United States
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, 2003
[ ] 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 0-11934
CENTURY PROPERTIES FUND XVIII
(Exact name of registrant as specified in its charter)
California 94-2834149
(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)
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CENTURY PROPERTIES FUND XVIII
CONSOLIDATED BALANCE SHEET
(Unaudited)
(in thousands, except unit data)
March 31, 2003
Assets
Cash and cash equivalents $ 539
Receivables and deposits 45
Restricted escrows 123
Other assets 147
Investment properties:
Land $ 7,296
Buildings and related personal property 21,697
28,993
Less accumulated depreciation (13,967) 15,026
$ 15,880
Liabilities and Partners' (Deficit) Capital
Liabilities
Accounts payable $ 38
Other liabilities 223
Accrued property taxes 113
Tenant security deposit liabilities 64
Mortgage notes payable 18,420
Partners' (Deficit) Capital
General partner $ (6,247)
Limited partners (75,000 units issued and
outstanding) 3,269 (2,978)
$ 15,880
See Accompanying Notes to Consolidated Financial Statements
CENTURY PROPERTIES FUND XVIII
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(in thousands, except per unit data)
Three Months Ended
March 31,
2003 2002
Revenues:
Rental income $ 1,025 $ 1,142
Other income 111 118
Total revenues 1,136 1,260
Expenses:
Operating 458 475
General and administrative 70 78
Depreciation 222 218
Interest 332 337
Property tax 109 121
Total expenses 1,191 1,229
Net (loss) income $ (55) $ 31
Net (loss) income allocated to general
partner (9.9%) $ (6) $ 3
Net (loss) income allocated to limited
partners (90.1%) (49) 28
$ (55) $ 31
Net (loss) income per limited partnership unit $ (0.65) $ 0.37
Distributions per limited partnership unit $ 1.49 $ --
See Accompanying Notes to Consolidated Financial Statements
CENTURY PROPERTIES FUND XVIII
CONSOLIDATED STATEMENT OF CHANGES IN PARTNERS' (DEFICIT) CAPITAL
(Unaudited)
(in thousands, except unit data)
Limited
Partnership General Limited
Units Partner Partners Total
Original capital contributions 75,000 $ -- $75,000 $75,000
Partners' (deficit) capital
at December 31, 2002 75,000 $(6,240) $ 3,430 $(2,810)
Distributions to partners -- (1) (112) (113)
Net loss for the three months
ended March 31, 2003 -- (6) (49) (55)
Partners' (deficit) capital
at March 31, 2003 75,000 $(6,247) $ 3,269 $(2,978)
See Accompanying Notes to Consolidated Financial Statements
CENTURY PROPERTIES FUND XVIII
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
Three Months Ended
March 31,
2003 2002
Cash flows from operating activities:
Net (loss) income $ (55) $ 31
Adjustments to reconcile net (loss) income to net
cash provided by operating activities:
Depreciation 222 218
Amortization of loan costs 15 15
Change in accounts:
Receivables and deposits 15 5
Other assets 9 (113)
Accounts payable (8) (36)
Other liabilities 69 184
Accrued property taxes (229) (245)
Tenant security deposit liabilities 8 (4)
Net cash provided by operating activities 46 55
Cash flows from investing activities:
Property improvements and replacements (47) (76)
Net (deposits to) withdrawals from restricted escrows (4) 4
Net cash used in investing activities (51) (72)
Cash flows from financing activities:
Distributions to partners (113) --
Payments on mortgage notes payable (59) (64)
Net cash used in financing activities (172) (64)
Net decrease in cash and cash equivalents (177) (81)
Cash and cash equivalents at beginning of period 716 613
Cash and cash equivalents at end of period $ 539 $ 532
Supplemental disclosure of cash flow information:
Cash paid for interest $ 273 $ 261
See Accompanying Notes to Consolidated Financial Statements
CENTURY PROPERTIES FUND XVIII
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note A - Basis of Presentation
The accompanying unaudited consolidated financial statements of Century
Properties Fund XVIII (the "Partnership" or "Registrant") have been prepared in
accordance with generally accepted accounting principles for interim financial
information and with the instructions to Form 10-QSB and Item 310(b) of
Regulation S-B. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. The Partnership's general partner is Fox Partners. The
general partners of Fox Partners are Fox Capital Management Corporation ("FCMC"
or the "Managing General Partner"), Fox Realty Investors ("FRI") and Fox
Partners 82. The Managing General Partner, as well as the managing general
partner of FRI, are affiliates of Apartment Investment and Management Company
("AIMCO"), a publicly traded real estate investment trust. In the opinion of the
Managing General Partner, all adjustments (consisting of normal recurring
accruals) considered necessary for a fair presentation have been included.
