-----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, M9xLYHDGe+Rxr7U4iy2Vy+99ZwhnL1nzYBrgN0TYoheyEkhW58fom20Ftypbjp3b iRSU92xblnB+LXZTGxODsA== 0000711642-02-000333.txt : 20021114 0000711642-02-000333.hdr.sgml : 20021114 20021114132104 ACCESSION NUMBER: 0000711642-02-000333 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20020930 FILED AS OF DATE: 20021114 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ANGELES PARTNERS XII CENTRAL INDEX KEY: 0000720392 STANDARD INDUSTRIAL CLASSIFICATION: REAL ESTATE [6500] IRS NUMBER: 953903623 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10QSB SEC ACT: 1934 Act SEC FILE NUMBER: 000-13309 FILM NUMBER: 02823649 BUSINESS ADDRESS: STREET 1: 55 BEATTIE PLACE STREET 2: POST OFFICE BOX 1089 CITY: GREENVILLE STATE: SC ZIP: 29602 BUSINESS PHONE: 3037578101 MAIL ADDRESS: STREET 1: 55 BEATTIE PLACE STREET 2: POST OFFICE BOX 1089 CITY: GREENVILLE STATE: SC ZIP: 29602 10QSB 1 ap12.txt AP12 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, 2002 [ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _________to _________ Commission file number 0-13309 ANGELES PARTNERS XII (Exact name of small business issuer as specified in its charter) California 95-3903623 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 55 Beattie Place, P.O. Box 1089 Greenville, South Carolina 29602 (Address of principal executive offices) (864) 239-1000 (Issuer's telephone number) PART I - FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS ANGELES PARTNERS XII CONSOLIDATED BALANCE SHEET (Unaudited) (in thousands, except unit data) September 30, 2002
Assets Cash and cash equivalents $ 1,757 Receivables and deposits 869 Restricted escrows 435 Other assets 1,914 Investment properties: Land $ 7,598 Buildings and related personal property 83,731 91,329 Less accumulated depreciation (63,810) 27,519 $ 32,494 Liabilities and Partners' Deficit Liabilities Accounts payable $ 212 Tenant security deposit liabilities 726 Accrued property taxes 457 Other liabilities 1,378 Mortgage notes payable 58,151 Partners' Deficit General partners $ (5) Limited partners (44,718 units issued and outstanding) (28,425) (28,430) $ 32,494 See Accompanying Notes to Consolidated Financial Statements
ANGELES PARTNERS XII CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) (in thousands, except per unit data)
Three Months Ended Nine Months Ended September 30, September 30, 2002 2001 2002 2001 (restated) (restated) Revenues: Rental income $ 4,252 $ 4,381 $12,859 $13,195 Other income 443 342 1,383 961 Casualty gain (Note C) -- 3 -- 69 Total revenues 4,695 4,726 14,242 14,225 Expenses: Operating 1,336 1,503 4,383 4,780 General and administrative 438 187 895 574 Depreciation 1,306 1,244 3,992 3,716 Interest 1,180 1,025 3,511 3,085 Property taxes 483 517 1,444 1,601 Total expenses 4,743 4,476 14,225 13,756 (Loss) income from continuing operations (48) 250 17 469 Loss from discontinued operations (Notes A and D) -- -- -- (821) Gain on sale of discontinued operations (Note D) -- 197 -- 13,118 Net (loss) income $ (48) $ 447 $ 17 $12,766 Net (loss) income allocated to general partners $ (1) $ 4 $ -- $ 583 Net (loss) income allocated to limited partners (47) 443 17 12,183 $ (48) $ 447 $ 17 $12,766 Per limited partnership unit: (Loss) income from continuing operations $ (1.05) $ 5.55 $ 0.38 $ 10.38 Loss from discontinued operations -- -- -- (18.19) Gain on sale of discontinued operations -- 4.36 -- 280.25 Net (loss) income $ (1.05) $ 9.91 $ 0.38 $272.44 Distributions per limited partnership unit $ -- $ 10.67 $ 66.73 $208.73 See Accompanying Notes to Consolidated Financial Statements
ANGELES PARTNERS XII CONSOLIDATED STATEMENT OF CHANGES IN PARTNERS' CAPITAL (DEFICIT) (Unaudited) (in thousands, except unit data)
Limited Partnership General Limited Units Partners Partners Total Original capital contributions 44,773 $ 1 $ 44,773 $ 44,774 Partners' capital (deficit) at December 31, 2001 44,718 $ 25 $(25,458) $(25,433) Distributions to partners -- (30) (2,984) (3,014) Net income for the nine months ended September 30, 2002 -- -- 17 17 Partners' deficit at September 30, 2002 44,718 $ (5) $(28,425) $(28,430) See Accompanying Notes to Consolidated Financial Statements
ANGELES PARTNERS XII CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (in thousands)
Nine Months Ended September 30, 2002 2001 Cash flows from operating activities: Net income $ 17 $ 12,766 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation 3,992 3,947 Amortization of discounts and loan costs 149 201 Gain on sale of discontinued operations -- (13,118) Loss on early extinguishment of debt -- 748 Casualty gain -- (69) Change in accounts: Receivables and deposits 443 1 Other assets (240) (90) Accounts payable (107) (270) Tenant security deposit liabilities (32) (89) Accrued property taxes (33) (230) Other liabilities 959 129 Net cash provided by operating activities 5,148 3,926 Cash flows from investing activities: Property improvements and replacements (1,353) (3,316) Net receipts from restricted escrows 414 204 Insurance proceeds received -- 82 Net proceeds from sale of discontinued operations -- 14,932 Net cash (used in) provided by investing activities (939) 11,902 Cash flows from financing activities: Payments on mortgage notes payable (837) (652) Repayment of mortgage notes payable -- (7,671) Distributions to partners (3,014) (9,888) Net cash used in financing activities (3,851) (18,211) Net increase (decrease) in cash and cash equivalents 358 (2,383) Cash and cash equivalents at beginning of period 1,399 3,872 Cash and cash equivalents at end of period $ 1,757 $ 1,489 Supplemental disclosure of cash flow information: Cash paid for interest $ 3,223 $ 3,152 Supplemental disclosure of cash flow information: Property improvements and replacements included in accounts payable $ 48 $ -- At December 31, 2001, accounts payable included approximately $157,000 for property improvements and replacements, which are included in property improvements and replacements for the nine months ended September 30, 2002. See Accompanying Notes to Consolidated Financial Statements
