100,537 3,490,463 RESTRICTED CASH (Notes 1 and 5) 158,700 158,700 OTHER ASSETS (Note 5) 39,001 54,598 ----------- ----------- $38,311,564 $38,040,786 =========== =========== LIABILITIES AND PARTNERS' CAPITAL ACCOUNTS PAYABLE AND ACCRUED LIABILITIES (Note 4) $ 367,529 $ 413,457 SECURITY DEPOSITS 297,622 315,244 PREPAID RENT 16,866 75,583 ----------- ----------- 682,017 804,284 COMMITMENTS AND CONTINGENCIES (Note 5) PARTNERS' CAPITAL (Note 1) 37,629,547 37,236,502 ----------- ----------- $38,311,564 $38,040,786 =========== ===========
The accompanying notes are an integral part of these financial statements. 12 CENTURY HILLCRESTE APARTMENTS INVESTORS, L.P. (A CALIFORNIA LIMITED PARTNERSHIP) STATEMENTS OF INCOME FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
1997 1996 1995 ---------- ---------- ---------- REVENUES Rental income $5,960,474 $5,410,156 $5,394,552 Interest and other income (Note 3) 189,377 218,216 287,523 ---------- ---------- ---------- 6,149,851 5,628,372 5,682,075 ---------- ---------- ---------- EXPENSES Operating (Note 4) 1,255,071 1,165,010 1,178,744 Property taxes 514,306 537,717 422,121 Management fee - related party in 1995 (Note 4) 177,002 177,320 181,375 General and administrative (Note 4) 758,946 367,599 651,783 Depreciation 705,556 705,556 713,054 Provision for earthquake loss (Note 5) -- -- 36,662 ---------- ---------- ---------- 3,410,881 2,953,202 3,183,739 ---------- ---------- ---------- NET INCOME $2,738,970 $2,675,170 $2,498,336 ========== ========== ========== NET INCOME PER DEPOSITORY UNIT $ 0.38 $ 0.37 $ 0.34 ========== ========== ==========
The accompanying notes are an integral part of these financial statements. 13 CENTURY HILLCRESTE APARTMENTS INVESTORS, L.P. (A CALIFORNIA LIMITED PARTNERSHIP) STATEMENTS OF PARTNERS' CAPITAL (DEFICIENCY) FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
Special Limited General Limited Partner Partners Partners (Note 1) Total ------------- ------------- ------------- ------------- BALANCE, JANUARY 1, 1995 $(285,507) $36,922,814 $ - $36,637,307 DISTRIBUTIONS (Note 7) (27,262) (2,290,626) - (2,317,888) NET INCOME FOR 1995 24,983 2,473,353 - 2,498,336 ------------- ------------- ------------- ------------- BALANCE, DECEMBER 31, 1995 (287,786) 37,105,541 - 36,817,755 DISTRIBUTIONS (Note 7) (17,131) (2,239,292) - (2,256,423) NET INCOME FOR 1996 26,752 2,648,418 - 2,675,170 ------------- ------------- ------------- ------------- BALANCE, DECEMBER 31, 1996 (278,165) 37,514,667 - 37,236,502 DISTRIBUTIONS (Note 7) (23,459) (2,322,466) - (2,345,925) NET INCOME FOR 1997 27,390 2,711,580 - 2,738,970 ------------- ------------- ------------- ------------- BALANCE, DECEMBER 31, 1997 $(274,234) $37,903,781 $ - $37,629,547 ============= ============= ============= =============
The accompanying notes are an integral part of these financial statements. 14 CENTURY HILLCRESTE APARTMENTS INVESTORS, L.P. (A CALIFORNIA LIMITED PARTNERSHIP) STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
1997 1996 1995 ----------- ----------- ----------- CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 2,738,970 $ 2,675,170 $ 2,498,336 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation 705,556 705,556 713,054 Provision for earthquake loss -- -- 36,662 Decrease (increase) in other assets 15,597 (39,496) 317,783 Increase (decrease) in accounts payable and accrued liabilities (45,928) 54,098 (54,664) Increase (decrease) in due to general partners 0 (150,000) 58,669 Increase (decrease) in security deposits (17,622) 5,145 (10,241) Increase (decrease) in prepaid rent (58,717) 28,618 24,233 ----------- ----------- ----------- Net cash provided by operating activities 3,337,856 3,583,832 3,583,832 ----------- ----------- ----------- CASH FLOWS FROM INVESTING ACTIVITIES: Payments received pursuant to the minimum distribution guarantee -- 175,000 175,000 Increase in rental property (381,857) (445,250) -- Earthquake loss payments -- -- (1,128,385) ----------- ----------- ----------- Net cash used in investing activities (381,857) (270,250) (953,385) ----------- ----------- ----------- CASH FLOWS FROM FINANCING ACTIVITIES: Distributions to partners (2,345,925) (2,256,423) (2,317,888) ----------- ----------- ----------- NET INCREASE IN CASH AND CASH EQUIVALENTS 610,074 752,418 312,559 CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 3,490,463 2,738,045 2,425,486 ----------- ----------- ----------- CASH AND CASH EQUIVALENTS, END OF YEAR $ 4,100,537 $ 3,490,463 $ 2,738,045 =========== =========== ===========
