FORM 10-Q--QUARTERLY REPORT UNDER SECTION 13 OR 15 (D)
OF THE SECURITIES EXCHANGE ACT OF 1934
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[X] Quarterly Report Pursuant to Section 13 or 15(d) of The Securities
Exchange Act of 1934
For the quarterly period ended June 30, 1997
or
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from .........to.........
Commission file number 0-14528
CENTURY PENSION INCOME FUND XXIII
(Exact name of registrant as specified in its charter)
California 94-2963120
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
One Insignia Financial Plaza
Greenville, South Carolina 29602
(Address of principal executive offices) (Zip Code)
(864) 239-1000
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X . No .
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
a) CENTURY PENSION INCOME FUND XXIII
CONSOLIDATED BALANCE SHEETS
(in thousands, except unit data)
June 30, December 31,
1997 1996
(Unaudited) (Note)
Assets
Cash and cash equivalents $ 8,907 $ 8,289
Restricted cash -- 80
Receivables and other assets, net 1,718 2,011
Deferred charges 1,533 1,643
Mortgage loan receivable 1,137 1,137
Investment properties:
Land 16,384 18,165
Buildings and related personal property 63,929 69,172
80,313 87,337
Less accumulated depreciation (21,180) (21,604)
59,133 65,733
$ 72,428 $ 78,893
Liabilities and Partners' Deficit
Liabilities
Deferred income, accrued expenses and
other liabilities $ 1,232 $ 1,189
Accrued interest - promissory notes 1,048 1,048
Deferred interest - notes payable 149 1,499
Notes payable, $10,100 in default at
December 31, 1996, (Note C) 6,856 16,956
Non-recourse promissory notes:
Principal 41,939 41,939
Deferred interest payable 33,193 31,810
Minority interest in consolidated
joint ventures 8,021 7,844
Partners' Deficit
General partner's (1,199) (2,206)
Limited partners' (95,789 units issued and
outstanding at June 30, 1997 and
December 31, 1996) (18,811) (21,186)
(20,010) (23,392)
$ 72,428 $ 78,893
Note: The balance sheet at December 31, 1996, has been derived from the
audited financial statements at that date but does not include all of the
information and footnotes required by generally accepted accounting
principles for complete financial statements.
See Accompanying Notes to Consolidated Financial Statements
b) CENTURY PENSION INCOME FUND XXIII
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(in thousands, except unit data)
Three Months Ended Six Months Ended
June 30, June 30,
1997 1996 1997 1996
Revenues:
Rental income $ 2,575 $ 2,692 $ 5,339 $ 5,527
Interest income on mortgage
loans 21 21 41 41
Other income 133 132 267 271
Total revenues 2,729 2,845 5,647 5,839
Expenses:
Interest to promissory note
holders 1,215 1,215 2,431 2,431
Amortization of sales
commissions and
organizational costs 105 103 210 207
Operating 1,150 1,292 2,407 2,396
Depreciation 585 572 1,206 1,215
Interest on notes payable 207 433 639 865
General and administrative 264 251 511 546
Total expenses 3,526 3,866 7,404 7,660
Loss before minority
interest in joint ventures'
operations and extraordinary
gain on foreclosure (797) (1,021) (1,757) (1,821)
Minority interest in joint
ventures' operations (90) (92) (177) (156)
Loss before extraordinary gain (887) (1,113) (1,934) (1,977)
Extraordinary gain on
foreclosure -- -- 5,337 --
Net (loss) income $ (887) $ (1,113) $ 3,403 $ (1,977)
Net (loss) income allocated to
general partner $ (18) $ (22) $ 1,028 $ (40)
Net (loss) income allocated to
limited partners (869) (1,091) 2,375 (1,937)
$ (887) $ (1,113) $ 3,403 $ (1,977)
Net (loss) income per limited
partnership unit:
Loss before extraordinary gain $ (9.07) $ (11.39) $ (19.78) $ (20.23)
Extraordinary gain on
foreclosure -- -- 44.58 --
Net (loss) income per Limited
Partnership Unit $ (9.07) $ (11.39) $ 24.80 $ (20.23)
<FN>
See Accompanying Notes to Consolidated Financial Statements
c) CENTURY PENSION INCOME FUND XXIII
CONSOLIDATED STATEMENT OF CHANGES IN PARTNERS' DEFICIT
(Unaudited)
(in thousands, except unit data)
Limited
Partnership General Limited
Units Partner Partners' Total
Original capital contributions 95,789 $ 958 $ 47,894 $ 48,852
Partners' deficit at
December 31, 1995 95,789 $(2,089) $(17,579) $(19,668)
Distributions to partners -- (21) -- (21)
Net loss for the six months
ended June 30, 1996 -- (40) (1,937) (1,977)
Partners' deficit at
June 30, 1996 95,789 $(2,150) $(19,516) $(21,666)
Partners' deficit at
December 31, 1996 95,789 $(2,206) $(21,186) $(23,392)
Distributions to partners -- (21) -- (21)
Net income for the six months
ended June 30, 1997 -- 1,028 2,375 3,403
Partners' deficit at
June 30, 1997 95,789 $(1,199) $(18,811) $(20,010)
<FN>
See Accompanying Notes to Consolidated Financial Statements
d) CENTURY PENSION INCOME FUND XXIII
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
Six Months Ended
June 30,
1997 1996
Cash flows from operating activities:
Net income (loss) $ 3,403 $ (1,977)
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Depreciation 1,206 1,215
Amortization of deferred charges 326 337
Minority interest in joint ventures' operations 177 156
Deferred interest on non-recourse promissory notes 1,383 1,384
Extraordinary gain on foreclosure (5,337) --
Casualty gain (37) --
Change in accounts:
Restricted cash 13 158
Receivables and other assets (170) (414)
Deferred charges (243) (111)
Deferred income, accrued expenses and other liabilities (51) 469
Deferred interest - notes payable 241 303
Net cash provided by operating activities 911 1,520
Cash flows from investing activities:
Property replacements and improvements (272) (511)
Net cash used in investing activities (272) (511)
Cash flows from financing activities:
Joint venture partner contributions -- 38
Cash distributions to general partner (21) (21)
Net cash (used in) provided by financing activities (21) 17
Net increase in cash and cash equivalents 618 1,026
Cash and cash equivalents at beginning of period 8,289 6,378
Cash and cash equivalents at end of period $ 8,907 $ 7,404
Supplemental disclosure of cash flow information:
Cash paid for interest - notes payable $ 398 $ 562
Cash paid for interest - non-recourse promissory notes $ 1,048 $ 1,048
<FN>
See Accompanying Notes to Consolidated Financial Statements
CENTURY PENSION INCOME FUND XXIII
SUPPLEMENTAL DISCLOSURES OF NON-CASH ACTIVITIES
Foreclosure:
During the six months ended June 30, 1997, Sunnymead Towne Center was foreclosed
upon by the lender. In connection with this foreclosure, approximately $67,000
in cash was transferred to the lender as partial settlement on the outstanding
debt. This cash was previously classified as restricted cash on the
Partnership's balance sheet. In addition, the following balance sheet accounts
were adjusted by the non-cash amounts noted below (in thousands):
1997
Receivables and deposits $ (596)
Other assets (27)
Investment properties (5,713)
Tenant security deposit liabilities 42
Accrued interest on notes payable 1,591
Other liabilities 7
Notes payable 10,100
Casualty Loss:
The Partnership recorded a net casualty gain during the six months ended June
30, 1997, resulting from a fire at The Enclaves which destroyed six apartment
units. The damage resulted in a net gain of approximately $37,000. The
following balance sheet accounts were adjusted by the non-cash amounts noted
below (in thousands):
1997
Receivables and other assets $133
Building and related personal property 143
Other liabilities (143)
e) CENTURY PENSION INCOME FUND XXIII
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE A - BASIS OF PRESENTATION
The accompanying unaudited financial statements of Century Pension Income Fund
XXIII (the "Partnership") have been prepared in accordance with generally
accepted accounting principles for interim financial information and with the
instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they
do not include all of the information and footnotes required by generally
accepted accounting principles for complete financial statements. In the
opinion of Fox Capital Management Corporation ("FCMC" or the "Managing General
Partner"), a California corporation, all adjustments (consisting of normal
recurring accruals) considered necessary for a fair presentation have been
included. Operating results for the three and six month periods ended June 30,
1997, are not necessarily indicative of the results that may be expected for the
fiscal year ending December 31, 1997. For further information, refer to the
financial statements and footnotes thereto included in the Partnership's annual
report on Form 10-K for the year ended December 31, 1996.
Certain reclassifications have been made to the 1996 information to conform to
the 1997 presentation.
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 payments to
affiliates for services and as reimbursement of certain expenses incurred by
affiliates on behalf of the Partnership.