ANGELES PARTNERS XII NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) Note A - Basis of Presentation The accompanying unaudited consolidated financial statements of Angeles Partners XII (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"), 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, 2002, are not necessarily indicative of the results that may be expected for the fiscal year ending December 31, 2002. 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, 2001. The Managing General Partner is a wholly owned subsidiary of Apartment Investment and Management Company ("AIMCO"), a publicly traded real estate investment trust. Effective January 1, 2002, the Partnership adopted Statement of Financial Accounting Standards ("SFAS") No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets", which established standards for the way that public business enterprises report information about long-lived assets that are either being held for sale or have already been disposed of by sale or other means. The standard requires that results of operations for a long-lived asset that is being held for sale or has already been disposed of be reported as a discontinued operation on the statement of operations. As a result, the accompanying consolidated statements of operations have been restated as of January 1, 2001 to reflect the operations of Gateway Gardens and Briarwood Apartments as loss from discontinued operations. The Partnership recognized a loss from discontinued operations of approximately $821,000 on revenues of approximately $1,112,000 during the nine months ended September 30, 2001. Both properties were sold in May 2001 (see "Note D" for further discussion). The Partnership also adopted, effective April 1, 2002, SFAS No. 145, "Rescission of FASB Statements No. 4, 44 and 64". SFAS No. 4 "Reporting Gains and Losses from Extinguishment of Debt," required that all gains and losses from extinguishment of debt be aggregated and, if material, classified as an extraordinary item. SFAS No. 145 rescinds SFAS No. 4, and accordingly, gains and losses from extinguishment of debt should only be classified as extraordinary if they are unusual in nature and occur infrequently. Neither of these criteria applies to the Partnership. As a result, the accompanying consolidated statements of operations have been restated to reflect the loss on early extinguishment of debt at Gateway Gardens and Briarwood Apartments (see discussion above and "Note D") in discontinued operations rather than as an extraordinary item. Note B - Transactions with Affiliated Parties The Partnership has no employees and is dependent on the Managing General Partner and its affiliates for the management and administration of all Partnership activities. The Partnership Agreement provides for (i) payments to affiliates for services and (ii) reimbursement of certain expenses incurred by affiliates on behalf of the Partnership. Affiliates of the Managing General Partner are entitled to receive 5% of gross receipts from all of the Registrant's properties as compensation for providing property management services. The Registrant paid to such affiliates approximately $713,000 and $771,000 for the nine months ended September 30, 2002 and 2001, respectively, which is included in operating expenses and loss from discontinued operations. The Partnership Agreement provides for a fee equal to 7.5% of "net cash flow from operations", as defined in the Partnership Agreement to be paid to the Managing General Partner for executive and administrative management services. The Partnership expensed approximately $253,000 during the nine months ended September 30, 2002 which is included in other liabilities and general and administrative expenses. No such fee was earned during the nine months ended September 30, 2001. Affiliates of the Managing General Partner received reimbursement of accountable administrative expenses amounting to approximately $450,000 and $1,034,000 for the nine months ended September 30, 2002 and 2001, respectively, which is included in general and administrative expenses and investment properties. Included in these amounts are fees related to construction management services provided by an affiliate of the Managing General Partner of approximately $64,000 and $618,000 for the nine months ended September 30, 2002 and 2001, respectively. The construction management service fees are calculated based on a percentage of certain additions to investment properties. 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 distributions of $646,000 to the Managing General Partner related to the sales of Gateway Gardens Apartments and Briarwood Apartments in 2001 and Cooper Point Plaza in 1999. These distributions are 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 return this amount to the Partnership. Beginning in 2001, the Partnership began insuring its properties up to certain limits through coverage provided by AIMCO which is generally self-insured for a portion of losses and liabilities related to workers compensation, property casualty and vehicle liability. The Partnership insures its properties above the AIMCO limits through insurance policies obtained by AIMCO from insurers unaffiliated with the Managing General Partner. During the nine months ended September 30, 2002 and 2001, the Partnership was charged by AIMCO and its affiliates approximately $207,000 and $141,000, respectively, for insurance coverage and fees associated with policy claims administration. Note C - Casualty Gain During the nine months ended September 30, 2001, a net casualty gain of approximately $69,000 was recorded at Hunters Glen V Apartments. The casualty gain related to two separate fires which destroyed a total of seven units during May 2000. The gain was a result of