The accompanying notes are an integral part of these financial statements. 15 CENTURY HILLCRESTE APARTMENT INVESTORS, L.P. (a California Limited Partnership) NOTES TO FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Organization Century HillCreste Apartment Investors, L.P. (the "Partnership"), a California limited partnership, was formed on June 6, 1988, with National Partnership Investments Corp. (the "Managing General Partner"), and HillCreste Properties Inc. (the "Non-Managing General Partner") as the general partners (collectively, the "General Partners"). On October 26, 1988, the Partnership issued to investors (the "Limited Partners") 7,258,000 depositary units (each depositary unit being entitled to the beneficial interest of a limited partnership interest), for a total amount raised of $72,580,000, through a public offering. Concurrent with the issuance of the depositary units, the Partnership purchased a 315-unit apartment complex in the Century City area of Los Angeles, California (the "Property") from Casden Properties (the "Seller"). To complete the purchase of the Property, the Seller purchased a 10% special limited partnership interest in the Partnership for $6,855,000 and became the Special Limited Partner of the Partnership. Among other things, the Partnership Agreement provides that the 10% special limited partnership interest be subordinate to the other Limited Partners' specified priority return in the case of distributions of net cash flow from operations, plus the other Limited Partners' return of capital in the case of net sales or refinancing distribution proceeds. Casden Investment Corporation, an affiliate of the Seller, owns 100% of the outstanding common stock of the Managing General Partner. Use of Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Depreciation Depreciation is reported using the straight-line method over the estimated useful lives of the buildings and equipment as follows: Buildings 35 years Furniture and equipment 5 years Minimum Distribution Guarantee The minimum distribution guarantee payments from the Seller have been reflected as a reduction in the carrying amount of the Property. 5 16 CENTURY HILLCRESTE APARTMENT INVESTORS, L.P. (a California Limited Partnership) NOTES TO FINANCIAL STATEMENTS (CONTINUED) FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) For its contribution of $6,855,000, the Seller has rights to receive an allocation of the Partnership's net cash from operations after the Limited Partners receive a specified priority return. Cash and Cash Equivalents Cash and cash equivalents consist of cash and bank certificates of deposit with an original maturity of three months or less. The Partnership has its cash and cash equivalents on deposit primarily with one money market mutual fund. Such cash and cash equivalents are uninsured. Restricted Cash Restricted cash consists of bank certificates of deposits assigned to the City of Los Angeles in lieu of purchasing a subdivision improvement bond to effectuate the privatization of city streets located within the Property's perimeter (see Note 5). Income Taxes No provision has been made for income taxes in the accompanying financial statements since such taxes, if any, are the liability of the partners. Net Income Per Depository Unit Net income per depository unit was computed by dividing the Limited Partners' share of net income (99%) by the number of depository units outstanding during the year. The number of depository units was 7,258,000 for all years presented. Impairment of Long-Lived Assets The Partnership reviews long-lived assets to determine if there has been any permanent impairment whenever events or changes in circumstances indicate that the carrying amount of the asset may not be recoverable. If the sum of the expected future cash flows is less than the carrying amount of the assets, the Partnership recognizes an impairment loss. 6 17 CENTURY HILLCRESTE APARTMENT INVESTORS, L.P. (a California Limited Partnership) NOTES TO FINANCIAL STATEMENTS (CONTINUED) FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995 2. RENTAL PROPERTY At December 31, 1997 and 1996, rental property consists of the following:
1997 1996 ----------- ----------- Land $16,175,000 $16,175,000 Buildings 24,694,402 24,694,402 Furniture and equipment 3,870,000 3,870,000 Improvements 827,107 445,250 ----------- ----------- 45,566,509 45,184,652 Less: Accumulated depreciation 11,553,183 10,847,627 ----------- ----------- $34,013,326 $34,337,025 =========== ===========
In December 1996, Everest HillCreste Investors, LLC ("Everest"), an affiliate of Everest Century Investors, LLC, commenced a proxy solicitation of the Limited Partners seeking to obtain sufficient votes in order to (a) authorize Everest to notify the General Partners on behalf of Limited Partners to call for a special meeting of the Limited Partners, and (b) adopt a resolution at such meeting approving Everest's proposal to purchase the Property for $40 million subject to certain material conditions. On January 9, 1997, the Managing General Partner advised the limited partners that the proposed purchase price was less than the Property's appraised value of $46.9 million as of February 1996, and that four other, non-binding purchase proposals had been received for prices ranging from $40.2 million to $44.7 million, each subject to various contingencies and conditions. The Managing General Partner also informed the Limited Partners that Casden Properties, an affiliate of the Managing General Partner and the Special Limited Partner of the Partnership, has under the terms of the Amended and Restated Agreement of limited partnership (the "Partnership