-----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, EXi2fDvGp0ozo4vmeinXnaodkv3+K2UdV5MPymQpLdAZTI7NDM32lKCJ9gMef/Vi eKxblVAgOyub0f7z0/dZ6A== 0000711642-04-000391.txt : 20041115 0000711642-04-000391.hdr.sgml : 20041115 20041112184528 ACCESSION NUMBER: 0000711642-04-000391 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20040930 FILED AS OF DATE: 20041115 DATE AS OF CHANGE: 20041112 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ANGELES INCOME PROPERTIES LTD II CENTRAL INDEX KEY: 0000711642 STANDARD INDUSTRIAL CLASSIFICATION: REAL ESTATE [6500] IRS NUMBER: 953793526 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10QSB SEC ACT: 1934 Act SEC FILE NUMBER: 000-11767 FILM NUMBER: 041141154 BUSINESS ADDRESS: STREET 1: 1873 SOUTH BELLAIRE STREET 17TH FLOOR CITY: DENVER STATE: CO ZIP: 80222 BUSINESS PHONE: 3037578101 MAIL ADDRESS: STREET 1: 1873 SOUTH BELLAIRE STREET 17TH FLOOR CITY: DENVER STATE: CO ZIP: 80222 10QSB 1 aipl2.txt AIPL2 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 Form 10-QSB (Mark One) [X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 2004 [ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT For the transition period from _________to _________ Commission file number 0-11767 ANGELES INCOME PROPERTIES, LTD. II (Exact Name of Small Business Issuer as Specified in Its Charter) California 95-3793526 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 55 Beattie Place, PO Box 1089 Greenville, South Carolina 29602 (Address of principal executive offices) (864) 239-1000 (Issuer's telephone number) 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 ANGELES INCOME PROPERTIES, LTD. II CONSOLIDATED BALANCE SHEET (Unaudited) (in thousands, except unit data) September 30, 2004
Assets Cash and cash equivalents $ 515 Receivables and deposits 382 Restricted escrow 27 Other assets 572 Investment properties: Land $ 1,691 Buildings and related personal property 26,292 27,983 Less accumulated depreciation (22,618) 5,365 $ 6,861 Liabilities and Partners' Deficit Liabilities Accounts payable $ 400 Tenant security deposit liabilities 181 Accrued property taxes 109 Other liabilities 195 Due to affiliates (Note B) 42 Mortgage notes payable 18,640 Partners' Deficit General partners $ (565) Limited partners (99,804 units issued and outstanding) (12,141) (12,706) $ 6,861 See Accompanying Notes to Consolidated Financial Statements
ANGELES INCOME PROPERTIES, LTD. II CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) (in thousands, except per unit data)
Three Months Ended Nine Months Ended September 30, September 30, 2004 2003 2004 2003 (Restated) (Restated) Revenues: Rental income $ 1,122 $ 1,221 $ 3,385 $ 3,534 Other income 122 115 291 295 Total revenues 1,244 1,336 3,676 3,829 Expenses: Operating 543 454 1,465 1,311 General and administrative 48 88 171 267 Depreciation 187 170 558 898 Interest 370 366 1,104 1,108 Property taxes 163 141 440 410 Total expenses 1,311 1,219 3,738 3,994 (Loss) income from continuing operations (67) 117 (62) (165) Income (loss) from discontinued operations -- 213 (116) 182 Gain from sale of discontinued operations -- -- 9,652 -- Net (loss) income $ (67) $ 330 $ 9,474 $ 17 Net (loss) income allocated to general partners (1%) $ (1) $ 3 $ 95 $ -- Net (loss) income allocated to limited partners (99%) (66) 327 9,379 17 $ (67) $ 330 $ 9,474 $ 17 Per limited partnership unit: (Loss) income from continuing operations $ (0.66) $ 1.16 $ (0.62) $ (1.63) Income (loss) from discontinued operations -- 2.12 (1.15) 1.80 Gain from sale of discontinued operations -- -- 95.74 -- Net (loss) income $ (0.66) $ 3.28 $ 93.97 $ 0.17 Distributions per limited partnership unit $ -- $ 3.85 $ 41.73 $ 18.15 See Accompanying Notes to Consolidated Financial Statements
ANGELES INCOME PROPERTIES, LTD. II CONSOLIDATED STATEMENT OF CHANGES IN PARTNERS' DEFICIT (Unaudited) (in thousands, except unit data)
Limited Partnership General Limited Units Partners Partners Total Original capital contributions 100,000 $ 1 $ 50,000 $ 50,001 Partners' deficit at December 31, 2003 99,804 $ (618) $(17,355) $(17,973) Distributions to partners -- (42) (4,165) (4,207) Net income for the nine months ended September 30, 2004 -- 95 9,379 9,474 Partners' deficit at September 30, 2004 99,804 $ (565) $(12,141) $(12,706) See Accompanying Notes to Consolidated Financial Statements
ANGELES INCOME PROPERTIES, LTD. II CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (in thousands)
Nine Months Ended September 30, 2004 2003 Cash flows from operating activities: Net income $ 9,474 $ 17 Adjustments to reconcile net income to net cash provided by operating activities: Gain from sale of discontinued operations (9,652) -- Depreciation 582 1,162 Amortization of mortgage discounts and loan costs 61 56 Loss on early extinguishment of debt 159 58 Change in accounts: Receivables and deposits 50 (116) Other assets (155) (56) Accounts payable 70 (53) Tenant security deposit liabilities (64) 13 Accrued property taxes (64) 70 Due to affiliates (222) 14 Other liabilities (205) (13) Net cash provided by operating activities 34 1,152 Cash flows from investing activities: Proceeds from sale of investment property 10,769 -- Property improvements and replacements (448) (313) Net withdrawals from restricted escrows 6 134 Net cash provided by (used in) investing activities 10,327 (179) Cash flows from financing activities: Payments on mortgage notes payable (393) (412) Distributions to partners (4,207) (1,829) Proceeds from mortgage note payable -- 6,175 Repayment of mortgage notes payable (6,062) (5,017) Advance from affiliate 42 -- Loan costs paid (19) (174) Prepayment penalty paid -- (28) Net cash used in financing activities (10,639) (1,285) Net decrease in cash and cash equivalents (278) (312) Cash and cash equivalents at beginning of period 793 669 Cash and cash equivalents at end of period $ 515 $ 357 Supplemental disclosure of cash flow information: Cash paid for interest $ 1,074 $ 1,296 Supplemental disclosure of non-cash activity: Property improvements and replacements included in accounts payable $ 261 $ -- See Accompanying Notes to Consolidated Financial Statements
ANGELES INCOME PROPERTIES, LTD. II NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) Note A - Basis of Presentation The accompanying unaudited consolidated financial statements of Angeles Income Properties, Ltd. II (the "Partnership" or "Registrant") have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-QSB and Item 310(b) of Regulation S-B. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of Angeles Realty Corporation II (the "Managing General Partner"), which is wholly-owned by Apartment Investment and Management Company ("AIMCO"), a publicly traded real estate investment trust, 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, 2004 are not necessarily indicative of the results that may be expected for the fiscal year ending December 31, 2004. For further information, refer to the consolidated financial statements and footnotes thereto included in the Partnership's Annual Report on Form 10-KSB for the fiscal year ended December 31, 2003. The accompanying consolidated statements of operations for the three and nine months ended September 30, 2003 have been restated as of January 1, 2003 to reflect the operations of Georgetown Apartments as income (loss) from discontinued operations in accordance with Statement of Financial Accounting Standards ("SFAS") No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets". Georgetown Apartments was sold to a third party on March 2, 2004. 