-----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, VC0twHMkaO6Ee5+s41jdoYGIwP4tyeaX8y3rx36pgmOyLCxFFSALLlCrmE4EDkvH xq+JzVoQ5ww3dY3wgnYlRg== 0000711642-05-000636.txt : 20051114 0000711642-05-000636.hdr.sgml : 20051111 20051114141843 ACCESSION NUMBER: 0000711642-05-000636 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20050930 FILED AS OF DATE: 20051114 DATE AS OF CHANGE: 20051114 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: 051199981 BUSINESS ADDRESS: STREET 1: 55 BEATTIE PLACE CITY: GREENVILLE STATE: SC ZIP: 29601 BUSINESS PHONE: 8642391141 MAIL ADDRESS: STREET 1: 55 BEATTIE PLACE CITY: GREENVILLE STATE: SC ZIP: 29601 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, 2005 [ ] 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 ___ Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act) Yes __ No X_ PART I - FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS ANGELES INCOME PROPERTIES, LTD. II CONSOLIDATED BALANCE SHEET (Unaudited) (in thousands, except unit data) September 30, 2005
Assets Cash and cash equivalents $ 547 Receivables and deposits 441 Restricted escrows 517 Other assets 631 Investment properties: Land $ 1,691 Buildings and related personal property 27,613 29,304 Less accumulated depreciation (23,469) 5,835 $ 7,971 Liabilities and Partners' Deficit Liabilities Accounts payable $ 41 Tenant security deposit liabilities 166 Accrued property taxes 113 Other liabilities 263 Mortgage notes payable (Note D) 23,117 Partners' Deficit General partners $ (596) Limited partners (99,804 units issued and outstanding) (15,133) (15,729) $ 7,971 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, 2005 2004 2005 2004 Revenues: Rental income $ 1,237 $ 1,122 $ 3,578 $ 3,385 Other income 126 122 317 291 Total revenues 1,363 1,244 3,895 3,676 Expenses: Operating 520 543 1,625 1,465 General and administrative 63 48 188 171 Depreciation 219 187 647 558 Interest 376 370 1,108 1,104 Property taxes 132 163 394 440 Total expenses 1,310 1,311 3,962 3,738 Income (loss) from continuing operations 53 (67) (67) (62) Loss from discontinued operations -- -- -- (116) Gain from sale of discontinued operations -- -- -- 9,652 Net income (loss) $ 53 $ (67) $ (67) $ 9,474 Net income (loss) allocated to general partners (1%) $ 1 $ (1) $ (1) $ 95 Net income (loss) allocated to limited partners (99%) 52 (66) (66) 9,379 $ 53 $ (67) $ (67) $ 9,474 Per limited partnership unit: Income (loss) from continuing operations $ 0.52 $ (0.66) $ (0.66) $ (0.62) Loss from discontinued operations -- -- -- (1.15) Gain from sale of discontinued operations -- -- -- 95.74 Net income (loss) $ 0.52 $ (0.66) $ (0.66) $ 93.97 Distributions per limited partnership unit $ 29.96 $ -- $ 29.96 $ 41.73 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, 2004 99,804 $ (565) $(12,077) $(12,642) Distributions to partners -- (30) (2,990) (3,020) Net loss for the nine months ended September 30, 2005 -- (1) (66) (67) Partners' deficit at September 30, 2005 99,804 $ (596) $(15,133) $(15,729) 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, 2005 2004 Cash flows from operating activities: Net (loss) income $ (67) $ 9,474 Adjustments to reconcile net (loss) income to net cash provided by operating activities: Gain from sale of discontinued operations -- (9,652) Depreciation 647 582 Amortization of loan costs 107 61 Loss on early extinguishment of debt -- 159 Change in accounts: Receivables and deposits (131) 50 Other assets (15) (155) Accounts payable (14) 70 Tenant security deposit liabilities (5) (64) Accrued property taxes 113 (64) Due to affiliates (4) (222) Other liabilities 9 (205) Net cash provided by operating activities 640 34 Cash flows from investing activities: Proceeds from sale of investment property -- 10,769 Property improvements and replacements (1,081) (448) Net (deposits to) withdrawals from restricted escrows (9) 6 Net cash (used in) provided by investing activities (1,090) 10,327 Cash flows from financing activities: Payments on mortgage notes payable (268) (393) Distributions to partners (3,020) (4,207) Proceeds from mortgage note payable 3,800 -- Repayment of mortgage note payable -- (6,062) Advances from affiliate 68 42 Loan costs paid (98) (19) Payments on advances from affiliate (330) -- Net cash provided by (used in) financing activities 152 (10,639) Net decrease in cash and cash equivalents (298) (278) Cash and cash equivalents at beginning of period 845 793 Cash and cash equivalents at end of period $ 547 $ 515 Supplemental disclosure of cash flow information: Cash paid for interest $ 1,011 $ 1,074 Supplemental disclosure of non-cash activity: Property improvements and replacements included in accounts payable $ 26 $ 261 At December 31, 2004, approximately $48,000 of property improvements and replacements were included in accounts payable and are included in property improvements and replacements for the nine months ended September 30, 2005. 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, 2005 are not necessarily indicative of the results that may be expected for the fiscal year ending December 31, 2005. 