FORM 10-Q--QUARTERLY REPORT UNDER SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
(As last amended in Rel. No. 312905, eff. 4/26/93.)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] Quarterly Report Pursuant to Section 13 or 15(d) of The Securities
Exchange Act of 1934
For the quarterly period ended June 30, 1996
or
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period.........to.........
(Amended by Exchange Act Rel. No. 312905, eff. 4/26/93.)
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)
Registrant's telephone number (864) 239-1000
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,
1996 1995
(Unaudited) (Note)
Assets
Cash and cash equivalents $ 7,404 $ 6,378
Restricted cash -- 158
Other assets 1,308 894
Mortgage loans receivable, net 1,137 1,137
Deferred sales commissions, net 693 823
Deferred organization expenses, net 412 489
Deferred leasing commissions, net 838 857
Investment properties:
Land 18,165 18,165
Buildings and related personal 68,857 68,347
87,022 86,512
Less accumulated depreciation (20,309) (19,094)
66,713 67,418
$ 78,505 $ 78,154
Liabilities and Partners' Deficit
Liabilities
Accrued expenses and other liabilities $ 1,207 $ 738
Accrued interest - notes payable 1,017 714
Notes payable 16,956 16,956
Non-recourse promissory notes:
Principal 41,939 41,939
Deferred interest payable 31,476 30,092
Minority interest in consolidated
joint ventures 7,576 7,383
Partners' Deficit
General partner (2,150) (2,089)
Limited partners (95,789 units issued and
outstanding at June 30, 1996 and
December 31, 1995) (19,516) (17,579)
(21,666) (19,668)
$ 78,505 $ 78,154
Note: The balance sheet at December 31, 1995, 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,
1996 1995 1996 1995
Revenues:
Rental income $ 2,691 $ 2,719 $ 5,527 $ 5,609
Interest income on mortgage
loans 21 21 41 41
Other income 133 643 271 756
Total revenues 2,845 3,383 5,839 6,406
Expenses:
Interest to promissory note
holders 1,215 1,215 2,431 2,431
Amortization 171 164 337 333
Operating 1,224 1,146 2,266 2,183
Depreciation 572 652 1,215 1,281
Interest 433 419 865 827
General and administrative 251 173 546 397
Loss on satisfaction of
mortgage of loan
receivable -- -- -- 978
Total expenses 3,866 3,769 7,660 8,430
Loss before minority
interest in joint ventures'
operations (1,021) (386) (1,821) (2,024)
Minority interest in joint
ventures (92) (237) (156) (333)
Net loss $ (1,113) $ (623) $ (1,977) $ (2,357)
Net loss allocated to
general partners 2% $ (22) $ (12) $ (40) $ (47)
Net loss allocated to
limited partners 98% (1,091) (611) (1,937) (2,310)
$ (1,113) $ (623) $ (1,977) $ (2,357)
Net loss per Limited
Partnership Unit $ (11.39) $ (6.37) $ (20.23) $ (24.11)
<FN>
See Accompanying Notes to Consolidated Financial Statements
c) CENTURY PENSION INCOME FUND XXIII
STATEMENT OF PARTNERS' CAPITAL (DEFICIT)
(Unaudited)
(in thousands, except unit data)
Limited
Partnership General Limited
Units Partner's Partners' Total
Original capital contributions 95,789 $ 977 $ 47,894 $ 48,852
Partners' deficit
at December 31, 1995 95,789 $ (2,089) $ (17,579) $ (19,668)
Distributions -- (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)
<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,
1996 1995
Operating activities:
Net loss $ (1,977) $ (2,357)
Adjustments to reconcile net loss to cash
provided by operating activities:
Depreciation and amortization 1,552 1,614
Loss on satisfaction of mortgage loan receivable -- 978
Minority interest in joint ventures 156 333
Deferred interest added to note payable principal -- 6
Deferred costs paid (111) (156)
Deferred interest on non-recourse promissory notes 1,384 1,383
Change in accounts:
Receivables and other assets (414) 185
Accrued expenses and other liabilities 469 174
Accrued interest - notes payable 303 --
Net cash provided by
operating activities 1,362 2,160
Investing activities:
Property replacements and improvements (511) (358)
Restricted cash 158 3
Cost of real estate acquired through foreclosure -- (1,114)
Proceeds from satisfaction of mortgage loan receivable -- 1,007
Net cash used in investing activities (353) (462)
Financing activities:
Joint venture partner contributions 38 --
Joint venture partner distributions -- (573)
Cash distribution to general partner (21) (21)
Net cash provided by (used in)
financing activities 17 (594)
Increase in cash and cash equivalents 1,026 1,104
Cash and cash equivalents at beginning of period 6,378 5,202
Cash and cash equivalents at end of period $ 7,404 $ 6,306
Supplemental disclosure of cash flow information:
Cash paid for interest - notes payable $ 562 $ 820
Cash paid for interest - non-recourse promissory notes $ 1,048 $ 1,048
Supplemental Disclosure of non-cash investing and
financing activities:
Deferred interest added to note payable principal $ -- $ 3
<FN>
See Accompanying Notes to Consolidated Financial Statements
e) CENTURY PENSION INCOME FUND XXIII
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note A - Basis of Presentation
The accompanying unaudited financial statements of Century Properties 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"), 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, 1996, are not necessarily indicative
of the results that may be expected for the fiscal year ending December 31,
1996. 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, 1995.