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 reimbursement of certain expenses incurred by affiliates on behalf of the Partnership. Affiliates of the Managing General Partner are entitled to receive 5% of gross receipts from all of the Partnership's properties as compensation for providing property management services. The Partnership paid to such affiliates approximately $198,000 and $247,000 for the nine months ended September 30, 2004 and 2003, respectively, which are included in operating expenses and income (loss) from discontinued operations. Affiliates of the Managing General Partner received reimbursement of accountable administrative expenses amounting to approximately $136,000 and $127,000 for the nine months ended September 30, 2004 and 2003, respectively, which are included in general and administrative expenses and investment properties. Included in these amounts are fees related to construction management services provided by an affiliate of the Managing General Partner of approximately $13,000 for each of the nine months ended September 30, 2004 and 2003. The construction management service fees are calculated based on a percentage of current additions to investment properties. The Partnership Agreement provides for a fee equal to 10% of "Net cash flow from operations," as defined in the Partnership Agreement to be paid to the Managing General Partner for executive and administrative management services. Fees of approximately $39,000 were earned by the Managing General Partner for the nine months ended September 30, 2003, which is included in general and administrative expenses. There were no such fees earned by the Managing General Partner for the nine months ended September 30, 2004. Pursuant to the Partnership Agreement, the Managing General Partner is entitled to receive a distribution equal to 3% of the aggregate disposition price of sold properties. The Partnership paid a distribution of approximately $86,000 to the Managing General Partner related to the sale of Atlanta Crossing Shopping Center in March 2000. This amount is subordinate to the limited partners receiving their original capital contributions plus a cumulative preferred return of 6% per annum of their adjusted capital investment, as defined in the Partnership Agreement. If the limited partners have not received these returns when the Partnership terminates, the Managing General Partner will be required to return this amount to the Partnership. No such distribution was paid to the Managing General Partner related to the March 2004 sale of Georgetown Apartments. The Partnership paid an affiliate of the Managing General Partner approximately $62,000 for loan costs related to the refinancing of the mortgages encumbering Georgetown Apartments during the nine months ended September 30, 2003. These costs were capitalized and the unamortized balance is included in loss from discontinued operations for the nine months ended September 30, 2004, as a result of the property's sale in March 2004. In accordance with the Partnership Agreement, during the nine months ended September 30, 2004, an affiliate of the Managing General Partner advanced the Partnership approximately $42,000 to fund costs related to the upcoming refinancing of the mortgage encumbering Landmark Apartments. This advance bears interest at the prime rate plus 2% (6.75% at September 30, 2004). Interest expense was less than $1,000 for the nine months ended September 30, 2004. At September 30, 2004, the total outstanding advances and accrued interest was approximately $42,000 and is included in due to affiliates. There were no such advances made by affiliates of the Managing General Partner to the Partnership during the nine months ended September 30, 2003. 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 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 nine months ended September 30, 2004 and 2003, the Partnership was charged by AIMCO and its affiliates approximately $64,000 and $62,000, respectively, for insurance coverage and fees associated with policy claims administration. Note C - Disposition of Investment Property On March 2, 2004, the Partnership sold Georgetown Apartments to a third party for a gross sale price of approximately $10,950,000. The net proceeds realized by the Partnership were approximately $10,769,000 after payment of closing costs and a prepayment penalty owed by the Partnership and paid by the buyer. The Partnership used approximately $6,062,000 of the net proceeds to repay the mortgage encumbering the property. The Partnership realized a gain of approximately $9,652,000 as a result of the sale during the nine months ended September 30, 2004, which is included in gain from sale of discontinued operations. In addition, the Partnership recorded a loss on the early extinguishment of debt of approximately $159,000 as a result of the write-off of unamortized loan costs and a prepayment penalty, which is included in loss from discontinued operations. The property's operations, loss of approximately $116,000 for the nine months ended September 30, 2004 and income of approximately $213,000 and $182,000 for the three and nine months ended September 30, 2003, respectively, are included in income (loss) from discontinued operations. Included in income (loss) from discontinued operations are revenues of approximately $234,000 for the nine months ended September 30, 2004 and revenues of approximately $399,000 and $1,177,000 for the three and nine months ended September 30, 2003, respectively. Note D - Refinancing of Mortgage Notes Payable On May 21, 2003, the Partnership refinanced the mortgages encumbering Georgetown Apartments. The refinancing replaced the existing mortgages of approximately $5,017,000 with a new mortgage in the amount of $6,175,000. Total capitalized loan costs were approximately $174,000 during the nine months ended September 30, 2003. These costs included approximately $62,000 in fees paid to the Managing General Partner. The Partnership recognized a loss on the early extinguishment of debt of approximately $58,000 during the nine months ended September 30, 2003, due to the write off of unamortized loan costs and debt discounts and the payment of a prepayment penalty, which is included in income (loss) from discontinued operations. Note E - Contingencies In March 1998, several putative unit holders of limited partnership units of the Partnership commenced an action entitled Rosalie Nuanes, et al. v. Insignia Financial Group, Inc., et al. (the "Nuanes action") in the Superior Court of the State of California for the County of San Mateo. The plaintiffs named as defendants, among others, the Partnership, its Managing General Partner and several of their affiliated partnerships and corporate entities. The action purported to assert claims on behalf of a class of limited partners and derivatively on behalf of a number of limited partnerships (including the Partnership) that are named as nominal defendants, challenging, among other