0000711642-08-000519.txt : 20081112 0000711642-08-000519.hdr.sgml : 20081111 20081112081308 ACCESSION NUMBER: 0000711642-08-000519 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 20080930 FILED AS OF DATE: 20081112 DATE AS OF CHANGE: 20081112 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: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-11767 FILM NUMBER: 081178177 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 10-Q 1 aipl2908a_10q.htm 10Q FORM 10-QSB—QUARTERLY OR TRANSITIONAL REPORT UNDER SECTION 13 OR 15(d) OF

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

Form 10-Q

(Mark One)

[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2008

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _________to _________

Commission file number 0-11767

ANGELES INCOME PROPERTIES, LTD. II

(Exact name of registrant 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

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

[X] Yes [ ] No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer [ ]

Accelerated filer [ ]

Non-accelerated filer [ ]

(Do not check if a smaller reporting company)

Smaller reporting company [X]

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). [ ] Yes [X] No

PART I – FINANCIAL INFORMATION

ITEM 1. Financial Statements.

ANGELES INCOME PROPERTIES, LTD. II

BALANCE SHEETS

(Unaudited)

(in thousands, except unit data)

	September 30,	December 31,
	2008	2007
	(Unaudited)	(Note)
Assets
Cash and cash equivalents	$ 83	$ 527
Receivables and deposits	263	225
Restricted escrow	477	477
Other assets	526	556
Investment properties:
Land	1,691	1,691
Buildings and related personal property	31,727	30,195
	33,418	31,886
Less accumulated depreciation	(26,337)	(25,510)
	7,081	6,376
	$ 8,430	$ 8,161


Liabilities and Partners' Deficit
Liabilities
Accounts payable	$ 340	$ 204
Tenant security deposit liabilities	200	192
Accrued property taxes	123	--
Due to affiliates (Note B)	342	--
Other liabilities	358	390
Mortgage notes payable (Note D)	31,840	32,038
	33,203	32,824

Partners' Deficit
General partners	(686)	(685)
Limited partners (99,804 units issued and
outstanding)	(24,087)	(23,978)
	(24,773)	(24,663)
	$ 8,430	$ 8,161

Note: The balance sheet at December 31, 2007 has been derived from the audited financial statements at that date but does not include all the information and footnotes required by generally accepted accounting principles for complete financial statements.

See Accompanying Notes to Financial Statements

ANGELES INCOME PROPERTIES, LTD. II

STATEMENTS OF OPERATIONS

(Unaudited)

(in thousands, except per unit data)

	Three Months Ended		Nine Months Ended
	September 30,		September 30,
	2008	2007	2008	2007
Revenues:
Rental income	$ 1,453	$ 1,393	$ 4,411	$ 4,119
Other income	149	145	419	416
Total revenues	1,602	1,538	4,830	4,535

Expenses:
Operating	665	594	1,876	1,838
General and administrative	77	60	225	207
Depreciation	287	243	833	704
Interest	542	471	1,620	1,327
Property taxes	137	147	419	420
Total expenses	1,708	1,515	4,973	4,496

Casualty gain (Note C)	--	38	33	38

Net (loss) income	$ (106)	$ 61	$ (110)	$ 77

Net (loss) income allocated to general
partners (1%)	$ (1)	$ 1	$ (1)	$ 1
Net (loss) income allocated to limited
partners (99%)	(105)	60	(109)	76
	$ (106)	$ 61	$ (110)	$ 77
Net (loss) income per limited
partnership unit	$ (1.05)	$ 0.60	$ (1.09)	$ 0.76

Distributions per limited partnership	$ --	$ 74.94	$ --	$ 77.22
unit

See Accompanying Notes to Financial Statements

ANGELES INCOME PROPERTIES, LTD. II

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, 2007	99,804	$ (685)	$(23,978)	$(24,663)

Net loss for the nine months
ended September 30, 2008	--	(1)	(109)	(110)

Partners' deficit at
September 30, 2008	99,804	$ (686)	$(24,087)	$(24,773)

See Accompanying Notes to Financial Statements

ANGELES INCOME PROPERTIES, LTD. II

STATEMENTS OF CASH FLOWS

(Unaudited)

(in thousands)

	Nine Months Ended
	September 30,
	2008	2007
Cash flows from operating activities:
Net (loss) income	$ (110)	$ 77
Adjustments to reconcile net (loss) income to net
cash provided by operating activities:
Depreciation	833	704
Amortization of loan costs	68	60
Casualty gain	(33)	(38)
Change in accounts:
Receivables and deposits	(38)	1
Other assets	(38)	(67)
Accounts payable	6	1
Tenant security deposit liabilities	8	28
Accrued property taxes	123	119
Due to affiliates	60	--
Other liabilities	(32)	16
Net cash provided by operating activities	847	901

Cash flows from investing activities:
Property improvements and replacements	(1,408)	(731)
Insurance proceeds received	33	38
Net cash used in investing activities	(1,375)	(693)

Cash flows from financing activities:
Payments on mortgage notes payable	(198)	(118)
Distributions to partners	--	(7,785)
Proceeds from mortgage note payable	--	7,750
Advances from affiliates	282	--
Loan costs paid	--	(94)
Net cash provided by (used in) financing
activities	84	(247)

Net decrease in cash and cash equivalents	(444)	(39)
Cash and cash equivalents at beginning of period	527	716
Cash and cash equivalents at end of period	$ 83	$ 677

Supplemental disclosure of cash flow information:
Cash paid for interest, net of capitalized interest	$ 1,555	$ 1,230

Supplemental disclosure of non-cash activity:
Property improvements and replacements included
in accounts payable	$ 217	$ 51

At December 31, 2007 and 2006, approximately $87,000 and $24,000, respectively, 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, 2008 and 2007, respectively.

See Accompanying Notes to Financial Statements

ANGELES INCOME PROPERTIES, LTD. II

NOTES TO FINANCIAL STATEMENTS

(Unaudited)

Note A – Basis of Presentation

The accompanying unaudited 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-Q and Article 8-03 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of 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, 2008 are not necessarily indicative of the results that may be expected for the fiscal year ending December 31, 2008. For further information, refer to the financial statements and footnotes thereto included in the Partnership's Annual Report on Form 10-KSB for the fiscal year ended December 31, 2007.

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 $237,000 and $222,000 for the nine months ended September 30, 2008 and 2007, respectively, which are included in operating expenses.

Affiliates of the Managing General Partner charged the Partnership for reimbursement of accountable administrative expenses amounting to approximately $181,000 and $147,000 for the nine months ended September 30, 2008 and 2007, 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, 2008 and 2007 are construction management services provided by an affiliate of the Managing General Partner of approximately $97,000 and $51,000, respectively. At September 30, 2008, approximately $58,000 of these reimbursements remain unpaid and are included in due to affiliates. There were no such reimbursements outstanding at December 31, 2007.

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 was no such fee earned by the Managing General Partner for the nine months ended September 30, 2008 and 2007. At September 30, 2008 and December 31, 2007, there were no fees owed to the Managing General Partner.

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.

In accordance with the Partnership Agreement, during the nine months ended September 30, 2008, AIMCO Properties, L.P., an affiliate of the Managing General Partner advanced the Partnership approximately $282,000 to fund operating expenses and capital improvements at the Partnership’s investment properties. The advances bear interest at the prime rate plus 2% (7.0% at September 30, 2008). Interest expense was approximately $2,000 for the nine months ended September 30, 2008. There were no such advances or interest expense during the nine months ended September 30, 2007. At September 30, 2008, there were outstanding advances and associated accrued interest of approximately $284,000, which are included in due to affiliates. At December 31, 2007, there were no outstanding advances or associated accrued interest due to affiliates of the Managing General Partner. Subsequent to September 30, 2008, the Partnership received additional advances of approximately $310,000. The Partnership may receive additional advances of funds from AIMCO Properties, L.P. although AIMCO Properties, L.P. is not obligated to provide such advances. For more information on AIMCO Properties, L.P., including copies of its audited balance sheet, please see its reports filed with the Securities and Exchange Commission.

The Partnership insures its properties up to certain limits through coverage provided by AIMCO which is generally self-insured for a portion of losses and liabilities related to workers’ compensation, property casualty, general liability and vehicle liability. The Partnership insures its properties above the AIMCO limits through insurance policies obtained by AIMCO from insurers unaffiliated with the Managing General Partner. During the nine months ended September 30, 2008, the Partnership was charged by AIMCO and its affiliates approximately $134,000 for insurance coverage and fees associated with policy claims administration. Additional charges will be incurred by the Partnership during 2008 as other insurance policies renew later in the year. The Partnership was charged by AIMCO and its affiliates approximately $167,000 for insurance coverage and fees associated with policy claims administration during the year ended December 31, 2007.

Note C – Casualty Event

In June 2007, Deer Creek Apartments incurred damages of approximately $215,000 from a fire that damaged four apartment units. During the three and nine months ended September 30, 2007, the Partnership recognized a casualty gain of approximately $38,000 as a result of the receipt of insurance proceeds of approximately $38,000. During the fourth quarter of 2007, the Partnership recognized an additional casualty gain of approximately $126,000 as a result of additional insurance proceeds of approximately $126,000. The Partnership recognized an additional gain of approximately $33,000 during the nine months ended September 30, 2008 as a result of the receipt of additional insurance proceeds of approximately $33,000. The damaged assets were fully depreciated.

Note D – Additional Financing

On August 31, 2007, the Partnership obtained an additional mortgage loan in the principal amount of $7,750,000 on Deer Creek Apartments. The additional mortgage bears interest at a fixed rate of 5.83% per annum and requires monthly payments of principal and interest of approximately $46,000 beginning on October 1, 2007, through the September 1, 2015 maturity date, with a balloon payment of approximately $6,791,000 due at maturity. If no event of default exists at maturity, the maturity date will automatically be extended for one additional year, to September 1, 2016, during which period the additional mortgage would bear interest at the one-month LIBOR rate plus 250 basis points and would require monthly payments of principal and interest. As a condition of the loan, 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 financing. In connection with obtaining the additional mortgage, loan costs of approximately $95,000 were capitalized, of which approximately $83,000 was recognized during the nine months ended September 30, 2007, and are included in other assets.

Note E – Contingencies

The Partnership has previously disclosed in its quarterly, annual and current reports the legal proceedings related to the Nuanes and Heller actions. On June 30, 2006, the trial court entered an order confirming its approval of the class action settlement and entering judgment thereto after the Court of Appeal had remanded the matter for further findings. On August 31, 2006, an objector filed an appeal from the order. The Court of Appeal issued an opinion on February 20, 2008, affirming the order approving the settlement and judgment entered thereto, and the California Supreme Court thereafter denied the objector’s petition for review. All appeals have now been exhausted, and the Court’s order approving the settlement and entering judgment is now final. Payments associated with the settlement were disbursed during September 2008.

As previously disclosed, AIMCO Properties, L.P. and NHP Management Company, both affiliates of the Managing General Partner, were defendants in a lawsuit, filed as a collective action in August 2003 in the United States District Court for the District of Columbia, alleging that they willfully violated the Fair Labor Standards Act (“FLSA”) by failing to pay maintenance workers overtime for time worked in excess of 40 hours per week (“overtime claims”). The plaintiffs also contended that AIMCO Properties, L.P. and NHP Management Company failed to compensate maintenance workers for time that they were required to be "on-call" (“on-call claims”). In March 2007, the court in the District of Columbia decertified the collective action. In July 2007, plaintiffs’ counsel filed individual cases in Federal court in 22 jurisdictions. In the second quarter 2008, AIMCO Properties, L.P. settled the overtime cases involving 652 plaintiffs and established a framework for resolving the 88 remaining “on-call” claims and the attorneys’ fees claimed by plaintiffs’ counsel. As a result, the lawsuits asserted in the 22 Federal courts will be dismissed. During the three months ended September 30, 2008, the Partnership was charged approximately $3,000 for settlement amounts for alleged unpaid overtime to employees who had worked at the Partnership’s investment properties. At this time, the 88 remaining “on-call” claims and the attorneys’ fees claimed by the plaintiff’s counsel are not resolved. The Managing General Partner is uncertain as to the amount of any additional loss that may be allocable to the Partnership. Therefore, the Partnership cannot estimate whether any additional loss will occur or a potential range of loss.

The Partnership is unaware of any other pending or outstanding litigation matters involving it or its investment 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 policies, procedures, third-party audits and training and the Managing General Partner believes that these measures will prevent or eliminate mold exposure and will minimize the effects that mold may have on residents. To date, the Partnership has not incurred any material costs or liabilities relating to claims of mold exposure or to abate mold conditions. Because the law regarding mold is unsettled and subject to change the Managing General Partner can make no assurance that liabilities resulting from the presence of or exposure to mold will not have a material adverse effect on the Partnership’s financial condition or results of operations.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

The Private Securities Litigation Reform Act of 1995 provides a “safe harbor” for forward-looking statements in certain circumstances. Certain information included in this Report contains or may contain information that is forward-looking, including, without limitation, statements regarding the effect of redevelopments, the Partnership’s future financial performance, including the Partnership’s ability to maintain current or meet projected occupancy and rent levels, and the effect of government regulations. Actual results may differ materially from those described in the forward-looking statements and, in addition, will be affected by a variety of risks and factors that are beyond the Partnership’s control including, without limitation: natural disasters such as hurricanes; national and local economic conditions; the general level of interest rates; energy costs; the terms of governmental regulations that affect the Partnership’s properties and interpretations of those regulations; the competitive environment in which the Partnership operates; financing risks, including the risk that the Partnership’s cash flows from operations may be insufficient to meet required payments of principal and interest; real estate risks, including fluctuations in real estate values and the general economic climate in local markets and competition for tenants in such markets; insurance risks; development risks; litigation, including costs associated with prosecuting or defending claims and any adverse outcomes; and possible environmental liabilities, including costs, fines or penalties that may be incurred due to necessary remediation of contamination of properties presently owned or previously owned by the Partnership. Readers should carefully review the Partnership’s financial statements and the notes thereto, as well as the other documents the Partnership 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, 2008 and 2007:

	Average Occupancy
Property	2008	2007

Deer Creek Apartments	97%	96%
Plainsboro, New Jersey
Landmark Apartments	95%	96%
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 which 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’s net loss for the three and nine months ended September 30, 2008 was approximately $106,000 and $110,000, respectively, compared to net income of approximately $61,000 and $77,000 for the three and nine months ended September 30, 2007, respectively. The increase in net loss for both the three and nine months ended September 30, 2008 is due to an increase in total expenses, partially offset by an increase in total revenues. The increase in net loss for the three months ended September 30, 2008 was also due to the recognition of a casualty gain during 2007. Total expenses increased for both the three and nine months ended September 30, 2008 due to increases in operating, general and administrative, depreciation and interest expenses. Property taxes remained relatively constant for the comparable periods. The increase in operating expenses for the three and nine months ended September 30, 2008 is due to increases in contract services, salaries and related benefits, maintenance repairs and supplies at both the Partnership’s investment properties, partially offset by a decrease in insurance premiums primarily at Landmark Apartments. The increase in interest expense for both periods is a result of the additional financing obtained on Deer Creek Apartments in August 2007. The increase in depreciation expense for both periods is due to property improvements and replacements placed into service at the Partnership’s investment properties.

General and administrative expenses increased for the three and nine months ended September 30, 2008 due to an increase in a New Jersey partnership tax expense, partially offset by a decrease in 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, 2008 and 2007 are costs associated with the quarterly and annual communications with investors and regulatory agencies, and the annual audit required by the Partnership Agreement.

The increase in total revenues for both the three and nine months ended September 30, 2008 is primarily due to an increase in rental income. Rental income increased for both periods due to increases in the average rental rates at both of the Partnership’s investment properties and a decrease in bad debt expense at Deer Creek Apartments.

Liquidity and Capital Resources

At September 30, 2008, the Partnership had cash and cash equivalents of approximately $83,000, compared to approximately $677,000 at September 30, 2007. The decrease in cash and cash equivalents of approximately $444,000, from December 31, 2007, is due to approximately $1,375,000 of cash used in investing activities, partially offset by approximately $84,000 and $847,000 of cash provided by financing and operating activities, respectively. Cash used in investing activities consisted of property improvements and replacements, partially offset by insurance proceeds received. Cash provided by financing activities consisted of advances from affiliates, partially offset by payments of principal made on the mortgages encumbering Deer Creek Apartments. 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. Capital improvements planned for each of the Partnership's properties are detailed below.

Deer Creek Apartments

During the nine months ended September 30, 2008, the Partnership completed approximately $921,000 of capital improvements at the property, consisting primarily of water heater and roof replacements, cabinet, kitchen and bathroom upgrades, appliance and floor covering replacements and construction related to the casualty discussed above. These improvements were funded from operating cash flow, insurance proceeds and advances 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 the remainder of 2008. 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, 2008, the Partnership completed approximately $617,000 of capital improvements at the property, consisting primarily of plumbing and electrical upgrades, heating and air conditioning upgrades, stairway improvements and floor covering replacement. These improvements were funded from operating cash flow and advances 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 the remainder of 2008. 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.

Capital expenditures will be incurred only if cash is available from operations, Partnership reserves or advances from affiliates. 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 generally sufficient for any near-term needs (exclusive of capital improvements) of the Partnership. On August 31, 2007, the Partnership obtained an additional mortgage loan in the principal amount of $7,750,000 on Deer Creek Apartments. The additional mortgage bears interest at a fixed rate of 5.83% per annum and requires monthly payments of principal and interest of approximately $46,000 beginning on October 1, 2007, through the September 1, 2015 maturity date, with a balloon payment of approximately $6,791,000 due at maturity. If no event of default exists at maturity, the maturity date will automatically be extended for one additional year, to September 1, 2016, during which period the additional mortgage would bear interest at the one-month LIBOR rate plus 250 basis points and would require monthly payments of principal and interest. As a condition of the loan, 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 financing. In connection with obtaining the additional mortgage, loan costs of approximately $95,000 were capitalized, of which approximately $83,000 was recognized during the nine months ended September 30, 2007, and are included in other assets.

The mortgage indebtedness encumbering Deer Creek Apartments of approximately $23,305,000 requires monthly payments of principal and interest until the loans mature on September 1, 2015, with balloon payments totaling approximately $20,900,000 due at maturity. The mortgage indebtedness encumbering Landmark Apartments of approximately $8,535,000 requires payments of interest only with a balloon payment of $8,535,000 due at maturity in 2009. The Managing General Partner will attempt to refinance such indebtedness and/or sell the properties prior to the maturity dates. If the properties cannot be refinanced or sold for a sufficient amount, the Partnership will risk losing such properties through foreclosure.

The Partnership distributed the following amounts during the nine months ended September 30, 2008 and 2007 (in thousands, except per unit data):

	Nine Months	Per Limited	Nine Months	Per Limited
	Ended	Partnership	Ended	Partnership
	September 30, 2008	Unit	September 30, 2007	Unit

Finance	$ --	$ - --	$ 7,785	$ 77.22

From proceeds from the September 2005 and August 2007 second and third mortgages obtained on Deer Creek Apartments and the November 2006 refinancing of the mortgages encumbering Landmark Apartments.

Future cash distributions will depend on the levels of net cash generated from operations, 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 any distributions to its partners during 2008 or subsequent periods.

