FORM 10-QSB--QUARTERLY OR TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
Quarterly or Transitional Report
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-QSB
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended March 31, 2001
[ ] 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
(Issuer's telephone number)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the 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 STATEMENT OF NET LIABILITIES IN LIQUIDATION
(Unaudited)
(in thousands)
March 31, 2001
Assets
Cash and cash equivalents $ 525
Receivables and deposits, net of allowance for
uncollectible amounts of $304 82
Debt trustee escrow 2,138
Investment properties 5,752
8,497
Liabilities
Accounts payable 12
Tenant security deposit liabilities 23
Accrued property taxes 34
Other liabilities 905
Non-recourse promissory notes:
Principal 13,983
Interest payable 16,189
Minority interest in consolidated joint venture 191
Estimated costs during the period of liquidation 722
32,059
Net liabilities in liquidation $(23,562)
See Accompanying Notes to Consolidated Financial Statements
b)
CENTURY PENSION INCOME FUND XXIII
STATEMENT OF CHANGES IN NET LIABILITIES IN LIQUIDATION
(Unaudited)
(in thousands)
Three Months Ended March 31, 2001
Net liabilities in liquidation at beginning of period $(23,748)
Changes in net liabilities in liquidation attributed to:
Decrease in cash and cash equivalents (645)
Decrease in receivables and deposits (813)
Increase in debt trustee escrow 1,418
Increase in investment properties 410
Decrease in accounts payable 57
Decrease in accrued property taxes 16
Decrease in other liabilities 106
Increase in non-recourse promissory notes - interest
payable (405)
Increase in minority interest in consolidated joint
venture (23)
Decrease in estimated costs during the period of
liquidation 65
Net liabilities in liquidation at end of period $(23,562)
See Accompanying Notes to Consolidated Financial Statements
c)
CENTURY PENSION INCOME FUND XXIII
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note A - Basis of Presentation
As of December 31, 1999, Century Pension Income Fund XXIII (the "Partnership" or
"Registrant") adopted the liquidation basis of accounting due to the imminent
loss of its investment properties.
The Partnership's Nonrecourse Promissory Notes are secured by a deed of trust on
all properties owned in fee by the Partnership. The Notes were issued in two
series. The "1985 Series Notes", in the amount of $33,454,000 bear interest at
12% per annum, and the "1986 Series Notes", in the amount of $8,485,000, bear
interest at 10% per annum, except that portions of the interest were deferred,
provided the Partnership made minimum interest payments of 5% on the unpaid
principal balance. The Nonrecourse Promissory Notes had a balance of principal
and deferred interest of approximately $80,000,000 at their maturity date of
February 15, 1999. The Partnership was unable to satisfy the Nonrecourse
Promissory Notes at maturity and as a result, the Partnership was in default on
the Nonrecourse Promissory Notes. Fox Capital Management Corporation ("FCMC" or
the "Managing General Partner") contacted the indenture trustee for the
Nonrecourse Promissory Notes regarding this default. In connection with these
conversations, on July 30, 1999 the Partnership entered into a forbearance
agreement with the indenture trustee pursuant to which the indenture trustee
agreed not to exercise its rights and remedies under the indenture for up to 390
days. In turn, the Partnership agreed to (a) deliver to the indenture trustee
for the benefit of the noteholders all of the accumulated cash of the
Partnership, less certain reserves and anticipated operating expenses, (b)
market all of its properties for sale, (c) deliver all net cash proceeds from
any sales to the indenture trustee until the notes are fully satisfied and (d)
comply with the reporting requirements under the indenture. At the expiration of
the forbearance period, the Partnership had not sold all of its properties or
satisfied the Nonrecourse Promissory Notes. With the consent of the indenture
trustee, the forbearance period has been extended to August 31, 2001. During
1999 and 2000, the Partnership sold all but two of its investment properties.
The two remaining properties are actively being marketed for sale. Based on
current market conditions, it is unlikely that the sale of the Partnership's
assets will generate sufficient proceeds to pay off the Nonrecourse Promissory
Notes in full. If the Partnership cannot sell its properties for sufficient
value, in accordance with the terms of the forbearance agreement, it is likely
that the Partnership will lose its properties through delivery to an auctioneer.
