Item 1. Business
General
Century Properties Growth Fund XXII, LP (the "Partnership" or "Registrant") was organized in August 1984, as a California limited partnership under the Uniform Limited Partnership Act of the California Corporations Code. Fox Partners IV (the “General Partner”), a California general partnership, is the general partner of the Partnership. The general partners of Fox Partners IV are Fox Capital Management Corporation ("FCMC" or the "Managing General Partner"), a California corporation, and Fox Realty Investors ("FRI"), a California general partnership. The managing general partner of FRI is NPI Equity Investments II, Inc., a Florida Corporation ("NPI Equity"). The Managing General Partner and NPI Equity are subsidiaries of Apartment Investment and Management Company ("AIMCO"), a publicly traded real estate investment trust. The Partnership Agreement provides that the Partnership is to terminate on December 31, 2016, unless terminated prior to such date. The principal business of the Partnership is to hold for investment and ultimately sell income-producing multi-family residential properties.
Beginning in September 1984 through June 1986, the Partnership offered $120,000,000 in limited partnership units and sold units having an initial cost of $82,848,000. The net proceeds of this offering were used to acquire eleven income-producing real estate properties. The Partnership's original property portfolio was geographically diversified with properties acquired in eight states. The Partnership's acquisition activities were completed in September 1986 and since then the principal activity of the Partnership has been managing its portfolio. The Partnership continues to own and operate one residential property. One property was acquired by the lender through foreclosure in 1992, one property was sold in each of 1995, 2001 and 2005, three properties were sold in 2006, two properties were sold in 2008 and one property was sold in 2009. Since its initial offering, the Partnership has not received, nor are the limited partners required to make, additional capital contributions.
On October 29, 2008, the Partnership changed its domicile from California to Delaware by merging with and into Century Properties Growth Fund XXII, LP, a Delaware limited partnership, with the Delaware partnership as the surviving entity in the merger. The merger was undertaken pursuant to an Agreement and Plan of Merger, dated as of September 18, 2008, by and between the California partnership and the Delaware partnership. All references herein to the Partnership shall mean Century Properties Growth Fund XXII, a California limited partnership, for all periods prior to October 29, 2008 and Century Properties Growth Fund XXII, LP, a Delaware limited partnership, for all periods from and after October 29, 2008.
Under the merger agreement, each unit of limited partnership interest in the California partnership was converted into an identical unit of limited partnership interest in the Delaware partnership and the general partnership interest in the California partnership previously held by the general partner was converted into a general partnership interest in the Delaware partnership. All interests in the Delaware partnership outstanding immediately prior to the merger were cancelled in the merger.
The voting and other rights of the limited partners provided for in the partnership agreement were not changed as a result of the merger. In the merger, the partnership agreement of the California partnership was adopted as the partnership agreement of the Delaware partnership, with the following changes: (i) references therein to the California Uniform Limited Partnership Act were amended to refer to the Delaware Revised Uniform Limited Partnership Act; (ii) a description of the merger was added; (iii) the name of the partnership was changed to “Century Properties Growth Fund XXII, LP” and (iv) a provision was added that gives the general partner authority to establish different designated series of limited partnership interests that have separate rights with respect to specified partnership property, and profits and losses associated with such specified property.
The Partnership has no full-time employees. The Managing General Partner is vested with full authority as to the general management and supervision of the business and affairs of the Partnership. The non-managing general partners and the limited partners have no right to participate in the management or conduct of such business and affairs. An affiliate of the Managing General Partner provides day-to-day management services for the Partnership's investment property.
A further description of the Partnership's business is included in "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations” included in this Form 10-K.
Item 2.
Item 2. Property
The following table sets forth the Partnership's investment in property:
Date of
Property
Purchase
Type of Ownership
Use
Wood Creek Apartments
5/84
Fee ownership subject to
Apartment
Mesa, Arizona
first and second mortgages (1)
units
(1) Property is held by a limited partnership in which the Partnership owns a 100% interest.
On September 30, 2009, the Partnership sold Autumn Run Apartments to a third party for a gross sales price of $24,745,000. The net proceeds realized by the Partnership were approximately $6,094,000 after payment of closing costs of approximately $526,000, a credit to the purchaser of approximately $150,000 for capital improvements at the property, and the assumption of the mortgage debt encumbering the property of approximately $17,975,000 by the purchaser. The Partnership recorded a gain of approximately $16,181,000 as a result of the sale. In addition, the Partnership recorded a loss on the early extinguishment of debt of approximately $215,000 due to the write-off of unamortized loan costs.
On October 24, 2008, the Partnership sold Copper Mill Apartments to a third party for a gross sales price of approximately $14,600,000. The net proceeds received by the Partnership were approximately $4,331,000 after payment of closing costs of approximately $75,000 and the assumption of the mortgage debt encumbering the property of approximately $10,194,000 by the purchaser. As a result of the sale, the Partnership recognized a gain of approximately $9,139,000 during the year ended December 31, 2008. In addition, the Partnership recorded a loss on early extinguishment of debt of approximately $118,000 due to the write-off of unamortized loan costs.
On October 29, 2008, the Partnership sold Cooper’s Pointe Apartments to a third party for a gross sales price of approximately $13,000,000. The net proceeds received by the Partnership were approximately $5,427,000 after payment of closing costs of approximately $138,000 and the assumption of the mortgage debt encumbering the property of approximately $7,435,000 by the purchaser. As a result of the sale, the Partnership recognized a gain of approximately $8,223,000 during the year ended December 31, 2008. In addition, the Partnership recorded a loss on early extinguishment of debt of approximately $66,000 due to the write-off of unamortized loan costs.
Schedule of Property
Set forth below for the Partnership's property is the gross carrying value, accumulated depreciation, depreciable life, method of depreciation and Federal tax basis at December 31, 2009.
See "Note A - Organization and Summary of Significant Accounting Policies” to the consolidated financial statements included in "Item 8. Financial Statements and Supplementary Data" for a description of the Partnership's capitalization and depreciation policies.
Schedule of Property Indebtedness
The following table sets forth certain information relating to the mortgage loans encumbering the Partnership's property.
Principal
Principal
Balance At
Balance
December 31,
Interest
Period
Maturity
Due At
Property
Rate (2)
Amortized
Date
Maturity (1)
(in thousands)
(in thousands)
Wood Creek Apartments
1st mortgage
$13,798
5.87%
yrs
08/2016
$12,190
2nd mortgage
5,651
5.68%
yrs
08/2016
5,049
Total
$19,449
$17,239
(1) See “Note C - Mortgage Notes Payable” to the consolidated financial statements included in "Item 8. Financial Statements and Supplementary Data" for information with respect to the Partnership's ability to prepay these loans and other specific details about the loans.
(2) Fixed rate mortgages.
On March 31, 2008, the Partnership obtained a second mortgage loan in the principal amount of $5,770,000 on Woodcreek Apartments. The second mortgage loan bears interest at a fixed rate of 5.68% per annum, and requires monthly payments of principal and interest of approximately $33,000, beginning on May 1, 2008 through the August 1, 2016 maturity date. The second mortgage loan has a balloon payment of approximately $5,049,000 due at maturity. As a condition of the new loan, the lender required AIMCO Properties, L.P., an affiliate of the Managing General Partner, to guarantee certain non-recourse obligations and liabilities of the Partnership with respect to the new mortgage financing. Total capitalized loan costs in connection with the new mortgage were approximately $82,000 and are included in other assets on the consolidated balance sheets included in “Item 8. Financial Statements and Supplementary Data”.
Schedule of Rental Rates and Occupancy
Average annual rental rates and occupancy for 2009 and 2008 for the property were as follows:
The real estate industry is highly competitive. The Partnership’s property is subject to competition from other residential apartment complexes in the area. The Managing General Partner believes that the property is adequately insured. The property is an apartment complex which leases units for terms of one year or less. No residential tenant leases 10% or more of the available rental space. The property is in good physical condition, subject to normal depreciation and deterioration as is typical for an asset of this type and age.