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, 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 receive 5% of gross receipts from both of the Partnership's properties as compensation for providing property management services. The Partnership paid to such affiliates approximately $192,000 and $198,000 for the nine months ended September 30, 2005 and 2004, respectively, which are included in operating expenses and loss from discontinued operations. Affiliates of the Managing General Partner charged the Partnership for reimbursement of accountable administrative expenses amounting to approximately $180,000 and $136,000 for the nine months ended September 30, 2005 and 2004, respectively, which are included in general and administrative expenses and investment properties. The portion of these reimbursements included in investment properties for the nine months ended September 30, 2005 and 2004 are fees related to construction management services provided by an affiliate of the Managing General Partner of approximately $93,000 and $13,000, respectively. The construction management service fees are calculated based on a percentage of additions to investment properties. The Partnership Agreement provides for a fee equal to 10% of "Net cash from operations," as defined in the Partnership Agreement to be paid to the Managing General Partner for executive and administrative management services. There were no such fees earned by the Managing General Partner for the nine months ended September 30, 2005 and 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. It is not presently expected that the limited partners will receive these returns when the Partnership terminates. Accordingly, no such distribution was paid to the Managing General Partner related to the March 2004 sale of Georgetown Apartments. In accordance with the Partnership Agreement, during the third and fourth quarters of 2004, an affiliate of the Managing General Partner advanced the Partnership approximately $262,000 to fund capital improvements and costs related to the refinancing of the mortgage encumbering Landmark Apartments. During the nine months ended September 30, 2005, an affiliate of the Managing General Partner advanced the Partnership approximately $68,000 to fund capital improvements at Landmark Apartments. These advances bore interest at the prime rate plus 2%. Interest expense was approximately $17,000 and less than $1,000 for the nine months ended September 30, 2005 and 2004, respectively. During the nine months ended September 30, 2005, the Partnership repaid the advances of approximately $330,000 and associated accrued interest of approximately $21,000 from proceeds from the second mortgage obtained on Deer Creek Apartments (as discussed in Note D). At September 30, 2005, there were no outstanding advances or associated accrued interest payable to affiliates of the Managing General Partner. The Partnership insures its properties up to certain limits through coverage provided by AIMCO which is generally self-insured for a portion of losses and liabilities related to workers' compensation, property casualty, general liability and vehicle liability. The Partnership insures its properties above the AIMCO limits through insurance policies obtained by AIMCO from insurers unaffiliated with the Managing General Partner. During the nine months ended September 30, 2005 and 2004, the Partnership was charged by AIMCO and its affiliates approximately $65,000 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, including revenues of approximately $234,000, are included in loss from discontinued operations. Note D - Second Mortgage Note Payable On September 1, 2005, the Partnership obtained a second mortgage loan in the amount of $3,800,000 on Deer Creek Apartments. The second mortgage consists of a stated fixed interest rate of 5.32% and requires monthly payments of principal and interest of approximately $21,000 beginning on October 1, 2005 until the loan matures September 1, 2015, with a balloon payment of approximately $3,128,000 due at maturity. The Partnership has the option of extending the maturity date for one additional year, to September 1, 2016. In connection with obtaining the second mortgage, loans costs of approximately $91,000 were capitalized and are included in other assets. In connection with the new financing, the Partnership agreed to certain modifications of the existing mortgage loan encumbering Deer Creek Apartments. The modification of terms consisted of a fixed interest rate of 7.68%, monthly payments of approximately $88,000, commencing October 1, 2005 through its maturity of September 1, 2015, with a balloon payment of approximately $10,755,000 due at maturity. The Partnership has the option of extending the maturity date for one additional year, to September 1, 2016. The previous terms consisted of monthly payments of approximately $110,000 with a stated fixed interest rate of 7.43% through its maturity of July 1, 2021, at which time the loan was scheduled to be fully amortized. 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 28, 2002, the trial court granted defendants motion to strike the complaint. Plaintiffs took an appeal from this order. On January 8, 2003, the parties filed a Stipulation of Settlement in proposed settlement of the Nuanes action and the Heller action. 