Certain reclassifications have been made to the 1995 information to conform to
the 1996 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 following transactions with Insignia Financial Group, Inc. ("Insignia"),
National Property Investors, Inc., and affiliates were charged to expense in
1996 and 1995:
For the Six Months Ended
June 30,
1996 1995
(in thousands)
Property management fees (included in operating
expense) $ 58 $ 51
Reimbursement for services of affiliates (included
in general and administrative expenses) 148 52
Services relating to successful real estate tax
appeals (included in operating expenses) -- 16
Partnership management fee (included in general
and administrative expenses) 55 55
For the period from January 19, 1996, to June 30, 1996, 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.
An affiliate of the general partner is entitled to receive a partnership
management fee in an amount equal to 10 percent of cash available for
distribution before interest payments to the Promissory Note Holders.
The general partner received cash distributions totaling $21,000 which is equal
to 2 percent of interest paid to Promissory Note holders, during the three month
periods ended March 31, 1996 and 1995.
The general partner of the Partnership is Fox Partners V, a California general
partnership, whose general partners are FCMC, a California corporation 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 acquired (i) control of NPI Equity Investments II, Inc.,
the managing general partner of FRI, and (ii) all of the issued and outstanding
shares of stock of FCMC. In connection with these transactions, affiliates of
Insignia appointed new officers and directors of NPI Equity Investments II, Inc.
and FCMC.
Note C - Sunnymead Towne Shopping Center
The Sunnymead Towne Shopping Center ("Sunnymead") located in Moreno Valley,
California, 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 and does not intend to
make any future payments as the value of Sunnymead is less than the debt. At
June 30, 1996, the note had a principal balance of approximately $10,100,000
with accrued interest of approximately $900,000. The lender has notified the
Partnership of its intent to foreclose on the property. The Partnership does
not plan to challenge the foreclosure proceedings, which are expected to be
concluded during the third quarter of 1996. 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.
Note D - Loss on Satisfaction of Mortgage Loan Receivable on In-Substance
Foreclosure Property
On April 28, 1995, the Partnership received $1,007,000 in full satisfaction of
its mortgage loan receivable on the Warren, Michigan property. The property had
been classified as an in-substance foreclosure property. The Partnership
accepted the discounted settlement because it determined that, based upon
projected future operational cash flow of the property and the cost of
litigation, it appeared likely that a substantial portion of contractual
obligations would not be collected.
The Partnership recorded a $978,000 loss on satisfaction of a mortgage loan
receivable at June 30, 1995. A $1,850,000 provision for doubtful mortgage loan
and interest receivable had previously been recorded in 1992.
Note E - Other Income
The Partnership accepted a lease buy-out of $800,000 in December 1994 from a
significant tenant that had occupied 27,000 square feet at Coral Palm Plaza
which was received in 1995. During June 1995, management re-leased 20,000
square feet of the unoccupied space, on similar terms, and recognized a portion
of the lease buy-out in the amount of $517,000. The remaining portion was
deferred and recognized as rental income in September 1995 when the remaining
7,000 square feet was re-leased on similar terms.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
The Partnership's investment properties consist of one apartment complex, four
business parks and three 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
occupancy for the six months ended June 30, 1996 and 1995:
Average
Occupancy
Property 1996 1995
Commerce Plaza 96% 96%
Tampa, Florida
Regency Centre 97% 99%
Lexington, Kentucky
Highland Park Commerce
Center - Phase II 95% 92%
Charlotte, North Carolina
Interrich Plaza 64% 87%
Richardson, Texas
Centre Stage
Shopping Center 98% 97%
Norcross, Georgia
Sunnymead Towne Center (1) 82% 91%
Moreno Valley, California
The Enclaves 96% 96%
Atlanta, Georgia
Medtronics (2) 100% 100%
Irvine, California
Coral Palm Plaza Joint Venture:
Coral Palm Plaza 74% 67%
Coral Springs, Florida
Minneapolis Business Parks
Joint Venture:
Alpha Business Center 92% 95%
Bloomington, Minnesota
Plymouth Service Center 100% 100%
Plymouth, Minnesota
Westpoint Business Center 96% 91%
Plymouth, Minnesota
(1) Vacated tenant, which previously occupied 98,000 square feet, continues to
make lease payments. Property is physically 25 percent occupied at June
30, 1996.