Real Estate Taxes and Rate
Real estate taxes and rate in 2009 for the property were as follows:
Billing
Rate
(in thousands)
Wood Creek Apartments
$201
0.68%
Capital Expenditures
Wood Creek Apartments
During the year ended December 31, 2009, the Partnership completed approximately $394,000 in capital expenditures at Wood Creek Apartments, consisting primarily of kitchen and bath upgrades, air conditioning upgrades and appliance and floor covering replacements. These improvements were funded from operating cash flow. 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 2010. Such capital expenditures will depend on the physical condition of the property as well as anticipated cash flow generated by the property.
Autumn Run Apartments
During the year ended December 31, 2009, the Partnership completed approximately $118,000 in capital expenditures at Autumn Run Apartments, consisting primarily of roof and floor covering replacements. These improvements were funded from operating cash flow. The Partnership sold Autumn Run Apartments to a third party on September 30, 2009.
Capital improvements will be incurred only if cash is available from operations or from Partnership reserves. To the extent that capital improvements are completed, the Partnership’s distributable cash flow, if any, may be adversely affected at least in the short term.
Item 3.
Item 3. Legal Proceedings
As previously disclosed, AIMCO Properties, L.P. and NHP Management Company, both affiliates of the Managing General Partner, were defendants in a lawsuit, filed as a collective action in August 2003 in the United States District Court for the District of Columbia, alleging that they willfully violated the Fair Labor Standards Act (“FLSA”) by failing to pay maintenance workers overtime for time worked in excess of 40 hours per week (“overtime claims”). The plaintiffs also contended that AIMCO Properties, L.P. and NHP Management Company (“the Defendants”) failed to compensate maintenance workers for time that they were required to be "on-call" (“on-call claims”). In March 2007, the court in the District of Columbia decertified the collective action. In July 2007, plaintiffs’ counsel filed individual cases in Federal court in 22 jurisdictions. In the second quarter of 2008, AIMCO Properties, L.P. settled the overtime cases involving 652 plaintiffs and established a framework for resolving the 88 remaining “on-call” claims and the attorneys’ fees claimed by plaintiffs’ counsel. As a result, the lawsuits asserted in the 22 Federal courts have been dismissed. During the fourth quarter of 2008, the Partnership paid approximately $1,000 for settlement amounts for alleged unpaid overtime to employees who had worked at the Partnership’s investment properties. At this time, the 88 remaining “on-call” claims and the attorneys’ fees claimed by plaintiffs’ counsel are not resolved. The parties have selected six “on-call” claims that will proceed forward through the arbitration process and have selected arbitrators. After those arbitrations have been completed, the parties will revisit settling the on-call claims. The first two arbitrations took place in December 2009 and the Defendants received a defense verdict against the first two claimants and plaintiffs dismissed the claims of the next two claimants. The remaining two arbitrations will take place in April 2010. The Managing General Partner is uncertain as to the amount of any additional loss that may be allocable to the Partnership. Therefore, the Partnership cannot estimate whether any additional loss will occur or a potential range of loss.
PART II
Item 5.
Item 5. Market for the Registrant’s Common Equity, Related Security Holder Matters and Issuer Purchases of Equity Securities
The Partnership, a publicly-held limited partnership, offered and sold 82,848 limited partnership units (the "Units") aggregating $82,848,000. The Partnership currently has 2,439 holders of record owning an aggregate of 82,848 Units at December 31, 2009. Affiliates of the Managing General Partner owned 54,702.50 Units or 66.03% at December 31, 2009. No public trading market has developed for the Units, and it is not anticipated that such a market will develop in the future.
The Partnership distributed the following amounts, which include the distribution payable, during the years ended December 31, 2009 and 2008 (in thousands, except per unit data):
Per Limited
Per Limited
Year Ended
Partnership
Year Ended
Partnership
December 31,
Unit
December 31,
Unit
Refinancing
proceeds (1)
$ --
$ --
$ 3,170
$ 37.50
Saleproceeds (2)
6,422
75.97
7,458
89.37
$ 6,422
$ 75.97
$ 10,628
$ 126.87
(1) Proceeds from the second mortgage obtained on Wood Creek Apartments.
(2) Proceeds from the October 2008 sales of Copper Mill Apartments and Cooper’s Pointe Apartments and the September 2009 sale of Autumn Run Apartments.
For 2009, the distribution payable of approximately $512,000 represents the estimated Illinois withholding taxes to be paid by the Partnership on behalf of certain partners in connection with the sale of Autumn Run Apartments.
Future cash distributions will depend on the levels of cash generated from operations, the timing of debt maturities, property sale and/or refinancings. The Partnership's cash available for distribution is reviewed on a monthly basis. There can be no assurance, however, that the Partnership will generate sufficient funds from operations, after planned capital expenditures, to permit distributions to its partners during 2010 or subsequent periods. See “Item 2. Property - Capital Improvements” for information relating to anticipated capital expenditures at the property.
In addition to its indirect ownership of the general partner interests in the Partnership, AIMCO and its affiliates owned 54,702.50 Units in the Partnership representing 66.03% of the outstanding Units at December 31, 2009. 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. Pursuant to the Partnership Agreement, unitholders holding a majority of the Units are entitled to take action with respect to a variety of matters, which include, but are not limited to, voting on certain amendments to the Partnership Agreement and voting to remove the Managing General Partner. As a result of its ownership of 66.03% of the outstanding Units, AIMCO and its affiliates are in a position to influence all voting decisions with respect to the Partnership. With respect to 17,341.50 Units, such affiliates are required to vote such Units: (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 third party unitholders. Except for the foregoing, no other limitations are imposed on such affiliates' ability to influence voting decisions with respect to the Partnership. Although the General Partner owes fiduciary duties to the limited partners of the Partnership, the Managing General Partner also owes fiduciary duties to both the General Partner and AIMCO as the sole stockholder of the Managing General Partner.
Item 7.
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations
This item should be read in conjunction with the consolidated financial statements and other items contained elsewhere in this report.
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 that 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 net income of approximately $14,913,000 and $16,880,000 for the years ended December 31, 2009 and 2008, respectively. The consolidated statements of operations included in “Item 8.
Item 8. Financial Statements and Supplementary Data
CENTURY PROPERTIES GROWTH FUND XXII, LP
LIST OF FINANCIAL STATEMENTS
Report of Independent Registered Public Accounting Firm
Consolidated Balance Sheets - December 31, 2009 and 2008
Consolidated Statements of Operations - Years ended December 31, 2009 and 2008
Consolidated Statements of Changes in Partners' Deficit - Years ended December 31, 2009 and 2008
Consolidated Statements of Cash Flows - Years ended December 31, 2009 and 2008
Notes to Consolidated Financial Statements
Report of Independent Registered Public Accounting Firm
The Partners
Century Properties Growth Fund XXII, LP
We have audited the accompanying consolidated balance sheets of Century Properties Growth Fund XXII, LP as of December 31, 2009 and 2008, and the related consolidated statements of operations, changes in partners' deficit, and cash flows for each of the two years in the period ended December 31, 2009. These financial statements are the responsibility of the Partnership's management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. We were not engaged to perform an audit of the Partnership’s internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Partnership’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Century Properties Growth Fund XXII, LP at December 31, 2009 and 2008, and the consolidated results of its operations and its cash flows for each of the two years in the period ended December 31, 2009, in conformity with U.S. generally accepted accounting principles.