things, the acquisition of interests in certain Managing General Partner entities by Insignia Financial Group, Inc. ("Insignia") and entities that were, at one time, affiliates of Insignia; past tender offers by the Insignia affiliates to acquire limited partnership units; management of the partnerships by the Insignia affiliates; and the series of transactions which closed on October 1, 1998 and February 26, 1999 whereby Insignia and Insignia Properties Trust, respectively, were merged into AIMCO. The plaintiffs sought monetary damages and equitable relief, including judicial dissolution of the Partnership. In addition, during the third quarter of 2001, a complaint captioned Heller v. Insignia Financial Group (the "Heller action") was filed against the same defendants that are named in the Nuanes action. On or about August 6, 2001, plaintiffs filed a first amended complaint. The Heller action was brought as a purported derivative action, and asserted claims for, among other things, breach of fiduciary duty, unfair competition, conversion, unjust enrichment, and judicial dissolution. On January 8, 2003, the parties filed a Stipulation of Settlement in proposed settlement of the Nuanes action and the Heller action. In general terms, the proposed settlement provides for certification for settlement purposes of a settlement class consisting of all limited partners in this Partnership and others (the "Partnerships") as of December 20, 2002, the dismissal with prejudice and release of claims in the Nuanes and Heller litigation, payment by AIMCO of $9.9 million (which shall be distributed to settlement class members after deduction of attorney fees and costs of class counsel and certain costs of settlement) and up to $1 million toward the cost of independent appraisals of the Partnerships' properties by a court appointed appraiser. An affiliate of the Managing General Partner has also agreed to make at least one round of tender offers to purchase all of the partnership interests in the Partnerships within one year of final approval, if it is granted, and to provide partners with the independent appraisals at the time of these tenders. The proposed settlement also provided for the limitation of the allowable costs which the Managing General Partner or its affiliates will charge the Partnerships in connection with this litigation and imposes limits on the class counsel fees and costs in this litigation. On April 11, 2003, notice was distributed to limited partners providing the details of the proposed settlement. On June 13, 2003, the court granted final approval of the settlement and entered judgment in both the Nuanes and Heller actions. On August 12, 2003, an objector ("Objector") filed an appeal (the "Appeal") seeking to vacate and/or reverse the order approving the settlement and entering judgment thereto. On November 24, 2003, the Objector filed an application requesting the court order AIMCO to withdraw settlement tender offers it had commenced, refrain from making further offers pending the appeal and auction any units tendered to third parties, contending that the offers did not conform with the terms of the settlement. Counsel for the Objector (on behalf of another investor) had alternatively requested the court take certain action purportedly to enforce the terms of the settlement agreement. On December 18, 2003, the court heard oral argument on the motions and denied them both in their entirety. The Objector filed a second appeal challenging the court's use of a referee and its order requiring Objector to pay those fees. On January 28, 2004, the Objector filed his opening brief in the Appeal. On April 23, 2004, the Managing General Partner and its affiliates filed a response brief in support of the settlement and the judgment thereto. The plaintiffs have also filed a brief in support of the settlement. On June 4, 2004, Objector filed a reply to the briefs submitted by the Managing General Partner and Plaintiffs. In addition both the Objector and plaintiffs filed briefs in connection with the second appeal. The Court of Appeals heard oral argument on both appeals on September 22, 2004 and took the matters under submission. The Managing General Partner does not anticipate that any costs to the Partnership, whether legal or settlement costs, associated with these cases will be material to the Partnership's overall operations. On August 8, 2003 AIMCO Properties L.P., an affiliate of the Managing General Partner, was served with a complaint in the United States District Court, District of Columbia alleging that AIMCO Properties L.P. willfully violated the Fair Labor Standards Act ("FLSA") by failing to pay maintenance workers overtime for all hours worked in excess of forty per week. On March 5, 2004 the plaintiffs filed an amended complaint also naming NHP Management Company, which is also an affiliate of the Managing General Partner. The complaint is styled as a Collective Action under the FLSA and seeks to certify state subclasses in California, Maryland, and the District of Columbia. Specifically, the plaintiffs contend that AIMCO Properties L.P. failed to compensate maintenance workers for time that they were required to be "on-call". Additionally, the complaint alleges AIMCO Properties L.P. failed to comply with the FLSA in compensating maintenance workers for time that they worked in responding to a call while "on-call". The defendants have filed an answer to the amended complaint denying the substantive allegations. Some discovery has taken place and settlement negotiations continue. Although the outcome of any litigation is uncertain, AIMCO Properties, L.P. does not believe that the ultimate outcome will have a material adverse effect on its financial condition or results of operations. Similarly, the Managing General Partner does not believe that the ultimate outcome will have a material adverse effect on the Partnership's consolidated financial condition or results of operations. The Partnership is unaware of any other pending or outstanding litigation matters involving it or its investment properties that are not of a routine nature arising in the ordinary course of business. As previously disclosed, the Central Regional Office of the United States Securities and Exchange Commission (the "SEC") is conducting a formal investigation relating to certain matters. Although the staff of the SEC is not limited in the areas that it may investigate, AIMCO believes the areas of investigation include AIMCO's miscalculated monthly net rental income figures in third quarter 2003, forecasted guidance, accounts payable, rent concessions, vendor rebates, capitalization of payroll and certain other costs, and tax credit transactions. AIMCO is cooperating fully. AIMCO is not able to predict when the matter will be resolved. AIMCO does not believe that the ultimate outcome will have a material adverse effect on its consolidated financial condition or results of operations. Similarly, the Managing General Partner does not believe that the ultimate outcome will have a material adverse effect on the Partnership's consolidated financial condition or results of operations. Note F - Subsequent Event On November 1, 2004, the Registrant obtained a mortgage in the principal amount of $7,000,000 on one