Upon the sale or disposal of the last property, the Partnership is expected to
terminate.
As a result of the decision to liquidate the Partnership, the Partnership
changed its basis of accounting for its financial statements at December 31,
1999, to the liquidation basis of accounting. Consequently, assets have been
valued at estimated net realizable value and liabilities are presented at their
estimated settlement amounts, including estimated costs associated with carrying
out the liquidation. The valuation of assets and liabilities necessarily
requires many estimates and assumptions and there are substantial uncertainties
in carrying out the liquidation. The actual realization of assets and settlement
of liabilities could be higher or lower than amounts indicated and is based upon
the Managing General Partner's estimates as of the date of the consolidated
financial statements.
Included in liabilities in the statement of net liabilities in liquidation as of
March 31, 2001 is approximately $722,000 of costs, net of income, that the
Managing General Partner estimates will be incurred during the period of
liquidation based on the assumption that the liquidation process will be
completed by September 30, 2001. Because the success in realization of assets
and the settlement of liabilities is based on the Managing General Partner's
best estimates, the liquidation period may be shorter than projected or it may
be extended beyond the projected period.
Principles of Consolidation
The consolidated financial statements include all of the accounts of the
Partnership and the joint ventures in which the Partnership has a controlling
interest. An affiliated partnership owned the minority interest in these joint
ventures. All significant inter-entity transactions and balances have been
eliminated. The Managing General partner is a subsidiary of Apartment Investment
and Management Company ("AIMCO"), a publicly traded real estate investment
trust.
Note B - 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 affiliates were incurred during the three month
periods ended March 31, 2001 and 2000:
2001 2000
(in thousands)
Property management fees $ -- $ 32
Reimbursement for services of affiliates 51 48
During the three months ended March 31, 2000, affiliates of the Managing General
Partner were entitled to receive 5% of gross receipts from the Partnership's
residential property as compensation for providing property management services.
The Partnership paid to such affiliates approximately $32,000 for the three
months ended March 31, 2000. For the Partnership's commercial properties, these
services were provided by an unrelated party for the three months ended March
31, 2001 and 2000.
An affiliate of the Managing General Partner received reimbursement of
accountable administrative expenses amounting to approximately $51,000 and
$48,000 for the three months ended March 31, 2001 and 2000, respectively.
There were no distributions during the three months ended March 31, 2001 and
2000.
In addition to its indirect ownership of the general partner interest in the
Partnership, AIMCO currently owns 72 limited partnership units in the
Partnership representing approximately 0.08% of the outstanding units as of
March 31, 2001. Affiliates of the Managing General Partner also own 5,410
limited partnership units (8.09%) of the Partnership's 1985 Nonrecourse
Promissory Notes and 1,585 limited partnership units (9.34%) of the
Partnership's 1986 Nonrecourse Promissory Notes.
Note C - Sale of Investment Properties
On January 19, 2000, Coral Palm Joint Venture, a joint venture in which the
Partnership has a controlling interest, sold Coral Palm Plaza, to an
unaffiliated third party for net sales proceeds of approximately $5,992,000
after payment of closing costs. The Partnership's share of the net sales
proceeds was approximately $3,995,000 and the minority's share was approximately
$1,997,000, which was distributed during the three months ended March 31, 2000.
The Partnership's share of the net sales proceeds was used to pay a portion of
the principal and accrued interest on the Nonrecourse Promissory Notes.
Note D - Segment Reporting
Statement of Financial Accounting Standards ("SFAS") No. 131, "Disclosure about
Segments of an Enterprise and Related Information" established standards for the
way that public business enterprises report information about operating segments
in annual financial statements and requires that those enterprises report
selected information about operating segments in interim financial reports. It
also establishes standards for related disclosures about products and services,
geographic areas, and major customers. As defined in SFAS No. 131, the
Partnership has only one reportable segment. The Managing General Partner
believes that segment-based disclosures will not result in a more meaningful
presentation than the financial statements as currently presented.