/s/ERNST & YOUNG LLP
Greenville, South Carolina
March 29, 2010
CENTURY PROPERTIES GROWTH FUND XXII, LP
CONSOLIDATED BALANCE SHEETS
(in thousands, except unit data)
See Accompanying Notes to Consolidated Financial Statements
CENTURY PROPERTIES GROWTH FUND XXII, LP
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per unit data)
See Accompanying Notes to Consolidated Financial Statements
CENTURY PROPERTIES GROWTH FUND XXII, LP
CONSOLIDATED STATEMENTS OF CHANGES IN PARTNERS' DEFICIT
(in thousands, except unit data)
Limited
Partnership
General
Limited
Units
Partner
Partners
Total
Original capital contributions
82,848
$ --
$ 82,848
$ 82,848
Partners' deficit at
December 31,
82,848
$(5,339)
$(21,681)
$(27,020)
Distributions to partners
--
(117)
(10,511)
(10,628)
Net income for the year ended
December 31,
--
2,507
14,373
16,880
Partners' deficit
at December 31,
82,848
(2,949)
(17,819)
(20,768)
Distributions to partners
--
(128)
(6,294)
(6,422)
Net income for the year ended
December 31,
--
1,899
13,014
14,913
Partners' deficit at
December 31,
82,848
$(1,178)
$(11,099)
$(12,277)
See Accompanying Notes to Consolidated Financial Statements
CENTURY PROPERTIES GROWTH FUND XXII, LP
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
Included in accounts payable at December 31, 2007 were approximately $820,000 of property improvements and replacements which are included in property improvements and replacements for the year ended December 31, 2008.
See Accompanying Notes to Consolidated Financial Statements
CENTURY PROPERTIES GROWTH FUND XXII, LP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31,
Note A - Organization and Summary of Significant Accounting Policies
Organization
Century Properties Growth Fund XXII, LP (the "Partnership" or "Registrant") is a Delaware Limited Partnership organized in August 1984 to acquire and operate residential apartment complexes. The Partnership's general partner is Fox Partners IV (the “General Partner”), a California general partnership. The general partners of Fox Partners IV are Fox Capital Management Corporation (the "Managing General Partner" or "FCMC"), a California corporation, and Fox Realty Investors ("FRI"), a California general partnership. The Managing General Partner is a subsidiary of Apartment Investment and Management Company ("AIMCO"), a publicly traded real estate investment trust. The Partnership Agreement provides that the Partnership is to terminate on December 31, 2016 unless terminated prior to such date. The Partnership commenced operations on September 25, 1984. The Partnership currently operates one apartment property in Arizona.
On October 29, 2008, the Partnership changed its domicile from California to Delaware by merging with and into Century Properties Growth Fund XXII, LP, a Delaware limited partnership, with the Delaware partnership as the surviving entity in the merger. The merger was undertaken pursuant to an Agreement and Plan of Merger, dated as of September 18, 2008, by and between the California partnership and the Delaware partnership. All references herein to the Partnership shall mean Century Properties Growth Fund XXII, a California limited partnership, for all periods prior to October 29, 2008 and Century Properties Growth Fund XXII, LP, a Delaware limited partnership, for all periods from and after October 29, 2008.
Under the merger agreement, each unit of limited partnership interest in the California partnership was converted into an identical unit of limited partnership interest in the Delaware partnership and the general partnership interest in the California partnership previously held by the general partner was converted into a general partnership interest in the Delaware partnership. All interests in the Delaware partnership outstanding immediately prior to the merger were cancelled in the merger.
The voting and other rights of the limited partners provided for in the partnership agreement were not changed as a result of the merger. In the merger, the partnership agreement of the California partnership was adopted as the partnership agreement of the Delaware partnership, with the following changes: (i) references therein to the California Uniform Limited Partnership Act were amended to refer to the Delaware Revised Uniform Limited Partnership Act; (ii) a description of the merger was added; (iii) the name of the partnership was changed to “Century Properties Growth Fund XXII, LP” and (iv) a provision was added that gives the general partner authority to establish different designated series of limited partnership interests that have separate rights with respect to specified partnership property, and profits and losses associated with such specified property.
Subsequent Events
The Partnership’s management evaluated subsequent events through the time this Annual Report on Form 10-K was filed.
Basis of Presentation
The accompanying consolidated statements of operations for the year ended December 31, 2008 have been restated as of January 1, 2008 to reflect the operations of Autumn Run Apartments as income from discontinued operations and the assets and liabilities of Autumn Run Apartments as of December 31, 2008 are reflected as held for sale due to its sale on September 30, 2009. The consolidated statement of operations for the year ended December 31, 2008 also reflects the operations of Copper Mill Apartments and Cooper’s Pointe Apartments as loss from discontinued operations due to their sales on October 24, 2008 and October 29, 2008, respectively.
The following table presents summarized results of operations related to the Partnership’s discontinued operations (in thousands):
Year Ended
December 31,
Autumn Run
Apartments
Revenues
$ 2,574
Expenses
(2,963)
Loss on early extinguishment of debt
(215)
Loss from discontinued operations
$ (604)
Certain reclassifications have been made to the 2008 balances to conform to the 2009 presentation.
Principles of Consolidation
The Partnership's consolidated financial statements include the accounts of Wood Creek CPGF 22, L.P. The Partnership owns a 100% interest in this partnership. The Partnership has the ability to control the major operating and financial policies of this partnership. All interpartnership transactions have been eliminated.
Recent Accounting Pronouncement
In June 2009, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting Standards No. 168, The FASB Accounting Standards Codification and the Hierarchy of Generally Accepted Accounting Principles-a replacement of FASB Statement No. 162, or SFAS No. 168, which is effective for financial statements issued for interim and annual periods ending after September 15, 2009. Upon the effective date of SFAS No. 168, the FASB Accounting Standards Codification, or the FASB ASC, became the single source of authoritative GAAP recognized by the FASB to be applied by nongovernmental entities. Rules and interpretive releases of the Securities and Exchange Commission, or SEC, under authority of federal securities laws are also sources of authoritative GAAP for SEC registrants. The FASB ASC superseded all then-existing non-SEC accounting and reporting standards, and all other non-grandfathered non-SEC accounting literature not included in the FASB ASC is now non-authoritative. Subsequent to the effective date of SFAS No. 168, the FASB will issue Accounting Standards Updates that serve to update the FASB ASC.
Use of Estimates
The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Actual results could differ from those estimates.
Allocation of Profits, Gains, Losses and Distributions
Profits, gains, losses and distributions of the Partnership are allocated between general and limited partners in accordance with the provisions of the Partnership Agreement.
Profits and losses, not including gains from property dispositions, are allocated as follows: a) first, 10% to the general partner, and b) remainder allocated two percent to the general partner and 98% to the limited partners.
Any gain from property dispositions shall be allocated as follows: a) first, to the general partner in an amount equal to distributions to the general partner from proceeds of property dispositions or refinancings; b) until the general partner no longer has a deficit balance in its capital account, 12% to the general partner and 88% to the limited partners, and c) remainder to the limited partners.
Fair Value of Financial Instruments
FASB ASC Topic 825, “Financial Instruments”, requires disclosure of fair value information about financial instruments, whether or not recognized in the balance sheet, for which it is practicable to estimate fair value. Fair value is defined as the amount at which the instruments could be exchanged in a current transaction between willing parties, other than in a forced or liquidation sale. The Partnership believes that the carrying amount of its financial instruments (except for long term debt) approximates their fair value due to the short-term maturity of these instruments. The Partnership estimates the fair value of its long-term debt by discounting future cash flows using a discount rate commensurate with that currently believed to be available to the Partnership for similar term, long-term debt. At December 31, 2009, the fair value of the Partnership's long-term debt at the Partnership's incremental borrowing rate approximated its carrying value.
Cash and Cash Equivalents
Cash and cash equivalents includes cash on hand and in banks. At certain times, the amount of cash deposited at a bank may exceed the limit on insured deposits. Cash balances included approximately $569,000 and $1,079,000 at December 31, 2009 and 2008, respectively, that are maintained by an affiliated management company on behalf of affiliated entities in cash concentration accounts.
