-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, ESS0Df7x3AiTN61xbVQVAPhllMCPvKiopShjH+7/DAb7Q5jiaiP2q1uL3biwAT0A 2nXQ9HwnihnoYTgskhC2fQ== 0000702986-96-000003.txt : 19961113 0000702986-96-000003.hdr.sgml : 19961113 ACCESSION NUMBER: 0000702986-96-000003 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19960930 FILED AS OF DATE: 19961112 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: ANGELES PARTNERS XI CENTRAL INDEX KEY: 0000702986 STANDARD INDUSTRIAL CLASSIFICATION: REAL ESTATE [6500] IRS NUMBER: 953788040 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10QSB SEC ACT: 1934 Act SEC FILE NUMBER: 000-11766 FILM NUMBER: 96660080 BUSINESS ADDRESS: STREET 1: ONE INSIGNIA FINANCIAL PLZ STREET 2: PO BOX 1089 CITY: GREENVILLE STATE: SC ZIP: 29602 BUSINESS PHONE: 8032391000 MAIL ADDRESS: STREET 1: ONE INSIGNIA FINANCIAL PLAZA STREET 2: P.O. BOX 1089 CITY: GREENVILLE STATE: SC ZIP: 29602 10QSB 1 FORM 10-QSB.--QUARTERLY REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 QUARTERLY OR TRANSITIONAL REPORT (As last amended by 34-32231, eff. 6/3/93.) U.S. Securities and Exchange Commission Washington, D.C. 20549 FORM 10-QSB [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 1996 [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period.........to......... Commission file number 0-11766 ANGELES PARTNERS XI (Exact name of small business issuer as specified in its charter) California 95-3788040 (State or other jurisdiction of (IRS Employer incorporation or organization) Identification No.) One Insignia Financial Plaza, P.O. Box 1089 Greenville, South Carolina 29602 (Address of principal executive offices) (Zip Code) Issuer's telephone number (864) 239-1000 Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No PART I - FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS a) ANGELES PARTNERS XI CONSOLIDATED BALANCE SHEET (Unaudited) (in thousands, except unit data) September 30, 1996
Assets Cash and cash equivalents: Unrestricted $ 959 Restricted--tenant security deposits 517 Accounts receivable 190 Escrow for taxes 164 Restricted escrows 75 Other assets 232 Investment in, and advances of $157 to, joint venture 193 Investment properties: Land $ 3,998 Buildings and related personal property 24,862 28,860 Less accumulated depreciation (15,414) 13,446 $ 15,776 Liabilities and Partners' Deficit Liabilities Accounts payable $ 510 Due to affiliates 441 Tenant security deposits 514 Accrued interest 1,393 Other liabilities 270 Notes payable, including $7,019 in default 30,426 Partners' Deficit General partners $ (494) Limited partners (39,842 units issued and outstanding) (17,284) (17,778) $ 15,776 See Accompanying Notes to Consolidated Financial Statements
b) ANGELES PARTNERS XI CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) (in thousands, except unit data)
Three Months Ended Nine Month Ended September 30, September 30, 1996 1995 1996 1995 Revenues: Rental income $ 1,644 $ 1,852 $ 4,950 $ 5,608 Other income 84 102 271 269 Total revenues 1,728 1,954 5,221 5,877 Expenses: Operating 483 561 1,361 1,743 General and administrative 48 49 148 189 Maintenance 224 224 577 573 Depreciation 382 409 1,130 1,216 Interest 1,267 849 2,826 2,541 Property taxes 183 204 538 563 Bad debt expense -- 31 -- 31 Total expenses 2,587 2,327 6,580 6,856 Gain on sale of investment property -- 2,336 -- 2,336 Casualty gain -- -- 170 -- Equity in net income (loss) of joint venture 30 40 (24) (7) Debt restructure costs -- (330) -- (330) (Loss) income before extraordinary item (829) 1,673 (1,213) 1,020 Extraordinary gain on forgiveness of debt -- 221 -- 221 Net (loss) income $ (829) $ 1,894 $(1,213) $ 1,241 Net (loss) income allocated to general partners (1%) $ (8) $ 19 $ (12) $ 12 Net (loss) income allocated to limited partners (99%) (821) 1,875 (1,201) 1,229 Net (loss) income $ (829) $ 1,894 $(1,213) $ 1,241 Per limited partnership unit: (Loss) income before extraordinary item $(20.60) $ 41.57 $(30.14) $ 25.34 Extraordinary gain on forgiveness of debt -- 5.48 -- 5.48 Net (loss) income $(20.60) $ 47.05 $(30.14) $ 30.82 See Accompanying Notes to Consolidated Financial Statements
c) ANGELES PARTNERS XI CONSOLIDATED STATEMENT OF CHANGES IN PARTNERS' DEFICIT (Unaudited) (in thousands, except unit data)
Limited Partnership General Limited Units Partners Partners Total Original capital contributions 40,000 $ 30 $ 40,000 $ 40,030 Partners' deficit at December 31, 1995 39,842 $ (482) $(16,059) $(16,541) Distributions to partners (24) (24) Nt loss for the nine months ended September 30, 1996 (12) (1,201) (1,213) Partners' deficit at September 30, 1996 39,842 $ (494) $(17,284) $(17,778) See Accompanying Notes to Consolidated Financial Statements
d) ANGELES PARTNERS XI CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (in thousands)