Agreement"), a right of first refusal to acquire the Property for the proposed sales price and terms (the "Right of First Refusal"). Subsequently, Everest has increased its offer by $7 million to $47 million (the "Everest Proposal"). Additionally, the Partnership received (a) a report from an independent real estate appraisal firm that the Property's current market value is approximately $47 million and (b) a non-binding proposal from one of the four prior offerees proposing to increase its offer to purchase the Property to $47.4 million. The Managing General Partner makes no recommendation as to the Everest Proposal. The Managing General Partner has been informed that its affiliate, the Special Limited Partner, plans, subject to obtaining reasonable financing, to exercise the aforementioned Right of First Refusal in the event the Everest Proposal is approved. 7 18 CENTURY HILLCRESTE APARTMENT INVESTORS, L.P. (a California Limited Partnership) NOTES TO FINANCIAL STATEMENTS (CONTINUED) FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995 2. RENTAL PROPERTY (Continued) A real estate investment trust organized by an affiliate of NAPICO has advised the Partnership that it intends to make a proposal to purchase from the Partnership the real estate assets of the Partnership for $52,500,000. 3. MINIMUM DISTRIBUTION GUARANTEE RECEIVABLE FROM PARTNER The Minimum Distribution Guarantee Agreement (the "Guarantee Agreement") required the Seller, who is also the Special Limited Partner, to make payments to the Partnership, if and when necessary, in an amount sufficient to enable the Partnership to provide the Limited Partners with distributions sufficient to achieve a minimum annual return upon the Limited Partners' investment in the Partnership, through December 31, 1993, as follows:
Years Ended December 31, Annual Return on Investment ------------------------ --------------------------- 1988 8.0% 1989 8.0% 1990 8.5% 1991 9.0% 1992 9.0% 1993 9.0%
Pursuant to a Memorandum of Understanding entered into on August 11, 1995, the Seller agreed to pay to the Partnership the sum of $350,000 in two equal installments of $175,000 each; the first such $175,000 payment was made in August 1995 and the second payment was made in May 1996. These payments represent the amount of a real estate tax refund received in 1994 for overpayment of prior year taxes which had previously been offset against amounts receivable from the Seller under the Guarantee Agreement. In addition, in August 1995, the Seller made an additional payment of $135,000 pursuant to the Memorandum of Understanding representing interest on late guarantee payments. This has been included in interest and other income. Through December 31, 1997, the Seller has funded a total of $13,130,998 directly to the Partnership for distributions to the Limited Partners pursuant to the Guarantee Agreement, which includes the $350,000, referred to above. The period covered by the Guarantee Agreement expired on December 31, 1993. Except with respect to the payments made or to be made pursuant to the Memorandum of Understanding, commencing in 1994, distributions, if any, to the Partners are made from cash flow from operations. 4. FEES PAID TO GENERAL PARTNERS AND AFFILIATES In accordance with the Partnership and other agreements, certain fees and reimbursements have been paid to the general partners and their affiliates as follows: 8 19 CENTURY HILLCRESTE APARTMENT INVESTORS, L.P. (a California Limited Partnership) NOTES TO FINANCIAL STATEMENTS (CONTINUED) FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995 4. FEES PAID TO GENERAL PARTNERS AND AFFILIATES (Continued) a. A partnership management fee of $50,000 annually is paid to the Managing General Partner. This fee is included in general and administrative expenses for 1997, 1996 and 1995. b. Prior to February 1, 1995, a property management fee equal to 5% of collected revenues was paid to an affiliate of the Managing General Partner. Effective February 1, 1995, the property management fee payable to the Managing General Partner's affiliate was reduced to 3%. The property management fees paid to the affiliate for the year ended December 31, 1995 were $181,375. On January 1, 1996, property management was transferred to an unaffiliated agent, who manages the property for a fee of 3% of rental revenues. The property management fees paid to the unaffiliated agent for the years ended December 31,1997 and 1996 were $177,002 and $177,320, respectively. Additionally, the Partnership paid approximately $41,700 for the year ended December 31, 1995 to an affiliate of the Managing General Partner for maintenance services. c. Partnership expense reimbursements, not to exceed $50,000 annually, are paid to the Non-Managing General Partner. The Non-Managing General Partner expense reimbursements for 1990 through 1996 in the amount of $350,000, which were previously disputed, were paid in the year ended December 31, 1997. Of this amount, $50,000 was expensed in 1990 and was included in accounts payable and accrued liabilities at December 31, 1996. The balance of $300,000 was expensed and included in general and administrative expenses for 1997. In addition $50,000 has been paid and expensed for the year ended December 31, 1997. d. The Managing General Partner is entitled to receive 1% of distributions (as defined in the Partnership Agreement) which are made by the Partnership. The distributions received by the Managing General Partner for the years ended December 31, 1997, 1996 and 1995 were $23,459, $17,131 and $27,262, respectively. e. The Partnership is obligated to pay certain fees to the Managing General Partner or its affiliates upon sale of the Property. The payment of such fees is subordinated to certain preferred returns to the Limited Partners. 