of its investment properties, Landmark Apartments, located in Raleigh, North Carolina. The existing mortgage with an outstanding principal amount of approximately $5,950,000 matured on November 1, 2004 and was repaid with proceeds from the new mortgage. The new mortgage requires monthly payments of interest beginning on December 1, 2004 until the loan matures November 1, 2006, with interest being equal to the average of the one month LIBOR plus 235 basis points (minimum rate of 4.3662%). In conjunction with the mortgage note, the Partnership paid approximately $13,000 to enter into an interest rate cap agreement, which limits the Partnership's exposure to interest rate increase. Under this interest rate cap agreement, the Partnership's interest rate on the amounts owed to GMAC Commercial Mortgage will be no higher than 5.5%. Adjustments to the initial amount paid are recognized in interest expense. In addition, the new mortgage requires monthly escrow deposits for taxes, insurance and replacement reserves and a $500,000 repair reserve that was established with the lender at closing. As a condition of making the new mortgage, the lender required AIMCO Properties, L.P., an affiliate of the Registrant, to guarantee the obligations and liabilities of the Registrant with respect to the new mortgage. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION The matters discussed in this report contain certain forward-looking statements, including, without limitation, statements regarding future financial performance and the effect of government regulations. Actual results may differ materially from those described in the forward-looking statements and will be affected by a variety of risks and factors including, without limitation: national and local economic conditions; the terms of governmental regulations that affect the Registrant and interpretations of those regulations; the competitive environment in which the Registrant operates; financing risks, including the risk that cash flows from operations may be insufficient to meet required payments of principal and interest; real estate risks, including variations of real estate values and the general economic climate in local markets and competition for tenants in such markets; litigation, including costs associated with prosecuting and defending claims and any adverse outcomes, and possible environmental liabilities. Readers should carefully review the Registrant's financial statements and the notes thereto, as well as the risk factors described in the documents the Registrant files from time to time with the Securities and Exchange Commission. The Partnership's investment properties consist of two apartment complexes. The following table sets forth the average occupancy of the properties for the nine months ended September 30, 2004 and 2003: Average Occupancy Property 2004 2003 Deer Creek Apartments 93% 95% Plainsboro, New Jersey Landmark Apartments 81% 86% Raleigh, North Carolina The Managing General Partner attributes the decrease in occupancy at Landmark Apartments to increased competition in the Raleigh area. The Partnership's financial results depend upon a number of factors including the ability to attract and maintain tenants at the investment properties, interest rates on mortgage loans, costs incurred to operate the investment properties, 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 properties to assess the feasibility of increasing rents, maintaining or increasing occupancy levels and protecting the Partnership from increases in expenses. As part of this plan, the Managing General Partner attempts to protect the Partnership from the burden of inflation-related increases in expenses by increasing rents and maintaining a high overall occupancy level. However, 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 a net loss of approximately $67,000 for the three months ended September 30, 2004 and net income of approximately $9,474,000 for the nine months ended September 30, 2004, as compared to net income of approximately $330,000 and $17,000 for the three and nine months ended September 30, 2003, respectively. On March 2, 2004, the Partnership sold Georgetown Apartments to a third party for a gross sale price of approximately $10,950,000. The net proceeds realized by the Partnership were approximately $10,769,000 after payment of closing costs and a prepayment penalty owed by the Partnership and paid by the buyer. The Partnership used approximately $6,062,000 of the net proceeds to repay the mortgage encumbering the property. The Partnership realized a gain of approximately $9,652,000 as a result of the sale during the nine months ended September 30, 2004, which is included in gain from sale of discontinued operations. In addition, the Partnership recorded a loss on early extinguishment of debt of approximately $159,000 as a result of the write-off of unamortized loan costs and a prepayment penalty, which is included in loss from discontinued operations. The property's operations, loss of approximately $116,000 for the nine months ended September 30, 2004 and income of approximately $213,000 and $182,000 for the three and nine months ended September 30, 2003, respectively, are included in income (loss) from discontinued operations. Included in income (loss) from discontinued operations are revenues of approximately $234,000 for the nine months ended September 30, 2004 and revenues of approximately $399,000 and $1,177,000 for the three and nine months ended September 30, 2003, respectively. The Partnership's loss from continuing operations for the three and nine months ended September 30, 2004 was approximately $67,000 and $62,000, compared to income from continuing operations of approximately $117,000 for the three months ended September 30, 2003 and loss from continuing operations of approximately $165,000 for the nine months ended September 30, 2003. The decrease in income from continuing operations for the three months ended September 30, 2004 is due to a decrease in total revenues and an increase in total expenses. The decrease in loss from continuing operations for the nine months ended September 30, 2004 is due to a decrease in total expenses, partially offset by a decrease in total revenues. The decrease in total revenues for the three months ended September 30, 2004 is due to a decrease in rental income, partially offset by an increase in other income. The decrease in total revenues for the nine months ended September 30, 2004 is due to a decrease in rental income. Other income remained relatively constant for the nine months ended September 30, 2004. The decrease in rental income for both the three and nine months ended September 30, 2004 is due to decreases in occupancy at both of the Partnership's investment properties and the average rental rate at Landmark Apartments, partially offset by an increase in the average rental rate at Deer Creek Apartments. The increase in other income for the three months ended September 30, 2004 is primarily due to an increase in lease cancellation fees at Landmark Apartments. The increase in total expenses for the three months ended September 30, 2004 is due to increases in operating, depreciation, and property tax expenses, partially offset by a decrease in general and