Nine Months Ended September 30, 1996 1995 Cash flows from operating activities: Net (loss) income $ (1,213) $ 1,241 Adjustments to reconcile net (loss) income to cash provided by operating activities: Equity in net loss from joint venture 24 7 Depreciation 1,130 1,216 Amortization of loan costs 42 76 Bad debt expense -- 31 Gain on sale of investment property -- (2,336) Extraordinary gain on forgiveness of debt -- (221) Casualty gain (170) -- Change in accounts: Restricted cash (6) (13) Accounts receivable (6) (14) Escrows for taxes (51) 89 Other assets 5 (7) Accounts payable 402 (372) Tenant security deposit liabilities 14 (9) Accrued interest 894 701 Due to affiliates 91 45 Other liabilities 54 164 Net cash provided by operating activities 1,210 598 Cash flows from investing activities: Advances to joint venture (117) -- Proceeds from sale of investment property -- 4,717 Property improvements and replacements (466) (1,096) Deposits to restricted escrows -- (615) Withdrawals from restricted escrows -- 540 Net cash (used in) provided by investing activities (583) 3,546 Cash flows from financing activities: Distributions to partners (24) -- Proceeds from mortgage notes payable -- 33 Repayments of mortgage notes payable (231) (3,987) Payments on mortgage notes payable (283) (570) Net cash used in financing activities (538) (4,524) Increase (decrease) in cash 89 (380) Cash and cash equivalents at beginning of period 870 1,606 Cash and cash equivalents at end of period $ 959 $ 1,226 Supplemental disclosure of cash flow information: Cash paid during this period for interest $ 1,889 $ 1,657 Property improvements and replacements included in accounts payable $ -- $ 57 Interest transferred to mortgage notes payable $ 50 $ 1,889 See Accompanying Notes to Consolidated Financial Statements
e) ANGELES PARTNERS XI NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) NOTE A - GOING CONCERN Angeles Partners XI (the "Partnership") continues to incur operating losses and is in default on approximately $7,019,000 of its unsecured indebtedness, plus related accrued interest of approximately $1,065,000, due to its inability to make interest and principal payments when due. The Partnership has extended the maturity date on its first mortgage debt secured by the Fox Run Apartments property, in the principal amount of $21,610,000, to December 1996. The Partnership is current on its first mortgage; however, the Partnership does not have the resources to pay this debt when it matures. The second mortgages secured by Fox Run Apartments, in the principal amount of $6,840,000, are held by Angeles Mortgage Investment Trust ("AMIT"). Angeles Realty Corporation II (the "Managing General Partner") had negotiated amendments to these mortgages which required interest only payments based on an 8% pay rate with interest continuing to accrue at the original rates of 11.5% and 12.5% as per the note agreements. The principal amount of this debt and accrued interest was due in September 1996. The Managing General Partner is conducting negotiations to refinance the first and second mortgages, however, there is no assurance that these negotiations will be successful. As a result of a significant portion of the debt being in default or maturing in 1996, there is substantial doubt about the Partnership's ability to continue as a going concern. The financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or amounts or classification of liabilities that may result from the outcome of these uncertainties. NOTE B - BASIS OF PRESENTATION The accompanying unaudited financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-QSB and Item 310(b) of Regulation S-B. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of the Managing General Partner, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three and nine month periods ended September 30, 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-KSB for the fiscal year ended December 31, 1995. Certain reclassifications have been made to the 1995 information to conform to the 1996 presentation. NOTE C - 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 expenses owed to the Managing General Partner and affiliates during the nine month periods ended September 30, 1996 and 1995 were paid or accrued: 1996 1995 (in thousands) Property management fees $259 $284 Reimbursement for services of affiliates, (Total of $441 and $317 accrued at 119 102 September 30, 1996 and 1995, respectively) (1) (1) Included in "Reimbursements for services of affiliates" for 1996 is approximately $26,000 in reimbursements for construction oversight costs. The Partnership insures 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 receives 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. In November 1992, Angeles Acceptance Pool, L.P. ("AAP"), a Delaware limited partnership was organized to acquire and hold the obligations evidencing the working capital loan previously provided to the Partnership by Angeles Capital Investments, Inc. ("ACII"). Angeles Corporation ("Angeles") is the 99% limited partner of AAP. Angeles Acceptance Directives, Inc. ("AAD"), an affiliate of the Managing General Partner, was, until April 14, 1995, the 1% General Partner of AAP. On April 14, 1995, as part of a settlement of claims between affiliates of the Managing General Partner and Angeles, AAD resigned as general partner of AAP and simultaneously received a 1/2% limited partner interest in AAP. An affiliate of Angeles now serves as the general partner of AAP. This working capital loan funded the Partnership's operating deficits in prior years. Total indebtedness, which is included as a note payable, was approximately $1,797,000 at September 30, 1996, with monthly interest only payments at prime. A principal payment was made in September 1995 in the amount of approximately $194,000 from the proceeds of the sale of Harbour Landing Apartments. The remaining principal balance is to be paid the earlier of i) the availability of funds, ii) the sale of the remaining property owned by the Partnership, or iii) November 1997. Total interest expense for this loan was approximately $112,000 and $132,000 for the nine months ended September 30, 1996 and 1995, respectively. There was approximately $165,000 of interest payable accrued at September 30, 1996. NOTE C - TRANSACTIONS WITH AFFILIATED PARTIES (CONTINUED) AMIT currently provides secondary financing secured by the Partnership's investment property, the Fox Run Apartments, and the Joint Venture, which is secured by the Joint Venture's sole investment property known as the Princeton Meadows Golf Course. In addition, AMIT provides unsecured financing to the Partnership. Total AMIT indebtedness, included as a note payable, was approximately $7,019,000 ($6,840,000 in second mortgages secured by Fox Run Apartments) at September 30, 1996, and was in default due to nonpayment upon maturities, September 1996 and February 1995. Total interest expense on this financing was approximately $1,191,000 and $508,000 for the nine months ended September 30, 1996 and 1995, respectively. Accrued interest payable was approximately $1,065,000 at September 30, 1996. Interest expense on the debt on the Joint Venture was approximately $150,000 and $155,000 for the nine months ended September 30, 1996 and 1995, respectively. Accrued interest on the Joint Venture was approximately $19,000 at September 30, 1996. MAE GP Corporation ("MAE GP"), an affiliate of the Managing General Partner, owns 1,675,113 Class B Shares of AMIT. MAE GP has the option to convert these Class B Shares, in whole or in part, into Class A Shares on the basis of 1 Class A Share for every 49 Class B Shares. These Class B Shares entitle MAE GP to receive 1.2% of the distributions of net cash distributed to AMIT. These Class B Shares also entitle MAE GP to vote on the same basis as Class A Shares which allows MAE GP to vote approximately 37% of the total shares (unless and until converted to Class A Shares at which time the percentage of the vote controlled represented by the shares held by MAE GP would approximate 1.2% of the vote). Between the date of acquisition of these shares (November 24, 1992) and March 31, 1995, MAE GP has declined to vote these shares. Since that date, MAE GP voted its shares at the 1995 annual meeting in connection with the election of trustees and other matters. MAE GP has not exerted, and continues to decline to exert, any management control over or participate in the management of AMIT. In addition, Liquidity Assistance, LLC, ("LAC"), an affiliate of the Managing General Partner and an affiliate of Insignia Financial Group, Inc., which provides property management and partnership administration services to the Partnership, currently owns 87,700 Class A Shares of AMIT. These Class A Shares entitle LAC to vote approximately 2% of the total shares. The number of Class A Shares of AMIT owned by LAC increased from 63,200 shares on September 30, 1996, to 87,700 shares as of October 22, 1996. The voting percentage also increased from 1.5% to 2% over the same period. As part of a settlement of certain disputes with AMIT, MAE GP granted to AMIT an option to acquire the Class B Shares. This option can be exercised at the end of 10 years or when all loans made by AMIT to partnerships affiliated with MAE GP as of November 9, 1994, which is the date of execution of a definitive Settlement Agreement, have been paid in full, but in no event prior to November 9, 1997. AMIT delivered to MAE GP cash in the sum of $250,000 at closing, which occurred April 14, 1995, as payment for the option. Upon exercise of the option, AMIT would remit to MAE GP an additional $94,000. NOTE C - TRANSACTIONS WITH AFFILIATED PARTIES (CONTINUED) Simultaneously with the execution of the option, MAE GP executed an irrevocable proxy in favor of AMIT the result of which is MAE GP will be able to vote the Class B Shares on all matters except those involving transactions between AMIT and MAE GP affiliated borrowers or the election of any MAE GP affiliate as an officer or trustee of AMIT. On those matters, MAE GP granted to the AMIT trustees, in their capacity as trustees of AMIT, proxies with regard to the Class B Shares instructing such trustees to vote said Class B Shares in accordance with the vote of the majority of the Class A Shares voting to be determined without consideration of the votes of "Excess Class A Shares" as defined in Section 6.13 of the Declaration of Trust of AMIT. NOTE D - INVESTMENT IN JOINT VENTURE The Partnership owns a 41.1% interest in Princeton Meadows Golf Course Joint Venture ("Joint Venture"). The balance sheet of the Joint Venture is summarized as follows: September 30, 1996 (in thousands) Assets Cash $ 232 Deferred charges and other assets 169 Investment properties, net 1,899 Total $ 2,300 Liabilities and Partners' Capital Notes payable to AMIT $ 1,567 Other liabilities 642 Partners' capital 91 Total $ 2,300 NOTE D - INVESTMENT IN JOINT VENTURE - (CONTINUED) The statements of operations of the Joint Venture are summarized as follows: Three Months Ended Nine Months Ended September 30, September 30, 1996 1995 1996 1995 (in thousands) (in thousands) Revenue $ 568 $ 501 $ 1,177 $ 985 Costs and expenses (495) (405) (1,235) (1,003) Net income (loss) $ 73 $ 96 $ (58) $ (18) The Partnership's equity interest in the net loss of the Joint Venture for the nine months ended September 30, 1996, and September 30, 1995, was approximately $24,000 and $7,000, respectively. The Princeton Meadows Golf Course property had an underground fuel storage tank that was removed in 1992. This fuel storage tank caused contamination to the area. Management installed monitoring wells in the area where the tank was formerly buried. Some samples from these wells indicated lead and phosphorous readings that were higher than the range prescribed by the New Jersey Department of Environmental Protection ("DEP"). The Joint Venture notified DEP of the findings when they were first discovered. However, DEP did not give any directives as to corrective action until late 1995. In November 1995, representatives of the Joint Venture and the New Jersey DEP met and developed a plan of action to clean-up the contamination site at Princeton Meadows Golf Course. The Joint Venture has engaged an engineering firm to conduct consulting and compliance work and a second firm to perform the field work necessary for the clean-up. The Joint Venture has recorded a liability of $199,000 for the costs of the clean-up. The contracts have been executed and work has commenced with the expected completion date to be sometime in late 1996. The Managing General Partner believes the liability recorded is sufficient to cover all costs associated with this incident. NOTE E - OTHER ITEMS On September 6, 1995, the Managing General Partner sold the Harbour Landing property to an unaffiliated third party. Net proceeds were $4,716,872 and the total gain on the sale was $2,336,262. Also, as a result of the sale $220,594 of debt was forgiven. The second mortgage, which was secured by Harbour Landing Apartments, is held by AMIT and is still in default at September 30, 1996. Due to the sale of the property, this debt became unsecured debt of the Partnership. Prior to the third quarter of 1995, the Partnership was in default on the mortgages held by AMIT, which is secured by the Fox Run property, due to its inability to make interest and principal payments when due. However, during the third quarter of 1995, the Partnership was successful in negotiating amendments to these mortgages effective September 1, 1995. As a result of the modifications, $330,277 of debt restructuring costs were incurred and the past due interest of $1,610,382 at August 31, 1995 was capitalized to the principal balance of the mortgage pursuant to the agreement. During the second quarter of 1996, there were two separate fires at Fox Run Apartments. Sixteen units received extensive damage, while four were completely destroyed. The insurance proceeds to be received are estimated at $170,000. The destroyed units were fully depreciated, resulting in a casualty gain of $170,000. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION The Partnership's investment property consists of one apartment complex. The following table sets forth the average occupancy of the property for the nine months ended September 30, 1996 and 1995: Average Occupancy Property 1996 1995 Fox Run Apartments Plainsboro, New Jersey 95% 96% The Partnership generated net losses for the three and nine months ended September 30, 1996, of approximately $829,000 and $1,213,000, respectively, versus net income for the three and nine months ended September 30, 1995, of approximately $1,894,000 and $1,241,000, respectively. The net loss for the nine months ended September 30, 1996, versus the net income for the nine months ended September 30, 1995, is primarily attributable to the sale of Harbour Landing Apartments in September 1995. On September 6, 1995, the Managing General Partner sold the Harbour Landing property to an unaffiliated third party. Net proceeds were $4,716,872 and the total gain on the sale was $2,336,262. Also, as a result of the sale $220,594 of debt was forgiven. The second mortgage, which was secured by Harbour Landing Apartments, is held by AMIT and is still in default at September 30, 1996. Due to the sale of the property, this debt became unsecured debt of the Partnership. As a result of the sale of Harbour Landing Apartments, there was an overall decrease in rental income for the three and nine months ended September 30, 1996, versus the three and nine months ended September 30, 1995. This was partially offset by a slight increase in rental income at Fox Run Apartments. While average occupancy decreased at Fox Run Apartments, average rent per unit increased. Other income increased due to an increase in lease cancellation fees and utility collections at Fox Run Apartments. The sale of Harbour Landing Apartments resulted in a decrease in operating, maintenance, depreciation, interest and property tax expense for the nine months ended September 30, 1996, as compared to the nine months ended September 30, 1995. The decreases in expenses as a result of the sale were partially offset by increases in maintenance, depreciation and interest expense at Fox Run Apartments. Maintenance expense increased at Fox Run Apartments due primarily to snow removal costs associated with the severe winter of 1996. There were also extensive swimming pool repairs and exterior building improvements. Depreciation expense increased at Fox Run Apartments due to the completion of certain property improvements in 1995 and in the first half of 1996. The default interest assessed on the AMIT debt that matured September 1, 1996, lead to an increase in interest expense at Fox Run Apartments. The Partnership has a 41.1% investment in the Princeton Meadows Golf Course Joint Venture. For the three and nine months ended September 30, 1996, the Partnership realized equity in net income and equity in net loss of the Joint Venture of approximately $30,000 and $24,000, respectively, as compared to an equity in net income and equity in net loss of the Joint Venture of approximately $40,000 and $7,000 for the three and nine months ended September 30, 1995, respectively. The loss for the nine months ended September 30, 1996, can be attributed to an increase in advertising, salaries, insurance and maintenance expense. Advertising expense increased as a result of an aggressive advertising campaign and salary expense increased due to the hiring of additional qualified personnel, including a full time golf pro for the course. The environmental issue at the property (See "Note B - Investment in Joint Venture") necessitated a purchase of new insurance. The Partnership also implemented a preventive maintenance program and repairs were made to the cart paths and course. These increases in expenses were only partially offset by an increase in revenues. These revenue increases can be attributed to maintenance upgrades at the golf course that have improved the appearance of the property. During the second quarter of 1996, there were two separate fires at Fox Run Apartments. Sixteen units received extensive damage, while four were completely destroyed. The insurance proceeds to be received are estimated at $170,000. The destroyed units were fully depreciated, resulting in a casualty gain of $170,000. Prior to the third quarter of 1995, the Partnership was in default on the mortgages held by AMIT, which is secured by the Fox Run property, due to its inability to make interest and principal payments when due. However, during the third quarter of 1995, the Partnership was successful in negotiating amendments to these mortgages effective September 1, 1995. As a result of the modifications, $330,277 of debt restructuring costs were incurred and the past due interest of $1,610,382 at August 31, 1995 was capitalized to the principal balance of the mortgage pursuant to the agreement. The Managing General Partner continues to monitor the rental market environment at its investment property to assess the feasibility of increasing rents, to maintain or increase the occupancy level and to protect the Partnership from increases in expense. The Managing General Partner expects to be able, at a minimum, to continue protecting the Partnership from inflation-related increases in expenses by increasing rents and maintaining a high overall occupancy level. However, rental concessions and rental reductions needed to offset softening market conditions could affect the ability to sustain this plan. At September 30, 1996, the Partnership had unrestricted cash of approximately $959,000 as compared to approximately $1,226,000 at September 30, 1995. Net cash provided by operating activities for the nine months ended September 30, 1996 increased as compared to the nine months ended September 30, 1995 due to an increase in accounts payable, partially offset by a decrease in other liabilities. The proceeds received from the sale of Harbour Landing provided cash from investing activities in 1995, while advances made to the joint venture and property improvements and replacements resulted in cash used in investing activities in 1996. Net cash used in financing activities decreased for the nine months ended September 30, 1996, as compared to the corresponding period ended September 30, 1995, due to repayments on mortgage notes payable, resulting from the pay-off of the debt secured by Harbour Landing Apartments in September 1995, as a result of the sale of this investment property. Offsetting this decrease was a distribution paid for the withholding tax imposed by the state of South Carolina on the taxable income of non-resident limited partners. This tax amounted to approximately $24,000 during 1996. The Partnership continues to incur operating losses and is in default on approximately $7,019,000 of principal debt, of which approximately $6,840,000 is secured by second mortgages on Fox Run Apartments, plus related accrued interest of approximately $1,065,000, due to its inability to make interest and principal payments when due. The Partnership is current on its first mortgage secured by the Fox Run Apartments property; however, the Partnership does not have the resources to pay this debt when it becomes due. The Partnership has been granted a six month extension and the debt now matures in December 1996. The second mortgages secured by the Fox Run Apartments property are held by AMIT. The Managing General Partner had negotiated amendments to these mortgages which required interest only payments based on an 8% pay rate with interest continuing to accrue at the original rates of 11.5% and 12.5% as per the note agreements. The principal amount of this debt and accrued interest matured in September 1996. The Managing General Partner is conducting negotiations to refinance the first and second mortgages, however, there is no assurance that these negotiations will be successful. As a result of a significant portion of the debt being in default or maturing in 1996, there is substantial doubt about the Partnership's ability to continue as a going concern. The financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or amounts or classification of liabilities that may result from the outcome of these uncertainties. The Partnership has no material capital programs scheduled to be performed in 1996, although certain routine capital expenditures and maintenance expenses have been budgeted. These capital expenditures and maintenance expenses will be incurred only if cash is available from operations or is received from the capital reserve account. The sufficiency of existing liquid assets to meet future liquidity and capital expenditure requirements is directly related to the level of capital expenditures required at the property to adequately maintain the physical assets and other operating needs of the Partnership. As mentioned previously, approximately $7,019,000 in debt of the Partnership is in default due to non- payment upon maturity. The remaining indebtedness of approximately $23,407,000 ranges from interest only to an amortization period of 30 years with maturity dates ranging from December 1996 to November 1997, during which time $23,308,000 of balloon payments are due. The Managing General Partner is currently negotiating the refinancing of this indebtedness, however, there are no certainties that the refinancing will be successful. Future cash distributions will depend on the levels of net cash generated from operations, refinancings, property sale and the availability of cash reserves. PART II - OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS AMIT, a real estate investment trust, made a loan to the Joint Venture in September 1991 in the amount of $1,280,000, secured by the Joint Venture's real property known as Princeton Meadows Golf Course. The Partnership believed that the loan was a non-recourse obligation. AMIT asserted that this loan was recourse by virtue of an amendment purportedly entered into as of November 1, 1992, but which the Partnership has been informed and believes was actually executed in December 1992 ("Note Modification"). The Partnership has been further informed and believes that the amendment was executed at the direction of Angeles Corporation ("Angeles") by an individual in his purported capacity as an officer of the Managing General Partner of the Partnership and the Joint Venture at a time when such person was not in fact an officer of such entities. Accordingly, the Partnership and the Joint Venture filed Proofs of Claim in the Angeles bankruptcy proceeding with respect to the purported amendment. Additionally, the Partnership and the Joint Venture filed a Proof of Claim in the Angeles Funding Corporation and Angeles Real Estate Corporation bankruptcy proceedings on similar grounds. Both Angeles Funding Corporation and Angeles Real Estate Corporation are affiliates of Angeles. In addition, Angeles has agreed to cooperate with the Partnership and the Joint Venture in any action commenced by or against them by AMIT asserting that the $1,280,000 obligation owed to AMIT is recourse to the Partnership. Angeles further agreed to waive the attorney-client privilege with respect to any information relating to the Note Modification. Accordingly, the Partnership and the Joint Venture withdrew their Proofs of Claim on August 9, 1995. MAE GP, an affiliate of the Managing General Partner, owns 1,675,113 Class B Shares of AMIT. MAE GP has the option to convert these Class B Shares, in whole or in part, into Class A Shares on the basis of 1 Class A Share for every 49 Class B Shares. These Class B Shares entitle MAE GP to receive 1.2% of the distributions of net cash distributed to AMIT. These Class B Shares also entitle MAE GP to vote on the same basis as Class A Shares which allows MAE GP to vote approximately 37% of the total shares (unless and until converted to Class A Shares at which time the percentage of the vote controlled represented by the shares held by MAE GP would approximate 1.2% of the vote). Between the date of acquisition of these shares (November 24, 1992) and March 31, 1995, MAE GP declined to vote these shares. Since that date, MAE GP voted its shares at the 1995 annual meeting in connection with the election of trustees and other matters. MAE GP has not exerted, and continues to decline to exert, any management control over or participate in the management of AMIT. MAE GP may choose to vote these shares in the future. In addition, LAC, an affiliate of the Managing General Partner and an affiliate of Insignia Financial Group, Inc., which provides property management and partnership administration services to the Partnership, currently owns 87,700 Class A Shares of AMIT. These Class A Shares entitle LAC to vote approximately 2% of the total shares. The number of Class A Shares of AMIT owned by LAC increased from 63,200 shares on September 30, 1996, to 87,700 shares as of October 22, 1996. The voting percentage also increased from 1.5% to 2% over the same period. As part of a settlement of certain disputes with AMIT, MAE GP granted to AMIT an option to acquire the Class B Shares. This option can be exercised at the end of 10 years or when all loans made by AMIT to partnerships affiliated with MAE GP as of November 9, 1994, (which is the date of execution of a definitive Settlement Agreement) have been paid in full, but in no event prior to November 9, 1997. AMIT delivered to MAE GP cash in the sum of $250,000 at closing, which occurred April 14, 1995, as payment for the option. Upon exercise of the option, AMIT would remit to MAE GP an additional $94,000. Simultaneously with the execution of the option, MAE GP executed an irrevocable proxy in favor of AMIT the result of which is MAE GP will be able to vote the Class B Shares on all matters except those involving transactions between AMIT and MAE GP affiliated borrowers or the election of any MAE GP affiliate as an officer or trustee of AMIT. On those matters, MAE GP granted to the AMIT trustees, in their capacity as trustees of AMIT, proxies with regard to the Class B Shares instructing such trustees to vote said Class B Shares in accordance with the vote of the majority of the Class A Shares voting to be determined without consideration of the votes of "Excess Class A Shares" as defined in Section 6.13 of the Declaration of Trust of AMIT. The Registrant is unaware of any other pending or outstanding litigation that is not of a routine nature. The Managing General Partner of the Registrant believes that all such pending or outstanding litigation will be resolved without a material adverse effect upon the business, financial condition, or operations of the Partnership. 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 September 30, 1996. SIGNATURES In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. ANGELES PARTNERS XI By: Angeles Realty Corporation II Managing General Partner By: /s/Carroll D. Vinson Carroll D. Vinson President By: /s/Robert D. Long, Jr. Robert D. Long, Jr. Vice President/CAO Date: November 12, 1996 EX-27 2
5 This schedule contains summary financial information extracted from Angeles Partners XI 1996 Third Quarter 10-QSB and is qualified in its entirety by reference to such 10-QSB filing. 0000702986 ANGELES PARTNERS XI 1,000 9-MOS DEC-31-1996 SEP-30-1996 959 0 190 0 0 0 28,860 15,414 15,776 0 30,426 0 0 0 (17,778) 15,776 0 5,221 0 0 6,580 0 2,826 0 0 0 0 0 0 (1,213) (30.14) 0 Registrant has an unclassified balance sheet. Multiplier is 1.
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