5. COMMITMENTS AND CONTINGENCIES a. On January 17, 1994, the Property sustained damage due to the earthquake in the Los Angeles area (the "Northridge Earthquake"). For the years ended December 31, 1995 and 1994, approximately $37,000, and $1,142,000, respectively, has been provided for repairing the damage caused by the Northridge Earthquake. The provision for earthquake loss for 1994 is net of an insurance settlement of $355,448. 9 20 CENTURY HILLCRESTE APARTMENT INVESTORS, L.P. (a California Limited Partnership) NOTES TO FINANCIAL STATEMENTS (CONTINUED) FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995 5. COMMITMENTS AND CONTINGENCIES (Continued) b. Approvals from the City of Los Angeles were obtained to "privatize" the streets and alleys providing access to the Property and to construct wrought iron security fencing with controlled entrances into the Property. The final resolution vacating the streets and alleys was approved on December 31, 1994. Landscape and the construction of the perimeter fencing and related improvements, including a guardhouse at the Ambassador Street entrance and a directory/trellis at the Peerless Street location is nearing completion. As a condition to its approval of the proposed "privatization", the City of Los Angeles required the construction of a storm drain and related improvements, for which an improvement agreement and guarantee in the amount $158,700 has been filed with the City of Los Angeles. The Partnership has pledged a certificate of deposit in such amount to the City to secure the improvement guarantee. Contracts in the amount of $767,000 and $60,685 have been awarded to construct the wrought iron security fencing and to construct a storm drain and related improvements, respectively, for which construction work commenced in September 1996. As of December 31, 1997, $827,107 has been paid to the contractor. c. The Managing General Partner of the Partnership is a plaintiff in various lawsuits and has also been named as a defendant in other lawsuits arising from transactions in the ordinary course of business. In the opinion of management and the Managing General Partner, the claims will not result in any material liability to the Partnership. In addition, the Partnership is involved in the actions described below: d. The Partnership, NAPICO, and several of NAPICO's officers, directors and affiliates consented to the entry, on June 25, 1997, of an administrative cease and desist order by the U.S. Securities and Exchange Commission, (the "Commission"), without admitting or denying any of the findings made by the Commission. The order concerns, in part, the treatment of Partnership funds deposited between September 1991 and July 1993 in a master disbursement account used by the Partnership's previous property management company. The Commission found that those funds should have been recorded on the Partnership's books and reported in its financial statements as related party accounts receivable rather than as cash as done so by the Partnership's auditors. Although the Commission found that this misclassification of current assets violated federal securities laws, the Commission did not find that these violations were intentional nor did the Commission find that limited partners had suffered any loss or damage as a result of these violations. Moreover, the Commission's order does not impose any cost, burden or penalty on the Partnership and does not impact NAPICO's ability to serve as the Partnership's Managing General Partner. The events that gave rise to the Commission's order occurred in or before 1993. Subsequent corrective action by the Partnership and its general partners precludes any recurrence of the cash management issues described in the Commission's order. 