administrative expenses. The decrease in total expenses for the nine months ended September 30, 2004 is due to decreases in both general and administrative and depreciation expenses, partially offset by increases in both operating and property tax expenses. Interest expense remained relatively constant for both the three and nine months ended September 30, 2004. The increase in operating expenses for both the three and nine months ended September 30, 2004 is primarily due to increases in utility, payroll, contract maintenance, and advertising expenses at Deer Creek Apartments, partially offset by a decrease in snow removal expense at Deer Creek Apartments. The increase in depreciation expense for the three months ended September 30, 2004 is due to property improvements and replacements placed into service at both of the Partnership's investment properties during the past twelve months. The decrease in depreciation expense for the nine months ended September 30, 2004 is due to buildings and property improvements and replacements placed in service in prior years becoming fully depreciated during the second and third quarters of 2003, partially offset by property improvements and replacements placed into service at both of the Partnership's investment properties during the past twelve months. The increase in property tax expense for both the three and nine months ended September 30, 2004 is due to an increase in the tax rate at Deer Creek Apartments. The decrease in general and administrative expense for both the three and nine months ended September 30, 2004 is due to decreases in New Jersey partnership tax expense, the Partnership management fee payable from net cash flow from operations as defined in the Partnership Agreement, and professional expenses associated with the administration of the Partnership, partially offset by an increase in the cost of services included in the management reimbursements to the Managing General Partner as allowed under the Partnership Agreement. Also included in general and administrative expenses for the three and nine months ended September 30, 2004 and 2003 are costs associated with the quarterly and annual communications with investors and regulatory agencies and the annual audit required by the Partnership Agreement. Liquidity and Capital Resources At September 30, 2004, the Partnership had cash and cash equivalents of approximately $515,000, compared to approximately $357,000 at September 30, 2003. The decrease in cash and cash equivalents of approximately $278,000, from December 31, 2003, is due to approximately $10,639,000 of cash used in financing activities, partially offset by approximately $10,327,000 of cash provided by investing activities and approximately $34,000 of cash provided by operating activities. Cash used in financing activities consisted of repayment of the mortgage encumbering Georgetown Apartments, distributions to partners, payments of principal made on the mortgages encumbering the Partnership's investment properties and loan costs paid related to the extension obtained on the mortgage encumbering Landmark Apartments, partially offset by an advance from an affiliate of the Managing General Partner. Cash provided by investing activities consisted of proceeds received from the sale of Georgetown Apartments and net receipts from an escrow account maintained by the mortgage lender, partially offset by property improvements and replacements. The Partnership invests its working capital reserves in interest bearing accounts. The sufficiency of existing liquid assets to meet future liquidity and capital expenditure requirements is directly related to the level of capital expenditures required at the properties to adequately maintain the physical assets and other operating needs of the Partnership and to comply with Federal, state, and local legal and regulatory requirements. The Managing General Partner monitors developments in the area of legal and regulatory compliance. For example, the Sarbanes-Oxley Act of 2002 mandates or suggests additional compliance measures with regard to governance, disclosure, audit and other areas. In light of these changes, the Partnership expects that it will incur higher expenses related to compliance. Capital improvements planned for each of the Partnership's properties are detailed below. Georgetown Apartments During the nine months ended September 30, 2004, the Partnership completed approximately $9,000 of capital improvements at Georgetown Apartments, consisting primarily of floor covering replacement. These improvements were funded from operating cash flow. The Partnership sold Georgetown Apartments to a third party on March 2, 2004. Deer Creek Apartments During the nine months ended September 30, 2004, the Partnership completed approximately $216,000 of capital improvements at Deer Creek Apartments, consisting primarily of structural improvements, interior building improvements, water heater upgrades, and floor covering replacement. These improvements were funded from operating cash flow. The Partnership evaluates the capital improvement needs of the property during the year and currently expects that only necessary improvements will be made during the remainder of 2004 in order to maintain occupancy at the property. Additional capital improvements may be considered and will depend on the physical condition of the property as well as the anticipated cash flow generated by the property. Landmark Apartments During the nine months ended September 30, 2004, the Partnership completed approximately $484,000 of capital improvements at Landmark Apartments, consisting primarily of a repair project to address water infiltration issues with 15 units. Based upon current plans, the Managing General Partner anticipates the project to be complete in November 2004 at a total cost of approximately $400,000. Other improvements consisted primarily of major landscaping, interior building improvements, and floor covering replacement. These improvements were funded from replacement reserves and operating cash flow. The Partnership is currently evaluating the capital improvement needs of the property for 2004 and expects to complete an additional $37,000 in capital improvements not related to the water infiltration project and approximately $48,000 for property redevelopment as mentioned above during the remainder of 2004. Additional capital improvements may be considered and will depend on the physical condition of the property as well as the anticipated cash flow generated by the property and replacement reserves. The additional capital expenditures will be incurred only if cash is available from operations or from Partnership reserves. To the extent that such budgeted capital improvements are completed, the Partnership's distributable cash flow, if any, may be adversely affected at least in the short term. The Partnership's assets are thought to be sufficient for any near-term needs (exclusive of capital improvements) of the Partnership. The mortgage indebtedness encumbering Deer Creek Apartments of approximately $12,681,000 is amortized over 20 years and matures on July 1, 2021, at which time the loan is scheduled to be fully amortized. The mortgage indebtedness encumbering Landmark Apartments of approximately $5,959,000 is amortized over a period of 30 years with a balloon payment of approximately $5,950,000 due November 1, 2004. The mortgage encumbering Landmark Apartments matured November 1, 2003. However, the Managing General Partner negotiated a one year extension, which extended the maturity of the loan to November 1, 2004, with a one-time right to extend to February 1, 2005. The extension required the Partnership to continue making monthly payments of principal and interest under the terms of the original mortgage. On November 1, 2004, the Registrant obtained a mortgage in the principal amount of $7,000,000 on one of its investment properties, Landmark Apartments, located in Raleigh, North Carolina. The existing mortgage with an outstanding principal amount of approximately $5,950,000 matured on November 1, 2004 and was repaid with proceeds from the new mortgage. The new mortgage requires monthly payments of interest beginning on December 1, 2004 until the loan matures November 1, 2006, with interest being equal to the average of the one month LIBOR plus 235 basis points (minimum rate of 4.3662%). In conjunction with the mortgage note, the Partnership paid approximately $13,000 to enter into an interest rate cap agreement, which limits the Partnership's exposure to interest rate increase. Under this interest rate cap agreement, the Partnership's interest rate on the amounts owed to GMAC Commercial Mortgage will be no higher than 5.5%. Adjustments to the initial amount paid are recognized in interest expense. In addition, the new mortgage requires monthly escrow deposits for taxes, insurance and replacement reserves and a $500,000 repair reserve that was established with the lender at closing. As a condition of making the new mortgage, the lender required AIMCO Properties, L.P., an affiliate of the Registrant, to guarantee the obligations and liabilities of the Registrant with respect to the new mortgage. The Managing General Partner will attempt to refinance the mortgage encumbering Landmark Apartments and/or sell the property prior to such maturity date. If the property cannot be refinanced or sold for a sufficient amount, the Partnership will risk losing such property through foreclosure. The Partnership distributed the following amounts during the nine months ended September 30, 2004 and 2003 (in thousands, except per unit data):
Nine Months Ended Per Limited Nine Months Ended Per Limited September 30, Partnership September 30, Partnership 2004 Unit 2003 Unit Sale (1) $3,927 $38.96 $ -- $ -- Refinance (2) -- -- 1,032 10.24 Operations 280 2.77 797 7.91 Total $4,207 $41.73 $1,829 $18.15
(1) From proceeds from the sale of Georgetown Apartments. (2) From proceeds from the refinancing of the mortgages encumbering Georgetown Apartments during May 2003. Future cash distributions will depend on the levels of net cash generated from operations, the availability of cash reserves and the timing of debt maturities, refinancings, and/or property sales. 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 required capital expenditures to permit additional distributions to its partners during the remainder of 2004 or subsequent periods. Other In addition to its indirect ownership of the general partner interest in the Partnership, AIMCO and its affiliates owned 64,653 limited partnership units (the "Units") in the Partnership representing 64.78% of the outstanding Units at September 30, 2004. 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. In this regard, on November 5, 2004, AIMCO Properties, L.P., commenced a tender offer to acquire 35,151 Units for a purchase price of $118.69 per Unit. Such offer expires on December 7, 2004. Pursuant to the Partnership Agreement, unitholders holding a majority of the Units are entitled to take action with respect to a variety of matters that 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 64.78% of the outstanding Units, AIMCO and its affiliates are in a position to control all such voting decisions with respect to the Partnership. Although the Managing General Partner owes fiduciary duties to the limited partners of the Partnership, the Managing General Partner also owes fiduciary duties to AIMCO as its sole stockholder. As a result, the duties of the Managing General Partner, as managing general partner, to the Partnership and its limited partners may come into conflict with the duties of the Managing General Partner to AIMCO as its sole stockholder. Critical Accounting Policies and Estimates The consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States, which require the Partnership to make estimates and assumptions. The Partnership believes that of its significant accounting policies, the following may involve a higher degree of judgment and complexity. Impairment of Long-Lived Assets The Partnership's investment properties are recorded at cost, less accumulated depreciation, unless considered impaired. If events or circumstances indicate that the carrying amount of a property may be impaired, the Partnership will make an assessment of its recoverability by estimating the undiscounted future cash flows, excluding interest charges, of the property. If the carrying amount exceeds the aggregate future cash flows, the Partnership would recognize an impairment loss to the extent the carrying amount exceeds the fair value of the property. Real property investments are subject to varying degrees of risk. Several factors may adversely affect the economic performance and value of the Partnership's investment properties. These factors include, but are not limited to, changes in the national, regional and local economic climate; local conditions, such as an oversupply of multifamily properties; competition from other available multifamily property owners and changes in market rental rates. Any adverse changes in these factors could cause impairment of the Partnership's assets. Revenue Recognition The Partnership generally leases apartment units for twelve-month terms or less. Rental income attributable to leases is recognized monthly as it is earned. 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. The Partnership will offer rental concessions during particularly slow months or in response to heavy competition from other similar complexes in the area. Any concessions given at the inception of the lease are amortized over the life of the lease. ITEM 3. CONTROLS AND PROCEDURES (a) Disclosure Controls and Procedures. The Partnership's management, with the participation of the principal executive officer and principal financial officer of the Managing General Partner, who are the equivalent of the Partnership's principal executive officer and principal financial officer, respectively, has evaluated the effectiveness of the Partnership's disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the "Exchange Act")) as of the end of the period covered by this report. Based on such evaluation, the principal executive officer and principal financial officer of the Managing General Partner, who are the equivalent of the Partnership's principal executive officer and principal financial officer, respectively, have concluded that, as of the end of such period, the Partnership's disclosure controls and procedures are effective. (b) Internal Control Over