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 May 4, 2004, the Objector filed a second appeal challenging the court's use of a referee and its order requiring Objector to pay those fees. On March 21, 2005, the Court of Appeals issued opinions in both pending appeals. With regard to the settlement and judgment entered thereto, the Court of Appeals vacated the trial court's order and remanded to the trial court for further findings on the basis that the "state of the record is insufficient to permit meaningful appellate review". With regard to the second appeal, the Court of Appeals reversed the order requiring the Objector to pay referee fees. On April 26, 2005, the Court of Appeals lifted the stay of a pending appeal related to the Heller action and the trial court's order striking the complaint. On April 28, 2005, the Objector filed a Petition for Review with the California Supreme Court in connection with the opinion vacating the order approving settlement and remanding for further findings. On June 10, 2005, the California Supreme Court denied Objector's Petition for Review and the Court of Appeals sent the matter back to the trial court on June 21, 2005. The parties intend to ask the trial court to make further findings in connection with settlement consistent with the Court of Appeal's remand order. With respect to the related Heller appeal, on July 28, 2005, the Court of Appeals reversed the trial court's order striking the first amended complaint. On August 18, 2005, Objector and his counsel filed a motion to disqualify the trial court based on a peremptory challenge and filed a motion to disqualify for cause on October 17, 2005. On or about October 13, 2005 Objector filed a motion to intervene and on or about October 19, 2005 filed both a motion to take discovery relating to the adequacy of plaintiffs as derivative representatives and a motion to dissolve the anti-suit injunction in connection with settlement. On October 27, 2005, the Court denied Objector's peremptory challenge and struck Objector's motion to disqualify for cause. No hearing has been set on Objector's remaining motions. On November 3, 2005, Objector and his counsel filed a writ of mandate to the Court of Appeals challenging the court's October 27, 2005 order. 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. AIMCO Properties L.P. and NHP Management Company, both affiliates of the Managing General Partner, are defendants in a lawsuit alleging that they 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. The complaint, filed in the United States District Court for the District of Columbia, attempts to bring 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. and NHP Management Company failed to compensate maintenance workers for time that they were required to be "on-call". Additionally, the complaint alleges AIMCO Properties L.P. and NHP Management Company failed to comply with the FLSA in compensating maintenance workers for time that they worked in excess of 40 hours in a week. In June 2005 the Court conditionally certified the collective action on both the on-call and overtime issues, which allows the plaintiffs to provide notice of the collective action to all non-exempt maintenance workers from August 7, 2000 through the present. Those employees will have the opportunity to opt-in to the collective action, and AIMCO Properties, L.P. and NHP Management Company will have the opportunity to move to decertify the collective action. Because the court denied plaintiffs' motion to certify state subclasses, on September 26, 2005, the plaintiffs filed a class action with the same allegations in the Superior Court of California (Contra Costa County). 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 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. 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. Environmental Various Federal, state and local laws subject property owners or operators to liability for management, and the costs of removal or remediation, of certain hazardous substances present on a property. Such laws often impose liability without regard to whether the owner or operator knew of, or was responsible for, the release or presence of the hazardous substances. The presence of, or the failure to manage or remedy properly, hazardous substances may adversely affect occupancy at affected apartment communities and the ability to sell or finance affected properties. In addition to the costs associated with investigation and remediation actions brought by government agencies, and potential fines or penalties imposed by such agencies in connection therewith, the presence of hazardous substances on a property could result in claims by private plaintiffs for personal injury, disease, disability or other infirmities. Various laws also impose liability for the cost of removal, remediation or disposal of hazardous substances through a licensed disposal or treatment facility. Anyone who arranges for the disposal or treatment of hazardous substances is potentially liable under such laws. These laws often impose liability whether or not the person arranging for the disposal ever owned or operated the disposal facility. In connection with the ownership, operation and management of its properties, the Partnership could potentially be liable for environmental liabilities or costs associated with its properties. Mold The Partnership is aware of lawsuits against owners and managers of multifamily properties asserting claims of personal injury and property damage caused by the presence of mold, some of which have resulted in substantial monetary judgments or settlements. The Partnership has only limited insurance coverage for property damage loss claims arising from the presence of mold and for personal injury claims related to mold exposure. Affiliates of the Managing General Partner have implemented a national policy and procedures to prevent or eliminate mold from its properties and the Managing General Partner believes that these measures will minimize the effects that mold could have on residents. To date, the Partnership has not incurred any material costs or liabilities relating to claims of mold exposure or to abate mold conditions. Because the law regarding mold is unsettled and subject to change the Managing General Partner can make no assurance that liabilities resulting from the presence of or exposure to mold will not have a material adverse effect on the Partnership's consolidated financial condition or results of operations. SEC Investigation The Central Regional Office of the United States Securities and Exchange Commission (the "SEC") continues its 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 have included 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, tax credit transactions, and tender offers for limited partnership interests. AIMCO is cooperating fully. AIMCO is not able to predict when the investigation 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. 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, 2005 and 2004: Average Occupancy Property 2005 2004 Deer Creek Apartments 95% 93% Plainsboro, New Jersey Landmark Apartments 83% 81% Raleigh, North Carolina 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 net income of approximately $53,000 and net loss of approximately $67,000 for the three and nine months ended September 30, 2005, respectively, as compared to net loss of approximately $67,000 and net income of approximately $9,474,000 for the three and nine months ended September 30, 2004, 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 on the consolidated statements of 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, including revenues of approximately $234,000, are included in loss from discontinued operations. The Partnership's income from continuing operations for the three months ended September 30, 2005 was approximately $53,000, compared to loss from continuing operations of approximately $67,000 for the three months ended September 30, 2004. The Partnership's loss from continuing operations for the nine months ended September 30, 2005 and 2004 was approximately $67,000 and $62,000, respectively. The increase in income from continuing operations for the three months ended September 30, 2005 is due to an increase in total revenues. The increase in loss from continuing operations for the nine months ended September 30, 2005 is due to an increase in total expenses, partially offset by an increase in total revenues. The increase in total revenues for the three months ended September 30, 2005 is due to an increase in rental income. The increase in total revenues for the nine months ended September 30, 2005 is due to increases in both rental and other income. Other income remained relatively constant for the three months ended September 30, 2005. The increase in rental income for the three months ended September 30, 2005 is primarily due to increases in occupancy at Landmark Apartments and the average rental rate and reduced bad debt expense at both of the Partnership's investment properties. The increase in rental income for the nine months ended September 30, 2005 is primarily due to increases in occupancy and the average rental rate and reduced bad debt expense at both properties. The increase in other income for the nine months ended September 30, 2005 is primarily due to increases in late charges and resident utility payments at Deer Creek Apartments, and cleaning and damage fees at Landmark Apartments, partially offset by a decrease in lease cancellation fees at both of the Partnership's investment properties. Total expenses remained relatively constant for the three months ended September 30, 2005, as increases in depreciation and general and administrative expenses were offset by decreases in both operating and property tax expense. The increase in total expenses for the nine months ended September 30, 2005 is due to increases in operating, depreciation, and general and administrative expenses, partially offset by a decrease in property tax expense. Interest expense remained relatively constant for both the three and nine months ended September 30, 2005. The decrease in operating expenses for the three months ended September 30, 2005 is primarily due to decrease in utilities and contract maintenance expense at Landmark Apartments, partially offset by an increase in payroll related expenses at Landmark Apartments and fees associated with tenant application processing at both properties. The increase in operating expenses for the nine months ended September 30, 2005 is primarily due to increases in contract maintenance, utilities, and payroll related expenses at Landmark Apartments and tenant application processing fees at both properties. The increase in depreciation expense for both periods 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 property tax expense for both periods is due to the Partnership's successful appeal of the assessed value of Deer Creek Apartments. The increase in general and administrative expenses for both the three and nine months ended September 30, 2005 is primarily due to an increase in partnership tax expense. The increase in general and administrative expenses for the nine months ended September 30, 2005 was partially offset by a decrease in management reimbursements to the Managing General Partner as allowed under the Partnership Agreement as a result of the sale of Georgetown Apartments in 2004. Also included in general and administrative expenses for the three and nine months ended September 30, 2005 and 2004 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, 2005, the Partnership had cash and cash equivalents of approximately $547,000, compared to approximately $515,000 at September 30, 2004. The decrease in cash and cash equivalents of approximately $298,000, from December 31, 2004, is due to approximately $1,090,000 of cash used in investing activities, partially offset by approximately $640,000 of cash provided by operating activities and approximately $152,000 of cash provided by financing activities. Cash used in investing activities consisted of property improvements and replacements and net deposits to restricted escrow accounts maintained by the mortgage lender. Cash provided by financing activities consisted of proceeds from the second mortgage obtained on Deer Creek Apartments and an advance from an affiliate of the Managing General Partner, partially offset by distributions to partners, payments on advances from an affiliate of the Managing General Partner, payments of principal made on the mortgages encumbering Deer Creek Apartments and loan costs paid. 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. Deer Creek Apartments During the nine months ended September 30, 2005, the Partnership completed approximately $428,000 of capital improvements at Deer Creek Apartments, consisting primarily of structural improvements, security equipment, water heaters, furniture upgrades and appliance and floor covering replacements. These improvements were funded from operating cash flow. The Partnership regularly evaluates the capital improvement needs of the property. While the Partnership has no material commitments for property improvements and replacements, certain routine capital expenditures are anticipated during 2005. Such capital expenditures will depend on the physical condition of the property as well as anticipated cash flow generated by the property. Landmark Apartments During the nine months ended September 30, 2005, the Partnership completed approximately $631,000 of capital improvements at Landmark Apartments, consisting primarily of a repair project to address water filtration issues with 15 units. This project was completed in May 2005 and all units are back online. Other improvements consisted primarily of structural improvements, exterior painting, major landscaping, fitness equipment, interior and exterior building improvements, furniture upgrades, electrical upgrades, plumbing upgrades, cabinet upgrades, and floor covering replacement. These improvements were funded from operating cash flow and an advance from an affiliate of the Managing General Partner. The Partnership regularly evaluates the capital improvement needs of the property. While the Partnership has no material commitments for property improvements and replacements, certain routine capital expenditures are anticipated during 2005. Such capital expenditures will depend on the physical condition of the property as well as replacement reserves and anticipated cash flow generated by the property. The capital expenditures will be incurred only if cash is available from operations or from Partnership reserves. To the extent that capital improvements are completed, the Partnership's distributable cash flow, if any, may be adversely affected at least in the short term. The Partnership's assets are thought to be sufficient for any near-term needs (exclusive of capital improvements) of the Partnership. On September 1, 2005, the Partnership obtained a second mortgage loan in the amount of $3,800,000 on Deer Creek Apartments. The second mortgage consists of a stated fixed interest rate of 5.32% and requires monthly payments of principal and interest of approximately $21,000 beginning on October 1, 2005 until the loan matures September 1, 2015, with a balloon payment of approximately $3,128,000 due at maturity. The Partnership has the option of extending the maturity date for one additional year, to September 1, 2016. In connection with obtaining the second mortgage, loans costs of approximately $91,000 were capitalized and are included in other assets on the consolidated balance sheet. In connection with the new financing, the Partnership agreed to certain modifications of the existing mortgage loan encumbering Deer Creek Apartments. The modification of terms consisted of a fixed interest rate of 7.68%, monthly payments of approximately $88,000, commencing October 1, 2005 through its maturity of September 1, 2015, with a balloon payment of approximately $10,755,000 due at maturity. The Partnership has the option of extending the maturity date for one additional year, to September 1, 2016. The previous terms consisted of monthly payments of approximately $110,000 with a stated fixed interest rate of 7.43% through its maturity of July 1, 2021, at which time the loan was scheduled to be fully amortized. On November 1, 2004, the Partnership obtained a mortgage in the principal amount of $7,000,000 on Landmark Apartments. 