Other

In addition to its indirect ownership of the general partner interest in the Partnership, AIMCO and its affiliates owned 71,374 limited partnership units (the "Units") in the Partnership representing 71.51% of the outstanding Units at September 30, 2008. 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 71.51% 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 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

Investment properties are recorded at cost, less accumulated depreciation, unless the carrying amount of the asset is not recoverable. If events or circumstances indicate that the carrying amount of a property may not be recoverable, the Partnership will make an assessment of its recoverability by comparing the carrying amount to the Partnership’s estimate of the undiscounted future cash flows, excluding interest charges, of the property. If the carrying amount exceeds the aggregate undiscounted future cash flows, the Partnership would recognize an impairment loss to the extent the carrying amount exceeds the estimated fair value of the property.

Real property investment is 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, general economic climate; competition from other apartment communities and other housing options; local conditions, such as loss of jobs or an increase in the supply of apartments that might adversely affect apartment occupancy or rental rates; changes in governmental regulations and the related cost of compliance; increases in operating costs (including real estate taxes) due to inflation and other factors, which may not be offset by increased rents; and changes in tax laws and housing laws, including the enactment of rent control laws or other laws regulating multi-family housing. 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 4T. 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) Changes in 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.

Item 6. Exhibits.

See Exhibit Index.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	ANGELES INCOME PROPERTIES, LTD. II

	By: Angeles Realty Corporation II
	Managing General Partner

Date: November 11, 2008	By: /s/Martha L. Long
	Martha L. Long
	Senior Vice President

Date: November 11, 2008	By: /s/Stephen B. Waters
	Stephen B. Waters
	Vice President

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 the Partnership’s Annual Report on Form 10-K 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.

10.31 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.

10.33 Loan Agreement dated November 30, 2006, between Angeles Income Properties, Ltd. II, a California Limited partnership, and Capmark Bank, A Utah Industrial Bank, incorporated by reference to the Current Report on Form 8-K dated November 30, 2006.

10.34 Promissory Note dated November 30, 2006, between Angeles Income Properties, Ltd. II, a California Limited partnership, and Capmark Bank, A Utah Industrial Bank, incorporated by reference to the Current Report on Form 8-K dated November 30, 2006.

10.35 Guaranty dated November 30, 2006, between AIMCO Properties, L.P., a Delaware limited partnership, and Capmark Bank, A Utah Industrial Bank, incorporated by reference to the Current Report on Form 8-K dated November 30, 2006.

10.36 Multifamily Note dated August 31, 2007 between Angeles Income Properties, Ltd. II, a California limited partnership, and Capmark Bank, a Utah industrial bank, incorporated by reference to the Current Report on Form 8-K dated August 31, 2007.

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.

EX-31.1 2 aipl2_ex31z1.htm EXHIBIT 31.1 Exhibit 31

Exhibit 31.1

CERTIFICATION

I, Martha L. Long, certify that:

1. I have reviewed this quarterly report on Form 10-Q 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 registrant as of, and for, the periods presented in this report;

4. The registrant'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)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)), for the registrant 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 registrant, 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) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant'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

(d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5. The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant’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 registrant’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 registrant's internal control over financial reporting.

Date: November 11, 2008

/s/Martha L. Long

Martha L. Long

Senior Vice President of Angeles Realty Corporation II, equivalent of the chief executive officer of the Partnership

EX-31.2 3 aipl2_ex31z2.htm EXHIBIT 31.2 Exhibit 31

Exhibit 31.2

CERTIFICATION

I, Stephen B. Waters certify that:

1. I have reviewed this quarterly report on Form 10-Q of Angeles Income Properties, Ltd. II;

5. The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant'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 registrant'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 registrant's internal control over financial reporting.

Date: November 11, 2008

/s/Stephen B. Waters

Stephen B. Waters

Vice President of Angeles Realty Corporation II, equivalent of the chief financial officer of the Partnership

EX-32.1 4 aipl2_ex32z1.htm EXHIBIT 32.1 Exhibit 32

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-Q of Angeles Income Properties, Ltd. II (the "Partnership"), for the quarterly period ended September 30, 2008 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 11, 2008

	/s/Stephen B. Waters
	Name: Stephen B. Waters
	Date: November 11, 2008

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.