Financial Reporting. There have not been any changes in the Partnership's internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the fiscal quarter to which this report relates that have materially affected, or are reasonably likely to materially affect, the Partnership's internal control over financial reporting. PART II - OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS In March 1998, several putative unit holders of limited partnership units of the Partnership commenced an action entitled Rosalie Nuanes, et al. v. Insignia Financial Group, Inc., et al. (the "Nuanes action") in the Superior Court of the State of California for the County of San Mateo. The plaintiffs named as defendants, among others, the Partnership, its Managing General Partner and several of their affiliated partnerships and corporate entities. The action purported to assert claims on behalf of a class of limited partners and derivatively on behalf of a number of limited partnerships (including the Partnership) that are named as nominal defendants, challenging, among other things, the acquisition of interests in certain Managing General Partner entities by Insignia Financial Group, Inc. ("Insignia") and entities that were, at one time, affiliates of Insignia; past tender offers by the Insignia affiliates to acquire limited partnership units; management of the partnerships by the Insignia affiliates; and the series of transactions which closed on October 1, 1998 and February 26, 1999 whereby Insignia and Insignia Properties Trust, respectively, were merged into AIMCO. The plaintiffs sought monetary damages and equitable relief, including judicial dissolution of the Partnership. In addition, during the third quarter of 2001, a complaint captioned Heller v. Insignia Financial Group (the "Heller action") was filed against the same defendants that are named in the Nuanes action. On or about August 6, 2001, plaintiffs filed a first amended complaint. The Heller action was brought as a purported derivative action, and asserted claims for, among other things, breach of fiduciary duty, unfair competition, conversion, unjust enrichment, and judicial dissolution. On January 8, 2003, the parties filed a Stipulation of Settlement in proposed settlement of the Nuanes action and the Heller action. In general terms, the proposed settlement provides for certification for settlement purposes of a settlement class consisting of all limited partners in this Partnership and others (the "Partnerships") as of December 20, 2002, the dismissal with prejudice and release of claims in the Nuanes and Heller litigation, payment by AIMCO of $9.9 million (which shall be distributed to settlement class members after deduction of attorney fees and costs of class counsel and certain costs of settlement) and up to $1 million toward the cost of independent appraisals of the Partnerships' properties by a court appointed appraiser. An affiliate of the Managing General Partner has also agreed to make at least one round of tender offers to purchase all of the partnership interests in the Partnerships within one year of final approval, if it is granted, and to provide partners with the independent appraisals at the time of these tenders. The proposed settlement also provided for the limitation of the allowable costs which the Managing General Partner or its affiliates will charge the Partnerships in connection with this litigation and imposes limits on the class counsel fees and costs in this litigation. On April 11, 2003, notice was distributed to limited partners providing the details of the proposed settlement. On June 13, 2003, the court granted final approval of the settlement and entered judgment in both the Nuanes and Heller actions. On August 12, 2003, an objector ("Objector") filed an appeal (the "Appeal") seeking to vacate and/or reverse the order approving the settlement and entering judgment thereto. On November 24, 2003, the Objector filed an application requesting the court order AIMCO to withdraw settlement tender offers it had commenced, refrain from making further offers pending the appeal and auction any units tendered to third parties, contending that the offers did not conform with the terms of the settlement. Counsel for the Objector (on behalf of another investor) had alternatively requested the court take certain action purportedly to enforce the terms of the settlement agreement. On December 18, 2003, the court heard oral argument on the motions and denied them both in their entirety. The Objector filed a second appeal challenging the court's use of a referee and its order requiring Objector to pay those fees. On January 28, 2004, the Objector filed his opening brief in the Appeal. On April 23, 2004, the Managing General Partner and its affiliates filed a responsebrief in support of the settlement and the judgment thereto. The plaintiffs have also filed a brief in support of the settlement. On June 4, 2004, Objector filed a reply to the briefs submitted by the Managing General Partner and Plaintiffs. In addition both the Objector and plaintiffs filed briefs in connection with the second appeal. The Court of Appeals heard oral argument on both appeals on September 22, 2004 and took the matters under submission. The Managing General Partner does not anticipate that any costs to the Partnership, whether legal or settlement costs, associated with these cases will be material to the Partnership's overall operations. On August 8, 2003 AIMCO Properties L.P., an affiliate of the Managing General Partner, was served with a complaint in the United States District Court, District of Columbia alleging that AIMCO Properties L.P. willfully violated the Fair Labor Standards Act ("FLSA") by failing to pay maintenance workers overtime for all hours worked in excess of forty per week. On March 5, 2004 the plaintiffs filed an amended complaint also naming NHP Management Company, which is also an affiliate of the Managing General Partner. The complaint is styled as a Collective Action under the FLSA and seeks to certify state subclasses in California, Maryland, and the District of Columbia. Specifically, the plaintiffs contend that AIMCO Properties L.P. failed to compensate maintenance workers for time that they were required to be "on-call". Additionally, the complaint alleges AIMCO Properties L.P. failed to comply with the FLSA in compensating maintenance workers for time that they worked in responding to a call while "on-call". The defendants have filed an answer to the amended complaint denying the substantive allegations. Some discovery has taken place and settlement negotiations continue. Although the outcome of any litigation is uncertain, AIMCO Properties, L.P. does not believe that the ultimate outcome will have a material adverse effect on its financial condition or results of operations. Similarly, the Managing General Partner does not believe that the ultimate outcome will have a material adverse effect on the Partnership's consolidated financial condition or results of operations. ITEM 6. EXHIBITS See Exhibit Index. 