Operating results for the three month period ended March 31, 2003 are not
necessarily indicative of the results that may be expected for the fiscal year
ending December 31, 2003. For further information, refer to the consolidated
financial statements and footnotes thereto included in the Partnership's Annual
Report on Form 10-KSB for the year ended December 31, 2002.
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 (i) payments to
affiliates for services and (ii) reimbursement of certain expenses incurred by
affiliates on behalf of the Partnership.
Affiliates of the Managing General Partner are entitled to receive 5% of gross
receipts from both of the Partnership's properties for providing property
management services. The Partnership paid to such affiliates approximately
$58,000 and $65,000 for the three months ended March 31, 2003 and 2002,
respectively, which is included in operating expenses.
An affiliate of the Managing General Partner received reimbursement of
accountable administrative expenses amounting to approximately $39,000 and
$48,000 for the three months ended March 31, 2003 and 2002, respectively, which
is included in general and administrative expenses.
As compensation for the services rendered in managing the Partnership, the
Managing General Partner is entitled to receive a Partnership Management Fee
equal to 9% of distributions from operations as defined in the Partnership
Agreement. During the three months ended March 31, 2003 and 2002, no amounts
were paid to the Managing General Partner as all distributions were made from
cumulative undistributed sales and refinancing proceeds.
An affiliate of the Managing General Partner has made available to the
Partnership a credit line of up to $150,000 per property owned by the
Partnership. At the present time, the Partnership has no outstanding amounts due
under this line of credit.
The Partnership insures its properties up to certain limits through coverage
provided by AIMCO which is generally self-insured for a portion of losses and
liabilities related to workers compensation, property casualty and vehicle
liability. The Partnership insures its properties above the AIMCO limits through
insurance policies obtained by AIMCO from insurers unaffiliated with the
Managing General Partner. During 2003 and 2002 the Partnership's cost for
insurance coverage and fees associated with policy claims administration
provided by AIMCO and its affiliates will be approximately $66,000 and $79,000,
respectively.
Note C - Legal Proceedings
In March 1998, several putative unit holders of limited partnership units of the
Partnership commenced an action entitled Rosalie Nuanes, et al. v. Insignia
Financial Group, Inc., et al. (the "Nuanes action") in the Superior Court of the
State of California for the County of San Mateo. The plaintiffs named as
defendants, among others, the Partnership, its Managing General Partner and
several of their affiliated partnerships and corporate entities. The action
purports to assert claims on behalf of a class of limited partners and
derivatively on behalf of a number of limited partnerships (including the
Partnership) which are named as nominal defendants, challenging, among other
things, the acquisition of interests in certain Managing General Partner
entities by Insignia Financial Group, Inc. ("Insignia") and entities which were,
at one time, affiliates of Insignia; past tender offers by the Insignia
affiliates to acquire limited partnership units; management of the partnerships
by the Insignia affiliates; and the series of transactions which closed on
October 1, 1998 and February 26, 1999 whereby Insignia and Insignia Properties
Trust, respectively, were merged into AIMCO. The plaintiffs seek monetary
damages and equitable relief, including judicial dissolution of the Partnership.
On June 25, 1998, the Managing General Partner filed a motion seeking dismissal
of the action. In lieu of responding to the motion, the plaintiffs filed an
amended complaint. The Managing General Partner filed demurrers to the amended
complaint which were heard February 1999.
Pending the ruling on such demurrers, settlement negotiations commenced. On
November 2, 1999, the parties executed and filed a Stipulation of Settlement,
settling claims, subject to court approval, on behalf of the Partnership and all
limited partners who owned units as of November 3, 1999. Preliminary approval of
the settlement was obtained on November 3, 1999 from the Court, at which time
the Court set a final approval hearing for December 10, 1999. Prior to the
December 10, 1999 hearing, the Court received various objections to the
settlement, including a challenge to the Court's preliminary approval based upon
the alleged lack of authority of prior lead counsel to enter the settlement. On
December 14, 1999, the Managing General Partner and its affiliates terminated
the proposed settlement. In February 2000, counsel for some of the named
plaintiffs filed a motion to disqualify plaintiff's lead and liaison counsel who
negotiated the settlement. On June 27, 2000, the Court entered an order
disqualifying them from the case and an appeal was taken from the order on
October 5, 2000. On December 4, 2000, the Court appointed the law firm of Lieff
Cabraser Heimann & Bernstein LLP as new lead counsel for plaintiffs and the
putative class. Plaintiffs filed a third amended complaint on January 19, 2001.