Depreciation
Depreciation is provided by the straight-line method over the estimated lives of the apartment property and related personal property. For Federal income tax purposes, the accelerated cost recovery method is used for depreciation of (1) real property over 27.5 years and (2) personal property additions over 5 years.
Deferred Costs
At December 31, 2009 and 2008, loan costs of approximately $203,000 and $528,000, respectively, less accumulated amortization of approximately $58,000 and $144,000 for the years ended December 31, 2009 and 2008, respectively, are included in other assets and assets held for sale. During the year ended December 31, 2009, loan costs of approximately $325,000 and amortization of approximately $110,000 were written off in connection with the sale of Autumn Run Apartments. The loan costs are amortized over the terms of the related loan agreements. Amortization expense was approximately $24,000 and $73,000 for the years ended December 31, 2009 and 2008, respectively, and is included in interest expense and (loss) income from discontinued operations. Amortization expense is expected to be approximately $22,000 for each of the years 2010 through 2014.
Leasing commissions and other direct costs incurred in connection with successful leasing efforts are deferred and amortized over the terms of the related leases. Amortization of these costs is included in operating expenses and (loss) income from discontinued operations.
Tenant Security Deposits
The Partnership requires security deposits from lessees for the duration of the lease and such deposits are included in receivables and deposits. Deposits are refunded when the tenant vacates, provided the tenant has not damaged the space and is current on rental payments.
Leases
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.
Investment Property
Investment property consists of one apartment complex and is stated at cost, less accumulated depreciation, unless the carrying amount of the asset is not recoverable. The Partnership capitalizes costs incurred in connection with capital expenditure activities, including redevelopment and construction projects, other tangible property improvements and replacements of existing property components. Costs including interest, property taxes and operating costs associated with redevelopment and construction projects are capitalized during periods in which redevelopment and construction projects are in progress. Costs incurred in connection with capital projects are capitalized where the costs of the project exceed $250. Included in these capitalized costs are payroll costs associated with time spent by site employees in connection with the planning, execution and control of all capital expenditure activities at the property level. The Partnership did not capitalize any costs related to interest, property taxes, or operating costs during the years ended December 31, 2009 and 2008. Capitalized costs are depreciated over the useful life of the asset. Expenditures for ordinary repairs, maintenance and apartment turnover costs are expensed as incurred.
If events or circumstances indicate that the carrying amount of the property may not be recoverable, the Partnership will make an assessment of its recoverability by comparing the carrying amount to the Partnership’s estimate of the undiscounted future cash flows, excluding interest charges, of the property. If the carrying amount exceeds the estimated aggregate undiscounted future cash flows, the Partnership would recognize an impairment loss to the extent the carrying amount exceeds the estimated fair value of the property. No adjustments for impairment of value were necessary for the years ending December 31, 2009 and 2008.
Segment Reporting
FASB ASC Topic 280-10, “Segment Reporting”, established standards for the way public business enterprises report information about operating segments in annual financial statements and requires that those enterprises report selected information about operating segments in interim financial reports. FASB ASC Topic 280-10 also established standards for related disclosures about products and services, geographic areas, and major customers. As defined in FASB ASC Topic 280-10, the Partnership has only one reportable segment.
Advertising
The Partnership expenses the costs of advertising as incurred. Advertising costs of approximately $100,000 and $184,000 for the years ended December 31, 2009 and 2008, respectively, are included in operating expenses and (loss) income from discontinued operations.
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 certain payments to affiliates for services and as 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 properties as compensation for providing property management services. The Partnership paid to such affiliates approximately $301,000 and $521,000 for the years ended December 31, 2009 and 2008, respectively, which are included in operating expenses and (loss) income from discontinued operations.
Affiliates of the Managing General Partner charged the Partnership for reimbursement of accountable administrative expenses amounting to approximately $157,000 and $704,000 for the years ended December 31, 2009 and 2008, respectively, which is included in general and administrative expenses, investment property, assets held for sale and gain from sale of discontinued operations. The portion of these reimbursements included in investment property, assets held for sale and gain from sale of discontinued operations for the years ended December 31, 2009 and 2008 are construction management services provided by an affiliate of the Managing General Partner of approximately $59,000 and $496,000, respectively.
Pursuant to the Partnership Agreement, for managing the affairs of the Partnership, the Managing General Partner is entitled to receive a Partnership management incentive allocation equal to 10% of the Partnership's adjusted cash from operations as distributed. No incentive was paid during the years ended December 31, 2009 and 2008 as no cash from operations was distributed.
AIMCO Properties, L.P., 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. Advances under the credit line are unsecured and accrue interest at the prime rate plus 2% per annum. During the year ended December 31, 2008, AIMCO Properties, L.P. exceeded this limit and advanced the Partnership approximately $115,000 to cover the rate lock deposit associated with obtaining the second mortgage loan on Wood Creek Apartments, approximately $642,000 to cover operating expenses at all of the Partnership’s investment properties and approximately $625,000 to fund capital improvements at Cooper’s Pointe Apartments. During the year ended December 31, 2009, AIMCO Properties, L.P. advanced the Partnership approximately $247,000 to fund real estate taxes at Autumn Run Apartments. Interest expense on the outstanding advance balances amounted to approximately $3,000 and $41,000 for the years ended December 31, 2009 and 2008, respectively. During the years ended December 31, 2009 and 2008, the Partnership repaid advances and associated accrued interest of approximately $250,000 and $2,391,000, respectively. At December 31, 2009 and 2008, there were no advances or associated accrued interest due to AIMCO Properties, L.P. The Partnership may receive additional advances of funds from AIMCO Properties, L.P. although AIMCO Properties, L.P. is not obligated to provide such advances. For more information on AIMCO Properties, L.P., including copies of its audited balance sheet, please see its reports filed with the Securities and Exchange Commission.
The Partnership insures its properties up to certain limits through coverage provided by AIMCO which is generally self-insured for a portion of losses and liabilities related to workers’ compensation, property casualty, general liability and vehicle liability. The Partnership insures its properties above the AIMCO limits through insurance policies obtained by AIMCO from insurers unaffiliated with the Managing General Partner. During the years ended December 31, 2009 and 2008, the Partnership was charged by AIMCO and its affiliates approximately $97,000 and $192,000, respectively, for insurance coverage and fees associated with policy claims administration.
In addition to its indirect ownership of the general partner interests in the Partnership, AIMCO and its affiliates owned 54,702.50 limited partnership units (the "Units") in the Partnership representing 66.03% of the outstanding Units at December 31, 2009. 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. Pursuant to the Partnership Agreement, unitholders holding a majority of the Units are entitled to take action with respect to a variety of matters, which include, but are not limited to, voting on certain amendments to the Partnership Agreement and voting to remove the Managing General Partner. As a result of its ownership of 66.03% of the outstanding Units, AIMCO and its affiliates are in a position to influence all voting decisions with respect to the Partnership. With respect to 17,341.50 Units, such affiliates are required to vote such Units: (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 third party unitholders. Except for the foregoing, no other limitations are imposed on such affiliates' ability to influence voting decisions with respect to the Partnership. Although the General Partner owes fiduciary duties to the limited partners of the Partnership, the Managing General Partner also owes fiduciary duties to both the General Partner and AIMCO as the sole stockholder of the Managing General Partner.
Note C - Mortgage Notes Payable
The principal terms of mortgage notes payable are as follows:
(1) Fixed rate mortgages.
The mortgage notes payable are non-recourse and are secured by a pledge of the Partnership's rental property and by a pledge of revenues from the respective rental property. The mortgage notes payable include prepayment penalties if repaid prior to maturity. Further, the property may not be sold subject to existing indebtedness.