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 INCOME PROPERTIES, LTD. II By: Angeles Realty Corporation II Managing General Partner By: /s/Martha L. Long Martha L. Long Senior Vice President By: /s/Stephen B. Waters Stephen B. Waters Vice President Date: November 12, 2004 ANGELES INCOME PROPERTIES, LTD. II EXHIBIT INDEX Exhibit Number Description of Exhibit 3.1 Amendment Agreement of Limited Partnership of the Partnership dated October 12, 1982 filed in Form 10K dated November 30, 1983, incorporated herein by reference 3.2 Amended Agreement of Limited Partnership of the Partnership dated March 31, 1983 filed in the Prospectus, of the Partnership, as Exhibit A, dated March 31, 1983 incorporated herein by reference 10.15 Multifamily Note - Landmark Apartments between Angeles Income Properties, Ltd. II and Lehman Brothers Holdings, Inc. d/b/a Lehman Capital, a division of Lehman Brothers Holdings, Inc. dated November 1, 1996 10.19 Multifamily Note dated June 27, 2001, by and between Angeles Income Properties, Ltd. II, a California Limited Partnership, and GMAC Commercial Mortgage Corporation for Deer Creek Apartments, is incorporated by reference to the Quarterly Report on Form 10-QSB for the quarter ended June 30, 2001. 10.21 Purchase and Sale Contract between Georgetown AIP II, L.P. and Freestone Realty Advisors, LLC, dated November 25, 2003, incorporated by reference to the Current Report on Form 8-K dated March 2, 2004. 10.22 First Amendment to Purchase and Sale Contract between Georgetown AIP II, L.P. and Freestone Realty Advisors, LLC, dated January 9, 2004, incorporated by reference to the Current Report on Form 8-K dated March 2, 2004. 10.23 Second Amendment to Purchase and Sale Contract between Georgetown AIP II, L.P. and Freestone Realty Advisors, LLC, dated January 12, 2004, incorporated by reference to the Current Report on Form 8-K dated March 2, 2004. 10.24 Third Amendment to Purchase and Sale Contract between Georgetown AIP II, L.P. and Freestone Realty Advisors, LLC, dated January 13, 2004, incorporated by reference to the Current Report on Form 8-K dated March 2, 2004. 10.25 Reinstatement and Fourth Amendment to Purchase and Sale Contract between Georgetown AIP II, L.P. and Freestone Realty Advisors, LLC, dated January 24, 2004, incorporated by reference to the Current Report on Form 8-K dated March 2, 2004. 10.26 Assignment and Assumption of Contract between Freestone Realty Advisors, LLC, as Assignor and Georgetown Apartment Homes-FRIP, L.L.C., as Assignee, dated February 11, 2004, incorporated by reference to the Current Report on Form 8-K dated March 2, 2004. 10.27 Modification and Extension Agreement by and among Federal Home Loan Mortgage Corporation, Angeles Income Properties, Ltd. II, and Commonwealth Land Title Company of North Carolina for Landmark Apartments is incorporated by reference to the Annual Report on Form 10-KSB for the year ended December 31, 2003. 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 Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. Exhibit 31.1 CERTIFICATION I, Martha L. Long, certify that: 1. I have reviewed this quarterly report on Form 10-QSB of Angeles Income Properties Ltd. II; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the small business issuer as of, and for, the periods presented in this report; 4. The small business issuer's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the small business issuer and have: (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the small business issuer, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; (b) Evaluated the effectiveness of the small business issuer's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and (c) Disclosed in this report any change in the small business issuer's internal control over financial reporting that occurred during the small business issuer's most recent fiscal quarter (the small business issuer's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the small business issuer's internal control over financial reporting; and 5. The small business issuer's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the small business issuer's auditors and the audit committee of the small business issuer's board of directors (or persons performing the equivalent functions): (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the small business issuer's ability to record, process, summarize and report financial information; and (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the small business issuer's internal control over financial reporting. Date: November 12, 2004 /s/Martha L. Long Martha L. Long Senior Vice President of Angeles Realty Corporation II, equivalent of the chief executive officer of the Partnership Exhibit 31.2 CERTIFICATION I, Stephen B. Waters, certify that: 1. I have reviewed this quarterly report on Form 10-QSB of Angeles Income Properties Ltd. II; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the small business issuer as of, and for, the periods presented in this report; 4. The small business issuer's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the small business issuer and have: (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the small business issuer, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; (b) Evaluated the effectiveness of the small business issuer's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and (c) Disclosed in this report any change in the small business issuer's internal control over financial reporting that occurred during the small business issuer's most recent fiscal quarter (the small business issuer's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the small business issuer's internal control over financial reporting; and 5. The small business issuer's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the small business issuer's auditors and the audit committee of the small business issuer's board of directors (or persons performing the equivalent functions): (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the small business issuer's ability to record, process, summarize and report financial information; and (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the small business issuer's internal control over financial reporting. Date: November 12, 2004 /s/Stephen B. Waters Stephen B. Waters Vice President of Angeles Realty Corporation II, equivalent of the chief financial officer of the Partnership Exhibit 32.1 Certification of CEO and CFO Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 In connection with the Quarterly Report on Form 10-QSB of Angeles Income Properties, Ltd. II (the "Partnership"), for the quarterly period ended September 30, 2004 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), Martha L. Long, as the equivalent of the chief executive officer of the Partnership, and Stephen B. Waters, as the equivalent of the chief financial officer of the Partnership, each hereby certifies, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to the best of his knowledge: (1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Partnership. /s/Martha L. Long Name: Martha L. Long Date: November 12, 2004 /s/Stephen B. Waters Name: Stephen B. Waters Date: November 12, 2004 This certification is furnished with this Report pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and shall not be deemed filed by the Partnership for purposes of Section 18 of the Securities Exchange Act of 1934, as amended. -----END PRIVACY-ENHANCED MESSAGE-----