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. Loan costs associated with the existing mortgage were fully amortized. Total capitalized loan costs associated with the new mortgage were approximately $208,000 during the year ended December 31, 2004. These costs included approximately $70,000 paid to the Managing General Partner. Approximately $7,000 of additional loan costs were capitalized during the nine months ended September 30, 2005. 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 (6.2084% at September 30, 2005 with a minimum rate of 4.3662%). In conjunction with the new 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 increases. Under this interest rate cap agreement, the Partnership's interest rate on the amounts owed to the lender will be no higher than 7.85%. The Partnership has adopted SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities", which was amended by SFAS No. 138 "Accounting for Certain Derivative Instruments and Certain Hedging Activities - an Amendment of SFAS No. 133". The Partnership's interest rate cap does not qualify for special hedge accounting treatment as defined by SFAS 133, and therefore all changes in the fair value of the interest rate cap will be recognized in the consolidated statements of operations as an adjustment to 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 Managing General Partner, to guarantee the obligations and liabilities of the Partnership with respect to the new mortgage. The Partnership distributed the following amounts during the nine months ended September 30, 2005 and 2004 (in thousands, except per unit data):
Nine Months Nine Months Ended Per Limited Ended Per Limited September 30, Partnership September 30, Partnership 2005 Unit 2004 Unit Sale (1) $ -- $ -- $3,927 $38.96 Finance (2) 3,020 29.96 -- -- Operations -- -- 280 2.77 Total $3,020 $29.96 $4,207 $41.73
(1) From proceeds from the sale of Georgetown Apartments. (2) From proceeds from the second mortgage obtained on Deer Creek Apartments. Future cash distributions will depend on the levels of net cash generated from operations 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 planned capital expenditures to permit additional distributions to its partners in 2005 or subsequent periods. Other In addition to its indirect ownership of the general partner interest in the Partnership, AIMCO and its affiliates owned 69,235 limited partnership units (the "Units") in the Partnership representing 69.37% of the outstanding Units at September 30, 2005. A number of these Units were acquired pursuant to tender offers made by AIMCO or its affiliates. It is possible that AIMCO or its affiliates will acquire additional Units in exchange for cash or a combination of cash and units in AIMCO Properties L.P., the operating partnership of AIMCO, either through private purchases or tender offers. Pursuant to the Partnership Agreement, unitholders holding a majority of the Units are entitled to take action with respect to a variety of matters 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 69.37% 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. The Partnership will offer rental concessions during particularly slow months or in response to heavy competition from other similar complexes in the area. Rental income attributable to leases, net of any concessions, is recognized on a straight-line basis over the term of the lease. The Partnership evaluates all accounts receivable from residents and establishes an allowance, after the application of security deposits, for accounts greater than 30 days past due on current tenants and all receivables due from former tenants. 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 28, 2002, the trial court granted defendants motion to strike the complaint. Plaintiffs took an appeal from this order. On January 8, 2003, the parties filed a Stipulation of Settlement in proposed settlement of the Nuanes action and the Heller action. 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 May 4, 2004, the Objector filed a second appeal challenging the court's use of a referee and its order requiring Objector to pay those fees. On March 21, 2005, the Court of Appeals issued opinions in both pending appeals. With regard to the settlement and judgment entered thereto, the Court of Appeals vacated the trial court's order and remanded to the trial court for further findings on the basis that the "state of the record is insufficient to permit meaningful appellate review". With regard to the second appeal, the Court of Appeals reversed the order requiring the Objector to pay referee fees. On April 26, 2005, the Court of Appeals lifted the stay of a pending appeal related to the Heller action and the trial court's order striking the complaint. On April 28, 2005, the Objector filed a Petition for Review with the California Supreme Court in connection with the opinion vacating the order approving settlement and remanding for further findings. On June 10, 2005, the California Supreme Court denied Objector's Petition for Review and the Court of Appeals sent the matter back to the trial court on June 21, 2005. The parties intend to ask the trial court to make further findings in connection with settlement consistent with the Court of Appeal's remand order. With respect to the related Heller appeal, on July 28, 2005, the Court of Appeals reversed the trial court's order striking the first amended complaint. On August 18, 2005, Objector and his counsel filed a motion to disqualify the trial court based on a peremptory challenge and filed a motion to disqualify for cause on October 17, 2005. On or about October 13, 2005 Objector filed a motion to intervene and on or about October 19, 2005 filed both a motion to take discovery relating to the adequacy of plaintiffs as derivative representatives and a motion to dissolve the anti-suit injunction in connection with settlement. On October 27, 2005, the Court denied Objector's peremptory challenge and struck Objector's motion to disqualify for cause. No hearing has been set on Objector's remaining motions. On November 3, 2005, Objector and his counsel filed a writ of mandate to the Court of Appeals challenging the court's October 27, 2005 order. 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. AIMCO Properties L.P. and NHP Management Company, both affiliates of the Managing General Partner, are defendants in a lawsuit alleging that they 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. The complaint, filed in the United States District Court for the District of Columbia, attempts to bring 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. and NHP Management Company failed to compensate maintenance workers for time that they were required to be "on-call". Additionally, the complaint alleges AIMCO Properties L.P. and NHP Management Company failed to comply with the FLSA in compensating maintenance workers for time that they worked in excess of 40 hours in a week. In June 2005 the Court conditionally certified the collective action on both the on-call and overtime issues, which allows the plaintiffs to provide notice of the collective action to all non-exempt maintenance workers from August 7, 2000 through the present. Those employees will have the opportunity to opt-in to the collective action, and AIMCO Properties, L.P. and NHP Management Company will have the opportunity to move to decertify the collective action. Because the court denied plaintiffs' motion to certify state subclasses, on September 26, 2005, the plaintiffs filed a class action with the same allegations in the Superior Court of California (Contra Costa County). 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 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. ITEM 5. OTHER INFORMATION None. 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 14, 2005 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 10.21 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. 10.28 Loan Agreement dated November 1, 2004 between Angeles Income Properties, Ltd. II, a California limited partnership and GMAC Commercial Mortgage Bank, incorporated by reference to the Current Report on Form 8-K dated November 1, 2004. 10.29 Promissory Note dated November 1, 2004 between Angeles Income Properties, Ltd. II, a California limited partnership and GMAC Commercial Mortgage Bank, incorporated by reference to the Current Report on Form 8-K dated November 1, 2004. 10.30 Guaranty dated November 1, 2004 by AIMCO Properties, L.P., for the benefit of GMAC Commercial Mortgage Bank, incorporated by reference to the Current Report on Form 8-K dated November 1, 2004. 10.31 Loan Agreement dated September 1, 2005 between Angeles Income Properties, Ltd. II, a California limited partnership and GMAC Commercial Mortgage Bank, incorporated by reference to the Current Report on Form 8-K dated September 1, 2005. 10.32 Amended and Restated Loan Agreement dated September 1, 2005 between Angeles Income Properties, Ltd. II, a California limited partnership and Federal Home Loan Mortgage Corporation, incorporated by reference to the Current Report on Form 8-K dated September 1, 2005. 31.1 Certification of equivalent of Chief Executive Officer pursuant to Securities Exchange Act Rules 13a-14(a)/15d-14(a), as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. 31.2 Certification of equivalent of Chief Financial Officer pursuant to Securities Exchange Act Rules 13a-14(a)/15d-14(a), as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. 32.1 Certification of equivalent of Chief Executive Officer and Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. 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 14, 2005 /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 14, 2005 /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, 2005 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 14, 2005 /s/Stephen B. Waters Name: Stephen B. Waters Date: November 14, 2005 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-----