On March 31, 2008, the Partnership obtained a second mortgage loan in the principal amount of $5,770,000 on Woodcreek Apartments. The second mortgage loan bears interest at a fixed rate of 5.68% per annum, and requires monthly payments of principal and interest of approximately $33,000, beginning on May 1, 2008 through the August 1, 2016 maturity date. The second mortgage loan has a balloon payment of approximately $5,049,000 due at maturity. As a condition of the new loan, the lender required AIMCO Properties, L.P., an affiliate of the Managing General Partner, to guarantee certain non-recourse obligations and liabilities of the Partnership with respect to the new mortgage financing. Total capitalized loan costs in connection with the new mortgage were approximately $82,000 and are included in other assets.
Scheduled principal payments of the mortgage notes payable subsequent to December 31, 2009, are as follows (in thousands):
$
Thereafter
17,851
$19,449
Note D - Investment Property and Accumulated Depreciation
Reconciliation of "Investment Property and Accumulated Depreciation":
The aggregate cost of the investment properties for Federal income tax purposes at December 31, 2009 and 2008, is approximately $20,130,000 and $42,295,000, respectively. The accumulated depreciation for Federal income tax purposes at December 31, 2009 and 2008, is approximately $15,972,000 and $33,527,000, respectively.
Note E - Income Taxes
The Partnership is classified as a partnership for Federal income tax purposes. Accordingly, no provision for income taxes is made in the consolidated financial statements of the Partnership. Taxable income or loss of the Partnership is reported in the income tax returns of its partners.
The following is a reconciliation of reported net income and Federal taxable income (in thousands, except per unit data):
Net income as reported
$14,913
$16,880
Add (deduct):
Depreciation differences
Change in prepaid rent
(27)
(18)
Gain on sale of properties
3,768
2,324
Casualty gain
--
(474)
Other
(112)
(71)
Federal taxable income
$19,284
$19,450
Federal taxable income per limited
partnership unit
$202.69
$204.13
For 2009 and 2008, allocations under the Internal Revenue Code Section 704(b) result in the limited partners being allocated a non-pro rata share of taxable income.
The following is a reconciliation between the Partnership's reported amounts and Federal tax basis of net liabilities:
The Partnership is subject to an entity tax that is based upon the Partnership’s base income in Illinois. Autumn Run Apartments was subject to local taxes based upon net income. During the year ended December 31, 2009, as a result of the sale of Autumn Run Apartments, the Partnership recognized current tax expense of approximately $72,000, which is reflected as a reduction of gain from sale of discontinued operations. The corresponding liability is included in taxes payable at December 31, 2009.
Note F - Casualty Event
During the year ended December 31, 2007, the Partnership recognized a casualty gain of approximately $142,000 at Autumn Run Apartments related to a fire that damaged twelve units on June 21, 2007. The gain was the result of the receipt of insurance proceeds of approximately $270,000, partially offset by the write off of approximately $128,000 of undepreciated property improvements and replacements. During the year ended December 31, 2008, the Partnership recognized a casualty gain of approximately $549,000 due to the receipt of additional insurance proceeds, which is included in (loss) income from discontinued operations.
Note G - Disposition of Investment Properties
On September 30, 2009, the Partnership sold Autumn Run Apartments to a third party for a gross sales price of $24,745,000. The net proceeds realized by the Partnership were approximately $6,094,000 after payment of closing costs of approximately $526,000, a credit to the purchaser of approximately $150,000 for capital improvements at the property, and the assumption of the mortgage debt encumbering the property of approximately $17,975,000 by the purchaser. The Partnership recorded a gain of approximately $16,181,000 as a result of the sale. In addition, the Partnership recorded a loss on the early extinguishment of debt of approximately $215,000 due to the write-off of unamortized loan costs.
On October 24, 2008, the Partnership sold Copper Mill Apartments to a third party for a gross sales price of approximately $14,600,000. The net proceeds received by the Partnership were approximately $4,331,000 after payment of closing costs of approximately $75,000 and the assumption of the mortgage debt encumbering the property of approximately $10,194,000 by the purchaser. As a result of the sale, the Partnership recognized a gain of approximately $9,139,000 during the year ended December 31, 2008. In addition, the Partnership recorded a loss on early extinguishment of debt of approximately $118,000 due to the write-off of unamortized loan costs.
On October 29, 2008, the Partnership sold Cooper’s Pointe Apartments to a third party for a gross sales price of approximately $13,000,000. The net proceeds received by the Partnership were approximately $5,427,000 after payment of closing costs of approximately $138,000 and the assumption of the mortgage debt encumbering the property of approximately $7,435,000 by the purchaser. As a result of the sale, the Partnership recognized a gain of approximately $8,223,000 during the year ended December 31, 2008. In addition, the Partnership recorded a loss on early extinguishment of debt of approximately $66,000 due to the write-off of unamortized loan costs.
Note H - Distributions
The Partnership distributed the following amounts, which include the distribution payable, during the years ended December 31, 2009 and 2008 (in thousands, except per unit data):
Per Limited
Per Limited
Year Ended
Partnership
Year Ended
Partnership
December 31,
Unit
December 31,
Unit
Refinancing
proceeds (1)
$ --
$ --
$ 3,170
$ 37.50
Saleproceeds (2)
6,422
75.97
7,458
89.37
$ 6,422
$ 75.97
$ 10,628
$ 126.87
(1) Proceeds from the second mortgage obtained on Wood Creek Apartments.
(2) Proceeds from the October 2008 sales of Copper Mill Apartments and Cooper’s Pointe Apartments and the September 2009 sale of Autumn Run Apartments.
For 2009, the distribution payable of approximately $512,000 represents the estimated Illinois withholding taxes to be paid by the Partnership on behalf of certain partners in connection with the sale of Autumn Run Apartments.
Note I - Contingencies
As previously disclosed, AIMCO Properties, L.P. and NHP Management Company, both affiliates of the Managing General Partner, were defendants in a lawsuit, filed as a collective action in August 2003 in the United States District Court for the District of Columbia, alleging that they willfully violated the Fair Labor Standards Act (“FLSA”) by failing to pay maintenance workers overtime for time worked in excess of 40 hours per week (“overtime claims”). The plaintiffs also contended that AIMCO Properties, L.P. and NHP Management Company (“the Defendants”) failed to compensate maintenance workers for time that they were required to be "on-call" (“on-call claims”). In March 2007, the court in the District of Columbia decertified the collective action. In July 2007, plaintiffs’ counsel filed individual cases in Federal court in 22 jurisdictions. In the second quarter of 2008, AIMCO Properties, L.P. settled the overtime cases involving 652 plaintiffs and established a framework for resolving the 88 remaining “on-call” claims and the attorneys’ fees claimed by plaintiffs’ counsel. As a result, the lawsuits asserted in the 22 Federal courts have been dismissed. During the fourth quarter of 2008, the Partnership paid approximately $1,000 for settlement amounts for alleged unpaid overtime to employees who had worked at the Partnership’s investment properties. At this time, the 88 remaining “on-call” claims and the attorneys’ fees claimed by plaintiffs’ counsel are not resolved. The parties have selected six “on-call” claims that will proceed forward through the arbitration process and have selected arbitrators. After those arbitrations have been completed, the parties will revisit settling the on-call claims. The first two arbitrations took place in December 2009 and the Defendants received a defense verdict against the first two claimants and plaintiffs dismissed the claims of the next two claimants. The remaining two arbitrations will take place in April 2010. The Managing General Partner is uncertain as to the amount of any additional loss that may be allocable to the Partnership. Therefore, the Partnership cannot estimate whether any additional loss will occur or a potential range of loss.
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, including lead-based paint. 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 the 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 policies, procedures, third-party audits and training and the Managing General Partner believes that these measures will prevent or eliminate mold exposure and will minimize the effects that mold may 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.
ITEM 9.
ITEM 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure
None.
Item 9A(T).
Item 9A(T). 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.
Management’s Report on Internal Control Over Financial Reporting
The Partnership’s management is responsible for establishing and maintaining adequate internal control over financial reporting. Internal control over financial reporting is defined in Rule 13a-15(f) and 15d-15(f) under the Exchange Act as a process designed by, or under the supervision of, the principal executive and principal financial officers of the Managing General Partner, who are the equivalent of the Partnership’s principal executive officer and principal financial officer, respectively, and effected by the Partnership’s management and other personnel to provide reasonable assurance regarding the reliability of financial reporting and the preparation of consolidated financial statements for external purposes in accordance with generally accepted accounting principles and includes those policies and procedures that:
· pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of assets;
· provide reasonable assurance that transactions are recorded as necessary to permit preparation of consolidated financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures are being made only in accordance with authorizations of the Partnership’s management; and
· provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of assets that could have a material effect on the consolidated financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Projections of any evaluation of effectiveness to future periods are subject to the risks that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
The Partnership’s management assessed the effectiveness of the Partnership’s internal control over financial reporting as of December 31, 2009. In making this assessment, the Partnership’s management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control-Integrated Framework.
Based on their assessment, the Partnership’s management concluded that, as of December 31, 2009, the Partnership’s internal control over financial reporting is effective.
This annual report does not include an attestation report of the Partnership’s registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to the attestation by the Partnership’s registered public accounting firm pursuant to temporary rules of the Securities and Exchange Commission that permit the Partnership to provide only management’s report in this annual report.
(b) Changes in Internal Control Over Financial Reporting.
There has been no change in the Partnership’s internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the fourth quarter of 2009 that has materially affected, or is reasonably likely to materially affect, the Partnership’s internal control over financial reporting.
Item 9B.
Item 9B. Other Information
None.
PART III
Item 10.
Item 10. Directors, Executive Officers and Corporate Governance
Century Properties Growth Fund XXII, LP (the “Partnership” or the “Registrant”) has no directors or officers. The general partner of the Partnership is Fox Partners IV, a California general partnership. The managing general partner of Fox Partners IV is Fox Capital Management Corporation, (“FCMC” or the “Managing General Partner”).
The names and ages of, as well as the positions and offices held by, the present directors and officers of the Managing General Partner are set forth below. There are no family relationships between or among any officers or directors.
Name
Age
Position
Steven D. Cordes
Director and Senior Vice President
John Bezzant
Director and Senior Vice President
Timothy J. Beaudin
President and Chief Operating Officer
Ernest M. Freedman
Executive Vice President and Chief Financial Officer
Lisa R. Cohn
Executive Vice President, General Counsel and Secretary
Paul Beldin
Senior Vice President and Chief Accounting Officer
Stephen B. Waters
Senior Director of Partnership Accounting
Steven D. Cordes was appointed as a Director of the Managing General Partner effective March 2, 2009. Mr. Cordes has been a Senior Vice President of the Managing General Partner and AIMCO since May 2007. Mr. Cordes joined AIMCO in 2001 as a Vice President of Capital Markets with responsibility for AIMCO’s joint ventures and equity capital markets activity. Prior to joining AIMCO, Mr. Cordes was a manager in the financial consulting practice of PricewaterhouseCoopers. Effective March 2009, Mr. Cordes was appointed to serve as the equivalent of the chief executive officer of the Partnership. Mr. Cordes brings particular expertise to the Board in the areas of asset management as well as finance and accounting.
John Bezzant was appointed as a Director of the Managing General Partner effective December 16, 2009. Mr. Bezzant has been a Senior Vice President of the Managing General Partner and AIMCO since joining AIMCO in June 2006. Prior to joining AIMCO, from 2005 to June 2006, Mr. Bezzant was a First Vice President at Prologis, a Denver, Colorado-based real estate investment trust, and from 1986 to 2005, Mr. Bezzant served as Vice President, Asset Management at Catellus Development Corporation, a San Francisco, California-based real estate investment trust. Mr. Bezzant brings particular expertise to the Board in the areas of real estate finance, property operations, sales and development.
Timothy J. Beaudin was appointed President and Chief Operating Officer of AIMCO and the Managing General Partner in February 2009. He joined AIMCO and the Managing General Partner as Executive Vice President and Chief Development Officer in October 2005 and was appointed Executive Vice President and Chief Property Operating Officer of the Managing General Partner and AIMCO in October 2008. Mr. Beaudin oversees conventional and affordable property operations, transactions, asset management, and redevelopment and construction services for AIMCO and the Managing General Partner. Prior to joining AIMCO and beginning in 1995, Mr. Beaudin was with Catellus Development Corporation. During his last five years at Catellus, Mr. Beaudin served as Executive Vice President, with management responsibility for development, construction and asset management.
Ernest M. Freedman was appointed Executive Vice President and Chief Financial Officer of the Managing General Partner and AIMCO in November 2009. Mr. Freedman joined AIMCO in 2007 as Senior Vice President of Financial Planning and Analysis and has served as Senior Vice President of Finance since February 2009, responsible for financial planning, tax, accounting and related areas. Prior to joining AIMCO, from 2004 to 2007, Mr. Freedman served as chief financial officer of HEI Hotels and Resorts.
Lisa R. Cohn was appointed Executive Vice President, General Counsel and Secretary of the Managing General Partner and AIMCO in December 2007. From January 2004 to December 2007, Ms. Cohn served as Senior Vice President and Assistant General Counsel of AIMCO. Ms. Cohn joined AIMCO in July 2002 as Vice President and Assistant General Counsel. Prior to joining AIMCO, Ms. Cohn was in private practice with the law firm of Hogan and Hartson LLP.
Paul Beldin joined AIMCO in May 2008 and has served as Senior Vice President and Chief Accounting Officer of AIMCO and the Managing General Partner since that time. Prior to joining AIMCO, Mr. Beldin served as controller and then as chief financial officer of America First Apartment Investors, Inc., a publicly traded multifamily real estate investment trust, from May 2005 to September 2007 when the company was acquired by Sentinel Real Estate Corporation. Prior to joining America First Apartment Investors, Inc., Mr. Beldin was a senior manager at Deloitte and Touche LLP, where he was employed from August 1996 to May 2005, including two years as an audit manager in SEC services at Deloitte’s national office.
Stephen B. Waters was appointed Senior Director of Partnership Accounting of AIMCO and the Managing General Partner in June 2009. Mr. Waters has responsibility for partnership accounting with AIMCO and serves as the principal financial officer of the Managing General Partner. Mr. Waters joined AIMCO as a Director of Real Estate Accounting in September 1999 and was appointed Vice President of the Managing General Partner and AIMCO in April 2004. Prior to joining AIMCO, Mr. Waters was a senior manager at Ernst & Young LLP.
The Registrant is not aware of the involvement in any legal proceedings with respect to the directors and executive officers listed in this Item 10.
One or more of the above persons are also directors and/or officers of a general partner (or general partner of a general partner) of limited partnerships which either have a class of securities registered pursuant to Section 12(g) of the Securities Exchange Act of 1934, or are subject to the reporting requirements of Section 15(d) of such Act. Further, one or more of the above persons are also officers of Apartment Investment and Management Company and the general partner of AIMCO Properties, L.P., entities that have a class of securities registered pursuant to Section 12(g) of the Securities Exchange Act of 1934, or are subject to the reporting requirements of Section 15 (d) of such Act.
The board of directors of the Managing General Partner does not have a separate audit committee. As such, the board of directors of the Managing General Partner fulfills the functions of an audit committee. The board of directors has determined that Steven D. Cordes meets the requirement of an "audit committee financial expert".
The directors and officers of the Managing General Partner with authority over the Partnership are all employees of subsidiaries of AIMCO. AIMCO has adopted a code of ethics that applies to such directors and officers that is posted on AIMCO's website (www.AIMCO.com). AIMCO's website is not incorporated by reference to this filing.
Item 11.
Item 11. Executive Compensation
Neither the directors nor any of the officers of the Managing General Partner received any remuneration from the Registrant during the year ended December 31, 2009.
Item 12.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
Except as noted below, no person or entity was known by the Registrant to be the beneficial owner of more than 5% of the Limited Partnership Units (the “Units”) of the Registrant as of December 31, 2009.
Entity
Number of Units
Percentage
Market Ventures, LLC
45.0
0.06%
AIMCO IPLP, L.P.
17,341.5
20.93%
(an affiliate of AIMCO)
IPLP Acquisition I, LLC
5,459.0
6.59%
(an affiliate of AIMCO)
AIMCO Properties, L.P.
31,857.0
38.45%
(an affiliate of AIMCO)
AIMCO IPLP, L.P., IPLP Acquisition I, LLC and Market Ventures, LLC are indirectly ultimately owned by AIMCO. Their business addresses are 55 Beattie Place, Greenville, South Carolina 29601.
AIMCO Properties, L.P. is indirectly ultimately controlled by AIMCO. Its business address is 4582 S. Ulster St. Parkway, Suite 1100, Denver, Colorado 80222.
No director or officer of the Managing General Partner owns any Units.
Item 13.
Item 13. Certain Relationships and Related Transactions, and Director Independence
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 certain payments to affiliates for services and as 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 properties as compensation for providing property management services. The Partnership paid to such affiliates approximately $301,000 and $521,000 for the years ended December 31, 2009 and 2008, respectively, which are included in operating expenses and (loss) income from discontinued operations on the consolidated statements of operations included in “Item 8. Financial Statements and Supplementary Data”.
Affiliates of the Managing General Partner charged the Partnership for reimbursement of accountable administrative expenses amounting to approximately $157,000 and $704,000 for the years ended December 31, 2009 and 2008, respectively, which is included in general and administrative expenses, investment property, assets held for sale and gain from sale of discontinued operations on the consolidated financial statements included in “Item 8. Financial Statements and Supplementary Data”. The portion of these reimbursements included in investment property, assets held for sale and gain from sale of discontinued operations for the years ended December 31, 2009 and 2008 are construction management services provided by an affiliate of the Managing General Partner of approximately $59,000 and $496,000, respectively.
Pursuant to the Partnership Agreement, for managing the affairs of the Partnership, the Managing General Partner is entitled to receive a Partnership management incentive allocation equal to 10% of the Partnership's adjusted cash from operations as distributed. No incentive was paid during the years ended December 31, 2009 and 2008 as no cash from operations was distributed.
AIMCO Properties, L.P., 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. Advances under the credit line are unsecured and accrue interest at the prime rate plus 2% per annum. During the year ended December 31, 2008, AIMCO Properties, L.P. exceeded this limit and advanced the Partnership approximately $115,000 to cover the rate lock deposit associated with obtaining the second mortgage loan on Wood Creek Apartments, approximately $642,000 to cover operating expenses at all of the Partnership’s investment properties and approximately $625,000 to fund capital improvements at Cooper’s Pointe Apartments. During the year ended December 31, 2009, AIMCO Properties, L.P. advanced the Partnership approximately $247,000 to fund real estate taxes at Autumn Run Apartments. Interest expense on the outstanding advance balances amounted to approximately $3,000 and $41,000 for the years ended December 31, 2009 and 2008, respectively. During the years ended December 31, 2009 and 2008, the Partnership repaid advances and associated accrued interest of approximately $250,000 and $2,391,000, respectively. At December 31, 2009 and 2008, there were no advances or associated accrued interest due to AIMCO Properties, L.P. The Partnership may receive additional advances of funds from AIMCO Properties, L.P. although AIMCO Properties, L.P. is not obligated to provide such advances. For more information on AIMCO Properties, L.P., including copies of its audited balance sheet, please see its reports filed with the Securities and Exchange Commission.
The Partnership insures its properties up to certain limits through coverage provided by AIMCO which is generally self-insured for a portion of losses and liabilities related to workers’ compensation, property casualty, general liability and vehicle liability. The Partnership insures its properties above the AIMCO limits through insurance policies obtained by AIMCO from insurers unaffiliated with the Managing General Partner. During the years ended December 31, 2009 and 2008, the Partnership was charged by AIMCO and its affiliates approximately $97,000 and $192,000, respectively, for insurance coverage and fees associated with policy claims administration.
In addition to its indirect ownership of the general partner interests in the Partnership, AIMCO and its affiliates owned 54,702.50 Units in the Partnership representing 66.03% of the outstanding Units at December 31, 2009. 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. Pursuant to the Partnership Agreement, unitholders holding a majority of the Units are entitled to take action with respect to a variety of matters, which include, but are not limited to, voting on certain amendments to the Partnership Agreement and voting to remove the Managing General Partner. As a result of its ownership of 66.03% of the outstanding Units, AIMCO and its affiliates are in a position to influence all voting decisions with respect to the Partnership. With respect to 17,341.50 Units, such affiliates are required to vote such Units: (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 third party unitholders. Except for the foregoing, no other limitations are imposed on such affiliates' ability to influence voting decisions with respect to the Partnership. Although the General Partner owes fiduciary duties to the limited partners of the Partnership, the Managing General Partner also owes fiduciary duties to both the General Partner and AIMCO as the sole stockholder of the Managing General Partner.
Neither of the Managing General Partner's directors is independent under the independence standards established for New York Stock Exchange listed companies as both directors are employed by the parent of the Managing General Partner.
Item 14.
Item 14. Principal Accounting Fees and Services
The Managing General Partner has reappointed Ernst & Young LLP as independent auditors to audit the consolidated financial statements of the Partnership for 2010. The aggregate fees billed for services rendered by Ernst & Young LLP for 2009 and 2008 are described below.
Audit Fees. Fees for audit services totaled approximately $48,000 and $77,000 for 2009 and 2008, respectively. Fees for audit services also include fees for the reviews of the Partnership’s Quarterly Reports on Form 10-Q.
Tax Fees. Fees for tax services totaled approximately $15,000 and $23,000 for 2009 and 2008, respectively.
PART IV
Item 15.
Item 15. Exhibits, Financial Statement Schedules.
(a) The following consolidated financial statements of the Partnership are included in Item 8:
Consolidated Balance Sheets at December 31, 2009 and 2008.
Consolidated Statements of Operations for the years ended December 31, 2009 and 2008.
Consolidated Statements of Changes in Partners’ Deficit for the years ended December 31, 2009 and 2008.
Consolidated Statements of Cash Flows for the years ended December 31, 2009 and 2008.
Notes to Consolidated Financials Statements.
Schedules are omitted for the reason that they are inapplicable or equivalent information has been included elsewhere herein.
(b) Exhibits:
See Exhibit Index.
The agreements included as exhibits to this Form 10-K contain representations and warranties by each of the parties to the applicable agreement. These representations and warranties have been made solely for the benefit of the other parties to the applicable agreement and:
should not in all instances be treated as categorical statements of fact, but rather as a way of allocating the risk to one of the parties if those statements prove to be inaccurate;
have been qualified by disclosures that were made to the other party in connection with the negotiation of the applicable agreement, which disclosures are not necessarily reflected in the agreement;
may apply standards of materiality in a way that is different from what may be viewed as material to an investor; and
were made only as of the date of the applicable agreement or such other date or dates as may be specified in the agreement and are subject to more recent developments.