Note E - Legal Proceedings
In March 1998, several putative unit holders of limited partnership units of the
Partnership commenced an action entitled Rosalie Nuanes, et al. v. Insignia
Financial Group, Inc., et al. in the Superior Court of the State of California
for the County of San Mateo. The plaintiffs named as defendants, among others,
the Partnership, its Managing General Partner and several of their affiliated
partnerships and corporate entities. The action purports to assert claims on
behalf of a class of limited partners and derivatively on behalf of a number of
limited partnerships (including the Partnership) which are named as nominal
defendants, challenging, among other things, the acquisition of interests in
certain general partner entities by Insignia Financial Group, Inc. ("Insignia")
and entities which were, at one time, affiliates of Insignia; past tender offers
by the Insignia affiliates to acquire limited partnership units; management of
the partnerships by the Insignia affiliates; and the Insignia Merger. The
plaintiffs seek monetary damages and equitable relief, including judicial
dissolution of the Partnership. On June 25, 1998, the Managing General Partner
filed a motion seeking dismissal of the action. In lieu of responding to the
motion, the plaintiffs filed an amended complaint. The Managing General Partner
filed demurrers to the amended complaint which were heard February 1999.
Pending the ruling on such demurrers, settlement negotiations commenced. On
November 2, 1999, the parties executed and filed a Stipulation of Settlement,
settling claims, subject to court approval, on behalf of the Partnership and all
limited partners who owned units as of November 3, 1999. Preliminary approval of
the settlement was obtained on November 3, 1999 from the Court, at which time
the Court set a final approval hearing for December 10, 1999. Prior to the
December 10, 1999 hearing, the Court received various objections to the
settlement, including a challenge to the Court's preliminary approval based upon
the alleged lack of authority of prior lead counsel to enter the settlement. On
December 14, 1999, the Managing General Partner and its affiliates terminated
the proposed settlement. In February 2000, counsel for some of the named
plaintiffs filed a motion to disqualify plaintiff's lead and liaison counsel who
negotiated the settlement. On June 27, 2000, the Court entered an order
disqualifying them from the case and an appeal was taken from the order on
October 5, 2000. On December 4, 2000, the Court appointed the law firm of Lieff
Cabraser Heimann & Bernstein LLP as new lead counsel for plaintiffs and the
putative class. Plaintiffs filed a third amended complaint on January 19, 2001.
On March 2, 2001, the Managing General Partner and its affiliates filed a
demurrer to the third amended complaint. The Court has also scheduled a hearing
on a motion for class certification for August 27, 2001. Plaintiffs must file
their motion for class certification no later than June 15, 2001. The Managing
General Partner does not anticipate that costs associated with this case will be
material to the Partnership's overall operations.
The Partnership is unaware of any other pending or outstanding litigation that
is not of a routine nature arising in the ordinary course of business.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
The matters discussed in this Form 10-QSB contain certain forward-looking
statements and involve risks and uncertainties (including changing market
conditions, competitive and regulatory matters, etc.) detailed in the
disclosures contained in this Form 10-QSB and the other filings with the
Securities and Exchange Commission made by the Partnership from time to time.
The discussion of the Registrant's business and results of operations, including
forward-looking statements pertaining to such matters, does not take into
account the effects of any changes to the Registrant's business and results of
operations. Accordingly, actual results could differ materially from those
projected in the forward-looking statements as a result of a number of factors,
including those identified herein.
The Partnership's remaining investment properties consist of two business parks.
The following table sets forth the average occupancy for each of the
Partnership's investment properties for the three months ended March 31, 2001
and 2000:
Average Occupancy
Property 2001 2000
Commerce Plaza 70% 80%
Tampa, Florida
Highland Park III 90% 94%
Charlotte, North Carolina
The Managing General Partner attributes the decrease in occupancy at Commerce
Plaza to a major tenant vacating the property during the first quarter of 2000
when its lease expired. A portion of the space was leased to a new tenant and
the Managing General Partner is actively marketing the remaining space.
Occupancy at Highland Park III decreased due to 3,175 square feet of space
vacated which was not yet been leased.