receiving insurance proceeds of approximately $82,000, net of the write off of undepreciated fixed assets of approximately $13,000. Note D - Disposition of Investment Properties On May 11, 2001, the Partnership sold Gateway Gardens Apartments to an unrelated third party, for net proceeds of approximately $12,208,000 after payment of closing costs and a prepayment penalty owed by the Partnership and paid by the buyer. The Partnership realized a gain of approximately $10,813,000 as a result of the sale. The Partnership used approximately $6,146,000 of the net proceeds to repay the mortgages encumbering the property. In addition, the Partnership recorded a loss on early extinguishment of debt of approximately $596,000 as a result of prepayment penalties and unamortized loan costs and debt discount being written off which is included in loss from discontinued operations. On May 11, 2001, the Partnership sold Briarwood Apartments to an unrelated third party, for net proceeds of approximately $2,724,000 after payment of closing costs and a prepayment penalty owed by the Partnership and paid by the buyer. The Partnership realized a gain of approximately $2,305,000 as a result of the sale. The Partnership used approximately $1,525,000 of the net proceeds to repay the mortgages encumbering the property. In addition, the Partnership recorded a loss on early extinguishment of debt of approximately $152,000 as a result of prepayment penalties and unamortized loan costs and debt discount being written off which is included in loss from discontinued operations. Note E - 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 purports to assert claims on behalf of a class of limited partners and derivatively on behalf of a number of limited partnerships (including the Partnership) which 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 which 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 seek monetary damages and equitable relief, including judicial dissolution of the Partnership. On June 25, 1998, the Managing General Partner filed a motion seeking dismissal of the action. In lieu of responding to the motion, the plaintiffs filed an amended complaint. The Managing General Partner filed demurrers to the amended complaint which were heard February 1999. Pending the ruling on such demurrers, settlement negotiations commenced. On November 2, 1999, the parties executed and filed a Stipulation of Settlement, settling claims, subject to court approval, on behalf of the Partnership and all limited partners who owned units as of November 3, 1999. Preliminary approval of the settlement was obtained on November 3, 1999 from the Court, at which time the Court set a final approval hearing for December 10, 1999. Prior to the December 10, 1999 hearing, the Court received various objections to the settlement, including a challenge to the Court's preliminary approval based upon the alleged lack of authority of prior lead counsel to enter the settlement. On December 14, 1999, the Managing General Partner and its affiliates terminated the proposed settlement. In February 2000, counsel for some of the named plaintiffs filed a motion to disqualify plaintiff's lead and liaison counsel who negotiated the settlement. On June 27, 2000, the Court entered an order disqualifying them from the case and an appeal was taken from the order on October 5, 2000. On December 4, 2000, the Court appointed the law firm of Lieff Cabraser Heimann & Bernstein LLP as new lead counsel for plaintiffs and the putative class. Plaintiffs filed a third amended complaint on January 19, 2001. On March 2, 2001, the Managing General Partner and its affiliates filed a demurrer to the third amended complaint. On May 14, 2001, the Court heard the demurrer to the third amended complaint. On July 10, 2001, the Court issued an order sustaining defendants' demurrer on certain grounds. On July 20, 2001, Plaintiffs filed a motion for reconsideration of the Court's July 10, 2001 order granting in part and denying in part defendants' demurrer. On September 7, 2001, Plaintiffs filed a fourth amended class and derivative action complaint. On September 12, 2001, the Court denied Plaintiffs' motion for reconsideration. On October 5, 2001, the Managing General Partner and affiliated defendants filed a demurrer to the fourth amended complaint, which was heard on December 11, 2001. On February 2, 2002, the Court served its order granting in part the demurrer. The Court has dismissed without leave to amend certain of the plaintiffs' claims. On February 11, 2002, plaintiffs filed a motion seeking to certify a putative class comprised of all non-affiliated persons who own or have owned units in the partnerships. The Managing General Partner and affiliated defendants oppose the motion. On April 29, 2002, the Court held a hearing on plaintiffs' motion for class certification and took the matter under submission after further briefing, as ordered by the court, was submitted by the parties. On July 10, 2002, the Court entered an order vacating the current trial date of January 13, 2003 (as well as the pre-trial and discovery cut-off dates) and stayed the case in its entirety through November 7, 2002 so that the parties can have an opportunity to discuss settlement. On October 30, 2002, the court entered an order extending the stay in effect rhrough January 10, 2003. During the third quarter of 2001, a complaint (the "Heller action") was filed against the same defendants that are named in the Nuanes action, captioned Heller v. Insignia Financial Group. On or about August 6, 2001, plaintiffs filed a first amended complaint. The first amended complaint in the Heller action is brought as a purported derivative action, and asserts claims for among other things breach of fiduciary duty; unfair competition; conversion, unjust enrichment; and judicial dissolution. Plaintiffs in the Nuanes action filed a motion to consolidate the Heller action with the Nuanes action and stated that the Heller action was filed in order to preserve the derivative claims that were dismissed without leave to amend in the Nuanes action by the Court order dated July 10, 2001. On October 5, 2001, the Managing General Partner and affiliated defendants moved to strike the first amended complaint in its entirety for violating the Court's July 10, 2001 order granting in part and denying in part defendants' demurrer in the Nuanes action, or alternatively, to strike certain portions of the complaint based on the statute of limitations. Other defendants in the action demurred to the fourth amended complaint, and, alternatively, moved to strike the complaint. On December 11, 2001, the court heard argument on the motions and took the matters under submission. On February 4, 2002, the Court served notice of its order granting defendants' motion to strike the Heller complaint as a violation of its July 10, 2001 order in the Nuanes action. On March 27, 2002, the plaintiffs filed a notice appealing the order striking the complaint. The parties are currently in the midst of briefing that appeal. The Managing General Partner does not anticipate that any costs, whether legal or settlement costs, associated with these cases will be material to the Partnership's overall operations. The Partnership is unaware of any other pending or outstanding litigation this is not of a routine nature arising in the ordinary course of business. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION The Private Securities Litigation Reform Act of 1995 provides a "safe harbor" for forward-looking statements in certain circumstances. 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. The discussions of the Registrant's business and results of operations, including forward-looking statements pertaining to such matters, do not take into account the effects of any changes to the Registrant's business and results of operations. 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; 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 six apartment complexes. The following table sets forth the average occupancy of the properties for the nine months ended September 30, 2002 and 2001: Average Occupancy Property 2002 2001 Hunters Glen - IV Apartments 95% 96% Plainsboro, New Jersey Hunters Glen - V Apartments 95% 95% Plainsboro, New Jersey Hunters Glen - VI Apartments 96% 96% Plainsboro, New Jersey Chambers Ridge Apartments 94% 95% Harrisburg, Pennsylvania Twin Lake Towers Apartments 93% 93% Westmont, Illinois Pickwick Place Apartments 89% 90% Indianapolis, Indiana Results from Operations The Partnership recognized a net loss of approximately $48,000 for the three month period ending September 30, 2002 and net income of approximately $17,000 for the nine month period ending September 30, 2002 compared to net income of approximately $447,000 and $12,766,000 for the three and nine month periods ended September 30, 2001, respectively. The decrease in net income for the three and nine months ended September 30, 2002 is primarily due to the sale of Gateway Gardens and Briarwood Apartments in May 2001 and the recognition of a casualty gain at Hunters Glen V in 2001. Effective January 1, 2002, the Partnership adopted Statement of Financial Accounting Standards No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets", which established standards for the way that public business enterprises report information about long-lived assets that are either being held for sale or have already been disposed of by sale or other means. The standard requires that results of operations for a long-lived asset that is being held for sale or has already been disposed of be reported as a discontinued operation on the statement of operations. As a result, the accompanying consolidated statements of operations have been restated as of January 1, 2001 to reflect the operations of Gateway Gardens and Briarwood Apartments as loss from discontinued operations. The Partnership recognized a loss from discontinued operations of approximately $821,000 on revenues of approximately $1,112,000 during the nine months ended September 30, 2001. On May 11, 2001, the Partnership sold Gateway Gardens Apartments to an unrelated third party, for net proceeds of approximately $12,208,000 after payment of closing costs and a prepayment penalty owed by the Partnership and paid by the buyer. The Partnership realized a gain of approximately $10,813,000 as a result of the sale. The Partnership used approximately $6,146,000 of the net proceeds to repay the mortgages encumbering the property. On May 11, 2001, the Partnership sold Briarwood Apartments to an unrelated third party, for net proceeds of approximately $2,724,000 after payment of closing costs and a prepayment penalty owed by the Partnership and paid by the buyer. The Partnership realized a gain of approximately $2,305,000 as a result of the sale. The Partnership used approximately $1,525,000 of the net proceeds to repay the mortgages encumbering the property. During the nine months ended September 30, 2001, a net casualty gain of approximately $69,000 was recorded at Hunters Glen V Apartments. The casualty gain related to two separate fires which destroyed a total of seven units during May 2000. The gain was a result of receiving insurance proceeds of approximately $82,000, net of the write off of net fixed assets of approximately $13,000. The Partnership recognized a loss from continuing operations of approximately $48,000 for the three month period ending September 30, 2002 and income from continuing operations of approximately $17,000 for the nine months ended September 30, 2002, compared to income from continuing operations of approximately $250,000 and $469,000 for the three and nine months ended September 30, 2001, respectively. The decrease in income from continuing operations for the three months ended September 30, 2002 is due to an increase in total expenses and a decrease in total revenues. The decrease in income from continuing operations for the nine months ended September 30, 2002 is due to an increase in total expenses partially offset by an increase in total revenues. The increase in total expenses for the three and nine months ended September 30, 2002 was primarily the result of an increase in depreciation, general and administrative and interest expenses partially offset by decreases in operating and property tax expenses. Depreciation expense increased due to property improvements and replacements placed in service at the properties during the past twelve months. Interest expense increased due to the refinancing of the mortgages at Hunters Glen V Apartments and Hunters Glen VI Apartments in December 2001, which resulted in a higher average debt balance during 2002. See "Liquidity and Capital Resources" for further information. Operating expenses decreased due to a decrease in property and maintenance expenses. Property expenses decreased primarily due to decreases in utilities at Hunters Glen IV and Chambers Ridge and a decrease in salaries and related benefits at Hunters Glen V, Hunters Glen VI, and Twin Lake Towers. Maintenance expenses decreased primarily due to a decrease in contract services and supplies at all properties. Property tax expense decreased due to an increase in the assessed values at Hunters Glen IV, V and VI Apartments for 2000 which was paid during the nine months ended September 30, 2001. General and administrative expenses increased due to an increase in Partnership management fees as a result of an increase in cash flows which are used to calculate the fee pursuant to the Partnership Agreement and a new Partnership tax related to the investment properties in New Jersey partially offset by a decrease in the cost of services included in the management reimbursements to the Managing General Partner as allowed under the Partnership Agreement. Also included in general and administrative expense 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 the nine months ended September 30, 2002 is due to an increase in other income partially offset by a decrease in rental income and the recognition of a casualty gain at Hunters Glen V Apartments (see above) in 2001. The decrease in total revenues for the three months ended September 30, 2002 is due to a decrease in rental income partially offset by an increase in other income. Other income increased primarily due to an increase in utility reimbursements, mainly water and sewer, at several of the properties due to submetering projects completed in the latter part of 2001. Rental income decreased due to decreases in occupancy at Hunter's Glen IV, Chambers Ridge Apartments and Pickwick Place and decreases in rental rates at all properties. As part of the ongoing business plan of the Partnership, the Managing General Partner monitors the rental market environment at 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, due to changing market conditions, which can result in the use of rental concessions and rental reductions to offset softening market conditions, there is no guarantee that the Managing General Partner will be able to sustain such a plan. Liquidity and Capital Resources At September 30, 2002, the Partnership had cash and cash equivalents of approximately $1,757,000 compared to approximately $1,489,000 at September 30, 2001. Cash and cash equivalents increased approximately $358,000 since December 31, 2001 due to approximately $5,148,000 of cash provided by operating activities partially offset by approximately $3,851,000 and $939,000 of cash used in financing and investing activities, respectively. Cash used in financing activities consisted of principal payments made on the mortgages encumbering the Registrant's properties and distributions to partners. Cash used in investing activities consisted of property improvements and replacements partially offset by net receipts from restricted escrows maintained by the mortgage lenders. The Registrant 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 investment 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 and is studying new federal laws, including the Sarbanes-Oxley Act of 2002. 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, including increased legal and audit fees. Capital improvements planned for each of the Partnership's properties are detailed below. Hunters Glen Apartments IV For 2002, the Partnership has budgeted approximately $127,000 in capital improvements at Hunters Glen IV Apartments consisting primarily of floor covering and appliance replacements and parking lot resurfacing. During the nine months ended September 30, 2002, the Partnership spent approximately $202,000 in budgeted and unbudgeted capital improvements consisting primarily of clubhouse renovations, air conditioning, structural, lighting and plumbing upgrades and floor covering replacements. These improvements were funded from operating cash flow and replacement reserves. Additional improvements may be considered and will depend on the physical condition of the property as well as the anticipated cash flow generated by the property and replacement reserves. Hunters Glen Apartments V For 2002, the Partnership has budgeted approximately $166,000 in capital improvements at Hunters Glen V Apartments consisting primarily of floor covering and appliance replacements, electrical upgrades, parking lot resurfacing and light fixture replacement. During the nine months ended September 30, 2002, the Partnership spent approximately $303,000 in budgeted and unbudgeted capital improvements consisting primarily of clubhouse renovations lighting and structural upgrades and floor covering replacements. These improvements were funded from operating cash flow. Additional improvements may be considered and will depend on the physical condition of the property as well as the anticipated cash flow generated by the property. Hunters Glen Apartments VI For 2002, the Partnership has budgeted approximately $150,000 in capital improvements at Hunters Glen VI Apartments consisting primarily of floor covering and appliance replacements, electrical upgrades, and parking lot resurfacing. During the nine months ended September 30, 2002, the Partnership spent approximately $241,000 in budgeted and unbudgeted capital improvements consisting primarily of floor covering replacements, clubhouse renovations, and lighting and air conditioning upgrades. These improvements were funded from operating cash flow. Additional improvements may be considered and will depend on the physical condition of the property as well as the anticipated cash flow generated by the property and replacement reserves. Chambers Ridge Apartments For 2002, the Partnership has budgeted approximately $251,000 in capital improvements at Chambers Ridge Apartments consisting primarily of a new fire suppression system and floor covering and appliance replacements. During the nine months ended September 30, 2002, the Partnership spent approximately $125,000 in capital improvements consisting primarily of floor covering replacements, swimming pool and sewer upgrades and major landscaping. These improvements were funded from operating cash flow. Additional improvements may be considered and will depend on the physical condition of the property as well as the anticipated cash flow generated by the property and replacement reserves. Twin Lake Towers Apartments For 2002, the Partnership has budgeted approximately $260,000 in capital improvements at Twin Lake Towers Apartments consisting primarily of floor covering and appliance replacements and heating and air conditioning upgrades. During the nine months ended September 30, 2002, the Partnership spent approximately $245,000 in capital improvements consisting primarily of maintenance equipment and floor covering and furniture and fixture replacements. These improvements were funded from operating cash flow. Additional improvements may be considered and will depend on the physical condition of the property as well as the anticipated cash flow generated by the property and replacement reserves. Pickwick Place Apartments For 2002, the Partnership has budgeted approximately $126,000 in capital improvements at Pickwick Place Apartments consisting primarily of floor covering and appliance replacements. During the nine months ended September 30, 2002, the Partnership spent approximately $128,000 in budgeted and unbudgeted capital improvements consisting primarily of building improvements, air conditioning upgrades, interior decoration, structural upgrades, major landscaping, and floor covering and appliance replacements. These improvements were funded from operating cash flow and replacement reserves. Additional improvements may be considered and will depend on the physical condition of the property as well as the anticipated cash flow generated by the property and replacement reserves. Additional capital expenditures will be incurred only if cash is available from operations or from Partnership reserves. To the extent that such budgeted capital improvements are completed, the Registrant's distributable cash flow, if any, may be adversely affected at least in the short term. On December 20, 2001, the Partnership refinanced the mortgages encumbering Hunters Glen Apartments V. The refinancing replaced first and second mortgage indebtedness of approximately $8,511,000 with a new mortgage in the amount of $14,332,000. The new mortgage carries a stated interest rate of 7.14%. The interest rate on the old mortgages was 7.83%. Principal and interest payments on the mortgage loan are due monthly until the mortgage matures in January 2022 at which time it is scheduled to be fully amortized. On December 20, 2001, the Partnership refinanced the mortgages encumbering Hunters Glen Apartments VI. The refinancing replaced first and second mortgage indebtedness of approximately $8,858,000 with a new mortgage in the amount of $14,918,000. The new mortgage carries a stated interest rate of 7.14%. The interest rate on the old mortgages was 7.83%. Principal and interest payments on the mortgage loan are due monthly until the mortgage matures in January 2022 at which time it is scheduled to be fully amortized. The Registrant's current assets are thought to be sufficient for any near-term needs (exclusive of capital improvements) of the Registrant. The Registrant's mortgage indebtedness encumbering Hunter's Glen V and VI Apartments of approximately $28,800,000 matures in January 2022 at which time it is scheduled to be fully amortized. The mortgage indebtedness encumbering the remaining properties of approximately $29,351,000, net of unamortized discounts, has maturity dates ranging from October 2003 to May 2005, during which time balloon payments totaling $28,719,000 are due. The Managing General Partner may attempt to refinance such indebtedness with balloon payments and/or sell the properties subject to such encumbrances prior to such 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, 2002 and 2001 (in thousands except per unit data):
Nine Months Per Nine Months Per Ended Limited Ended Limited September 30, Partnership September 30, Partnership 2002 Unit 2001 Unit Operations $1,893 $ 41.91 $3,634 $ 80.46 Refinancing (1) 1,121 24.82 -- -- Sale (2) -- -- 6,254 128.27 $3,014 $ 66.73 $9,888 $208.73
(1) From the December 2001 refinancings of Hunters Glen V and Hunters Glen VI Apartments. (2) From the 2001 sales of Briarwood and Gateway Gardens Apartments. Future cash distributions will depend on the levels of net cash generated from operations, the availability of cash reserves and the timing of the 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 that the Partnership will generate sufficient funds from operations, after required capital improvement expenditures, to permit further distributions to its partners during the remainder of 2002 or subsequent periods. Other In addition to its indirect ownership of the general partner interests in the Partnership, AIMCO and its affiliates owned 30,921 limited partnership units (the "Units") in the Partnership representing 69.15% of the outstanding Units at September 30, 2002. 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 of limited partnership interest in the Partnership in exchange for cash or a combination of cash and units in the operating partnership of AIMCO either through private purchases or tender offers. Under the Partnership Agreement, unitholders holding a majority of the Units are entitled to take action with respect to a variety of matters which would include voting on certain amendments to the Partnership Agreement and voting to remove the Managing General Partner. As a result of its ownership of 69.15% of the outstanding Units, AIMCO is in a position to control all voting decisions with respect to the Registrant. 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 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 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 an impairment in the Partnership's assets. Revenue Recognition The Partnership generally leases apartment units for twelve-month terms or less. Rental income attributable to leases is recognized monthly as it is earned. The Partnership will offer rental concessions during particularly slow months or in response to heavy competition from other similar complexes in the area. Concessions are charged to income as incurred. ITEM 3. CONTROLS AND PROCEDURES 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, within 90 days of the filing date of this quarterly report, evaluated the effectiveness of the Partnership's disclosure controls and procedures (as defined in Exchange Act Rules (13a-14(c) and (15d-14(c)) and have determined that such disclosure controls and procedures are adequate. There have been no significant changes in the Partnership's internal controls or in other factors that could significantly affect the Partnership's internal controls since the date of evaluation. The Partnership does not believe any significant deficiencies or material weaknesses exist in the Partnership's internal controls. Accordingly, no corrective actions have been taken. PART II - OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS In March 1998, several putative unitholders 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 purports to assert claims on behalf of a class of limited partners and derivatively on behalf of a number of limited partnerships (including the Partnership) which 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 which 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 seek monetary damages and equitable relief, including judicial dissolution of the Partnership. On June 25, 1998, the Managing General Partner filed a motion seeking dismissal of the action. In lieu of responding to the motion, the plaintiffs filed an amended complaint. The Managing General Partner filed demurrers to the amended complaint which were heard February 1999. Pending the ruling on such demurrers, settlement negotiations commenced. On November 2, 1999, the parties executed and filed a Stipulation of Settlement, settling claims, subject to court approval, on behalf of the Partnership and all limited partners who owned units as of November 3, 1999. Preliminary approval of the settlement was obtained on November 3, 1999 from the Court, at which time the Court set a final approval hearing for December 10, 1999. Prior to the December 10, 1999 hearing, the Court received various objections to the settlement, including a challenge to the Court's preliminary approval based upon the alleged lack of authority of prior lead counsel to enter the settlement. On December 14, 1999, the Managing General Partner and its affiliates terminated the proposed settlement. In February 2000, counsel for some of the named plaintiffs filed a motion to disqualify plaintiff's lead and liaison counsel who negotiated the settlement. On June 27, 2000, the Court entered an order disqualifying them from the case and an appeal was taken from the order on October 5, 2000. On December 4, 2000, the Court appointed the law firm of Lieff Cabraser Heimann & Bernstein LLP as new lead counsel for plaintiffs and the putative class. Plaintiffs filed a third amended complaint on January 19, 2001. On March 2, 2001, the Managing General Partner and its affiliates filed a demurrer to the third amended complaint. On May 14, 2001, the Court heard the demurrer to the third amended complaint. On July 10, 2001, the Court issued an order sustaining defendants' demurrer on certain grounds. On July 20, 2001, Plaintiffs filed a motion for reconsideration of the Court's July 10, 2001 order granting in part and denying in part defendants' demurrer. On September 7, 2001, Plaintiffs filed a fourth amended class and derivative action complaint. On September 12, 2001, the Court denied Plaintiffs' motion for reconsideration. On October 5, 2001, the Managing General Partner and affiliated defendants filed a demurrer to the fourth amended complaint, which was heard on December 11, 2001. On February 2, 2002, the Court served its order granting in part the demurrer. The Court has dismissed without leave to amend certain of the plaintiffs' claims. On February 11, 2002, plaintiffs filed a motion seeking to certify a putative class comprised of all non-affiliated persons who own or have owned units in the partnerships. The Managing General Partner and affiliated defendants oppose the motion. On April 29, 2002, the Court held a hearing on plaintiffs' motion for class certification and took the matter under submission after further briefing, as ordered by the court, was submitted by the parties. On July 10, 2002, the Court entered an order vacating the current trial date of January 13, 2003 (as well as the pre-trial and discovery cut-off dates) and stayed the case in its entirety through November 7, 2002 so that the parties can have an opportunity to discuss settlement. On October 30, 2002, the court entered an order extending the stay in effect rhrough January 10, 2003. During the third quarter of 2001, a complaint (the "Heller action") was filed against the same defendants that are named in the Nuanes action, captioned Heller v. Insignia Financial Group. On or about August 6, 2001, plaintiffs filed a first amended complaint. The first amended complaint in the Heller action is brought as a purported derivative action, and asserts claims for among other things breach of fiduciary duty; unfair competition; conversion, unjust enrichment; and judicial dissolution. Plaintiffs in the Nuanes action filed a motion to consolidate the Heller action with the Nuanes action and stated that the Heller action was filed in order to preserve the derivative claims that were dismissed without leave to amend in the Nuanes action by the Court order dated July 10, 2001. On October 5, 2001, the Managing General Partner and affiliated defendants moved to strike the first amended complaint in its entirety for violating the Court's July 10, 2001 order granting in part and denying in part defendants' demurrer in the Nuanes action, or alternatively, to strike certain portions of the complaint based on the statute of limitations. Other defendants in the action demurred to the fourth amended complaint, and, alternatively, moved to strike the complaint. On December 11, 2001, the court heard argument on the motions and took the matters under submission. On February 4, 2002, the Court served notice of its order granting defendants' motion to strike the Heller complaint as a violation of its July 10, 2001 order in the Nuanes action. On March 27, 2002, the plaintiffs filed a notice appealing the order striking the complaint. The parties are currently in the midst of briefing that appeal. The Managing General Partner does not anticipate that any costs, whether legal or settlement costs, associated with these cases will be material to the Partnership's overall operations. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K a) Exhibits: Exhibit 3.1, Amended Certificate and Agreement of Limited Partnership dated May 26, 1983 filed in Form S-11 dated June 2, 1983 and is incorporated herein by reference. Exhibit 99, Certification of Chief Executive Officer and Chief Financial Officer. b) Reports on Form 8-K filed during the quarter ended September 30, 2002: None. SIGNATURES In accordance with the requirements of the Exchange Act, the Registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. ANGELES PARTNERS XII By: Angeles Realty Corporation II Managing General Partner By: /s/Patrick J. Foye Patrick J. Foye Executive Vice President By: /s/Thomas C. Novosel Thomas C. Novosel Senior Vice President and Chief Accounting Officer Date: November 14, 2002 CERTIFICATION I, Patrick J. Foye, certify that: 1. I have reviewed this quarterly report on Form 10-QSB of Angeles Partners XII; 2. Based on my knowledge, this quarterly 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 quarterly report; 3. Based on my knowledge, the financial statements, and other financial information included in this quarterly 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 quarterly report; 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have: a) Designed such disclosure controls and procedures 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 quarterly report is being prepared; b) Evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and c) Presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions): a) All significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and 6. The registrant's other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. Date: November 13, 2002 _______________________ Patrick J. Foye Executive Vice President of Angeles Realty Corporation II, equivalent of the chief executive officer of the Partnership CERTIFICATION I, Paul J. McAuliffe, certify that: 1. I have reviewed this quarterly report on Form 10-QSB of Angeles Partners XII; 2. Based on my knowledge, this quarterly 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 quarterly report; 3. Based on my knowledge, the financial statements, and other financial information included in this quarterly 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 quarterly report; 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have: a) Designed such disclosure controls and procedures 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 quarterly report is being prepared; b) Evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and c) Presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions): a) All significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and 6. The registrant's other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. Date: November 13, 2002 _______________________ Paul J. McAuliffe Executive Vice President and Chief Financial Officer of Angeles Realty Corporation II, equivalent of the chief financial officer of the Partnership Exhibit 99 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 Partners XII (the "Partnership"), for the quarterly period ended September 30, 2002 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), Patrick J. Foye, as the equivalent of the chief executive officer of the Partnership, and Paul J. McAuliffe, 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. ____________________ Name: Patrick J. Foye Date: November 13, 2002 ____________________ Name: Paul J. McAuliffe Date: November 13, 2002 This certification accompanies the Report pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and shall not, except to the extent required by the Sarbanes-Oxley Act of 2002, be deemed filed by the Partnership for purposes of Section 18 of the Securities Exchange Act of 1934, as amended. -----END PRIVACY-ENHANCED MESSAGE-----