10 21 CENTURY HILLCRESTE APARTMENT INVESTORS, L.P. (a California Limited Partnership) NOTES TO FINANCIAL STATEMENTS (CONTINUED) FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995 5. COMMITMENTS AND CONTINGENCIES (Continued) e. On February 13, 1997, J/B Investment Partners ("J/B") filed an action in the Los Angeles Superior Court (the "J/B Lawsuit"), against the Managing General Partner and its directors, and Casden Properties and certain of its affiliates (collectively, the "Defendants"). By order dated November 25, 1997, the Los Angeles Superior Court dismissed the J/B Lawsuit with prejudice. No appeal has been taken. The J/B Lawsuit was styled as a class action brought against the Defendants on behalf of all limited partners of the Partnership, and a derivative action brought on behalf of the Partnership itself. The Partnership was named as a "nominal defendant." The complaint in the J/B Lawsuit contained four causes of action: (a) breach of fiduciary duty; (b) breach of contract; (c) unjust enrichment; and (d) equitable relief. The alleged wrongdoing of the Defendants as set forth in the J/B Lawsuit related to the following issues: 1. J/B alleged misappropriation and misuse of Partnership funds which were the subject of a previous lawsuit (the "Prior Lawsuit") filed in the Los Angeles Superior Court in June 1995 by (the Non-Managing General Partner). The Managing General Partner vigorously denied these allegations, and without admission of any wrongdoing the Prior Lawsuit was settled by a Memorandum of Understanding executed in August 1995, with final settlement documentation executed in April 1996, at which time the Prior Lawsuit was dismissed with prejudice as to all defendants. Additionally, J/B alleged that the Defendants wrongfully caused the Partnership to pay legal fees on behalf of the Managing General Partner or certain of its affiliates relating to a regulatory investigation discussed above. 2. J/B alleged that the Defendants failed to explore transactions that would maximize the value of the limited partners' investment in the Partnership, including the four unsolicited offers to purchase the Property, implementation of an auction process regarding the potential sale of the Property and obtaining financing with respect to the Property. 3. J/B alleged that the January 1997 letter from the Managing General Partner to the Limited Partners contained misleading statements about the original Everest proxy solicitation and about the Special Limited Partner's Right of First Refusal. Specifically, J/B contended that the January letter failed to disclose the Managing General Partner's advice and opinions regarding the response of the Limited Partners to the original Everest offer and contained misstatements about certain provisions of the Partnership Agreement pertaining to actions permitted or required to be taken by the Limited Partners of the Partnership. J/B stated that the Limited Partners were not authorized, by 11 22 CENTURY HILLCRESTE APARTMENT INVESTORS, L.P. (a California Limited Partnership) NOTES TO FINANCIAL STATEMENTS (CONTINUED) FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995 5. COMMITMENTS AND CONTINGENCIES (Continued) vote of a majority-in-interest or otherwise, to bind, compel, or require the Partnership to enter into any contract for the sale of the Property, including the proposed sales contract with Everest. In other words, J/B asserted that the Everest Proposal could not be implemented as proposed because it is beyond the Limited Partners' authority under the Partnership Agreement. Consequently, J/B claims that the conditions to the Special Limited Partner's Right of First Refusal to purchase the Property for a price and on terms equal to those contained in the Everest Proposal cannot under the Partnership Agreement be fulfilled, and, therefore, no such Right of First Refusal could be exercised. J/B was seeking damages in the J/B Lawsuit in a unspecified amount and equitable relief, including, among other things, a declaration judgment as to whether or not there exists a Right of First Refusal. f. The Partnership has assessed the potential impact of the Year 2000 computer systems issue on its operations. The Partnership believes that no significant actions are required to be taken by the Partnership to address the issue and that the impact of the Year 2000 computer systems issue will not materially affect the Partnership's future operating results or financial condition. 6. FAIR VALUE OF FINANCIAL INSTRUMENTS Statement of Financial Accounting Standards No. 107, "Disclosure about Fair Value of Financial Instruments," requires disclosure of fair value information about financial instruments. The carrying amount of assets and liabilities reported on the balance sheets that require such disclosure approximates fair value due to their short-term maturity. 7. SUBSEQUENT EVENT In January 1998, the Partnership distributed $601,022 to the General and Limited Partners related to 1997. 12 23 SCHEDULE III CENTURY HILLCRESTE APARTMENT INVESTORS, L.P. REAL ESTATE AND ACCUMULATED DEPRECIATION DECEMBER 31, 1997 NOTES: 1. Rental property is stated at cost. Depreciation is provided for on the straight-line method over the estimated useful lives of the assets. Substantially all of the apartments are leased on a month-to-month basis. 2. The total cost of land, buildings, and equipment for federal income tax purposes at December 31, 1997 is approximately $51,706,119. 3. Investment in rental property:
Buildings, Furniture and Land Equipment Total ------------ ------------ ------------ Balance, January 1, 1995 $ 16,175,000 $ 28,914,402 $ 45,089,402 Less: minimum distribution guarantee amounts funded in 1995 -- (175,000) (175,000) ------------ ------------ ------------ Balance, December 31, 1995 16,175,000 28,739,402 44,914,402 Less: minimum distribution guarantee amounts funded in 1996 -- (175,000) (175,000) Additions: Improvements -- 445,250 445,250 ------------ ------------ ------------ Balance, December 31, 1996 16,175,000 29,009,652 45,184,652 Additions: Improvements -- 381,857 381,857 ------------ ------------ ------------ Balance, December 31, 1997 $ 16,175,000 $ 29,391,509 $ 45,566,509 ============ ============ ============
24 PART III. ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT: CENTURY HILLCRESTE APARTMENT INVESTORS, L.P. (the "Partnership") has no directors or executive officers of its own. National Partnership Investments Corp. ("NAPICO" or the "Managing General Partner") is a wholly-owned subsidiary of Casden Investment Corporation, an affiliate of The Casden Company. The following biographical information is presented for the directors and executive officers of NAPICO with principal responsibility for the Partnership's affairs. CHARLES H. BOXENBAUM, 68, Chairman of the Board of Directors and Chief Executive Officer of NAPICO. Mr. Boxenbaum has been associated with NAPICO since its inception. He has been active in the real estate industry since 1960, and prior to joining NAPICO was a real estate broker with the Beverly Hills firm of Carl Rhodes Company. Mr. Boxenbaum has been a guest lecturer at national and state realty conventions, certified properties exchanger's seminars, Los Angeles Town Hall, National Association of Home Builders, International Council of Shopping Centers, Society of Conventional Appraisers, California Real Estate Association, National Institute of Real Estate Brokers, Appraisal Institute, various mortgage banking seminars, and the North American Property Forum held in London, England. In 1963, he was the winner of the Snyder Award, the highest annual award offered by the National Association of Real Estate Boards for Best Exchange. He is one of the founders and a past director of the First Los Angeles Bank, organized in November 1974. Mr. Boxenbaum was a member of the Board of Directors of the National Housing Council. Mr. Boxenbaum received his Bachelor of Arts degree from the University of Chicago. BRUCE E. NELSON, 46, President and a director of NAPICO. Mr. Nelson joined NAPICO in 1980 and became President in February 1989. He is responsible for the operations of all NAPICO sponsored limited partnerships. Prior to that he was primarily responsible for the securities aspects of the publicly offered real estate investment programs. Mr. Nelson is also involved in the identification, analysis, and negotiation of real estate investments. From February 1979 to October 1980, Mr. Nelson held the position of Associate General Counsel at Western Consulting Group, Inc., private residential and commercial real estate syndicators. Prior to that time, Mr. Nelson was engaged in the private practice of law in Los Angeles. Mr. Nelson received his Bachelor of Arts degree from the University of Wisconsin and is a graduate of the University of Colorado School of Law. He is a member of the State Bar of California and is a licensed real estate broker in California and Texas. ALAN I. CASDEN, 52, Chairman of The Casden Company, an affiliate of Casden Properties (formerly CoastFed Properties), a director and member of the audit committee of NAPICO, and chairman of the Executive Committee of NAPICO. Mr. Casden is Chairman of the Board, Chief Executive Officer and sole shareholder of The Casden Company and Casden Investment Corp. Prior to that, he was the president and chairman of Mayer Group, Inc., which he joined in 1975. He is also chairman of Mayer Management, Inc., a real estate management firm. Mr. Casden has been involved in approximately $3 billion of real estate financings and sales and has been responsible for the development and construction of more than 12,000 apartment units and 5,000 single-family homes and condominiums. 25 Mr. Casden is a member of the American Institute of Certified Public Accountants and of the California Society of Certified Public Accountants. Mr. Casden is a member of the advisory board of the National Multi-Family Housing Conference, the Multi-Family Housing Council, and the President's Council of the California Building Industry Association. He also serves on the advisory board to the School of Accounting of the University of Southern California. He holds a Bachelor of Science degree from the University of Southern California. HENRY C. CASDEN, 54, President, Chief Operating Officer and Secretary of The Casden Company and a director and secretary of NAPICO. Mr. Casden has been President and Chief Operating Officer of The Casden Company, as well as a director of NAPICO since February 1988. He became secretary of both companies in late 1994. From 1982 to 1988, Mr. Casden was of counsel and a partner in the Los Angeles law firm of Troy, Casden & Gould. From 1978 to 1981, he was of counsel and a partner in the Los Angeles law firm of Loeb & Loeb. From 1972 to 1978, Mr. Casden was a member of the Beverly Hills law firm of Fink & Casden, Professional Corporation. Mr. Casden received his Bachelor of Arts degree from the University of California at Los Angeles, and is a graduate of the University of San Diego Law School. Mr. Casden is a member of the State Bar of California and has numerous professional affiliations. BOB SCHAFER, 56, Senior Vice President of Finance. Mr. Schafer joined NAPICO in 1984 and is the Corporate Controller responsible for the financial reporting function of the company. Prior to this, he was a Group and Division Controller at Bergen Brunswig for over eight years, Controller at a Flintkote subsidiary for over four years, and Assistant Controller at an electronics subsidiary of General Electric for two years. Mr. Schafer is a member of the California Society of Certified Public Accountants. He holds a Bachelor of Science degree in accounting from Woodbury University, Burbank, California. PATRICIA W. TOY, 68, Senior Vice President - Communications and Assistant Secretary. Mrs. Toy joined NAPICO in 1977, following her receipt of an MBA from the Graduate School of Management, UCLA. From 1952 to 1956, Mrs. Toy served as a U.S. Naval Officer in communications and personnel assignments. She holds a Bachelor of Arts Degree from the University of Nebraska. MARK L. WALTHER, 37, Executive Vice President, General Counsel and Assistant Secretary. Mr. Walther joined NAPICO in 1987 and is responsible for the legal affairs of the NAPICO sponsored limited partnerships. Prior to joining NAPICO, Mr. Walther worked in the San Francisco law firm of Browne and Kahn which specialized in construction litigation. Mr. Walther received his Bachelor of Arts Degree in Political Science from the University of California, Santa Barbara and is a graduate of the University of California, Davis, School of Law. He is a member of the State Bar of Hawaii. NAPICO and several of its officers, directors and affiliates Charles H. Boxenbaum, Bruce E. Nelson and Alan I. Casden, consented to the entry, on June 25, 1997, of an administrative cease and desist order by the U.S. Securities and Exchange Commission (the "Commission"), without admitting or denying any of the findings made bu the Commission. The Commission found that NAPICO and others had violated certain federal securities laws in connection with transactions unrelated to the Partnership. The Commission's order did not impose any cost, burden or penalty on any partnership managed by NAPICO and does not impact NAPICO's ability to serve as the Partnership's Managing General Partner. 26 ITEM 11. MANAGEMENT REMUNERATION AND TRANSACTIONS: In accordance with the Partnership Agreement, certain fees and reimbursements are paid to the general partners and their affiliates as follows: (a) A partnership management fee of $50,000 annually is paid to the Managing General Partner. This fee is included in general and administrative expenses for 1997, 1996 and 1995. (b) Partnership expense reimbursements of $50,000 annually are paid to the Non-Managing General Partner. The Non-Managing General Partner expense reimbursements for 1990 through 1996 in the amount of $350,000, which were previously disputed, were paid in the year ended December 31, 1997. Of this mount, $50,000 was expensed in 1990 and was included in accounts payable and accrued liabilities at December 31, 1996. The balance of $300,000 was expensed and included in general and administrative expenses for 1997. In addition $50,000 has been paid and expensed for the year ended December 31, 1997. (c) A property management fee equal to 3% (5% prior to February 1, 1995) of collected revenues was paid to an affiliate of the Managing General Partner through December 31, 1995. The property management fees for the years ended December 31, 1995 were $181,375. On January 1, 1996, property management was transferred to an unaffiliated agent, who manages the property for a fee of 3% of rental revenues. Additionally, the Partnership paid approximately $41,700 and $21,200 for the years ended December 31, 1995 and 1994, respectively, to an affiliate of the Managing General Partner for maintenance services. (d) 1% of distributions (as defined in the Partnership Agreement) is payable to the Managing General Partner. (e) The Partnership is obligated to pay fees to the Managing General Partner or its affiliates upon sale of the Property based upon the form of such sale. The payment of such fees is subordinated to certain preferred returns to the Limited Partners. ITEM 12. SECURITY OF OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT: (a) Security of Ownership of Certain Beneficial Owners The General Partners own all of the outstanding general partnership interests of the Partnership; no person is known to own beneficially in excess of 5% of the outstanding limited partnership interests. 27 ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS: The Partnership has no officers, directors, or employees of its own. All of its affairs are managed by the Managing General Partner. The transactions with the Managing General Partner are primarily in the form of fees paid by the Partnership to the General Partners or their affiliates for services rendered to the Partnership, as discussed below: (a) A partnership management fee of $50,000 annually is paid to the Managing General Partner. This fee is included in general and administrative expenses for 1996, 1995 and 1994. (b) Partnership expense reimbursements of $50,000 annually are paid to the Non-Managing General Partner. The Non-Managing General Partner expense reimbursements for 1990 through 1996 in the amount of $350,000, which were previously disputed, were paid in the year ended December 31, 1997. Of this amount, $50,000 was expensed in 1990 and was included in accounts payable and accrued liabilities at December 31, 1996. The balance of $300,000 was expensed and included in general and administrative expenses for 1997. In addition $50,000 has been paid and expensed for the year ended December 31, 1997. (c) A property management fee equal to 3% (5% prior to February 1, 1995) of collected revenues was paid to an affiliate of the Managing General Partner through December 31, 1995. The property management fees for the year ended December 31, 1995 were $181,375. On January 1, 1996, property management was transferred to an unaffiliated agent, who manages the property for a fee of 3% of rental revenues. Additionally, the Partnership paid approximately $41,700 for the years ended December 31, 1995 to an affiliate of the Managing General Partner for maintenance services. (d) 1% of distributions (as defined in the Partnership Agreement) is payable to the Managing General Partner. (e) The Partnership is obligated to pay fees to the Managing General Partner or its affiliates upon sale of the Property based upon the form of such sale. The payment of such fees is subordinated to certain preferred returns to the Limited Partners. A real estate investment trust organized by an affiliate of NAPICO has advised the Partnership that it intends to make a proposal to purchase from the Partnership the real estate assets of the Partnership for $52,500,000. 28 PART IV. ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K: FINANCIAL STATEMENTS Report of Independent Public Accountants. Balance Sheets as of December 31, 1997 and 1996. Statements of Income for the years ended December 31, 1997, 1996 and 1995. Statements of Partners' Capital (Deficiency) for the years ended December 31, 1997, 1996 and 1995. Statements of Cash Flows for the years ended December 31, 1997, 1996 and 1995. Notes to Financial Statements. FINANCIAL STATEMENT SCHEDULE: Schedule III - Real Estate and Accumulated Depreciation, December 31, 1997. The remaining schedules are omitted because any required information is included in the financial statements and notes thereto, or they are not applicable or not required. EXHIBITS (3) Articles of incorporation and bylaws: The registrant is not incorporated. The Partnership Agreement was filed with Form S-11 Registration #33-22857 incorporated herein by reference. (10) Material contracts: The registrant is not party to any material contracts, other than the Amended and Restated Certificate and Agreement of Limited Partnership dated September 8, 1988 and the contracts representing the Partnership's acquisition of its apartment project as previously filed at the Securities Exchange Commission, File #33-22857 which is hereby incorporated by reference. REPORTS ON FORM 8-K A report on Form 8-K dated December 10, 1996, was filed with the Securities and Exchange Commission. This Form 8-K disclosed that the registrant became aware of an entity conducting a tender offer for up to 320,000 units in the registrant for $4.25 per unit. The general partners on behalf of the registrant, by letter, mailed on or about December 10, 1996, advised the limited partners that the general partners recommended rejecting the offer because they believed that it did not reflect the true value of the units. 29 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) 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 in the City of Los Angeles, State of California. CENTURY HILLCRESTE APARTMENT INVESTORS, L.P. By: NATIONAL PARTNERSHIP INVESTMENTS CORP. The General Partner /s/ CHARLES H. BOXENBAUM - -------------------------------------- Charles H. Boxenbaum Chairman of the Board of Directors and Chief Executive Officer /s/ BRUCE E. NELSON - -------------------------------------- Bruce E. Nelson Director and President /s/ ALAN I. CASDEN - -------------------------------------- Alan I. Casden Director /s/ HENRY C. CASDEN - -------------------------------------- Henry C. Casden Director /s/ BOB E. SCHAFER - -------------------------------------- Bob E. Schafer Senior Vice President of Finance EX-27 2 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE PARTNERSHIP'S STATEMENTS OF EARNINGS AND BALANCE SHEETS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 12-MOS DEC-31-1997 JAN-01-1997 DEC-31-1997 4,100,537 0 0 0 0 4,259,237 45,566,509 11,553,183 38,311,564 367,529 0 0 0 0 37,629,547 38,311,564 0 6,149,851 0 0 3,410,881 0 0 2,738,970 0 2,738,970 0 0 0 2,738,970 0 0
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