On March 2, 2001, the Managing General Partner and its affiliates filed a
demurrer to the third amended complaint. On May 14, 2001, the Court heard the
demurrer to the third amended complaint. On July 10, 2001, the Court issued an
order sustaining defendants' demurrer on certain grounds. On July 20, 2001,
Plaintiffs filed a motion for reconsideration of the Court's July 10, 2001 order
granting in part and denying in part defendants' demurrer. On September 7, 2001,
Plaintiffs filed a fourth amended class and derivative action complaint. On
September 12, 2001, the Court denied Plaintiffs' motion for reconsideration. On
October 5, 2001, the Managing General Partner and affiliated defendants filed a
demurrer to the fourth amended complaint, which was heard on December 11, 2001.
On February 2, 2002, the Court served its order granting in part the demurrer.
The Court has dismissed without leave to amend certain of the plaintiffs'
claims. On February 11, 2002, plaintiffs filed a motion seeking to certify a
putative class comprised of all non-affiliated persons who own or have owned
units in the partnerships. The Managing General Partner and affiliated
defendants oppose the motion. On April 29, 2002, the Court held a hearing on
plaintiffs' motion for class certification and took the matter under submission
after further briefing, as ordered by the court, was submitted by the parties.
On July 10, 2002, the Court entered an order vacating the trial date of January
13, 2003 (as well as the pre-trial and discovery cut-off dates) and stayed the
case in its entirety through November 7, 2002 so that the parties could have an
opportunity to discuss settlement. On October 30, 2002, the court entered an
order extending the stay in effect through January 10, 2003.
On January 8, 2003, the parties filed a Stipulation of Settlement in proposed
settlement of the Nuanes action and the Heller action described below. On April
4, 2003, the Court preliminarily approved the settlement and scheduled a hearing
on final approval for June 2, 2003.
In general terms, the proposed settlement provides for certification for
settlement purposes of a settlement class consisting of all limited partners in
this Partnership and others (the "Partnerships") as of December 20, 2002, the
dismissal with prejudice and release of claims in the Nuanes and Heller
litigation, payment by AIMCO of $9.9 million (which shall be distributed to
settlement class members after deduction of attorney fees and costs of class
counsel and certain costs of settlement) and up to $1 million toward the cost of
independent appraisals of the Partnerships' properties by a Court appointed
appraiser. An affiliate of the Managing General Partner has also agreed to make
a tender offer to purchase all of the partnership interests in the Partnerships
within one year of final approval, if it is granted, and to provide partners
with the independent appraisals at the time of these tenders. The proposed
settlement also provides for the limitation of the allowable costs which the
Managing General Partner or its affiliates will charge the Partnerships in
connection with this litigation and imposes limits on the class counsel fees and
costs in this litigation. On April 11, 2003, notice was distributed to limited
partners providing the details of the proposed settlement.
During the third quarter of 2001, a complaint (the "Heller action") was filed
against the same defendants that are named in the Nuanes action, captioned
Heller v. Insignia Financial Group. On or about August 6, 2001, plaintiffs filed
a first amended complaint. The first amended complaint in the Heller action is
brought as a purported derivative action, and asserts claims for among other
things breach of fiduciary duty; unfair competition; conversion, unjust
enrichment; and judicial dissolution. Plaintiffs in the Nuanes action filed a
motion to consolidate the Heller action with the Nuanes action and stated that
the Heller action was filed in order to preserve the derivative claims that were
dismissed without leave to amend in the Nuanes action by the Court order dated
July 10, 2001. On October 5, 2001, the Managing General Partner and affiliated
defendants moved to strike the first amended complaint in its entirety for
violating the Court's July 10, 2001 order granting in part and denying in part
defendants' demurrer in the Nuanes action, or alternatively, to strike certain
portions of the complaint based on the statute of limitations. Other defendants
in the action demurred to the fourth amended complaint, and, alternatively,
moved to strike the complaint. On December 11, 2001, the court heard argument on
the motions and took the matters under submission. On February 4, 2002, the
Court served notice of its order granting defendants' motion to strike the
Heller complaint as a violation of its July 10, 2001 order in the Nuanes action.
On March 27, 2002, the plaintiffs filed a notice appealing the order striking
the complaint. Before completing briefing on the appeal, the parties stayed
further proceedings in the appeal pending the Court's review of the terms of the
proposed settlement described above.
The Managing General Partner does not anticipate that any costs to the
Partnership, whether legal or settlement costs, associated with these cases will
be material to the Partnership's overall operations.