Accordingly, these representations and warranties may not describe the actual state of affairs as of the date they were made or at any other time. The Partnership acknowledges that, notwithstanding the inclusion of the foregoing cautionary statements, it is responsible for considering whether additional specific disclosures of material information regarding material contractual provisions are required to make the statements in this Form 10-K not misleading. Additional information about the Partnership may be found elsewhere in this Form 10-K and the Partnership’s other public filings, which are available without charge through the SEC’s website at http://www.sec.gov.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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 PROPERTIES GROWTH FUND XXII, LP
By: FOX PARTNERS IV
General Partner
By: FOX CAPITAL MANAGEMENT CORPORATION
Managing General Partner
By: /s/Steven D. Cordes
Steven D. Cordes
Senior Vice President
By: /s/Stephen B. Waters
Stephen B. Waters
Senior Director of Partnership Accounting
Date: March 29,
Pursuant to the requirements of the Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
/s/John Bezzant
Director and Senior
Date: March 29,
John Bezzant
Vice President
/s/Steven D. Cordes
Director and Senior
Date: March 29,
Steven D. Cordes
Vice President
/s/Stephen B. Waters
Senior Director of Partnership
Date: March 29,
Stephen B. Waters
Accounting
CENTURY PROPERTIES GROWTH FUND XXII, LP
EXHIBIT INDEX
Exhibit Number Description of Exhibit
2.1 NPI, Inc. Stock Purchase Agreement, dated as of August 17, 1995, incorporated by reference to the Partnership's Current Report on Form 8-K dated August 17, 1995.
2.2 Partnership Units Purchase Agreement dated as of August 17, 1995, incorporated by reference to Exhibit 2.1 to Form 8-K filed by Insignia Financial Group, Inc. ("Insignia") with the Securities and Exchange Commission on September 1, 1995.
2.3 Management Purchase Agreement dated as of August 17, 1995, incorporated by reference to Exhibit 2.2 to Form 8-K filed by Insignia 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 Partnership dated September 20, 1983, as amended on June 13, 1989, and as thereafter supplemented contained in the Partnership's Registration Statement on Form S-11 (Reg. No. 2-79007).
3.5 Amendment to amended and restated limited partnership agreement dated September 7, 2006. Filed with Form 10-QSB for the quarterly period ended September 30, 2006 and incorporated herein by reference.
3.6 Second Amendment to the Amended and Restated Limited Partnership Agreement dated September 18, 2008. Filed with Form 10-Q for the quarterly period ended September 30, 2008 and incorporated herein by reference.
3.7 Certificate of Merger dated October 29, 2008. Filed with Form 10-Q for the quarterly period ended September 30, 2008 and incorporated herein by reference.
10.29 Multifamily note between Wood Creek CPGF 22, L.P., a Delaware limited partnership and Capmark Finance Inc., a California Corporation, dated July 26, 2006 and incorporated by reference to the Registrant’s Current Report on Form 8-K dated July 26, 2006 and filed August 1, 2006.
10.30 Guaranty agreement dated July 26, 2006 between AIMCO Properties, L.P., a Delaware limited partnership and Capmark Finance, Inc., a California Corporation for the benefit of Capmark Finance, Inc. and incorporated by reference to the Registrant’s Current Report on Form 8-K dated July 26, 2006 and filed August 1, 2006.
10.40 Multifamily Note between Wood Creek CPGF 22, L.P., a Delaware limited partnership, and Capmark Bank dated March 31, 2008 and incorporated by reference to the Registrant’s Current Report on Form 8-K dated March 31, 2008.
10.41 Multifamily Deed of Trust, Assignment of Rents, Security Agreement and Fixture Filing between Wood Creek CPGF 22, L.P., a Delaware limited partnership and Capmark Bank dated March 31, 2008and incorporated by reference to the Registrant’s Current Report on Form 8-K dated March 31, 2008.
10.42 Agreement for Purchase and Sale and Joint Escrow Instructions between Cooper’s Pointe CPGF 22, L.P., a Delaware limited partnership, Copper Mill CPGF 22, L.P., a Delaware limited partnership, and the affiliated Selling Partnerships and JRK Property Holdings, Inc., a California corporation and JRK Birchmont Advisors, LLC, a Delaware limited liability company, dated September 29, 2008 and incorporated by reference to the Registrant’s Current Report on Form 8-K dated September 29, 2008.
10.43 First Amendment to Agreement for Purchase and Sale and Joint Escrow Instructions between Cooper’s Pointe CPGF 22, L.P., a Delaware limited partnership, Copper Mill CPGF 22, L.P., a Delaware limited partnership, and the affiliated Selling Partnerships and JRK Property Holdings, Inc., a California corporation and JRK Birchmont Advisors, LLC, a Delaware limited liability company, dated September 30, 2008 and incorporated by reference to the Registrant’s Current Report on Form 8-K dated September 29, 2008.
10.44 Second Amendment to Agreement for Purchase and Sale and Joint Escrow Instructions between Cooper’s Pointe CPGF 22, L.P., a Delaware limited partnership, Copper Mill CPGF 22, L.P., a Delaware limited partnership, and the affiliated Selling Partnerships and JRK Property Holdings, Inc., a California corporation and JRK Birchmont Advisors, LLC, a Delaware limited liability company, dated October 2, 2008 and incorporated by reference to the Registrant’s Current Report on Form 8-K dated September 29, 2008.
10.45 Third Amendment to Agreement for Purchase and Sale and Joint Escrow Instructions between Cooper’s Pointe CPGF 22, L.P., a Delaware limited partnership, Copper Mill CPGF 22, L.P., a Delaware limited partnership, and the affiliated Selling Partnerships and JRK Property Holdings, Inc., a California corporation and JRK Birchmont Advisors, LLC, a Delaware limited liability company, dated October 21, 2008. Incorporated by reference to the Partnership's Current Report on Form 8-K dated October 24, 2008.
10.46 Fourth Amendment to Agreement for Purchase and Sale and Joint Escrow Instructions between Cooper’s Pointe CPGF 22, L.P., a Delaware limited partnership, Copper Mill CPGF 22, L.P., a Delaware limited partnership, and the affiliated Selling Partnerships and JRK Property Holdings, Inc., a California corporation and JRK Birchmont Advisors, LLC, a Delaware limited liability company, dated October 23, 2008. Incorporated by reference to the Partnership's Current Report on Form 8-K dated October 24, 2008.
10.47 Purchase and Sale Contract between Century Properties Growth Fund XXII, LP, a Delaware limited partnership, and Autumn Run Apartments, LLC, an Illinois limited liability company, dated July 15, 2009. Incorporated by reference to the Registrant's Current Report on Form 8-K dated July 15, 2009.
10.48 First Amendment to Purchase and Sale Contract between Century Properties Growth Fund XXII, LP, a Delaware limited partnership, and Autumn Run Apartments, LLC, an Illinois limited liability company, dated August 5, 2009. Incorporated by reference to the Registrant’s Current Report on Form 8-K dated August 5, 2009.
10.49 Second Amendment to Purchase and Sale Contract between Century Properties Growth Fund XXII, LP, a Delaware limited partnership, and Autumn Run Apartments, LLC, an Illinois limited liability company, dated August 6, 2009. Incorporated by reference to the Registrant’s Current Report on Form 8-K dated August 5, 2009.
10.50 Third Amendment to Purchase and Sale Contract between Century Properties Growth Fund XXII, LP, a Delaware limited partnership, and Autumn Run Apartments, LLC, an Illinois limited liability company, dated September 8, 2009. Incorporated by reference to the Registrant’s Current Report on Form 8-K dated September 8, 2009.
10.51 Fourth Amendment to Purchase and Sale Contract between Century Properties Growth Fund XXII, LP, a Delaware limited partnership, and Autumn Run Apartments, LLC, an Illinois limited liability company, dated September 17, 2009. Incorporated by reference to the Registrant’s Current Report on Form 8-K dated September 17, 2009.
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.