The general partner of the Partnership is Fox Partners V, a California general
partnership, whose general partners are FCMC and Fox Realty Investors ("FRI"), a
California general partnership.
Pursuant to a series of transactions which closed during the first half of 1996,
affiliates of Insignia Financial Group, Inc. ("Insignia") acquired all of the
issued and outstanding shares of stock of FCMC, NPI Equity Investments II, Inc.
("NPI Equity"), the managing general partner of FRI, and National Property
Investors, Inc. ("NPI"). In connection with these transactions, affiliates of
Insignia appointed new officers and directors of NPI Equity and FCMC.
The following transactions with affiliates of Insignia, NPI, and affiliates of
NPI were incurred during the six month periods ended June 30, 1997 and 1996 (in
thousands):
1997 1996
Property management fees (included in operating
expenses) $ 76 $ 58
Reimbursement for services of affiliates (included
in general and administrative expenses) 98 148
Partnership management fee (included in general
and administrative expenses) 55 55
Affiliates of the Managing General Partner performed property management
services for The Enclaves during 1996 and 1997. Effective May 1, 1996, an
affiliate of Insignia began performing property management services for Coral
Palm Plaza.
For the period from January 19, 1996, to June 30, 1997, the Partnership insured
its properties under a master policy through an agency and insurer unaffiliated
with the Managing General Partner. An affiliate of the Managing General Partner
acquired, in the acquisition of a business, certain financial obligations from
an insurance agency which was later acquired by the agent who placed the current
year's master policy. The current agent assumed the financial obligations to
the affiliate of the Managing General Partner who received payments on these
obligations from the agent. The amount of the Partnership's insurance premiums
accruing to the benefit of the affiliate of the Managing General Partner by
virtue of the agent's obligations is not significant.
The Managing General Partner received cash distributions totaling approximately
$21,000 during each of the six month periods ended June 30, 1997 and 1996.
NOTE C - FORECLOSURE OF SUNNYMEAD'S TOWNE SHOPPING CENTER
On March 27, 1997, the Sunnymead Towne Shopping Center ("Sunnymead") located in
Moreno Valley, California, was foreclosed on. Sunnymead had a significant
tenant, which occupied 98,000 square feet, vacate in 1995. During February
1996, another major tenant vacated 11,000 square feet, leaving the property
approximately 25% physically occupied. Effective March 1, 1996, the Partnership
ceased making debt service payments, as the value of Sunnymead was estimated at
less than the debt. The property was placed in receivership on May 1, 1996. In
1995, a $2,900,000 provision for impairment of value was recorded on the
Sunnymead property. The Partnership determined that, based on economic
conditions at the time as well as projected future operational cash flows, the
decline in value was other than temporary and recovery of the carrying value was
not likely. Accordingly, the property's carrying value was reduced to an amount
equal to its estimated fair value. In the Managing General Partner's opinion,
it was not in the Partnership's best interest to contest the foreclosure action.
As a result of the foreclosure, the Partnership recorded a gain on foreclosure
of approximately $5,337,000. Prior to the foreclosure, the outstanding debt on
the property was a note payable with a principal balance of $10,100,000 and
accrued interest of approximately $1,591,000.
NOTE D - RESTRICTED CASH
Restricted cash at December 31, 1996 represents cash partially securing the
Sunnymead note payable, which was restricted as to its use pursuant to a court
approved reorganization plan and the modified note agreements (see "Note C").
ITEM 2.MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
The Partnership's remaining investment properties consist of one apartment
complex, four business parks and two shopping centers, as well as three business
parks and a shopping center owned by two consolidated joint ventures between the
Partnership and an affiliated partnership. The following table sets forth the
average physical occupancy for the six months ended June 30, 1997 and 1996:
Average
Occupancy
Property 1997 1996
Commerce Plaza 100% 96%
Tampa, Florida
Regency Centre 95% 97%
Lexington, Kentucky
Highland Park Commerce 89% 95%
Center - Phase II
Charlotte, North Carolina
Interrich Plaza 64% 64%
Richardson, Texas
Centre Stage Shopping Center 99% 98%
Norcross, Georgia
The Enclaves 92% 96%
Atlanta, Georgia
Medtronics 100% 100%
Irvine, California
Coral Palm Plaza Joint Venture:
Coral Palm Plaza 74% 74%
Coral Springs, Florida
Minneapolis Business Parks
Joint Venture:
Alpha Business Center 91% 92%
Bloomington, Minnesota
Plymouth Service Center 100% 100%
Plymouth, Minnesota
Westpoint Business Center 97% 96%
Plymouth, Minnesota
The Managing General Partner attributes the increase in occupancy at Commerce
Plaza to the leasing of the remaining available space to a new tenant during the
second quarter of 1996. Occupancy at Highland Park decreased as a result of two
tenants vacating the property in 1996. Occupancy at The Enclaves has decreased
as a result of upgrades and concessions offered at competing apartment
complexes.
The Partnership's net income for the six months ended June 30, 1997, was
approximately $3,403,000 compared to a net loss of approximately $1,977,000 for
the corresponding period of 1996. The Partnership's net loss for the three
months ended June 30, 1997, was approximately $887,000 compared to a net loss of
approximately $1,113,000 for the corresponding period of 1996. The increase in
net income for the six months ended June 30, 1997, is primarily attributable to
the gain on foreclosure of Sunnymead Towne Shopping Center during the first
quarter of 1997. The Partnership recognized an extraordinary gain on
foreclosure of approximately $5,337,000. The Partnership's loss before
extraordinary gain for the three and six month periods ended June 30, 1997 was
approximately $1,934,000 compared to approximately $1,977,000 for the
corresponding period of 1996. The decrease in net loss before extraordinary
gain for the three and six month periods ended June 30, 1997 was primarily due
to a decrease in interest on notes payable. The decrease in interest on notes
payable is a result of the foreclosure on the Sunnymead Towne Center property as
discussed above. This decrease in interest on notes payable was partially
offset by a decrease in rental income, which was also the result of the
Sunnymead Towne Center foreclosure. Despite the foreclosure on the Sunnymead
Towne Center operating expenses increased due to increases in these expenses at
The Enclaves and Medtronics. The increase in operating expense at The Enclaves
is the result of increased sewer expenses, business license and permits,
interior and exterior building improvements and tax expenses. Tax expenses
increased due to an increased assessment from the taxing authorities.
As part of the ongoing business plan of the Partnership, the Managing General
Partner monitors the rental market environment of its investment properties to
assess the feasibility of increasing rents, maintaining or increasing occupancy
levels and protecting the Partnership from increases in expense. As part of
this plan, the Managing General Partner attempts to protect the Partnership from
the burden of inflation-related increases in expenses by increasing rents and
maintaining a high overall occupancy level. However, due to changing market
conditions, which can result in the use of rental concessions and rental
reductions to offset softening market conditions, there is no guarantee that
the Managing General Partner will be able to sustain such a plan.
At June 30, 1997, the Partnership had unrestricted cash of approximately
$8,907,000 compared to approximately $7,404,000 at June 30, 1996. Net cash
provided by operating activities decreased primarily as a result of decreases in
tax accruals and interest accruals on notes payable. Also contributing to the
decrease in net cash provided by operating activities is an increase in cash
used for other liabilities. Net cash used in investing activities decreased due
to decreased property improvements and replacements in the second quarter of
1997. Net cash used in financing activities increased due to a contribution
from the minority interest in the joint venture in 1996.
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. Such assets are currently
thought to be sufficient for any near-term needs of the Partnership. The
mortgage indebtedness of approximately $6,856,000, requires interest only
payments with a balloon payment due in 2001. Also, the Partnership's Non-
Recourse Promissory Notes of approximately $75,132,000, including deferred
interest of approximately $33,193,000, require minimum interest payments of 5%
on principal per year and mature on February 15, 1999, at which time the
Partnership will have to extend the due dates of these notes, find replacement
funding, or sell properties. Future cash distributions will depend on the levels
of cash generated from operations and the availability of cash reserves. No
cash distributions to the limited partners were made in 1996 or during the six
months ended June 30, 1997. Currently, the Managing General Partner is
evaluating the feasibility of a distribution from cash reserves in 1997.
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a) Exhibits:
Exhibit 27, Financial Data Schedule, is filed as an exhibit to this
report.
b) Reports on Form 8-K: None filed during the quarter ended June 30,
1997.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
CENTURY PENSION INCOME FUND XXIII
By: FOX PARTNERS V,
Its General Partner
By: FOX CAPITAL MANAGEMENT CORPORATION,
Its Managing General Partner
By: /s/William H. Jarrard, Jr.
William H. Jarrard, Jr.
President and Director
By: /s/Ronald Uretta
Ronald Uretta
Vice President and Treasurer
Date: August 11, 1997