UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-QSB
(Mark One)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the quarterly period ended September 30, 2005
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
For the transition period from _________to _________
Commission file number 0-11934
CENTURY PROPERTIES FUND XVIII
(Exact name of small business issuer 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)
Check whether the issuer (i) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports) and (2) has been
subject to such filing requirements for the past 90 days. Yes X No ___
Indicate by check mark whether the registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act) Yes ___ No __X__
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CENTURY PROPERTIES FUND XVIII
CONSOLIDATED BALANCE SHEET
(Unaudited)
(in thousands, except unit data)
September 30, 2005
Assets
Cash and cash equivalents $ 37
Receivables and deposits 352
Restricted escrows 158
Other assets 274
Investment property:
Land $ 6,218
Buildings and related personal property 12,838
19,056
Less accumulated depreciation (8,907) 10,149
$ 10,970
Liabilities and Partners' (Deficiency) Capital
Liabilities
Accounts payable $ 132
Other liabilities 163
Accrued property taxes 223
Tenant security deposit liabilities 50
Due to affiliates (Note B) 2,830
Mortgage note payable 8,500
Partners' (Deficiency) Capital
General partner $ (5,425)
Limited partners (75,000 units issued and
outstanding) 4,497 (928)
$ 10,970
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 Nine Months Ended
September 30, September 30,
2005 2004 2005 2004
Revenues:
Rental income $ 536 $ 458 $ 1,542 $ 1,391
Other income 54 83 152 230
Casualty gain 8 -- 8 --
Total revenues 598 541 1,702 1,621
Expenses:
Operating 446 338 1,036 910
General and administrative 52 36 164 144
Depreciation 142 123 416 366
Interest 217 190 575 568
Property tax 74 83 223 239
Total expenses 931 770 2,414 2,227
Net loss $ (333) $ (229) $ (712) $ (606)
Net loss allocated to general
partner (9.9%) $ (33) $ (23) $ (70) $ (60)
Net loss allocated to limited
partners (90.1%) (300) (206) (642) (546)
$ (333) $ (229) $ (712) $ (606)
Net loss per limited partnership
unit $ (4.00) $ (2.75) $ (8.56) $ (7.28)
See Accompanying Notes to Consolidated Financial Statements
CENTURY PROPERTIES FUND XVIII
CONSOLIDATED STATEMENT OF CHANGES IN PARTNERS' (DEFICIENCY) 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' (deficiency) capital
at December 31, 2004 75,000 $(5,355) $ 5,139 $ (216)
Net loss for the nine months
ended September 30, 2005 -- (70) (642) (712)
Partners' (deficiency) capital
at September 30, 2005 75,000 $(5,425) $ 4,497 $ (928)
See Accompanying Notes to Consolidated Financial Statements
CENTURY PROPERTIES FUND XVIII
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
Nine Months Ended
September 30,
2005 2004
Cash flows from operating activities:
Net loss $ (712) $ (606)
Adjustments to reconcile net loss to net
cash provided by (used in) operating activities:
Depreciation 416 366
Bad debt expense 29 100
Amortization of loan costs 49 26
Casualty gain (8) --
Change in accounts:
Receivables and deposits 69 (88)
Other assets (24) (73)
Accounts payable 87 74
Tenant security deposit liabilities 9 1
Due to affiliates 168 5
Accrued property taxes (94) (75)
Other liabilities 31 60
Net cash provided by (used in) operating
activities 20 (210)
Cash flows from investing activities:
Property improvements and replacements (371) (560)
Insurance proceeds received 13 --
Net deposits to restricted escrows (95) (31)
Net cash used in investing activities (453) (591)
Cash flows from financing activities:
Advances from affiliates 539 372
Payments made to affiliates (152) --
Loan costs paid (20) (63)
Payments on mortgage notes payable -- (105)
Net cash provided by financing activities 367 204
Net decrease in cash and cash equivalents (66) (597)
Cash and cash equivalents at beginning of period 103 683
Cash and cash equivalents at end of period $ 37 $ 86
Supplemental disclosure of cash flow information:
Cash paid for interest $ 451 $ 480
Supplemental disclosure of non-cash information:
Property improvements and replacements included in
accounts payable $ 20 $ 52
At December 31, 2004, approximately $12,000 of property improvements and
replacements were included in accounts payable which are included in property
improvements and replacements for the nine months ended September 30, 2005.
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 and nine month periods ended September 30, 2005
are not necessarily indicative of the results that may be expected for the
fiscal year ending December 31, 2005. For further information, refer to the
consolidated financial statements and footnotes included in the Partnership's
Annual Report on Form 10-KSB for the year ended December 31, 2004.