(2) Property was acquired through deed in lieu of foreclosure of a mortgage
loan receivable in April 1995.
Occupancy at Interrich Plaza declined due to a major tenant vacating its space
during the second quarter of 1995. Occupancy at Coral Palm Plaza increased due
to the Partnership's ability to re-lease space vacated by a lease buyout from a
major tenant in 1994. Partially offsetting this increase in occupancy at Coral
Palm was the October 1995 lease buy-out and termination agreement with another
tenant. The $300,000 termination payment has been deferred and is being
amortized into income on a straight-line basis over the remainder of the former
tenant's lease until the related, unoccupied space is leased again. Occupancy
at Sunnymead Towne Center has decreased due to tenants vacating their space and
poor economic conditions in the local area. Occupancy at Westpoint Business
Center increased due to the execution of new leases and lease renewals during
the second quarter of 1995. Occupancy at Highland Park Commerce Center
increased due to the execution of new leases and lease renewals during the third
quarter of 1995.
The Partnership's net loss for the six months ended June 30, 1996, was
approximately $1,977,000, of which $1,113,000 was recorded in the second quarter
versus net losses of approximately $2,357,000 and $623,000 for the same periods
of 1995. The decrease in the net loss is attributable to the loss on
satisfaction of mortgage loan receivable of $978,000 recognized in 1995 as
discussed in "Item 1. Financial Statements-Note D". Interest income on
reserves, which is included in other income, increased in 1996 due to an
increase in cash reserves as compared to the first six months of 1995.
Partially offsetting the decrease in net loss was a decrease in other income and
an increase in general and administrative expense. The decrease in other income
in 1996 is the result of a lease buyout fee of $517,000 recognized in 1995 as
discussed in "Item 1. Financial Statements-Note E". The increase in general and
administrative expenses was due to increased costs associated with the
transition of the partnership administration offices during the six months ended
June 30, 1996.
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.
At June 30, 1996, the Partnership had unrestricted cash of $7,404,000 as
compared to $6,306,000 at June 30, 1995. Net cash provided by operating
activities decreased primarily as a result of the increase in receivables and
other assets. Receivables and other assets increased due to an increase in
accounts receivable, and tax escrows. Net cash used in investing activities
decreased due to a decrease in restricted cash which was offset by increased
property replacements and improvements. Net cash provided by financing
activities increased due to a contribution from the minority interest in the
joint venture during the first quarter of 1996 versus the distribution to the
joint venture partner in 1995.
The Sunnymead Towne Shopping Center ("Sunnymead") located in Moreno Valley,
California, 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 and does not intend to
make any future payments as the value of Sunnymead is less than the debt. At
June 30, 1996, the note had a principal balance of approximately $10,100,000
with accrued interest of approximately $900,000. The lender has notified the
Partnership of its intent to foreclose on the property. The Partnership does
not plan to challenge the foreclosure proceedings which are expected to be
concluded during the third quarter of 1996. In 1995, the Partnership recorded
a provision for impairment of value of $2,900,000. The Partnership estimates an
extraordinary gain on extinguishment of debt of approximately $11,000,000 and a
loss on foreclosure of approximately $6,000,000. The property was placed in
receivership on May 1, 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 $6,856,000, excluding the Sunnymead indebtedness,
requires interest only payments with a balloon payment due in 2001. Also, the
Partnership's Non-Recourse Promissory Notes of $73,415,000, including deferred
interest of $31,476,000, require minimum interest payments of 5% on principal
per year and mature on February 15, 1999. Future cash distributions will depend
on the levels of cash generated from operations, property sales, and the
availability of cash reserves. Cash distributions totaling approximately
$21,000, which were equal to 2 percent of interest paid to Promissory Note
holders, were paid to the general partner during the six months ended June 30,
1996 and 1995. At this time it appears that the original investment objective
of capital growth will not be attained and that investors will not receive a
return of all their invested capital.
As to the Promissory Note Holders and assuming the notes are held to maturity,
the ability of the Registrant to make it's payments of principal and interest is
dependent upon the ultimate sales prices, timing of sales of the remaining
properties, net proceeds received by the Registrant from sales and refinancing
and overall Partnership operations. Based on current projections, the
Promissory Note Holders will not receive any payment of residual interest.
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, 1996.
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,
A California Limited Partnership
By: FOX PARTNERS V,
its General Partner
By: FOX CAPITAL MANAGEMENT CORPORATION,
a General Partner
By: /s/William H. Jarrard, Jr.
William H. Jarrard, Jr.
President and Director
By: /s/Ronald Uretta
Ronald Uretta
Principal Financial Officer
and Principal Accounting Officer
Date: August 14, 1996