The Partnership recently entered into a contract to sell Highland Park III to an
unaffiliated third party. The sale, which is conditioned upon the purchaser
completing its due diligence review of the property and other customary
conditions, is expected to close, if at all, during the third quarter of 2001.
There can no assurance, however, that the sale will be consummated, or if
consummated, on what terms or in what time frame. The Partnership's Commerce
Plaza is being marketed for sale.
As of December 31, 1999, the Partnership adopted the liquidation basis of
accounting due to the imminent loss of its investment properties. The
Nonrecourse Promissory Notes had a balance of principal and deferred interest of
approximately $80,000,000 at their maturity date of February 15, 1999. The
Partnership was unable to satisfy the Nonrecourse Promissory Notes at maturity
and as a result, the Partnership was in default on the Nonrecourse Promissory
Notes. The Managing General Partner contacted the indenture trustee for the
Nonrecourse Promissory Notes regarding this default. In connection with these
conversations, on July 30, 1999 the Partnership entered into a forbearance
agreement with the indenture trustee pursuant to which the indenture trustee
agreed not to exercise its rights and remedies under the indenture for up to 390
days. In turn, the Partnership agreed to (a) deliver to the indenture trustee
for the benefit of the noteholders all of the accumulated cash of the
Partnership, less certain reserves and anticipated operating expenses, (b)
market all of its properties for sale, (c) deliver all net cash proceeds from
any sales to the indenture trustee until the notes are fully satisfied and (d)
comply with the reporting requirements under the indenture. At the expiration of
the forbearance period, the Partnership had not sold all of its properties or
satisfied the Nonrecourse Promissory Notes. With the consent of the indenture
trustee, the forbearance period has been extended to August 31, 2001. During
1999 and 2000, the Partnership sold all but two of its investment properties.
Commerce Plaza is actively being marketed for sale and Highland Park III is
under contract to sell, as discussed above. Based on current market conditions,
it is unlikely that the sale of the Partnership's assets will generate
sufficient proceeds to pay off the Nonrecourse Promissory Notes in full. If the
Partnership cannot sell its properties for sufficient value, in accordance with
the terms of the forbearance agreement, it is likely that the Partnership will
lose its properties through delivery to an auctioneer. Upon the sale or disposal
of the last property, the Partnership will terminate.
The statement of net liabilities in liquidation as of March 31, 2001, includes
approximately $722,000 of costs, net of income, that the Managing General
Partner estimates will be incurred during the period of liquidation, based on
the assumption that the liquidation process will be completed by September 30,
2001. Because the success in realization of assets and the settlement of
liabilities is based on the Managing General Partner's best estimates, the
liquidation period may be shorter or extended beyond the projected period.
On January 19, 2000, Coral Palm Joint Venture, a joint venture in which the
Partnership has a controlling interest, sold Coral Palm Plaza to an unaffiliated
third party for net sales proceeds of approximately $5,992,000 after payment of
closing costs. The Partnership's share of the net sales proceeds was
approximately $3,995,000 and the minority's share was approximately $1,997,000,
which was distributed during the three months ended March 31, 2000. The
Partnership's share of the net sales proceeds was used to pay a portion of the
principal and accrued interest on Nonrecourse Promissory Notes.
In light of the maturity of the Notes, no distributions were made to the limited
partners for the three month periods ended March 31, 2001 and 2000.
Capital improvements planned for each of the Partnership's properties are
detailed below. Additional capital expenditures will be incurred only if cash is
available from operations.
Commerce Plaza:
During the three months ended March 31, 2001, the Partnership did not complete
any capital improvements at Commerce Plaza. The Partnership has not budgeted
capital improvements for 2001 since it anticipates selling this property in
2001.
Highland Park III:
During the three months ended March 31, 2001, the Partnership spent
approximately $8,000 in capital improvements at Highland Park Commerce Center
consisting primarily of tenant improvements. These improvements were funded from
operating cash flow. The Partnership has not budgeted capital improvements for
2001 since it anticipates selling this property in 2001.