Reclassification:
Certain balances from 2004 have been reclassified to conform to the
2005 presentation.
Note B - Transactions with Affiliated Parties
The Partnership has no employees and depends 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 receive 5% of gross receipts from the
Partnership's property as compensation for providing property management
services. The Partnership paid to such affiliates approximately $83,000 and
$79,000 for the nine months ended September 30, 2005 and 2004, respectively,
which is included in operating expenses.
An affiliate of the Managing General Partner charged the Partnership
reimbursement of accountable administrative expenses amounting to approximately
$104,000 and $84,000 for the nine months ended September 30, 2005 and 2004,
respectively, which is included in general and administrative expenses. At
September 30, 2005, approximately $184,000 of reimbursements for services and
associated interest were accrued by the Partnership and are included in due to
affiliates on the accompanying consolidated balance sheet.
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 nine months ended September 30, 2005 and 2004, no amounts
were paid to the Managing General Partner as there were no distributions.
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. During the nine months ended September 30, 2005 and 2004, an
affiliate of the Managing General Partner agreed to advance funds in excess of
the $150,000 line of credit to fund operating expenses of Oak Run Apartments.
During the nine months ended September 30, 2005 and 2004, an affiliate of the
Managing General Partner advanced the Partnership approximately $539,000 and
$372,000, respectively. During the fourth quarter of 2004, an affiliate of the
Managing General Partner agreed to advance the Partnership approximately
$1,855,000 to cover costs associated with obtaining a new mortgage on the
property and to cover the deficiency between the existing mortgage payoff amount
and the new mortgage. During the nine months ended September 30, 2005, the
Partnership repaid approximately $152,000 for advances and approximately $80,000
for accrued interest. At September 30, 2005 the outstanding balance was
approximately $2,646,000 including accrued interest. Interest accrues at the
prime rate plus 2% (8.75% at September 30, 2005). Interest expense amounted to
approximately $137,000 and $2,000 for the nine months ended September 30, 2005
and 2004, respectively. Subsequent to September 30, 2005, an affiliate of the
Managing General Partner agreed to advance additional funds in excess of the
credit line to cover operational expenses and capital improvements at Oak Run
Apartments of approximately $189,000.
The Partnership insures its property 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, general
liability and vehicle liability. The Partnership insures its property above the
AIMCO limits through insurance policies obtained by AIMCO from insurers
unaffiliated with the Managing General Partner. During the nine months ended
September 30, 2005 and 2004, the Partnership was charged by AIMCO and its
affiliates approximately $40,000 and $39,000 for insurance coverage and fees
associated with policy claims administration.
Note C - Casualty Gain
During the three and nine months ended September 30, 2005, a net casualty gain
of approximately $8,000 was recorded at Oak Run Apartments. The casualty gain
related to a fire, occurring in May 2005, which caused damage to one unit at the
property. The gain was the result of the receipt of insurance proceeds of
approximately $13,000 offset by approximately $5,000 of undepreciated property
improvements and replacements being written off.
Note D - Contingencies
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
purported to assert claims on behalf of a class of limited partners and
derivatively on behalf of a number of limited partnerships (including the
Partnership) that 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 that 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 sought monetary
damages and equitable relief, including judicial dissolution of the Partnership.
In addition, during the third quarter of 2001, a complaint captioned Heller v.
Insignia Financial Group (the "Heller action") was filed against the same
defendants that are named in the Nuanes action. On or about August 6, 2001,
plaintiffs filed a first amended complaint. The Heller action was brought as a
purported derivative action, and asserted claims for, among other things, breach
of fiduciary duty, unfair competition, conversion, unjust enrichment, and
judicial dissolution. On January 28, 2002, the trial court granted defendants
motion to strike the complaint. Plaintiffs took an appeal from this order.
On January 8, 2003, the parties filed a Stipulation of Settlement in proposed
settlement of the Nuanes action and the Heller action. On June 13, 2003, the
court granted final approval of the settlement and entered judgment in both the
Nuanes and Heller actions. On August 12, 2003, an objector ("Objector") filed an
appeal (the "Appeal") seeking to vacate and/or reverse the order approving the
settlement and entering judgment thereto. On May 4, 2004, the Objector filed a
second appeal challenging the court's use of a referee and its order requiring
Objector to pay those fees.
On March 21, 2005, the Court of Appeals issued opinions in both pending appeals.
With regard to the settlement and judgment entered thereto, the Court of Appeals
vacated the trial court's order and remanded to the trial court for further
findings on the basis that the "state of the record is insufficient to permit
meaningful appellate review". With regard to the second appeal, the Court of
Appeals reversed the order requiring the Objector to pay referee fees. On April
26, 2005, the Court of Appeals lifted the stay of a pending appeal related to
the Heller action and the trial court's order striking the complaint. On April
28, 2005, the Objector filed a Petition for Review with the California Supreme
Court in connection with the opinion vacating the order approving settlement and
remanding for further findings. On June 10, 2005, the California Supreme Court
denied Objector's Petition for Review and the Court of Appeals sent the matter
back to the trial court on June 21, 2005. The parties intend to ask the trial
court to make further findings in connection with settlement consistent with the
Court of Appeal's remand order. With respect to the related Heller appeal, on
July 28, 2005, the Court of Appeals reversed the trial court's order striking
the first amended complaint.
On August 18, 2005, Objector and his counsel filed a motion to disqualify the
trial court based on a peremptory challenge and filed a motion to disqualify for
cause on October 17, 2005. On or about October 13, 2005 Objector filed a motion
to intervene and on or about October 19, 2005 filed both a motion to take
discovery relating to the adequacy of plaintiffs as derivative representatives
and a motion to dissolve the anti-suit injunction in connection with settlement.
On October 27, 2005, the Court denied Objector's peremptory challenge and struck
Objector's motion to disqualify for cause. No hearing has been set on Objector's
remaining motions. On November 3, 2005, Objector and his counsel filed a writ of
mandate to the Court of Appeals challenging the court's October 27, 2005 order.
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.
AIMCO Properties L.P. and NHP Management Company, both affiliates of the
Managing General Partner, are defendants in a lawsuit alleging that they
willfully violated the Fair Labor Standards Act ("FLSA") by failing to pay
maintenance workers overtime for all hours worked in excess of forty per week.
The complaint, filed in the United States District Court for the District of
Columbia, attempts to bring a collective action under the FLSA and seeks to
certify state subclasses in California, Maryland, and the District of Columbia.
Specifically, the plaintiffs contend that AIMCO Properties L.P. and NHP
Management Company failed to compensate maintenance workers for time that they
were required to be "on-call". Additionally, the complaint alleges AIMCO
Properties L.P. and NHP Management Company failed to comply with the FLSA in
compensating maintenance workers for time that they worked in excess of 40 hours
in a week. In June 2005 the Court conditionally certified the collective action
on both the on-call and overtime issues, which allows the plaintiffs to provide
notice of the collective action to all non-exempt maintenance workers from
August 7, 2000 through the present. Those employees will have the opportunity to
opt-in to the collective action, and AIMCO Properties, L.P. and NHP Management
Company will have the opportunity to move to decertify the collective action.
Because the court denied plaintiffs' motion to certify state subclasses, on
September 26, 2005, the plaintiffs filed a class action with the same
allegations in the Superior Court of California (Contra Costa County). Although
the outcome of any litigation is uncertain, AIMCO Properties, L.P. does not
believe that the ultimate outcome will have a material adverse effect on its
consolidated financial condition or results of operations. Similarly, the
Managing General Partner does not believe that the ultimate outcome will have a
material adverse effect on the Partnership's consolidated financial condition or
results of operations. Although the outcome of any litigation is uncertain,
AIMCO Properties, L.P. does not believe that the ultimate outcome will have a
material adverse effect on its consolidated financial condition or results of
operations. Similarly, the Managing General Partner does not believe that the
ultimate outcome will have a material adverse effect on the Partnership's
consolidated financial condition or results of operations.
The Partnership is unaware of any other pending or outstanding litigation
matters involving it or its investment property that are not of a routine nature
arising in the ordinary course of business.
Environmental
Various Federal, state and local laws subject property owners or operators to
liability for management, and the costs of removal or remediation, of certain
hazardous substances present on a property. Such laws often impose liability
without regard to whether the owner or operator knew of, or was responsible for,
the release or presence of the hazardous substances. The presence of, or the
failure to manage or remedy properly, hazardous substances may adversely affect
occupancy at affected apartment communities and the ability to sell or finance
affected properties. In addition to the costs associated with investigation and
remediation actions brought by government agencies, and potential fines or
penalties imposed by such agencies in connection therewith, the presence of
hazardous substances on a property could result in claims by private plaintiffs
for personal injury, disease, disability or other infirmities. Various laws also
impose liability for the cost of removal, remediation or disposal of hazardous
substances through a licensed disposal or treatment facility. Anyone who
arranges for the disposal or treatment of hazardous substances is potentially
liable under such laws. These laws often impose liability whether or not the
person arranging for the disposal ever owned or operated the disposal facility.
In connection with the ownership, operation and management of its property, the
Partnership could potentially be liable for environmental liabilities or costs
associated with its property.
Mold
The Partnership is aware of lawsuits against owners and managers of multifamily
properties asserting claims of personal injury and property damage caused by the
presence of mold, some of which have resulted in substantial monetary judgments
or settlements. The Partnership has only limited insurance coverage for property
damage loss claims arising from the presence of mold and for personal injury
claims related to mold exposure. Affiliates of the Managing General Partner have
implemented a national policy and procedures to prevent or eliminate mold from
its properties and the Managing General Partner believes that these measures
will minimize the effects that mold could have on residents. To date, the
Partnership has not incurred any material costs or liabilities relating to
claims of mold exposure or to abate mold conditions. Because the law regarding
mold is unsettled and subject to change the Managing General Partner can make no
assurance that liabilities resulting from the presence of or exposure to mold
will not have a material adverse effect on the Partnership's consolidated
financial condition or results of operations.
SEC Investigation
The Central Regional Office of the United States Securities and Exchange
Commission (the "SEC") continues its formal investigation relating to certain
matters. Although the staff of the SEC is not limited in the areas that it may
investigate, AIMCO believes the areas of investigation have included AIMCO's
miscalculated monthly net rental income figures in third quarter 2003,
forecasted guidance, accounts payable, rent concessions, vendor rebates,
capitalization of payroll and certain other costs, tax credit transactions, and
tender offers for limited partnership interest. AIMCO is cooperating fully.
AIMCO is not able to predict when the investigation will be resolved. AIMCO does
not believe that the ultimate outcome will have a material adverse effect on its
consolidated financial condition or results of operations. Similarly, the
Managing General Partner does not believe that the ultimate outcome will have a
material adverse effect on the Partnership's consolidated financial condition or
results of operations.
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. 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; litigation, including costs associated with prosecuting and
defending claims and any adverse outcomes, 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 property consists of one apartment complex. The
following table sets forth the average occupancy of the property for the nine
months ended September 30, 2005 and 2004.
Average Occupancy
Property 2005 2004
Oak Run Apartments 84% 79%
Dallas, Texas
Occupancy at Oak Run Apartments increased as a result of increased advertising,
additional leasing staff and a lowering of the average rental rate to make the
property more competitive in its market area.
The Partnership's financial results depend upon a number of factors including
the ability to attract and maintain tenants at the investment property, interest
rates on mortgage loans, costs incurred to operate the investment property,
general economic conditions and weather. As part of the ongoing business plan of
the Partnership, the Managing General Partner monitors the rental market
environment of its investment property 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, the Managing General Partner may use rental
concessions and rental rate reductions to offset softening market conditions,
accordingly, there is no guarantee that the Managing General Partner will be
able to sustain such a plan. Further, a number of factors which are outside the
control of the Partnership such as the local economic climate and weather can
adversely or positively affect the Partnership's financial results.
Results of Operations
The Partnership recognized a net loss of approximately $333,000 and $712,000 for
the three and nine months ended September 30, 2005 respectively compared to a
net loss of approximately $229,000 and $606,000 for the three and nine months
ended September 30, 2004, respectively. The increase in net loss for the three
and nine months ended September 30, 2005 was due to an increase in total
expenses partially offset by an increase in total revenues.
Total revenues increased for the three and nine months ended September 30, 2005
due to an increase in rental income and casualty gain partially offset by a
decrease in other income. Rental income increased due to an increase in
occupancy at Oak Run Apartments as discussed above and a decrease in bad debt
expense which were partially offset by a decrease in the average rental rate
charged. Other income decreased due to decreases in lease cancellation fees,
late charges, and cleaning and damage fees at Oak Run Apartments.
During the three and nine months ended September 30, 2005, a net casualty gain
of approximately $8,000 was recorded at Oak Run Apartments. The casualty gain
related to a fire, occurring in May 2005, which caused damage to one unit at the
property. The gain was the result of the receipt of insurance proceeds of
approximately $13,000 offset by approximately $5,000 of undepreciated property
improvements and replacements being written off.
Total expenses increased for the three and nine months ended September 30, 2005
due to an increase in operating, general and administrative, depreciation and
interest expenses partially offset by a decrease in property tax expense.
Operating expense increased due to an increase in advertising and property
expenses. Advertising expense increased due to an increase in leasing promotions
in a effort to increase occupancy levels. Property expense increased due to an
increase in salaries and related benefits. Depreciation expense increased due to
property improvements and replacements being placed into service during the past
twelve months which are now being depreciated. Interest expense increased due to
an increase in interest on advances from affiliates partially offset by a
decrease due to the refinancing of the mortgage encumbering Oak Run Apartments
in October 2004 as discussed below. Property tax expense decreased due to a
decrease in the estimated 2005 property taxes at Oak Run Apartments as a result
of a lower tax rate for the county taxes.
General and administrative expenses increased for the three and nine months
ended September 30, 2005 due to an increase in accountable reimbursements
charged by an affiliate of the Managing General Partner in accordance with the
Partnership Agreement. In addition, costs associated with the quarterly and
annual communications with investors and regulatory agencies and the annual
audit required by the Partnership Agreement are also included.
Liquidity and Capital Resources
At September 30, 2005, the Partnership had cash and cash equivalents of
approximately $ 37,000 compared to approximately $86,000 at September 30, 2004.
Cash and cash equivalents decreased approximately $66,000 from December 31, 2004
due to approximately $453,000 of cash used in investing activities partially
offset by approximately $367,000 and $20,000 of cash provided by financing and
operating activities, respectively. Cash used in investing activities consisted
of property improvements and replacements and net deposits to restricted escrows
maintained by the mortgage lender partially offset by insurance proceeds
received. Cash provided by financing activities consisted of advances from
affiliates partially offset by the repayment of advances from affiliates and
payment of additional loan costs. 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. During the nine months ended September 30, 2005 and 2004, an
affiliate of the Managing General Partner agreed to advance funds in excess of
the $150,000 line of credit to fund operating expenses of Oak Run Apartments.
During the nine months ended September 30, 2005 and 2004, an affiliate of the
Managing General Partner advanced the Partnership approximately $539,000 and
$372,000, respectively. During the fourth quarter of 2004, an affiliate of the
Managing General Partner agreed to advance the Partnership approximately
$1,855,000 to cover costs associated with obtaining a new mortgage on the
property and an amount to cover the deficiency between the existing mortgage
payoff amount and the new mortgage. During the nine months ended September 30,
2005, the Partnership repaid approximately $152,000 for advances and
approximately $80,000 for accrued interest. At September 30, 2005 the
outstanding balance was approximately $2,646,000 including accrued interest.
Interest accrues at the prime rate plus 2% (8.75% at September 30, 2005).
Interest expense amounted to approximately $137,000 and $2,000 for the nine
months ended September 30, 2005 and 2004, respectively. Subsequent to September
30, 2005, an affiliate of the Manging General Partner agreed to advance
additional funds in excess of the credit line to cover operational expenses and
capital improvements at Oak Run Apartments of approximately $189,000.
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 property 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. For
example, the Sarbanes-Oxley Act of 2002 mandates or suggests additional
compliance measures with regard to governance, disclosure, audit and other
areas. The Partnership expects that it will incur higher expenses related to
compliance. Capital improvements planned for the Partnership's property are
detailed below.
During the nine months ended September 30, 2005 the Partnership completed
approximately $379,000 of capital improvements at Oak Run Apartments consisting
primarily of signage, counter tops, floor covering and appliance replacements,
exterior improvements, and golf carts. These improvements were funded from
operations, replacement reserves, advances from affiliates and insurance
proceeds. The Partnership regularly evaluates the capital improvement needs of
the property. While the Partnership has no material commitments for property
improvements and replacements, certain routine capital expenditures are
anticipated during 2005. Such capital expenditures will depend on the physical
condition of the property as well as anticipated cash flow generated by the
property.
The additional capital expenditures will be incurred only to the extent of cash
available from operations and Partnership reserves. To the extent that such
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 assets are thought to be sufficient for any near-term needs
(exclusive of capital improvements) of the Partnership. On October 1, 2004, the
Partnership obtained a mortgage of $8,500,000 on its sole investment property,
Oak Run Apartments, located in Dallas, Texas. The existing mortgage of
approximately $9,728,000 matured on October 1, 2004 and was repaid with proceeds
from the new mortgage and an additional loan of approximately $1,918,000, which
was funded by an affiliate of the Partnership's Managing General Partner
("Affiliate Loan") to cover closing costs and the deficiency between the
existing mortgage payoff amount and the new mortgage. The Affiliate Loan is a
demand note that bears interest at the prime rate plus 2% (8.75% at September
30, 2005). The new mortgage requires monthly payments of interest which began on
November 1, 2004 until the loan matures October 1, 2007, with interest being
equal to the average of London Interbank Offered Rates for a term of one month
plus 285 basis points (minimum rate of 4.69%). In conjunction with the mortgage
note, the Partnership paid approximately $30,000 to enter into an interest rate
cap agreement, which limited the Partnership's exposure to interest rate
increases. Under this interest rate cap agreement, the Partnership's interest
rate on the amounts owed to the lender will be no higher than 8.85%. This
agreement expires October 1, 2007. The Partnership has adopted SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities", which was
amended by SFAS No. 138 "Accounting for Certain Derivative Instruments and
Certain Hedging Activities - an Amendment of SFAS No. 133". The Partnership's
interest rate cap does not qualify for special hedge accounting treatment as
defined by SFAS 133, and therefore all changes in the fair value of the interest
rate cap will be recognized in the consolidated statements of operations as an
adjustment to interest expense. In addition the new mortgage requires monthly
escrow deposits for taxes, insurance and replacement reserves. As a condition of
making the new mortgage, the lender required an affiliate of the Partnership to
guarantee the obligations and liabilities of the Partnership with respect to the
new mortgage.
There were no distributions during the nine months ended September 30, 2005 and
2004. Future cash distributions will depend on the levels of cash generated from
operations, and the timing of the debt maturity, property sale and/or
refinancing. The Partnership's cash available for distribution is reviewed on a
monthly basis. In light of the amounts accrued and payable to affiliates of the
Managing General Partner at September 30, 2005, there can be no assurance that
the Partnership will generate sufficient funds from operations after capital
improvements to permit any distributions to its partners during 2005 or
subsequent periods.
Other
In addition to its indirect ownership of the general partner interests in the
Partnership, AIMCO and its affiliates owned 42,694.50 limited partnership units
(the "Units") in the Partnership representing 56.93% of the total outstanding
Units at September 30, 2005. 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 in exchange for cash or a combination
of cash and units, in AIMCO Properties, L.P., 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 56.93%
of the total outstanding Units, AIMCO is in a position to influence all voting
decisions with respect to the Registrant. AIMCO IPLP, L.P., formerly 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 property is recorded at cost, less accumulated depreciation, unless
considered impaired. If events or circumstances indicate that the carrying
amount of the 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 property. These factors include, but are not limited
to, 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 impairment of the Partnership's
asset.
Revenue Recognition
The Partnership generally leases apartment units for twelve-month terms or less.
The Partnership will offer rental concessions during particularly slow months or
in response to heavy competition from other similar complexes in the area.
Rental income attributable to leases, net of any concessions, is recognized on a
straight-line basis over the term of the lease. The Partnership evaluates all
accounts receivable from residents and establishes an allowance, after the
application of security deposits, for accounts greater than 30 days past due on
current tenants and all receivables due from former tenants.
ITEM 3. CONTROLS AND PROCEDURES
(a) Disclosure Controls and Procedures. The Partnership's management, with the
participation of 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, has
evaluated the effectiveness of the Partnership's disclosure controls and
procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the
Securities Exchange Act of 1934, as amended (the "Exchange Act")) as of the end
of the period covered by this report. Based on such evaluation, 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 concluded that, as of the
end of such period, the Partnership's disclosure controls and procedures are
effective.
(b) Internal Control Over Financial Reporting. There have not been any changes
in the Partnership's internal control over financial reporting (as such term is
defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the
fiscal quarter to which this report relates that have materially affected, or
are reasonably likely to materially affect, the Partnership's internal control
over financial reporting.
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
purported to assert claims on behalf of a class of limited partners and
derivatively on behalf of a number of limited partnerships (including the
Partnership) that 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 that 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 sought monetary
damages and equitable relief, including judicial dissolution of the Partnership.
In addition, during the third quarter of 2001, a complaint captioned Heller v.
Insignia Financial Group (the "Heller action") was filed against the same
defendants that are named in the Nuanes action. On or about August 6, 2001,
plaintiffs filed a first amended complaint. The Heller action was brought as a
purported derivative action, and asserted claims for, among other things, breach
of fiduciary duty, unfair competition, conversion, unjust enrichment, and
judicial dissolution. On January 28, 2002, the trial court granted defendants
motion to strike the complaint. Plaintiffs took an appeal from this order.
On January 8, 2003, the parties filed a Stipulation of Settlement in proposed
settlement of the Nuanes action and the Heller action. On June 13, 2003, the
court granted final approval of the settlement and entered judgment in both the
Nuanes and Heller actions. On August 12, 2003, an objector ("Objector") filed an
appeal (the "Appeal") seeking to vacate and/or reverse the order approving the
settlement and entering judgment thereto. On May 4, 2004, the Objector filed a
second appeal challenging the court's use of a referee and its order requiring
Objector to pay those fees.
On March 21, 2005, the Court of Appeals issued opinions in both pending appeals.
With regard to the settlement and judgment entered thereto, the Court of Appeals
vacated the trial court's order and remanded to the trial court for further
findings on the basis that the "state of the record is insufficient to permit
meaningful appellate review". With regard to the second appeal, the Court of
Appeals reversed the order requiring the Objector to pay referee fees. On April
26, 2005, the Court of Appeals lifted the stay of a pending appeal related to
the Heller action and the trial court's order striking the complaint. On April
28, 2005, the Objector filed a Petition for Review with the California Supreme
Court in connection with the opinion vacating the order approving settlement and
remanding for further findings. On June 10, 2005, the California Supreme Court
denied Objector's Petition for Review and the Court of Appeals sent the matter
back to the trial court on June 21, 2005. The parties intend to ask the trial
court to make further findings in connection with settlement consistent with the
Court of Appeal's remand order. With respect to the related Heller appeal, on
July 28, 2005, the Court of Appeals reversed the trial court's order striking
the first amended complaint.
On August 18, 2005, Objector and his counsel filed a motion to disqualify the
trial court based on a peremptory challenge and filed a motion to disqualify for
cause on October 17, 2005. On or about October 13, 2005 Objector filed a motion
to intervene and on or about October 19, 2005 filed both a motion to take
discovery relating to the adequacy of plaintiffs as derivative representatives
and a motion to dissolve the anti-suit injunction in connection with settlement.
On October 27, 2005, the Court denied Objector's peremptory challenge and struck
Objector's motion to disqualify for cause. No hearing has been set on Objector's
remaining motions. On November 3, 2005, Objector and his counsel filed a writ of
mandate to the Court of Appeals challenging the court's October 27, 2005 order.
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.
AIMCO Properties L.P. and NHP Management Company, both affiliates of the
Managing General Partner, are defendants in a lawsuit alleging that they
willfully violated the Fair Labor Standards Act ("FLSA") by failing to pay
maintenance workers overtime for all hours worked in excess of forty per week.
The complaint, filed in the United States District Court for the District of
Columbia, attempts to bring a collective action under the FLSA and seeks to
certify state subclasses in California, Maryland, and the District of Columbia.
Specifically, the plaintiffs contend that AIMCO Properties L.P. and NHP
Management Company failed to compensate maintenance workers for time that they
were required to be "on-call". Additionally, the complaint alleges AIMCO
Properties L.P. and NHP Management Company failed to comply with the FLSA in
compensating maintenance workers for time that they worked in excess of 40 hours
in a week. In June 2005 the Court conditionally certified the collective action
on both the on-call and overtime issues, which allows the plaintiffs to provide
notice of the collective action to all non-exempt maintenance workers from
August 7, 2000 through the present. Those employees will have the opportunity to
opt-in to the collective action, and AIMCO Properties, L.P. and NHP Management
Company will have the opportunity to move to decertify the collective action.
Because the court denied plaintiffs' motion to certify state subclasses, on
September 26, 2005, the plaintiffs filed a class action with the same
allegations in the Superior Court of California (Contra Costa County). Although
the outcome of any litigation is uncertain, AIMCO Properties, L.P. does not
believe that the ultimate outcome will have a material adverse effect on its
consolidated financial condition or results of operations. Similarly, the
Managing General Partner does not believe that the ultimate outcome will have a
material adverse effect on the Partnership's consolidated financial condition or
results of operations.
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS
See Exhibit Index.
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/Martha L. Long
Martha L. Long
Senior Vice President
By: /s/Stephen B. Waters
Stephen B. Waters
Vice President
Date: November 14, 2005
CENTURY PROPERTIES FUND XVIII
EXHIBIT INDEX
Exhibit Number Description of Exhibit
2.5 Master Indemnity Agreement Incorporated by reference to Form 8-K filed by
Insignia Financial Group, Inc. with the Securities and Exchange Commission
on September 1, 1995.
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
Agreement on Form S-11 (Reg. No. 2-78495).
3.4a Amendment to the Limited Partnership Agreement dated April 4, 2005.
Incorporated by reference to the Registrant's Form 10-QSB for the quarterly
period ended March 31, 2005.
10.7 Loan Agreement dated September 30, 2004 between Oak Run, L.P., a South
Carolina limited partnership and GMAC Commercial Mortgage Bank.
Incorporated by reference to the Registrant's Form 8-K dated October 1,
2004.
10.8 Promissory Note dated September 30, 2004 between Oak Run L.P., a South
Carolina limited partnership and GMAC Commercial Mortgage Bank.
Incorporated by reference to the Registrant's Form 8-K dated October 1,
2004.
10.9 Guaranty dated September 30, 2004 by AIMCO Properties, L.P., for the
benefit of GMAC Commercial Mortgage Bank. Incorporated by reference to the
Registrant's Form 8-K dated October 1, 2004.
31.1 Certification of equivalent of Chief Executive Officer pursuant to
Securities Exchange Act Rules 13a-14(a)/15d-14(a), as Adopted Pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002.
31.2 Certification of equivalent of Chief Financial Officer pursuant to
Securities Exchange Act Rules 13a-14(a)/15d-14(a), as Adopted Pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002.
32.1 Certification of the equivalent of the Chief Executive Officer and Chief
Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant
to Section 906 of the Sarbanes-Oxley Act of 2002.
Exhibit 31.1
CERTIFICATION
I, Martha L. Long, certify that:
1. I have reviewed this quarterly report on Form 10-QSB of Century Properties
Fund XVIII;
2. Based on my knowledge, this 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
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material
respects the financial condition, results of operations and cash flows of
the small business issuer as of, and for, the periods presented in this
report;
4. The small business issuer's other certifying officer(s) and I are
responsible for establishing and maintaining disclosure controls and
procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for
the small business issuer and have:
(a) Designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the
small business issuer, including its consolidated subsidiaries, is
made known to us by others within those entities, particularly
during the period in which this report is being prepared;
(b) Evaluated the effectiveness of the small business issuer's
disclosure controls and procedures and presented in this report our
conclusions about the effectiveness of the disclosure controls and
procedures, as of the end of the period covered by this report based
on such evaluation; and
(c) Disclosed in this report any change in the small business issuer's
internal control over financial reporting that occurred during the
small business issuer's most recent fiscal quarter (the small
business issuer's fourth fiscal quarter in the case of an annual
report) that has materially affected, or is reasonably likely to
materially affect, the small business issuer's internal control over
financial reporting; and
5. The small business issuer's other certifying officer(s) and I have
disclosed, based on our most recent evaluation of internal control over
financial reporting, to the small business issuer's auditors and the audit
committee of the small business issuer's board of directors (or persons
performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design
or operation of internal control over financial reporting which are
reasonably likely to adversely affect the small business issuer's
ability to record, process, summarize and report financial
information; and
(b) Any fraud, whether or not material, that involves management or
other employees who have a significant role in the small business
issuer's internal control over financial reporting.
Date: November 14, 2005
/s/Martha L. Long
Martha L. Long
Senior Vice President of Fox Capital
Management Corporation, equivalent of the
chief executive officer of the Partnership
Exhibit 31.2
CERTIFICATION
I, Stephen B. Waters, certify that:
1. I have reviewed this quarterly report on Form 10-QSB of Century Properties
Fund XVIII;
2. Based on my knowledge, this 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
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material
respects the financial condition, results of operations and cash flows of
the small business issuer as of, and for, the periods presented in this
report;
4. The small business issuer's other certifying officer(s) and I are
responsible for establishing and maintaining disclosure controls and
procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for
the small business issuer and have:
(a) Designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the
small business issuer, including its consolidated subsidiaries, is
made known to us by others within those entities, particularly
during the period in which this report is being prepared;
(b) Evaluated the effectiveness of the small business issuer's
disclosure controls and procedures and presented in this report our
conclusions about the effectiveness of the disclosure controls and
procedures, as of the end of the period covered by this report based
on such evaluation; and
(c) Disclosed in this report any change in the small business issuer's
internal control over financial reporting that occurred during the
small business issuer's most recent fiscal quarter (the small
business issuer's fourth fiscal quarter in the case of an annual
report) that has materially affected, or is reasonably likely to
materially affect, the small business issuer's internal control over
financial reporting; and
5. The small business issuer's other certifying officer(s) and I have
disclosed, based on our most recent evaluation of internal control over
financial reporting, to the small business issuer's auditors and the audit
committee of the small business issuer's board of directors (or persons
performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design
or operation of internal control over financial reporting which are
reasonably likely to adversely affect the small business issuer's
ability to record, process, summarize and report financial
information; and
(b) Any fraud, whether or not material, that involves management or
other employees who have a significant role in the small business
issuer's internal control over financial reporting.
Date: November 14, 2005
/s/Stephen B. Waters
Stephen B. Waters
Vice President of Fox Capital Management
Corporation, equivalent of the chief
financial officer of the Partnership
Exhibit 32.1
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 September 30,
2005 as filed with the Securities and Exchange Commission on the date hereof
(the "Report"), Martha L. Long, as the equivalent of the Chief Executive Officer
of the Partnership, and Stephen B. Waters, 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/Martha L. Long
Name: Martha L. Long
Date: November 14, 2005
/s/Stephen B. Waters
Name: Stephen B. Waters
Date: November 14, 2005
This certification is furnished with this Report pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002 and shall not be deemed filed by the Partnership for
purposes of Section 18 of the Securities Exchange Act of 1934, as amended.