The Partnership is unaware of any other pending or outstanding litigation that
is not of a routine nature arising in the ordinary course of business.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
The matters discussed in this report contain certain forward-looking statements,
including, without limitation, statements regarding future financial performance
and the effect of government regulations. The discussions of the Registrant's
business and results of operations, including forward-looking statements
pertaining to such matters, do not take into account the effects of any changes
to the Registrant's business and results of operations. Actual results may
differ materially from those described in the forward-looking statements and
will be affected by a variety of risks and factors including, without
limitation: national and local economic conditions; the terms of governmental
regulations that affect the Registrant and interpretations of those regulations;
the competitive environment in which the Registrant operates; financing risks,
including the risk that cash flows from operations may be insufficient to meet
required payments of principal and interest; real estate risks, including
variations of real estate values and the general economic climate in local
markets and competition for tenants in such markets; and possible environmental
liabilities. Readers should carefully review the Registrant's financial
statements and the notes thereto, as well as the risk factors described in the
documents the Registrant files from time to time with the Securities and
Exchange Commission.
The Partnership's investment properties consist of two apartment complexes. The
following table sets forth the average occupancy of the properties for the three
months ended March 31, 2003 and 2002.
Average Occupancy
Property 2003 2002
Oak Run Apartments 91% 81%
Dallas, Texas
Overlook Point Apartments 83% 96%
Salt Lake City, Utah
Occupancy at Oak Run Apartments increased primarily due to an increased
marketing effort by the property's management team over the past year which
included a reduction in rental rates.
Occupancy at Overlook Apartments decreased due to a weak local economy and low
mortgage interest rates enabling more tenants to buy homes. During the first
quarter of 2002 occupancy was higher as a result of temporary residents for the
Olympics. Also impacting the decrease in occupancy for the first quarter of 2003
is the deployment of military personnel from the area.
Results of Operations
The Partnership's net loss for the three months ended March 31, 2003 was
approximately $55,000 compared to net income of approximately $31,000 for the
same period in 2002. The decrease in net income was due to a decrease in total
revenues slightly offset by a decrease in total expenses. The decrease in total
revenues was primarily due to a decrease in rental income attributable to the
decrease in occupancy at Overlook Apartments as discussed above.
Total expenses decreased due to decreases in operating, general and
administrative and property tax expenses. The decrease in operating expense was
primarily due to decreases in interior painting costs at Oak Run Apartments and
property management fees paid to the Managing General Partner which are based on
a percentage of rental revenues generated by the properties. General and
administrative expenses decreased due to a decrease in certain reimbursements
paid to the Managing General Partner in accordance with the Partnership
Agreement. The decrease in property tax expense was due to a decrease in the
assessed value by the local taxing authorities at Oak Run Apartments and the
receipt of a refund of 2002 taxes at Overlook Point Apartments during the three
months ended March 31, 2003. Other income, depreciation expense and interest
expense were relatively consistent for the comparable periods.
Included in general and administrative expenses is the cost of services provided
by the Managing General Partner and its affiliates as allowed under the
Partnership Agreement. Also included in general and administrative expenses are
costs associated with the quarterly and annual communications with investors and
regulatory agencies and the annual audit required by the Partnership Agreement.
As part of the ongoing business plan of the Partnership, the Managing General
Partner monitors the rental market environment of its investment properties to
assess the feasibility of increasing rents, maintaining or increasing occupancy
levels and protecting the Partnership from increases in expenses. As part of
this plan, the Managing General Partner attempts to protect the Partnership from
the burden of inflation-related increases in expenses by increasing rents and
maintaining a high overall occupancy level. However, due to changing market
conditions, which can result in the use of rental concessions and rental
reductions to offset softening market conditions, there is no guarantee that the
Managing General Partner will be able to sustain such a plan.
Liquidity and Capital Resources
At March 31, 2003, the Partnership had cash and cash equivalents of
approximately $539,000 compared to approximately $532,000 at March 31, 2002.
Cash and cash equivalents decreased approximately $177,000 from December 31,
2002 due to approximately $51,000 and $172,000 of cash used in investing and
financing activities, respectively, slightly offset by approximately $46,000 of
cash provided by operating activities. Cash used in investing activities
consisted of property improvements and replacements and deposits to restricted
escrows maintained by the mortgage lenders. Cash used in financing activities
consisted of principal payments made on the mortgages encumbering the
Partnership's properties and distributions to the partners. The Partnership
invests its working capital reserves in interest bearing accounts.
An affiliate of the Managing General Partner has made available to the
Partnership a credit line of up to $150,000 per property owned by the
Partnership. At the present time, the Partnership has no outstanding amounts due
under this line of credit. Other than cash and cash equivalents, the line of
credit is the Partnership's only unused source of liquidity.
The sufficiency of existing liquid assets to meet future liquidity and capital
expenditure requirements is directly related to the level of capital
expenditures required at the properties to adequately maintain the physical
assets and other operating needs of the Partnership and to comply with Federal,
state, and local legal and regulatory requirements. The Managing General Partner
monitors developments in the area of legal and regulatory compliance and is
studying new federal laws, including the Sarbanes-Oxley Act of 2002. The
Sarbanes-Oxley Act of 2002 mandates or suggests additional compliance measures
with regard to governance, disclosure, audit and other areas. In light of these
changes, the Partnership expects that it will incur higher expenses related to
compliance, including increased legal and audit fees. Capital improvements
planned for each of the Partnership's properties are detailed below.
Oak Run Apartments: During the three months ended March 31, 2003 the Partnership
completed approximately $28,000 of capital improvements at Oak Run Apartments
consisting primarily of floor covering replacements and parking lot resurfacing.
These improvements were funded from operations and replacement reserves. The
Partnership evaluates the capital improvement needs of the property during the
year and currently expects to complete an additional $170,000 in capital
improvements during the remainder of 2003 consisting primarily of floor covering
replacements, cabinets and countertops, and structural improvements. Additional
improvements may be considered and will depend on the physical condition of the
property as well as replacement reserves and anticipated cash flow generated by
the property.
Overlook Point Apartments: During the three months ended March 31, 2003 the
Partnership completed approximately $19,000 of capital improvements at Overlook
Point Apartments consisting primarily of floor covering replacements and
interior painting. These improvements were funded from operations. The
Partnership evaluates the capital improvement needs of the property during the
year and currently expects to complete an additional $65,000 in capital
improvements during the remainder of 2003 consisting primarily of floor covering
and appliance replacements. Additional improvements may be considered and will
depend on the physical condition of the property as well as anticipated cash
flow generated by the property.
The additional capital expenditures planned will be incurred only to the extent
of cash available from operations and Partnership reserves. To the extent that
such budgeted capital improvements are completed, the Partnership's
distributable cash flow, if any, may be adversely affected at least in the short
term.
The Partnership's current assets are thought to be sufficient for any near-term
needs (exclusive of capital improvements) of the Partnership. The mortgage
indebtedness of approximately $18,420,000 is being amortized over thirty years
with balloon payments of approximately $9,728,000 and $8,127,000 due in October
2004 and September 2005, respectively. The Managing General Partner will attempt
to refinance such indebtedness and/or sell the properties prior to such maturity
dates. If the properties cannot be refinanced or sold for a sufficient amount,
the Partnership may risk losing such properties through foreclosure.
The Partnership distributed the following amounts during the three months ended
March 31, 2003 and 2002 (in thousands, except per unit data):
Three Months Per Limited Three Months Per Limited
Ended Partnership Ended Partnership
March 31, 2003 Unit March 31, 2002 Unit
Sale and
Refinancing (1) $ 113 $ 1.49 $ -- $ --
(1) From prior cumulative undistributed sale and refinancing proceeds.
Future cash distributions will depend on the levels of net cash generated from
operations, the availability of cash reserves, and the timing of debt
maturities, refinancings and/or property sales. The Partnership's cash available
for distribution is reviewed on a monthly basis. There can be no assurance that
the Partnership will generate sufficient funds from operations after required
capital improvements expenditures to permit additional distributions to its
partners during the remainder of 2003 or subsequent periods.
In addition to its indirect ownership of the general partner interests in the
Partnership, AIMCO and its affiliates owned 41,671.50 limited partnership units
(the "Units") in the Partnership representing 55.56% of the total outstanding
Units at March 31, 2003. A number of these Units were acquired pursuant to
tender offers made by AIMCO or its affiliates. It is possible that AIMCO or its
affiliates will acquire additional units of limited partnership interest in the
Partnership in exchange for cash or a combination of cash and units in the
operating partnership of AIMCO either through private purchases or tender
offers. Under the Partnership Agreement, unitholders holding a majority of the
Units are entitled to take action with respect to a variety of matters, which
would include without limitation, voting on certain amendments to the
Partnership Agreement and voting to remove the Managing General Partner. As a
result of its ownership of 55.56% of the total outstanding Units, AIMCO is in a
position to influence all voting decisions with respect to the Registrant.
Insignia Properties L.P. ("IPLP"), an affiliate of AIMCO and the Managing
General Partner indirectly, had agreed for the benefit of non-tendering
unitholders, that it would vote the 21,513 Units acquired in January 1996: (i)
against any increase in compensation payable to the Managing General Partner or
to affiliates; and (ii) on all other matters submitted by it or its affiliates,
in proportion to the votes cast by non-tendering unitholders. Except for the
foregoing, no other limitations are imposed on IPLP's, AIMCO's or any of their
affiliates right to vote each Unit acquired. Although the Managing General
Partner owes fiduciary duties to the limited partners of the Partnership, the
Managing General Partner also owes fiduciary duties to AIMCO as its sole
stockholder. As a result, the duties of the Managing General Partner, as
managing general partner, to the Partnership and its limited partners may come
into conflict with the duties of the Managing General Partner to AIMCO, as its
sole stockholder.
Critical Accounting Policies and Estimates
The consolidated financial statements are prepared in accordance with accounting
principles generally accepted in the United States which require the Partnership
to make estimates and assumptions. The Partnership believes that of its
significant accounting policies, the following may involve a higher degree of
judgment and complexity.
Impairment of Long-Lived Assets
Investment properties are recorded at cost, less accumulated depreciation,
unless considered impaired. If events or circumstances indicate that the
carrying amount of a property may be impaired, the Partnership will make an
assessment of its recoverability by estimating the undiscounted future cash
flows, excluding interest charges, of the property. If the carrying amount
exceeds the aggregate future cash flows, the Partnership would recognize an
impairment loss to the extent the carrying amount exceeds the fair value of the
property.
Real property investments are subject to varying degrees of risk. Several
factors may adversely affect the economic performance and value of the
Partnership's investment properties. These factors include changes in the
national, regional and local economic climate; local conditions, such as an
oversupply of multifamily properties; competition from other available
multifamily property owners and changes in market rental rates. Any adverse
changes in these factors could cause an impairment in the Partnership's assets.
Revenue Recognition
The Partnership generally leases apartment units for twelve-month terms or less.
Rental income attributable to leases is recognized monthly as it is earned and
the Partnership fully reserves all balances outstanding over thirty days. The
Partnership will offer rental concessions during particularly slow months or in
response to heavy competition from other similar complexes in the area.
Concessions are charged to income as incurred.
ITEM 3. CONTROLS AND PROCEDURES
The principal executive officer and principal financial officer of the Managing
General Partner, who are the equivalent of the Partnership's principal executive
officer and principal financial officer, respectively, have, within 90 days of
the filing date of this quarterly report, evaluated the effectiveness of the
Partnership's disclosure controls and procedures (as defined in Exchange Act
Rules 13a-14(c) and 15d-14(c)) and have determined that such disclosure controls
and procedures are adequate. There have been no significant changes in the
Partnership's internal controls or in other factors that could significantly
affect the Partnership's internal controls since the date of evaluation. The
Partnership does not believe any significant deficiencies or material weaknesses
exist in the Partnership's internal controls. Accordingly, no corrective actions
have been taken.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
In March 1998, several putative unit holders of limited partnership units of the
Partnership commenced an action entitled Rosalie Nuanes, et al. v. Insignia
Financial Group, Inc., et al. (the "Nuanes action") in the Superior Court of the
State of California for the County of San Mateo. The plaintiffs named as
defendants, among others, the Partnership, its Managing General Partner and
several of their affiliated partnerships and corporate entities. The action
purports to assert claims on behalf of a class of limited partners and
derivatively on behalf of a number of limited partnerships (including the
Partnership) which are named as nominal defendants, challenging, among other
things, the acquisition of interests in certain Managing General Partner
entities by Insignia Financial Group, Inc. ("Insignia") and entities which were,
at one time, affiliates of Insignia; past tender offers by the Insignia
affiliates to acquire limited partnership units; management of the partnerships
by the Insignia affiliates; and the series of transactions which closed on
October 1, 1998 and February 26, 1999 whereby Insignia and Insignia Properties
Trust, respectively, were merged into AIMCO. The plaintiffs seek monetary
damages and equitable relief, including judicial dissolution of the Partnership.
On June 25, 1998, the Managing General Partner filed a motion seeking dismissal
of the action. In lieu of responding to the motion, the plaintiffs filed an
amended complaint. The Managing General Partner filed demurrers to the amended
complaint which were heard February 1999.
Pending the ruling on such demurrers, settlement negotiations commenced. On
November 2, 1999, the parties executed and filed a Stipulation of Settlement,
settling claims, subject to court approval, on behalf of the Partnership and all
limited partners who owned units as of November 3, 1999. Preliminary approval of
the settlement was obtained on November 3, 1999 from the Court, at which time
the Court set a final approval hearing for December 10, 1999. Prior to the
December 10, 1999 hearing, the Court received various objections to the
settlement, including a challenge to the Court's preliminary approval based upon
the alleged lack of authority of prior lead counsel to enter the settlement. On
December 14, 1999, the Managing General Partner and its affiliates terminated
the proposed settlement. In February 2000, counsel for some of the named
plaintiffs filed a motion to disqualify plaintiff's lead and liaison counsel who
negotiated the settlement. On June 27, 2000, the Court entered an order
disqualifying them from the case and an appeal was taken from the order on
October 5, 2000. On December 4, 2000, the Court appointed the law firm of Lieff
Cabraser Heimann & Bernstein LLP as new lead counsel for plaintiffs and the
putative class. Plaintiffs filed a third amended complaint on January 19, 2001.
On March 2, 2001, the Managing General Partner and its affiliates filed a
demurrer to the third amended complaint. On May 14, 2001, the Court heard the
demurrer to the third amended complaint. On July 10, 2001, the Court issued an
order sustaining defendants' demurrer on certain grounds. On July 20, 2001,
Plaintiffs filed a motion for reconsideration of the Court's July 10, 2001 order
granting in part and denying in part defendants' demurrer. On September 7, 2001,
Plaintiffs filed a fourth amended class and derivative action complaint. On
September 12, 2001, the Court denied Plaintiffs' motion for reconsideration. On
October 5, 2001, the Managing General Partner and affiliated defendants filed a
demurrer to the fourth amended complaint, which was heard on December 11, 2001.
On February 2, 2002, the Court served its order granting in part the demurrer.
The Court has dismissed without leave to amend certain of the plaintiffs'
claims. On February 11, 2002, plaintiffs filed a motion seeking to certify a
putative class comprised of all non-affiliated persons who own or have owned
units in the partnerships. The Managing General Partner and affiliated
defendants oppose the motion. On April 29, 2002, the Court held a hearing on
plaintiffs' motion for class certification and took the matter under submission
after further briefing, as ordered by the court, was submitted by the parties.
On July 10, 2002, the Court entered an order vacating the trial date of January
13, 2003 (as well as the pre-trial and discovery cut-off dates) and stayed the
case in its entirety through November 7, 2002 so that the parties could have an
opportunity to discuss settlement. On October 30, 2002, the court entered an
order extending the stay in effect through January 10, 2003.
On January 8, 2003, the parties filed a Stipulation of Settlement in proposed
settlement of the Nuanes action and the Heller action described below. On April
4, 2003, the Court preliminarily approved the settlement and scheduled a hearing
on final approval for June 2, 2003.
In general terms, the proposed settlement provides for certification for
settlement purposes of a settlement class consisting of all limited partners in
this Partnership and others (the "Partnerships") as of December 20, 2002, the
dismissal with prejudice and release of claims in the Nuanes and Heller
litigation, payment by AIMCO of $9.9 million (which shall be distributed to
settlement class members after deduction of attorney fees and costs of class
counsel and certain costs of settlement) and up to $1 million toward the cost of
independent appraisals of the Partnerships' properties by a Court appointed
appraiser. An affiliate of the Managing General Partner has also agreed to make
a tender offer to purchase all of the partnership interests in the Partnerships
within one year of final approval, if it is granted, and to provide partners
with the independent appraisals at the time of these tenders. The proposed
settlement also provides for the limitation of the allowable costs which the
Managing General Partner or its affiliates will charge the Partnerships in
connection with this litigation and imposes limits on the class counsel fees and
costs in this litigation. On April 11, 2003, notice was distributed to limited
partners providing the details of the proposed settlement.
During the third quarter of 2001, a complaint (the "Heller action") was filed
against the same defendants that are named in the Nuanes action, captioned
Heller v. Insignia Financial Group. On or about August 6, 2001, plaintiffs filed
a first amended complaint. The first amended complaint in the Heller action is
brought as a purported derivative action, and asserts claims for among other
things breach of fiduciary duty; unfair competition; conversion, unjust
enrichment; and judicial dissolution. Plaintiffs in the Nuanes action filed a
motion to consolidate the Heller action with the Nuanes action and stated that
the Heller action was filed in order to preserve the derivative claims that were
dismissed without leave to amend in the Nuanes action by the Court order dated
July 10, 2001. On October 5, 2001, the Managing General Partner and affiliated
defendants moved to strike the first amended complaint in its entirety for
violating the Court's July 10, 2001 order granting in part and denying in part
defendants' demurrer in the Nuanes action, or alternatively, to strike certain
portions of the complaint based on the statute of limitations. Other defendants
in the action demurred to the fourth amended complaint, and, alternatively,
moved to strike the complaint. On December 11, 2001, the court heard argument on
the motions and took the matters under submission. On February 4, 2002, the
Court served notice of its order granting defendants' motion to strike the
Heller complaint as a violation of its July 10, 2001 order in the Nuanes action.
On March 27, 2002, the plaintiffs filed a notice appealing the order striking
the complaint. Before completing briefing on the appeal, the parties stayed
further proceedings in the appeal pending the Court's review of the terms of the
proposed settlement described above.
The Managing General Partner does not anticipate that any costs to the
Partnership, whether legal or settlement costs, associated with these cases will
be material to the Partnership's overall operations.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a) Exhibits:
Exhibit 3.4, Agreement of Limited Partnership, incorporated by
reference to Exhibit A to the Prospectus of the Registrant
dated November 5, 1982, as revised December 30, 1982, and
after supplemented, contained in the Registrant's Registration
Statement on Form S-11 (Reg. No. 2-78495).
Exhibit 99, Certification Pursuant to 18 U.S.C. Section 1350,
as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act
of 2002.
b) Reports on Form 8-K:
None filed during the quarter ended March 31, 2003.
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 PROPERTIES FUND XVIII
By: FOX PARTNERS
General Partner
By: FOX CAPITAL MANAGEMENT CORPORATION
Managing General Partner
By: /s/Patrick J. Foye
Patrick J. Foye
Executive Vice President
By: /s/Thomas C. Novosel
Thomas C. Novosel
Senior Vice President and
Chief Accounting Officer
Date:May 13, 2003
CERTIFICATION
I, Patrick J. Foye, certify that:
1. I have reviewed this quarterly report on Form 10-QSB of Century Properties
Fund XVIII;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this quarterly
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
a) Designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this quarterly report is
being prepared;
b) Evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
quarterly report (the "Evaluation Date"); and
c) Presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based on our
most recent evaluation, to the registrant's auditors and the audit committee of
registrant's board of directors (or persons performing the equivalent
functions):
a) All significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to record,
process, summarize and report financial data and have identified for the
registrant's auditors any material weaknesses in internal controls; and
b) Any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
controls; and
6. The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.
Date: May 13, 2003
/s/Patrick J. Foye
Patrick J. Foye
Executive Vice President of Fox Capital
Management Corporation, equivalent of the
chief executive officer of the Partnership
CERTIFICATION
I, Paul J. McAuliffe, certify that:
1. I have reviewed this quarterly report on Form 10-QSB of Century Properties
Fund XVIII;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this quarterly
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
a) Designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this quarterly report is
being prepared;
b) Evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
quarterly report (the "Evaluation Date"); and
c) Presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based on our
most recent evaluation, to the registrant's auditors and the audit committee of
registrant's board of directors (or persons performing the equivalent
functions):
a) All significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to record,
process, summarize and report financial data and have identified for the
registrant's auditors any material weaknesses in internal controls; and
b) Any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
controls; and
6. The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.
Date: May 13, 2003
/s/Paul J. McAuliffe
Paul J. McAuliffe
Executive Vice President and Chief Financial
Officer of Fox Capital Management Corporation,
equivalent of the chief financial officer of
the Partnership
Exhibit 99
Certification of CEO and CFO
Pursuant to 18 U.S.C. Section 1350,
As Adopted Pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002
In connection with the Quarterly Report on Form 10-QSB of Century Properties
Fund XVIII (the "Partnership"), for the quarterly period ended March 31, 2003 as
filed with the Securities and Exchange Commission on the date hereof (the
"Report"), Patrick J. Foye, as the equivalent of the chief executive officer of
the Partnership, and Paul J. McAuliffe, as the equivalent of the chief financial
officer of the Partnership, each hereby certifies, pursuant to 18 U.S.C. Section
1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002,
that, to the best of his knowledge:
(1) The Report fully complies with the requirements of Section 13(a) or
15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all
material respects, the financial condition and results of operations
of the Partnership.
/s/Patrick J. Foye
Name: Patrick J. Foye
Date: May 13, 2003
/s/Paul J. McAuliffe
Name: Paul J. McAuliffe
Date: May 13, 2003
This certification accompanies the Report pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002 and shall not, except to the extent required by the
Sarbanes-Oxley Act of 2002, be deemed filed by the Partnership for purposes of
Section 18 of the Securities Exchange Act of 1934, as amended.