As part of the ongoing business plan of the Partnership, the Managing General
Partner monitors the rental market environment of its investment properties to
assess the feasibility of increasing rents, maintaining or increasing occupancy
levels and protecting the Partnership from increases in expenses. As part of
this plan, the Managing General Partner attempts to protect the Partnership from
the burden of inflation-related increases in expenses by increasing rents and
maintaining a high overall occupancy level. However, due to changing market
conditions, which can result in the use of rental concessions and rental
reductions to offset softening market conditions, there is no guarantee that the
Managing General Partner will be able to sustain such a plan.
In addition to its indirect ownership of the general partner interest in the
Partnership, AIMCO currently owns 72 limited partnership units in the
Partnership representing approximately 0.08% of the outstanding units as of
March 31, 2001. Affiliates of the Managing General Partner also own 5,410
limited partnership units (8.09%) of the Partnership's 1985 Nonrecourse
Promissory Notes and 1,585 limited partnership units (9.34%) of the
Partnership's 1986 Nonrecourse Promissory Notes.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
In March 1998, several putative unit holders of limited partnership units of the
Partnership commenced an action entitled Rosalie Nuanes, et al. v. Insignia
Financial Group, Inc., et al. in the Superior Court of the State of California
for the County of San Mateo. The plaintiffs named as defendants, among others,
the Partnership, its Managing General Partner and several of their affiliated
partnerships and corporate entities. The action purports to assert claims on
behalf of a class of limited partners and derivatively on behalf of a number of
limited partnerships (including the Partnership) which are named as nominal
defendants, challenging, among other things, the acquisition of interests in
certain general partner entities by Insignia Financial Group, Inc. ("Insignia")
and entities which were, at one time, affiliates of Insignia; past tender offers
by the Insignia affiliates to acquire limited partnership units; management of
the partnerships by the Insignia affiliates; and the Insignia Merger. The
plaintiffs seek monetary damages and equitable relief, including judicial
dissolution of the Partnership. On June 25, 1998, the Managing General Partner
filed a motion seeking dismissal of the action. In lieu of responding to the
motion, the plaintiffs filed an amended complaint. The Managing General Partner
filed demurrers to the amended complaint which were heard February 1999.
Pending the ruling on such demurrers, settlement negotiations commenced. On
November 2, 1999, the parties executed and filed a Stipulation of Settlement,
settling claims, subject to court approval, on behalf of the Partnership and all
limited partners who owned units as of November 3, 1999. Preliminary approval of
the settlement was obtained on November 3, 1999 from the Court, at which time
the Court set a final approval hearing for December 10, 1999. Prior to the
December 10, 1999 hearing, the Court received various objections to the
settlement, including a challenge to the Court's preliminary approval based upon
the alleged lack of authority of prior lead counsel to enter the settlement. On
December 14, 1999, the Managing General Partner and its affiliates terminated
the proposed settlement. In February 2000, counsel for some of the named
plaintiffs filed a motion to disqualify plaintiff's lead and liaison counsel who
negotiated the settlement. On June 27, 2000, the Court entered an order
disqualifying them from the case and an appeal was taken from the order on
October 5, 2000. On December 4, 2000, the Court appointed the law firm of Lieff
Cabraser Heimann & Bernstein LLP as new lead counsel for plaintiffs and the
putative class. Plaintiffs filed a third amended complaint on January 19, 2001.
On March 2, 2001, the Managing General Partner and its affiliates filed a
demurrer to the third amended complaint. The Court has also scheduled a hearing
on a motion for class certification for August 27, 2001. Plaintiffs must file
their motion for class certification no later than June 15, 2001. The Managing
General Partner does not anticipate that costs associated with this case will be
material to the Partnership's overall operations.
ITEM 2. EXHIBITS AND REPORTS ON FORM 8-K
a) Exhibits:
None.
b) Reports on Form 8-K:
None filed during the quarter ended March 31, 2001.
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the Registrant
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 J. Foye
Patrick J. Foye
Executive Vice President
By: /s/Martha L. Long
Martha L. Long
Senior Vice President
and Controller
Date: