-----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, VHwCFCFcPye7dEn2XCtgXF+KnNn3f3oX5Qr6WfxAw/eJiwhVISx+aCu1sFoRsqCO kl9uVL0MxywxP+v8dzDqEg== 0000720460-99-000009.txt : 19990402 0000720460-99-000009.hdr.sgml : 19990402 ACCESSION NUMBER: 0000720460-99-000009 CONFORMED SUBMISSION TYPE: 10KSB PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19981231 FILED AS OF DATE: 19990331 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: 10KSB SEC ACT: SEC FILE NUMBER: 000-13309 FILM NUMBER: 99580264 BUSINESS ADDRESS: STREET 1: 1873 SOUTH BELLAIRE STREET STREET 2: 17TH FLOOR CITY: DENVER STATE: CO ZIP: 80222 BUSINESS PHONE: 3037578101 MAIL ADDRESS: STREET 1: 1873 SOUTH BELLAIRE STREET STREET 2: 17TH FLOOR CITY: DENVER STATE: CO ZIP: 80222 10KSB 1 FORM 10-KSB-ANNUAL OR TRANSITIONAL REPORT UNDER SECTION 13 OR 15(D) FORM 10-KSB (Mark One) [X] ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 [No Fee Required] For the fiscal year ended December 31, 1998 [ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 [No Fee Required] For the transition period from __________to___________ Commission file number 0-13309 ANGELES PARTNERS XII (Name of small business issuer 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) Issuer's telephone number (864) 239-1000 Securities registered under Section 12(b) of the Exchange Act: None Securities registered under Section 12(g) of the Exchange Act: Limited Partnership Units (Title of class) Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X] No Check if there is no disclosure of delinquent filers in response to Item 405 of Regulation S-B contained in this form, and no disclosure will be contained, to the best of registrant's knowledge in definitive proxy or information statements incorporated by reference in Part III of this Form 10-KSB or any amendment to this Form 10-KSB.X] State issuer's revenues for its most recent fiscal year. $22,411,000 State the aggregate market value of the voting partnership interests held by nonaffiliates computed by reference to the price at which the partnership interests were sold, or the average bid and asked prices of such partnership interests, as of December 31, 1998. No market exists for the limited partnership interests of the Registrant, and, therefore, no aggregate market value can be determined. DOCUMENTS INCORPORATED BY REFERENCE NONE PART I ITEM 1. DESCRIPTION OF BUSINESS Angeles Partners XII (the "Partnership" or the "Registrant") is a publicly-held limited partnership organized under the California Uniform Limited Partnership Act on May 26, 1983. The Partnership's Managing General Partner is Angeles Realty Corporation II ("ARC II" or the "Managing General Partner"), a California corporation and wholly-owned subsidiary of MAE GP Corporation ("MAE GP"). Effective February 25, 1998, MAE GP was merged into Insignia Properties Trust ("IPT"), which was an affiliate of Insignia Financial Group, Inc. ("Insignia"). Effective February 26, 1999, IPT was merged into Apartment Investment and Management Company ("AIMCO"). Thus the Managing General Partner is now a wholly-owned subsidiary of AIMCO. The Elliott Accommodation Trust and the Elliott Family Partnership, a California limited partnership, were the Non- Managing General Partners. Effective December 31, 1997, the Elliott Family Partnership, Ltd., acquired the Elliott Accommodation Trust's general partner interest in the Registrant. The Managing General Partner and the Non-Managing General Partner are herein collectively referred to as the "General Partners". The Partnership Agreement provides that the Partnership is to terminate on December 31, 2035 unless terminated prior to such date. Commencing May 26, 1983, the Registrant offered pursuant to a Registration Statement filed with the Securities and Exchange Commission up to 80,000 Units of Limited Partnership Interest at a purchase price of $1,000 per Unit with a minimum purchase of 5 Units. The Managing General Partner contributed capital in the amount of $1,000 for a 1% interest in the Partnership. The offering terminated on February 13, 1985. Upon termination of the offering, the Registrant had sold 44,773 units aggregating $44,773,000. The Registrant is engaged in the business of operating and holding real properties for investment. In 1984 and 1985 during its acquisition phase, the Registrant acquired ten existing apartment properties and one existing commercial property. During 1991, the Registrant acquired a 44.5% general partnership interest in a joint venture along with two other related limited partnerships. In 1990, the Registrant lost one of its apartment properties to foreclosure. As of December 31, 1998, the Partnership continues to own and operate ten investment properties and a general partnership interest in an eleventh property. On January 4, 1999, subsequent to the Partnership's fiscal year end, the Partnership sold its only commercial property to an unaffiliated third party. The Partnership also had a 44.5% investment in Princeton Meadows Golf Course Joint Venture ("Joint Venture"). On February 26, 1999, the Joint Venture sold its only investment property, Princeton Meadows Golf Course, to an unaffiliated third party (See "Subsequent Events" below and "Item 2, Description of Properties"). The Managing General Partner of the Partnership intends to maximize the operating results and, ultimately, the net realizable value of each of the Partnership's properties in order to achieve the best possible return for the investors. Such results may best be achieved through property sales, refinancings, debt restructurings or relinquishment of the assets. The Partnership intends to evaluate each of its holdings periodically to determine the most appropriate strategy for each of the assets. The Managing General Partner's policy is to only commit cash from operations and financings secured by the real property to support operations, capital improvements and repayment of debt on a property specific basis. The Registrant has no full time employees. The Managing General Partner is vested with full authority as to the general management and supervision of the business and affairs of the Partnership. Limited Partners and the Non-Managing General Partner have no right to participate in the management or conduct of such business and affairs. An affiliate of the Managing General Partner provides property management services for the Partnership's residential properties and the Partnership's commercial property until October 1, 1998. Effective October 1, 1998, property management services were performed at the Partnership's commercial property by an unrelated party. The real estate business in which the Partnership is engaged is highly competitive. There are other residential and commercial properties within the market area of the Registrant's properties. The number and quality of competitive properties, including those which may be managed by an affiliate of the Managing General Partner in such market area, could have a material effect on the rental market for apartments and commercial space owned by the Registrant and the rents that may be charged for such apartments and space. While the Managing General Partner and its affiliates are a significant factor in the United States in the apartment industry, competition for the apartments is local. In addition, various limited partnerships have been formed by the Managing General Partner and/or affiliates to engage in business which may be competitive with the Registrant. Both the income and expenses of operating the remaining properties owned by the Partnership are subject to factors outside of the Partnership's control, such as an oversupply of similar properties resulting from overbuilding, increases in unemployment or population shifts, reduced availability of permanent mortgage financing, changes in zoning laws, or changes in patterns or needs of users. In addition, there are risks inherent in owning and operating residential and commercial properties because such properties are susceptible to the impact of economic and other conditions outside of the control of the Partnership. There have been, and it is possible there may be other, Federal, state and local legislation and regulations enacted relating to the protection of the environment. The Partnership is unable to predict the extent, if any, to which such new legislation or regulations might occur and the degree to which such existing or new legislation or regulations might adversely affect the properties owned by the Partnership. The Partnership monitors its properties for evidence of pollutants, toxins and other dangerous substances, including the presence of asbestos. In certain cases, environmental testing has been performed which resulted in no material adverse conditions or liabilities. In no case has the Partnership received notice that it is a potentially responsible party with respect to an environmental clean up site. However, the Joint Venture, in which the partnership had an equity interest, was responsible for an environmental clean- up. Upon the sale of the Princeton Meadows Golf Course, the Joint Venture received documents from the purchaser releasing the Joint Venture from any further responsibility or liability with respect to the clean-up (see "Item 7. Financial Statements _ Note G"). A further description of the Partnership's business is included in "Management's Discussion and Analysis or Plan of Operation" included in "Item 6." of this 10- KSB. Transfer of Control Pursuant to a series of transactions which closed on October 1, 1998 and February 26, 1999, Insignia Financial Group, Inc. and Insignia Properties Trust merged into Apartment Investment and Management Company ("AIMCO"), a publicly traded real estate investment trust, with AIMCO being the surviving corporation (the "Insignia Merger"). As a result, AIMCO ultimately acquired a 100% ownership interest in Insignia Properties Trust ("IPT"), the entity which controls the Managing General Partner. The Managing General Partner does not believe that this transaction will have a material effect on the affairs and operations of the Partnership. Subsequent Events On January 4, 1999, the Registrant sold Cooper Point Plaza to an unaffiliated third party for net sales proceeds of approximately $2,011,000 after payment of closing costs. The Registrant realized a gain of approximately $2,400,000 on the sale and a related $556,000 extraordinary loss on early extinguishment of debt. On February 26, 1999, the Joint Venture sold the Princeton Meadows Golf Course to an unaffiliated third party for gross sale proceeds of $5,100,000. The Joint Venture received net proceeds of $3,452,000 after payment of closing costs, resulting in a gain on sale of approximately $2,932,000. The Partnership's 1999 pro-rata share of this gain is expected to be approximately $1,305,000. Furthermore, as a result of the sale, unamortized loan costs in the amount of $6,500 were written off. This resulted in an extraordinary loss on early extinguishment of debt of approximately $6,500. The Partnership's 1999 pro-rata share of this extraordinary loss is expected to be approximately $3,000. ITEM 2. DESCRIPTION OF PROPERTIES: The following table sets forth the Registrant's investments in properties as of December 31, 1998:
Date of Property Purchase Type of Ownership Use Briarwood Apartments 06/25/85 Fee ownership subject to Apartment Cedar Rapids, Iowa first and second mortgages (2)73 units Chambers Ridge Apartments 07/26/84 Fee ownership subject to Apartment Harrisburg, Pennsylvania first and second mortgages (2)324 units Cooper Point Plaza (1) 12/14/84 Fee ownership subject to Retail Center Olympia, Washington a first mortgage 103,473 sq.ft. Gateway Gardens Apartments 12/21/84 Fee ownership subject to Apartment Cedar Rapids, Iowa first and second mortgages (2)328 units Hunters Glen Apartments - IV 01/31/85 Fee ownership subject to Apartment Plainsboro, New Jersey a first mortgage (2) 264 units Hunters Glen Apartments - V 01/31/85 Fee ownership subject to Apartment Plainsboro, New Jersey first and second mortgages (2)304 units Hunters Glen Apartments - VI 01/31/85 Fee ownership subject to Apartment Plainsboro, New Jersey first and second mortgages (2)328 units Pickwick Place Apartments 05/11/84 Fee ownership subject to Apartment Indianapolis, Indiana a first mortgage (2) 336 units Southpointe Apartments 06/12/85 Fee ownership subject to Apartment Bedford Heights, Ohio a first mortgage 499 units Twin Lake Towers Apartments 03/30/84 Fee ownership subject to Apartment Westmont, Illinois first and second mortgages (2)399 units
(1)On January 4, 1999, Cooper Point Plaza was sold to an unaffiliated third party. (See "Note J" of the Financial Statements included in "Item 7."). (2)Property is held by a Limited Partnership which the Registrant ultimately owns a 100% interest in. The Partnership also had a 44.5% interest in Princeton Golf Course Joint Venture ("Joint Venture"). The Partnership entered into a General Partnership Agreement with Angeles Income Properties, Ltd. II and Angeles Partners XI, both California partnerships and affiliates of the Managing General Partner, to form the Joint Venture. On February 26, 1999, the Joint Venture sold its only investment property, Princeton Meadows Golf Course, to an unaffiliated third party. (See "Note J" of the Financial Statements included in "Item 7.") The property owned by the Joint Venture, as of December 31, 1998, is summarized as follows: Date of Property Purchase Type of Ownership Use Princeton Meadows Golf Course 07/26/91 Fee ownership subject to Golf Course Princeton, New Jersey a first mortgage The Joint Venture is carried on the Partnership's balance sheet on the equity method of accounting and is included in "Investment in Joint Venture" (see "Item 7"). SCHEDULE OF PROPERTIES: Set forth below for each of the Registrant's properties is the gross carrying value, accumulated depreciation, depreciable life, method of depreciation and Federal tax basis. Gross Carrying Accumulated Federal Property Value Depreciation Rate Method Tax Basis (in thousands) (in thousands) Briarwood Apartments $ 1,867 $ 1,190 5-40 yrs (1) $ 664 Chambers Ridge Apartments 9,986 6,796 5-40 yrs (1) 3,257 Cooper Point Plaza 8,865 5,406 5-40 yrs (1) 4,588 Gateway Gardens Apartments 7,816 5,358 5-40 yrs (1) 2,330 Hunters Glen Apartments-IV 11,290 6,846 5-40 yrs (1) 4,240 Hunters Glen Apartments-V 13,132 7,991 5-40 yrs (1) 4,874 Hunters Glen Apartments-VI 14,168 8,607 5-40 yrs (1) 5,204 Pickwick Place Apartments 9,626 5,712 5-40 yrs (1) 3,663 Southpointe Apartments 10,138 6,890 5-40 yrs (1) 3,007 Twin Lake Towers Apartments 15,525 10,479 5-40 yrs (1) 4,241 $ 102,413 $ 65,275 $ 36,068 (1) Straight line and accelerated See "Note A" of the financial statements included in "Item 7." for a description of the Partnership's depreciation policy. SCHEDULE OF PROPERTY INDEBTEDNESS: The following table sets forth certain information relating to the loans encumbering the Registrant's properties.
Principal Principal Balance At Balance December 31, Interest Period Maturity Due At Property 1998 Rate Amortized Date Maturity (3) (in thousands) (in thousands) Briarwood Apartments 1st mortgage $ 1,535 7.83% 28.67 yrs 10/2003 $ 1,404 2nd mortgage 50 7.83% (1) 10/2003 50 Chambers Ridge Apartments 1st mortgage 5,304 7.83% 28.67 yrs 10/2003 4,849 2nd mortgage 174 7.83% (1) 10/2003 174 Cooper Point Plaza 1st mortgage 3,906 10.5% 28 yrs 09/2012 43 Gateway Gardens Apartments 1st mortgage 6,187 7.83% 28.67 yrs 10/2003 5,657 2nd mortgage 203 7.83% (1) 10/2003 203 Hunters Glen Apartments-IV 1st mortgage 8,267 8.43% 28.67 yrs 10/2003 7,787 Hunters Glen Apartments-V 1st mortgage 8,662 7.83% 28.67 yrs 10/2003 7,920 2nd mortgage 285 7.83% (1) 10/2003 285 Hunters Glen Apartments-VI 1st mortgage 9,016 7.83% 28.67 yrs 10/2003 8,243 2nd mortgage 297 7.83% (1) 10/2003 297 Pickwick Place Apartments 1st mortgage 6,383 9.1% 28 yrs 05/2005 5,775 Southpointe Apartments 1st mortgage (in default)(2) 11,000 8.59% (1) 01/2002 11,000 Additional borrowing (in default)(2) 17 9.00% (2) 01/2002 1 Twin Lake Towers Apartments 1st mortgage 10,700 7.83% 28.67 yrs 10/2003 9,782 2nd mortgage 352 7.83% (1) 10/2003 352 72,338 $ 63,822 Less unamortized discounts (987) $ 71,351
(1)Interest only payments. (2) The mortgage note secured by Southpointe Apartments was modified as of December 31, 1997. The modification agreement extended the term of the mortgage note from July 1999 to January 2002. The lender also agreed to advance to the Partnership an amount up to $180,000 for the payment of real estate taxes. The lender advanced approximately $23,000 to the Partnership for this purpose in 1997. See "Capital Resources and Liquidity" in "Item 6." for more information. (3) See "Item 7. Financial Statements _ Note C" for information with respect to the Registrant's ability to prepay these loans and more specific details as to the terms of the loans. RENTAL RATES AND OCCUPANCY: Average annual rental rate and occupancy for 1998 and 1997 for each property: Average Annual Average Annual Rental Rates Occupancy Property 1998 1997 1998 1997 Briarwood Apartments $6,638/unit $6,485/unit 97% 96% Chambers Ridge Apartments 6,928/unit 6,874/unit 92% 91% Cooper Point Plaza (3) 11.40/s.f. 11.40/s.f. 53% 53% Gateway Gardens Apartments 6,507/unit 6,331/unit 96% 94% Hunters Glen Apartments - IV 8,950/unit 8,702/unit 97% 96% Hunters Glen Apartments - V 8,995/unit 8,831/unit 97% 96% Hunters Glen Apartments - VI 8,846/unit 8,712/unit 96% 96% Pickwick Place Apartments (1) 6,947/unit 6,805/unit 95% 91% Southpointe Apartments (2) 5,726/unit 5,654/unit 70% 63% Twin Lake Towers Apartments 8,635/unit 8,269/unit 97% 97% (1) Occupancy increased at Pickwick Place Apartments due to rental concessions which have been offered in an effort to increase occupancy. (2) The mortgage indebtedness encumbering this property was modified in December 1997. As part of the agreement, the Partnership was required to advance funds of $150,000 to Southpointe Apartments for capital improvement projects. As of December 31, 1998, all of the improvements to be covered by this advance have been completed. Southpointe Apartments' low occupancy is due to delays in renovations and the past poor condition of the property. There continues to be extensive renovations that need to be completed at the property, however, there is not enough cash flow to complete these renovations. During March 1999 the property notified the mortgage lender that it would not be making the required monthly interest payments due to cash flow problems. The Managing General Partner is currently evaluating its options with respect to this property, however, no additional funds from the Partnership will be committed to the property at this time. (3) On January 4, 1999, the Registrant sold it's only commercial property, Cooper Point Plaza to an unaffiliated third party for net sales proceeds of $2,011,000 after payment of closing costs. The Registrant realized a gain of approximately $2,400,000 on the sale and a related $556,000 extraordinary loss on early extinguishment of debt. As noted under "Item 1. Description of Business", the real estate industry is highly competitive. All of the properties of the Partnership are subject to competition from other residential apartment complexes and commercial buildings in the area. The Managing General Partner believes that all of the properties are adequately insured. The residential properties are apartment complexes which lease units for terms of one year or less. As of December 31, 1998, no residential or commercial tenant leases 10% or more of the available rental space. All of the properties, except Southpointe Apartments, are in good physical condition subject to normal depreciation and deterioration as is typical for assets of this type and age. As noted above Southpointe is in need of extensive renovations, however, future levels of cash flow are not anticipated to be sufficient to complete all of the renovations. REAL ESTATE TAXES AND RATES: Real estate taxes and rates in 1998 for each property were: 1998 1998 Billing Rate (in thousands) Briarwood Apartments $ 77* 3.48% Chambers Ridge Apartments 161 2.78% Cooper Point Plaza 104 1.55% Gateway Gardens Apartments 257** 3.07% Hunters Glen Apartments _ IV 296 2.62% Hunters Glen Apartments _ V 320 2.62% Hunters Glen Apartments _ VI 324 2.62% Pickwick Place Apartments 204* 7.39% Southpointe Apartments 237 5.93% Twin Lake Towers Apartments 272* 5.52% * Represents 1997 billing. Tax bills for 1998 not yet received. ** Represents a fiscal year ending June 30, 1998. Since the properties fiscal year end is different than the tax year end the actual tax expense for this property for its fiscal year ended June 30, 1998 is partially based on 1997 calendar year rates which may be slightly different from 1998 rates. CAPITAL IMPROVEMENTS: Briarwood Apartments completed approximately $54,000 in capital expenditures for the year ended December 31, 1998, consisting primarily of building improvements and appliance replacements. These improvements were funded primarily from cash flow. Based on a report received from an independent third party consultant analyzing necessary exterior improvements and estimates made by the Managing General Partner on interior improvements, it is estimated that the property requires approximately $66,000 of capital improvements over the near term. The Partnership has budgeted, but is not limited to, capital improvements of approximately $82,000 for 1999 consisting primarily of structural repairs and other small projects. Chambers Ridge Apartments completed approximately $400,000 in capital expenditures for the year ended December 31, 1998, consisting primarily of a roof replacement project, building improvements, carpet replacements, electrical repairs and upgrades to HVAC condensing units. These improvements were funded primarily from cash flow. Based on a report received from an independent third party consultant analyzing necessary exterior improvements and estimates made by the Managing General Partner on interior improvements, it is estimated that the property requires approximately $2,264,000 of capital improvements over the near term. The Partnership has budgeted, but is not limited to, approximately $1,544,000 for 1999 consisting primarily of landscaping, parking lot and pool repairs and HVAC condensing unit replacements. Cooper Point Plaza did not have any capital expenditures for the year ended December 31, 1998. This property was sold on January 4, 1999 (see "Note J" of the financial statements included in "Item 7"). Gateway Gardens Apartments completed approximately $255,000 in capital expenditures for the year ended December 31, 1998, consisting primarily of HVAC condensing units, carpet replacements and new refrigerators. These improvements were funded primarily from cash flow. Based on a report received from an independent third party consultant analyzing necessary exterior improvements and estimates made by the Managing General Partner on interior improvements, it is estimated that the property requires approximately $332,000 of capital improvements over the near term. The Partnership has budgeted, but is not limited to, capital improvements of approximately $400,000 for 1999 consisting primarily of heating and air conditioning improvements along with electrical and flooring repairs. Hunters Glen Apartments IV completed approximately $90,000 in capital expenditures for the year ended December 31, 1998, consisting primarily of HVAC condensing units, carpet replacements and cabinet replacements. These improvements were funded primarily from cash flow. Based on a report received from an independent third party consultant analyzing necessary exterior improvements and estimates made by the Managing General Partner on interior improvements, it is estimated that the property requires approximately $1,022,000 of capital improvements over the near term. The Partnership has budgeted, but is not limited to, capital improvements of approximately $1,071,000 for 1999 consisting primarily of landscaping and irrigation, HVAC condensing unit replacement and parking lot and pool repairs. Hunters Glen Apartments V completed approximately $89,000 in capital expenditures for the year ended December 31, 1998, consisting primarily of HVAC condensing units, carpet replacements, cabinet replacements and new vinyl flooring. These improvements were funded primarily from cash flow. Based on a report received from an independent third party consultant analyzing necessary exterior improvements and estimates made by the Managing General Partner on interior improvements, it is estimated that the property requires approximately $1,163,000 of capital improvements over the near term. The Partnership has budgeted, but is not limited to, capital improvements of approximately $1,216,000 for 1999 consisting primarily of balcony and stairwell repairs, landscaping and parking lot repairs. Hunters Glen Apartments VI completed approximately $139,000 in capital expenditures for the year ended December 31, 1998, consisting primarily of HVAC condensing units, carpet replacements, cabinet replacements, new vinyl flooring and various other building improvements. These improvements were funded primarily from cash flow. Based on a report received from an independent third party consultant analyzing necessary exterior improvements and estimates made by the Managing General Partner on interior improvements, it is estimated that the property requires approximately $1,245,000 of capital improvements over the near term. The Partnership has budgeted, but is not limited to, capital improvements of approximately $1,302,000 for 1999 consisting primarily of exterior painting, landscaping and irrigation improvements and parking lot repairs. Pickwick Place Apartments completed approximately $682,000 in capital expenditures for the year ended December 31, 1998, consisting primarily of balcony replacements, carpet replacements, a roof replacement project, and repairs to 12 units damaged in a fire at the property in June of 1998 (see "Item 7. Financial Statements _ Note I"). With the exception of the insurance proceeds relating to the June 1998 fire, the improvements were funded primarily from cash flow. Based on a report received from an independent third party consultant analyzing necessary exterior improvements and estimates made by the Managing General Partner on interior improvements, it is estimated that the property requires approximately $319,000 of capital improvements over the near term. The Partnership has budgeted, but not limited to, capital improvements of approximately $524,000 in 1999 consisting primarily of roof, plumbing, electrical and balcony repairs. Southpointe Apartments completed approximately $93,000 in capital expenditures for the year ended December 31, 1998, consisting primarily of carpet replacement and new appliances. These improvements were funded primarily from cash flow. Based on a report received from an independent third party consultant analyzing necessary exterior improvements and estimates made by the Managing General Partner on interior improvements, it is estimated that the property requires approximately $614,000 of capital improvements over the near term. The Partnership has budgeted, but is not limited to, capital improvements of approximately $239,000 in 1999 consisting primarily of roof repairs, HVAC condensing unit replacement and parking lot repairs. Twin Lake Towers Apartments completed approximately $479,000 in capital expenditures for the year ended December 31, 1998, consisting primarily of a roof replacement project, balcony replacements, new siding and HVAC condensing units. These improvements were funded primarily from cash flow. Based on a report received from an independent third party consultant analyzing necessary exterior improvements and estimates made by the Managing General Partner on interior improvements, it is estimated that the property requires approximately $3,078,000 of capital improvements over the near term. The Partnership has budgeted, but is not limited to, capital improvements of approximately $3,075,000, in 1999 consisting primarily of HVAC condensing unit replacement, parking lot repairs and landscaping. The capital improvements planned for 1999 at the Partnership's properties will be made only to the extent of cash available from operations and Partnership reserves. ITEM 3. 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. in the Superior Court of the State of California for the County of San Mateo. The plaintiffs named as defendants, among others, the Partnership, the Managing General Partner and several of their affiliated partnerships and corporate entities. The complaint 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 the acquisition by Insignia Financial Group, Inc. ("Insignia") and entities which were, at one time, affiliates of Insignia ("Insignia Affiliates") of interests in certain general partner entities, past tender offers by Insignia Affiliates to acquire limited partnership units, the management of partnerships by Insignia Affiliates as well as a recently announced agreement between Insignia and Apartment Investment and Management Company. The complaint seeks 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 have filed an amended complaint. The Managing General Partner has filed demurrers to the amended complaint which were heard during February 1999. No ruling on such demurrers has been received. The Managing General Partner does not anticipate that costs associated with this case, if any, to be material to the Partnership's overall operations. On July 30, 1998, certain entities claiming to own limited partnership interests in certain limited partnerships whose general partners were, at the time, affiliates of Insignia filed a complaint entitled EVEREST PROPERTIES, LLC. V. INSIGNIA FINANCIAL GROUP, INC., ET AL. in the Superior Court of the State of California, county of Los Angeles. The action involves 44 real estate limited partnership (including the Partnership) in which the plaintiffs allegedly own interests and which Insignia Affiliates allegedly manage or control (the "Subject Partnerships"). This case was settled on March 3, 1999. The Partnership is responsible for a portion of the settlement costs. The expense will not have a material effect on the Partnership's operations. In July 1998, a limited partner of the Partnership commenced an action in the Circuit Court for Jackson County, Missouri entitled BOND PURCHASE LLC V. ANGELES PARTNERS XII, ET AL. The complaint claims that the Partnership and an affiliate of the Managing General Partner breached certain contractual and fiduciary duties allegedly owed to the claimant and seeks damages and injunctive relief. The Managing General Partner believes the claims to be without merit and intends to vigorously defend the claim. The Managing General Partner is unable to determine the costs associated with this claim at this time. The Partnership is unaware of any other pending or outstanding litigation that is not of a routine nature arising in the ordinary course of business. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS The Unit holders of the Partnership did not vote on any matter during the quarter ended December 31, 1998. PART II ITEM 5. MARKET FOR THE PARTNERSHIP'S COMMON EQUITY AND RELATED SECURITY HOLDER MATTERS The Partnership, a publicly-held limited partnership, sold 44,773 Limited Partnership Units during its offering period through February 13, 1985. As of December 31, 1998, the Partnership had 2,571 Limited Partners of record and 44,718 Limited Partnership Units outstanding. As of December 31, 1998, affiliates of the Managing General Partner own 16,595 limited partnership units or 37.109% of the outstanding Partnership Units. No public trading market has developed for the Units, and it is not anticipated that such a market will develop in the future. During the year ended December 31, 1998, a distribution of $650,000 ($14.54 per limited partnership unit) was declared and paid during January 1999 from surplus funds. There were no distributions to the partners for the year ending December 31, 1997. In February, 1999, a distribution of $2,500,000 was paid to partners of which $489,000 ($10.82 per limited partnership unit) was paid from operations and $2,011,000 ($44.97 per limited partnership unit) was paid from surplus funds. The Registrant's distribution policy will be reviewed on a quarterly basis. Future cash distributions will depend on the levels of net cash generated from operations, refinancings, property sales and the availability of cash reserves. There can be no assurance, however, that the Partnership will generate sufficient funds from operations, after required capital expenditures, to permit any additional distributions to its partners in 1999 or subsequent periods. ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION The matters discussed in this Form 10-KSB contain certain forward-looking statements and involve risks and uncertainties (including changing market conditions, competitive and regulatory matters, etc.) detailed in the disclosure contained in this Form 10-KSB and the other filings with the Securities and Exchange Commission made by the Registrant from time to time. The discussion of the Registrant's business and results of operations, including forward-looking statements pertaining to such matters, does not take into account the effects of any changes to the Registrant's business and results of operation. Accordingly, actual results could differ materially from those projected in the forward- looking statements as a result of a number of factors, including those identified herein. This item should be read in conjunction with the financial statements and other items contained elsewhere in this report. RESULTS OF OPERATIONS The Partnership incurred a net loss of approximately $684,000 for the year ended December 31, 1998, as compared to a net loss of approximately $2,025,000 for the year ended December 31, 1997. (See "Note D" of the financial statements for a reconciliation of these amounts to the Registrant's federal taxable losses). The decrease in net loss for the year ended December 31, 1998, is due to an increase in total revenues and a decrease in total expenses, which is partially offset by a decrease in equity income of the Joint Venture. Total revenues increased primarily due to an increase in rental income and, to a lesser extent, an increase in other income and the recognition of a casualty gain. Rental income increased primarily due to the increase in average rental rates of eight of the nine residential investment properties. Occupancy and average rental rates remained unchanged from 1997 at Cooper Point Plaza, the Partnership's only commercial property. Also contributing to the increase in rental revenue was the increase in occupancy in seven of the ten investment properties of the Partnership. Occupancy at the other three properties remained constant. Other income increased mainly due to an increase in lease cancellation fees at Gateway Gardens, Hunters Glen VI and Pickwick Place. Also, there was an increase in clubhouse rentals at Hunters Glen IV, V, and VI. A net casualty gain of $352,000 has been recorded in 1998 due to fires at Pickwick Place and Hunters Glen V and VI and water damage at Southpointe. In June 1998, a fire at Pickwick Place extensively damaged 12 apartment units. The undepreciated value of the units of approximately $80,000 was written off and netted with the insurance proceeds received of approximately $449,000, for a net casualty gain of $369,000. In May 1998, there were two smaller fires at Hunters Glen V and VI which resulted in damages of approximately $3,000 and $4,000, respectively. Finally, in February, 1998, there was some water damage at Southpointe which resulted in a net loss of $10,000 after the receipt of insurance proceeds. Total expenses decreased for the year ended December 31, 1998 as compared to the year ended December 31, 1997 due to decreases in operating and interest expense, which were offset by increases in general and administrative expense, depreciation expense and property tax expense. Operating expense decreased primarily as a result of the decrease in the number of corporate units available at Hunters Glen IV, V, and VI. The expenses associated with operating these units are higher because they are fully furnished and utilities are included. There was also a reduction in utility costs at Gateway Gardens, Chambers Ridge, and Twin Lake Towers. In addition, operating expense decreased due to the completion of a number of building improvement projects at the properties in 1997. These include exterior painting at Gateway Gardens, parking lot improvements at Southpointe, interior painting at Hunters Glen IV, V, and VI, Pickwick Place and Southpointe, exterior building renovations at Twin Lake Towers, and window covering replacements at Hunters Glen IV, V, and VI and Twin Lake Towers. Interest expense decreased primarily due to the modification of the mortgage encumbering Southpointe Apartments. This mortgage was in default from April 1997 until December 1997 during which time, interest was accruing at the default rate of 10.59%. Partially offsetting these decreases was an increase in general and administrative expense primarily due to an increase in expense reimbursements to affiliates of the Managing General Partner and management fees of $135,000 accrued to the Managing General Partner. This fee was accrued for executive and administrative management services and was equal to 7.5% of net cash flow from operations as defined in the Partnership Agreement. Included in general and administrative expenses at both December 31, 1998 and 1997 are reimbursements to the Managing General Partner allowed under the Partnership Agreement associated with its management of the Partnership. Costs associated with the quarterly and annual communications with investors and regulatory agencies and the annual audit required by the Partnership Agreement are also included. Depreciation expense increased due to the completion of capital improvements at all the Partnership's residential properties. Property taxes increased due to increased assessments at a number of the Partnership's residential properties. The Partnership has a 44.5% investment in the Princeton Meadows Golf Course Joint Venture. For 1998, the Partnership realized equity in loss of the Joint Venture of approximately $6,000 versus equity in income of the Joint Venture of approximately $42,000 in 1997 (see "Item 7." "Note G - Investment in Joint Venture"). The decrease in net income for the year ended December 31, 1998, versus the year ended December 31, 1997, can be attributed to an increase in expenses partially offset by a slight increase in income. In an effort to attract new customers, management completed major landscaping projects and renovations to its clubhouse in 1998 to improve the overall appearance of the golf course. On February 26, 1999, the Joint Venture sold Princeton Meadows Golf Course to an unaffiliated third party. (See "Note J" of the Financial Statements included in "Item 7."). 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 rent, maintaining or increasing occupancy levels and protecting the Registrant from increases in expense. As part of this plan, the Managing General Partner attempts to protect the Registrant 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 December 31, 1998 the Registrant held cash and cash equivalents of approximately $7,611,000, compared to approximately $6,459,000 at December 31, 1997. The increase in cash and cash equivalents is due to $3,835,000 of cash provided by operating activities, which was partially offset by $1,815,000 of cash used in investing activities and $868,000 of cash used in financing activities. Cash used in investing activities consisted of property improvements and replacements, offset by net withdrawals from restricted escrows maintained by the mortgage lender and net insurance proceeds relating to the casualties at Pickwick Place and Southpointe. Cash used in financing activities consisted of payments of principal made on the mortgages encumbering the Registrant's properties. The Registrant invests its working capital reserves in a money market account. The mortgage encumbering Southpointe Apartments was in default from April 1997 until December 31, 1997, due to non-payment of the monthly debt-service requirements. This property has increasing maintenance needs, some of which have been completed as of December 31, 1998. Historically, monthly payments of debt service have been late, as the property rents for the current month are used to pay the prior month's debt service. In February 1997, the tenants at Southpointe Apartments orchestrated a rent strike. The tenants demanded that until certain capital improvements were made at the property, rents would be held in escrow. The Managing General Partner negotiated with the attorney for the tenants regarding the tenant complaints. At December 31, 1997, certain improvements had been made and the remaining rents were released from escrow. The Managing General Partner had been unsuccessful in attempts to refinance the $11,000,000 mortgage indebtedness secured by Southpointe Apartments, which carried a maturity date of July 1999 and a stated interest rate of 8.59%. However, a modification was agreed upon at December 31, 1997, which extends the maturity date of the loan until January 2002. The modification was contingent upon the payment of all delinquent accrued interest, the installation of new boilers at the property with a cost of approximately $70,000, approximately $80,000 in capital improvements to be made over the next two years and a reduction in the management fee taken by the management company from 5% of gross revenues to 3% of gross revenues. In addition, in accordance with the mortgage agreement, the lender advanced the Partnership an additional $23,000 to be used to pay real estate taxes. This advance is secured by the mortgage agreement and accrues interest at 9%. The advance matures January 2002. In January 1998, a payment was made to the lender to satisfy all the accrued interest and secure the modification. All other terms of the debt remain the same. In March 1999 the Partnership notified the lender that it would not be making the required monthly interest payments on this mortgage due to cash flow problems, thus putting the debt in default. The Managing General Partner is currently in discussions with the lender with respect to the status of this debt. 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 Registrant and to comply with federal, state, local, legal and regulatory requirements. The Registrant has budgeted, but is not limited to, approximately $9,453,000 for all of the Registrant's properties in 1999. Budgeted capital improvements planned for Briarwood Apartments include structural repairs and other small projects. Budgeted capital improvements planned for Chambers Ridge Apartments include landscaping, parking lot and pool repairs and HVAC condensing unit replacements. Budgeted capital improvements planned for Gateway Gardens apartments include heating and air conditioning improvements and electrical and flooring repairs. Budgeted capital improvements planned for Hunters Glen Apartments IV include landscaping and irrigation, HVAC condensing unit replacements and parking lot and pool repairs. Budgeted capital improvements planned for Hunters Glen Apartments V include balcony and stairwell repairs, landscaping and parking lot repairs. Budgeted capital improvements planned for Hunters Glen Apartments VI include exterior painting, landscaping and irrigation improvements and parking lot repairs. Budgeted capital improvements planned for Pickwick Place Apartments include roof, plumbing, electrical and balcony repairs. Budgeted capital improvements planned for Southpointe Apartments include roof repairs, HVAC condensing unit replacements and parking lot repairs. Budgeted capital improvements planned for Twin Lake Towers apartments include HVAC condensing unit replacements, parking lot repairs and landscaping. The capital expenditures will be incurred only if cash is available from operations, capital reserve accounts 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. 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 its properties amounts to approximately $71,351,000, net of unamortized discounts, with maturity dates ranging from January 2002 to September 2012, during which time balloon payments totaling $63,822,000 are due. The Managing General Partner may attempt to refinance such indebtedness and/or sell the properties 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. During the year ended December 31, 1998, a distribution of $650,000 ($14.54 per limited partnership unit) was declared and paid during January 1999 from surplus funds. There were no cash distributions during the year ended December 31, 1997. In February 1999, a distribution of $2,500,000 was paid to partners, of which $489,000 ($10.82 per limited partnership unit) was paid from operations and $2,011,000 ($44.97 per limited partnership unit) was paid from surplus funds. Future cash distributions will depend on the levels of net cash generated from operations, refinancings, the sale of the properties or joint venture and the availability of cash reserves. The Partnership's distribution policy will be reviewed on a quarterly basis. There can be no assurance, however, that the Partnership will generate sufficient funds from operations after required capital expenditures, to permit any additional distributions to its partners in 1999 or subsequent periods. Year 2000 Compliance General Description of the Year 2000 Issue and the Nature and Effects of the Year 2000 on Information Technology (IT) and Non-IT Systems The Year 2000 issue is the result of computer programs being written using two digits rather than four digits to define the applicable year. The Partnership is dependent upon the Managing General Partner and its affiliates for management and administrative services ("Managing Agent"). Any of the computer programs or hardware that have date-sensitive software or embedded chips may recognize a date using "00" as the year 1900 rather than the year 2000. This could result in a system failure or miscalculations causing disruptions of operations, including, among other things, a temporary inability to process transactions, send invoices, or engage in similar normal business activities. Over the past two years, the Managing Agent has determined that it will be required to modify or replace significant portions of its software and certain hardware so that those systems will properly utilize dates beyond December 31, 1999. The Managing Agent presently believes that with modifications or replacements of existing software and certain hardware, the Year 2000 issue can be mitigated. However, if such modifications and replacements are not made or not completed in time, the Year 2000 issue could have a material impact on the operations of the Partnership. The Managing Agent's plan to resolve Year 2000 issues involves four Phases: assessment, remediation, testing, and implementation. To date, the Managing Agent has fully completed its assessment of all the information systems that could be significantly affected by the Year 2000, and has begun the remediation, testing and implementation phases on both hardware and software systems. Assessments are continuing in regards to embedded systems. The status of each is detailed below. Status of Progress in Becoming Year 2000 Compliant, Including Timetable for Completion of Each Remaining Phase Computer Hardware: During 1997 and 1998, the Managing Agent identified all of the computer systems at risk and formulated a plan to repair or replace each of the affected systems. In August 1998, the mainframe system used by the Managing Agent became fully functional. In addition to the mainframe, PC-based network servers and routers and desktop PCs were analyzed for compliance. The Managing Agent has begun to replace each of the non-compliant network connections and desktop PCs and, as of December 31, 1998, had completed approximately 75% of this effort. The total cost to the Managing Agent to replace the PC-based network servers, routers and desktop PCs is expected to be approximately $1.5 million of which $1.3 million has been incurred to date. The remaining network connections and desktop PCs are expected to be upgraded to Year 2000 compliant systems by March 31, 1999. Computer software: The Managing Agent utilizes a combination of off-the-shelf, commercially available software programs as well as custom-written programs that are designed to fit specific needs. Both of these types of programs were studied, and implementation plans written and executed with the intent of repairing or replacing any non-compliant software programs. During 1998, the Managing Agent began converting the existing property management and rent collection systems to its management properties Year 2000 compliant systems. The estimated additional costs to convert such systems at all properties, is $200,000, and the implementation and the testing process is expected to be completed by March 31, 1999. The final software area is the office software and server operating systems. The Managing Agent has upgraded all non-compliant office software systems on each PC and has upgraded 80% of the server operating systems. The remaining server operating systems are planned to be upgraded to be Year 2000 compliant by March 31, 1999. Operating Equipment: The Managing Agent has operating equipment, primarily at the property sites, which needed to be evaluated for Year 2000 compliance. In September 1997, the Managing Agent began taking a census and inventory of embedded systems (including those devices that use time to control systems and machines at specific properties, for example elevators, heating, ventilating, and air conditioning systems, security and alarm systems, etc.). The Managing Agent has chosen to focus its attention mainly upon security systems, elevators, heating, ventilating and air conditioning systems, telephone systems and switches, and sprinkler systems. While this area is the most difficult to fully research adequately, management has not yet found any major non-compliance issues that put the Managing Agent at risk financially or operationally. The Managing Agent intends to have a third-party conduct an audit of these systems and report their findings by March 31, 1999. Any of the above operating equipment that has been found to be non-compliant to date has been replaced or repaired. To date, these have consisted only of security systems and phone systems. As of December 31, 1998 the Managing Agent has evaluated approximately 86% of the operating equipment for the Year 2000 compliance. The total cost incurred for all properties managed by the Managing Agent as of December 31, 1998 to replace or repair the operating equipment was approximately $400,000. The Managing Agent estimates the cost to replace or repair any remaining operating equipment is approximately $325,000, which is expected to be completed by April 30, 1999. The Managing Agent continues to have "awareness campaigns" throughout the organization designed to raise awareness and report any possible compliance issues regarding operating equipment within our enterprise. Nature and Level of Importance of Third Parties and Their Exposure to the Year 2000 The Managing Agent continues to conduct surveys of its banking and other vendor relationships to assess risks regarding their Year 2000 readiness. The Managing Agent has banking relationships with three major financial institutions, all of which have indicated their compliance efforts will be complete before May 1999. The Managing Agent has updated data transmission standards with two of the three financial institutions. The Managing Agent's contingency plan in this regard is to move accounts from any institution that cannot be certified Year 2000 compliant by June 1, 1999. The Partnership does not rely heavily on any single vendor for goods and services, and does not have significant suppliers and subcontractors who share information systems (external agent). To date the Partnership is not aware of any external agent with a Year 2000 compliance issue that would materially impact the Partnership's results of operations, liquidity, or capital resources. However, the Partnership has no means of ensuring that external agents will be Year 2000 compliant. The Managing Agent does not believe that the inability of external agents to complete their Year 2000 remediation process in a timely manner will have a material impact on the financial position or results of operations of the Partnership. However, the effect of non-compliance by external agents is not readily determinable. Costs to Address Year 2000 The total cost of the Year 2000 project to the Managing Agent is estimated at $3.5 million and is being funded from operating cash flows. To date, the Managing Agent has incurred approximately $2.8 million ($0.6 million expensed and $2.2 million capitalized for new systems and equipment) related to all phases of the Year 2000 project. Of the total remaining project costs, approximately $0.5 million is attributable to the purchase of new software and operating equipment, which will be capitalized. The remaining $0.2 million relates to repair of hardware and software and will be expensed as incurred. The Partnership's portion of these costs are not material. Risks Associated with the Year 2000 The Managing Agent believes it has an effective program in place to resolve the Year 2000 issue in a timely manner. As noted above, the Managing Agent has not yet completed all necessary phases of the Year 2000 program. In the event that the Managing Agent does not complete any additional phases, certain worst case scenarios could occur. The worst case scenarios could include elevators, security and heating, ventilating and air conditioning systems that read incorrect dates and operate with incorrect schedules (e.g., elevators will operate on Monday as if it were Sunday). Although such a change would be annoying to residents, it is not business critical. In addition, disruptions in the economy generally resulting from Year 2000 issues could also adversely affect the Partnership. The Partnership could be subject to litigation for, among other things, computer system failures, equipment shutdowns or failure to properly date business records. The amount of potential liability and lost revenue cannot be reasonably estimated at this time. Contingency Plans Associated with the Year 2000 The Managing Agent has contingency plans for certain critical applications and is working on such plans for others. These contingency plans involve, among other actions, manual workarounds and selecting new relationships for such activities as banking relationships and elevator operating systems. ITEM 7. FINANCIAL STATEMENTS ANGELES PARTNERS XII LIST OF FINANCIAL STATEMENTS Report of Independent Auditors Consolidated Balance Sheet - December 31, 1998 Consolidated Statements of Operations - Years ended December 31, 1998 and 1997 Consolidated Statements of Changes in Partners' Deficit - Years ended December 31, 1998 and 1997 Consolidated Statements of Cash Flows - Years ended December 31, 1998 and 1997 Notes to Consolidated Financial Statements Report of Ernst & Young LLP, Independent Auditors The Partners Angeles Partners XII We have audited the accompanying consolidated balance sheet of Angeles Partners XII as of December 31, 1998, and the related consolidated statements of operations, changes in partners' deficit and cash flows for each of the two years in the period ended December 31, 1998. These financial statements are the responsibility of the Partnership's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by the Partnership's management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Angeles Partners XII at December 31, 1998, and the consolidated results of its operations and its cash flows for each of the two years in the period ended December 31, 1998, in conformity with generally accepted accounting principles. /s/ERNST & YOUNG LLP Greenville, South Carolina March 3, 1999 ANGELES PARTNERS XII CONSOLIDATED BALANCE SHEET (in thousands, except unit data) December 31, 1998 Assets Cash and cash equivalents $ 7,611 Receivables and deposits, net of allowance for doubtful accounts of $9 1,985 Restricted escrows 1,269 Other assets 1,356 Investment in, and advances of $149 to, joint venture (Note G) 184 Investment properties (Notes C and F): Land $ 10,341 Buildings and related personal property 92,072 102,413 Less accumulated depreciation (65,275) 37,138 $ 49,543 Liabilities and Partners' Deficit Liabilities Accounts payable $ 555 Tenant security deposit liabilities 959 Accrued taxes 1,085 Distribution payable 650 Other liabilities 892 Mortgage notes payable, including $11,017 in default (Notes C and F) 71,351 Partners' Deficit General partners $ (638) Limited partners (44,718 units issued and outstanding) (25,311) (25,949) $ 49,543 See Accompanying Notes to Consolidated Financial Statements ANGELES PARTNERS XII CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands, except unit data) Years Ended December 31, 1998 1997 Revenues: Rental income $ 20,639 $ 19,832 Other income 1,420 1,284 Casualty gain 352 -- Total revenues 22,411 21,116 Expenses: Operating 8,571 9,132 General and administrative 760 509 Depreciation 4,995 4,965 Interest 6,414 6,492 Property taxes 2,291 2,161 Bad debt recovery -- (146) Loss on disposal of property 58 70 Total expenses 23,089 23,183 Equity in (loss) income of joint venture (Note G) (6) 42 Net loss $ (684) $ (2,025) Net loss allocated to general partners (1%) $ (7) $ (20) Net loss allocated to limited partners (99%) (677) (2,005) Net loss $ (684) $ (2,025) Net loss per limited partnership unit $ (15.14) $ (44.83) Distributions per limited partnership unit $ 14.54 $ -- See Accompanying Notes to Consolidated Financial Statements ANGELES PARTNERS XII CONSOLIDATED STATEMENTS OF CHANGES IN PARTNERS' DEFICIT (in thousands, except unit data) Limited Partnership General Limited Units Partners Partners Total Original capital contributions 44,773 $ 1 $ 44,773 $ 44,774 Partners' deficit at December 31, 1996 44,718 $ (611) $ (21,979) $ (22,590) Net loss for the year ended December 31, 1997 -- (20) (2,005) (2,025) Partners' deficit at December 31, 1997 44,718 (631) (23,984) (24,615) Net loss for the year ended December 31, 1998 -- (7) (677) (684) Distributions to Partners -- (650) (650) Partners' deficit at December 31, 1998 44,718 $ (638) $ (25,311) $ (25,949) See Accompanying Notes to Consolidated Financial Statements ANGELES PARTNERS XII CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands) Years Ended December 31, 1998 1997 Cash flows from operating activities: Net loss $ (684) $ (2,025) Adjustments to reconcile net loss to net cash provided by operating activities: Depreciation 4,995 4,965 Amortization of discounts, loan costs, and leasing commissions 414 427 Bad debt recovery -- (146) Casualty gain (352) -- Loss on disposal of asset 58 70 Equity in loss (income) of joint venture 6 (42) Change in accounts: Receivables and deposits (311) 278 Other assets 91 (82) Accounts payable 25 (61) Tenant security deposit liabilities (1) 37 Accrued taxes 40 13 Other liabilities (446) 622 Net cash provided by operating activities 3,835 4,056 Cash flows from investing activities: Property improvements and replacements (2,281) (1,671) Advances to joint venture -- (5) Net withdrawals from restricted escrows 36 32 Net insurance proceeds related to casualty gain 430 -- Net cash used in investing activities (1,815) (1,644) Cash flows from financing activities: Loan costs paid -- (15) Proceeds from mortgage advance -- 23 Payments on mortgage notes payable (868) (788) Net cash used in financing activities (868) (780) Net increase in cash and cash equivalents 1,152 1,632 Cash and cash equivalents at beginning of year 6,459 4,827 Cash and cash equivalents at end of year $ 7,611 $ 6,459 Supplemental disclosure of cash flow information: Cash paid for interest $ 6,651 $ 5,464 Supplemental disclosure of non-cash activity: At December 31, 1998, distributions payable and partners' deficit were adjusted by $650,000 for unpaid distributions. See Accompanying Notes to Consolidated Financial Statements ANGELES PARTNERS XII Notes to Consolidated Financial Statements December 31, 1998 NOTE A - ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES Organization: Angeles Partners XII (the "Partnership" or the "Registrant") is a publicly-held limited partnership organized under the California Uniform Limited Partnership Act pursuant to the amended Certificate and Agreement of Limited Partnership (hereinafter referred to as the "Agreement") dated May 26, 1983. The Partnership's Managing General Partner is Angeles Realty Corporation II ("ARC II" or the "Managing General Partner"), a California corporation and wholly- owned subsidiary of MAE GP Corporation ("MAE GP"). Effective February 25, 1998, MAE GP was merged into Insignia Properties Trust ("IPT"), which was an affiliate of Insignia Financial Group, Inc. ("Insignia"). Effective February 26, 1999, IPT was merged into Apartment Investment and Management Company ("AIMCO"). Thus the Managing General Partner is now a wholly-owned subsidiary of AIMCO. The Elliott Accommodation Trust and the Elliott Family Partnership, a California limited partnership, were the Non-Managing General Partners. Effective December 31, 1997, the Elliott Family Partnership, Ltd., acquired the Elliott Accommodation Trust's general partner interest in the Registrant. The Managing General Partner and the Non-Managing General Partner are herein collectively referred to as the "General Partners". The Partnership Agreement provides that the Partnership is to terminate on December 31, 2035 unless terminated prior to such date. As of December 31, 1998, the Partnership operates nine residential properties and one commercial property in or near major urban areas in the United States and owns a general partner interest in a golf course. Principles of Consolidation: For the year ended December 31, 1997, the consolidated financial statements of the Partnership included its 99% limited partnership interest in Hunters Glen AP XII LP, Hunters Glen Phase I AP XII LP, Hunters Glen GP LP, AP XII Associates LP, and Pickwick Place AP XII LP. The Partnership may remove the General Partner of these limited partnerships; therefore, these partnerships are controlled and consolidated by the Partnership. During 1998, the 1% general partner interests in AP XII Associates LP, Hunters Glen Phase I AP XII, LP and Hunters Glen AP XII LP were transferred to AP XII Associates GP, LLC, Hunters Glen Phase I GP, LLC and Hunters Glen Phase V GP, LLC, respectively, single member limited liability corporations, which are wholly-owned by the Registrant. Also, the 1% general partner interest in Hunters Glen AP XII, LP was transferred to Hunters Glen Phase V GP, LLC, a single member limited liability corporation wholly-owned by the Registrant. The 1% General Partner of Hunters Glen GP, LP withdrew from the Partnership and its interest was transferred to the 99% limited partner, the Registrant. As a result, Hunters Glen GP, LP was left with only a single partner and was effectively terminated. All significant interpartnership balances have been eliminated. Minority interest is immaterial and not shown separately in the financial statements. Allocation of Profits, Gains, and losses: The Partnership will allocate all profits, losses and distributions related to the operations of its investment properties 1% to the General Partners and 99% to the Limited Partners. All profits, losses and distributions related to the sales and/or refinancing of its investment properties will be allocated in accordance with the Agreement. Except as discussed below, the Partnership will allocate distributions 1% to the General Partners and 99% to the Limited Partners. Upon the sale or other disposition, or refinancing, of any asset of the Partnership, the distributable net proceeds shall be distributed as follows: (i) to the Partners in proportion to their interests until the Limited Partners have received cumulative distributions equal to their original capital contributions reduced by the amount of any previous distributions; (ii) to the Partners until the Limited Partners have received distributions from all sources equal to their 6% cumulative distribution; (iii) to the Managing General Partner until it has received an amount equal to 3% of the aggregate Disposition Prices of all properties or other investments sold or otherwise disposed of, or refinanced; (iv) to the Partners in proportion to their interests until the Limited Partners have received cumulative distributions from all sources equal to 150% of the Capital Contribution of the Limited Partners; (v) to the Managing General Partner until it has received an amount equal to 17.6% of the distributions made pursuant to (iv); and (vi) 85% to the Limited Partners and non-Managing General Partner in proportion to their interests and 15% ("Incentive Interest") to the Managing General Partner. Use of Estimates: The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates. Cash and Cash Equivalents: Cash and cash equivalents includes cash on hand and in banks, money market accounts, and certificates of deposit with original maturities of less than 90 days. At certain times, the amount of cash deposited at a bank may exceed the limit on insured deposits. Security Deposits: The Partnership requires security deposits from lessees for the duration of the lease and such deposits are included in receivables and deposits. The security deposits are refunded when the tenant vacates, provided the tenant has not damaged its space and is current on its rental payments. Loan Costs: Loan costs of approximately $2,734,000 are included in other assets and are being amortized on a straight-line basis over the lives of the loans. Accumulated amortization is approximately $1,642,000 at December 31, 1998, and is also included in other assets. Restricted escrows: Capital Improvement - At the time of the refinancings of the mortgages encumbering Briarwood Apartments, Chambers Ridge Apartments, Gateway Gardens Apartments, Hunters Glen Apartments and Twin Lake Towers Apartments, $1,610,000 of the proceeds were designated for "Capital Improvement Escrows" for certain capital improvements. The balance in the Capital Improvement Escrows at December 31, 1998, is $364,000. Replacement Reserve - In conjunction with the refinancing of the mortgage encumbering Pickwick Place Apartments on April 17, 1995, a replacement reserve was established to fund certain nonrecurring costs for interior and exterior capital improvements at the property. The balance in this escrow account is $81,000 at December 31, 1998. General Reserve - In addition to the Capital Improvement and Replacement Reserve Escrows, General Escrow Accounts of approximately $711,000 were established in conjunction with the refinancings. These funds were established to make necessary repairs and replacements of existing improvements, debt service, out-of-pocket expenses incurred for ordinary and necessary administrative tasks, and payment of real property taxes and insurance premiums. The Partnership is required to deposit net operating income (as defined in the mortgage note) from the refinanced properties to the General Escrow Accounts until the reserve account equals $400 per apartment unit or $808,000. The balance in the General Escrow Accounts at December 31, 1998, is approximately $824,000. Joint Venture: The Partnership accounts for its 44.5% investment in Princeton Meadows Golf Course Joint Venture ("Joint Venture") using the equity method of accounting (see "Note G"). Under the equity method, the Partnership records its equity interest in earnings or losses of the Joint Venture; however, the investment in the Joint Venture will be recorded at an amount less than zero (a liability) to the extent of the Partnership's share of net liabilities of the Joint Venture. Investment Properties: Investment properties consist of nine apartment complexes and one commercial property which are stated at cost. Acquisition fees are capitalized as a cost of real estate. In accordance with Financial Accounting Statements Board Statement No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of," the Partnership records impairment losses on long-lived assets used in operations when events and circumstances indicate that the assets might be impaired and the undiscounted cash flows estimated to be generated by those assets are less than the carrying amounts of those assets. For the years ended December 31, 1998 and 1997, no adjustments for impairment of value were recorded. Depreciation: Depreciation is computed utilizing accelerated and straight-line methods over the estimated useful lives of the investment properties and related personal property. For Federal income tax purposes, depreciation is computed by using the straight-line method over an estimated life of 5 to 20 years for personal property and 15 to 40 years for real property. Lease Commissions: Lease commissions are being amortized using the straight- line method over the term of the respective leases and are included in operating expense. Leases: The Partnership generally leases apartment units for twelve-month terms or less. Commercial building lease terms are from twelve months to ten years. In addition, the Managing General Partner's policy is to offer rental concessions during particularly slow months or in response to heavy competition from other similar complexes in the area. Concessions are charged against rental income as incurred. Fair Value of Financial Instruments: Statement of Financial Accounting Standards ("SFAS") No. 107, "Disclosures about Fair Value of Financial Instruments", as amended by SFAS No. 119, "Disclosures about Derivative Financial Instruments and Fair Value of Financial Instruments", requires disclosure of fair value information about financial instruments, whether or not recognized in the balance sheet, for which it is practicable to estimate fair value. Fair value is defined in the SFAS as the amount at which the instruments could be exchanged in a current transaction between willing parties, other than in a forced or liquidation sale. The Partnership believes that the carrying amount of its financial instruments (except for long term debt) approximates their fair value due to the short term maturity of these instruments. The fair value of the Partnership's long term debt, after discounting the scheduled loan payments to maturity, approximates its carrying value. Segment Reporting: In June 1997, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 131, "Disclosure about Segments of an Enterprise and Related Information" ("Statement 131"), which is effective for years beginning after December 15, 1997. Statement 131 established standards for the way that public business enterprises report information about operating segments in annual financial statements and requires that those enterprises report selected information about operating segments in interim financial reports. It also establishes standards for related disclosures about products and services, geographic areas, and major customers. (See "Note K" for detailed disclosures of the Partnership's segment.) Advertising Costs: The Partnership expenses the costs of advertising as incurred. Advertising costs of approximately $214,000 and approximately $222,000 for the years ended December 31, 1998 and 1997, respectively, are included in operating expense on the accompanying statements of operations. Reclassifications: Certain reclassifications have been made to the 1997 balances to conform to the 1998 presentation. NOTE B - TRANSFER OF CONTROL Pursuant to a series of transactions which closed on October 1, 1998 and February 26, 1999, Insignia Financial Group, Inc. and Insignia Properties Trust merged into Apartment Investment and Management Company ("AIMCO"), a publicly traded real estate investment trust, with AIMCO being the surviving corporation (the "Insignia Merger"). As a result, AIMCO ultimately acquired a 100% ownership interest in Insignia Properties Trust ("IPT"), the entity which controls the Managing General Partner. The Managing General Partner does not believe that this transaction will have a material effect on the affairs and operations of the Partnership. NOTE C - MORTGAGE NOTES PAYABLE The principle terms of mortgage notes payable are as follows:
Principal Monthly Principal Balance At Payment Stated Balance December 31, Including Interest Maturity Due At Property 1998 Interest Rate Date Maturity (in thousands) (in thousands) Briarwood Apartments 1st mortgage $ 1,535 $ 12 7.83% 10/2003 $ 1,404 2nd mortgage 50 (*) 7.83% 10/2003 50 Chambers Ridge Apartments 1st mortgage 5,304 41 7.83% 10/2003 4,849 2nd mortgage 174 1 7.83% 10/2003 174 Cooper Point Plaza 1st mortgage (2) 3,906 45 10.5% 09/2012 43 Gateway Gardens Apartments 1st mortgage 6,187 48 7.83% 10/2003 5,657 2nd mortgage 203 1 7.83% 10/2003 203 Hunters Glen Apartments-IV 1st mortgage 8,267 65 8.43% 10/2003 7,787 Hunters Glen Apartments-V 1st mortgage 8,662 67 7.83% 10/2003 7,920 2nd mortgage 285 2 7.83% 10/2003 285 Hunters Glen Apartments-VI 1st mortgage 9,016 70 7.83% 10/2003 8,243 2nd mortgage 297 2 7.83% 10/2003 297 Pickwick Place Apartments 1st mortgage 6,383 54 9.1% 05/2005 5,775 Southpointe Apartments 1st mortgage, in default (1) 11,000 79 8.59% 01/2002 11,000 Additional borrowing, in default (1) 17 1 9.00% 01/2002 1 Twin Lake Towers Apartments 1st mortgage 10,700 83 7.83% 10/2003 9,782 2nd mortgage 352 2 7.83% 10/2003 352 72,338 Less unamortized discounts (987) Total $ 71,351 $ 573 $ 63,822
(*) Monthly payment is less than $1,000 (1) The mortgage note secured by Southpointe Apartments was modified as of December 31, 1997. The modification agreement extended the term of the mortgage note from July 1999 to January 2002. The lender also agreed to advance to the Partnership an amount up to $180,000 for the payment of real estate taxes. The lender advanced approximately $23,000 to the Partnership for this purpose in 1997. In March 1999, the Partnership notified the lender that it would not be making the required monthly interest payments due to cash flow problems, thus putting the debt in default. (2) On January 4, 1999, Cooper Point Plaza was sold to an unaffiliated third party. Upon closing, the Partnership was required to pay approximately $78,000 in prepayment penalties to pay off the mortgage encumbering the property. The mortgage notes payable are nonrecourse and are secured by pledge of certain of the Partnership's investment properties and by pledge of revenues from the respective investment properties. Certain of the notes impose prepayment penalties if repaid prior to maturity. Further, the properties may not be sold subject to existing indebtedness. Scheduled principal payments of mortgage notes payable subsequent to December 31, 1998, are as follows (in thousands): 1999 $ 11,941 2000 1,023 2001 1,112 2002 1,203 2003 48,055 Thereafter 9,004 $ 72,338 NOTE D - INCOME TAXES The Partnership has received a ruling from the Internal Revenue Service that it will be classified as a partnership for Federal income tax purposes. Accordingly, taxable income or loss of the Partnership is reported in the income tax returns of its partners and no provision for income taxes is made in the financial statements of the Partnership. The following is a reconciliation of reported net loss and Federal taxable income (loss) (in thousands, except per unit data): 1998 1997 Net loss as reported $ (684) $ (2,025) Add (deduct): Depreciation differences 1,081 1,162 Unearned income 62 97 Discounts on mortgage notes payable (7) 25 Casualty (259) Other 271 24 Federal taxable income (loss) $ 464 $ (717) Federal taxable income (loss) per limited partnership unit $ 10.27 $ (15.87) The following is a reconciliation between the Partnership's reported amounts and Federal tax basis of net assets and liabilities (in thousands): Net liabilities $ (25,949) Land and buildings 8,976 Accumulated depreciation (10,046) Syndication and distribution costs 6,093 Investment in Joint Venture 610 Dividends payable 650 Other (121) Net liabilities _ Federal tax basis $ (19,787) NOTE E - 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) certain payments to affiliates for services and (ii) reimbursement of certain expenses incurred by affiliates on behalf of the Partnership. The following amounts owed to the Managing General Partner and affiliates for the years ended December 31, 1998 and 1997, were paid or accrued: 1998 1997 (in thousands) Property management fees (included in Operating expenses) $1,034 $ 1,029 Partnership management fee (included in general and administrative expense) (1) 135 -- Reimbursement for services of affiliates (included in operating and general and Administrative expenses and investment Property) 504 431 (1) 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. Included in reimbursements for services of affiliates for the year ended December 31, 1998 and 1997, is approximately $56,000 and $70,000, respectively, of construction oversight reimbursements. During the years ended December 31, 1998 and 1997 affiliates of the Managing General Partner, were entitled to receive 5% of the gross receipts from all of the Registrant's properties (except Southpointe which is 3%) as compensation for providing property management services. The Registrant paid to such affiliates $1,016,000 and $1,006,000 for the years ended December 31, 1998 and 1997 respectively. During the year ended December 31, 1997 and for the nine months ended September 30, 1998, affiliates of the Managing General Partner were entitled to varying percentages of gross receipts from the Registrant's commercial property as compensation for providing management services. These services were performed by affiliates of the Managing General Partner during 1997 and for the nine months ended September 30, 1998. The Registrant paid to such affiliates $18,000 and $23,000 for the nine months ended September 30, 1998 and for the year ended December 31, 1997, respectively. Effective October 1, 1998 (the effective date of the Insignia Merger), these services for the commercial property were performed by an unrelated party. Affiliates of the Managing General Partner received reimbursement of accountable administrative expenses amounting to approximately $504,000 and $431,000 for the years ended December 31, 1998 and 1997, respectively. Angeles Mortgage Investment Trust ("AMIT"), a real estate investment trust, provides financing (the "AMIT Loans") to the Princeton Meadows Golf Course Joint Venture. The AMIT Loan had a principal balance of $1,567,000 at December 31, 1998, accrues interest at a rate of 12.5% per annum and matures on September 1, 2000, at which time the outstanding balance and any unpaid interest is due. Interest expense on the debt secured by the Joint Venture was approximately $196,000 for both of the years ended December 31, 1998 and 1997, respectively. Accrued interest was $18,000 at December 31, 1998. Pursuant to a series of transactions, affiliates of the Managing General Partner acquired ownership interests in AMIT. On September 17, 1998, AMIT was merged with and into Insignia Properties Trust ("IPT"), the entity which controlled the Managing General Partner. Effective February 26, 1999, IPT was merged into AIMCO. As a result, AIMCO is the current holder of the AMIT Loan. On February 26, 1999, Princeton Meadows Golf Course was sold to an unaffiliated third party. Upon closing, the AMIT principal balance of $1,567,000 plus accrued interest of approximately $17,000 was paid off. The Partnership was permitted to make advances to the Joint Venture as deemed appropriate by the Managing General Partner. These advances did not bear interest and did not have stated terms of repayment. At December 31, 1998, the amount of advances receivable from the Joint Venture was approximately $149,000. On April 14, 1998, an affiliate of the Managing General Partner (the "Purchaser") commenced a tender offer for limited partnership interests in the Partnership. The Purchaser offered to purchase up to 18,500 of the outstanding units of limited partnership interest in the Partnership at $500 per Unit, net to the seller in cash. The Purchaser acquired 8,002 units at $500 per Unit pursuant to this tender offer or 17.894% of the outstanding limited partnership units. On August 13, 1998, the purchaser commenced a second tender offer for limited partnership interests in the Partnership. The Purchaser offered to purchase up to 12,000 of the outstanding units of limited partnership interest in the Partnership at $600 per Unit, net to the seller in cash. In connection with this tender offer, the Purchaser acquired 4,607 units at $600 per Unit or 10.302% of the outstanding limited partnership units. As a result of these purchases, AIMCO currently owns, through its affiliates, a total of 16,595 limited partnership units or 37.109% of the outstanding limited partnership units. Consequently, AIMCO could be in a position to significantly influence all voting decisions with respect to the Registrant. Under the Partnership Agreement, unitholders holding a majority of the Units are entitled to take action with respect to a variety of matters. When voting on matters, AIMCO would in all likelihood vote the Units it acquired in a manner favorable to the interest of the Managing General Partner because of their affiliation with the Managing General Partner. For the period from January 1, 1997 to August 31, 1997, the Partnership insured its properties under a master policy through an agency affiliated with the Managing General Partner with an insurer unaffiliated with the Managing General Partner. An affiliate of the Managing General Partner acquired, in the acquisition of a business, certain financial obligations from an insurance agency which was later acquired by the agent who placed the current year's master policy. The agent assumed the financial obligations of the affiliate of the Managing General Partner which receives payments on these obligations from the agent. The amount of the Partnership's insurance premiums that accrued to the benefit of the affiliate of the Managing General Partner by virtue of the agent's obligations was not significant. NOTE F - INVESTMENT PROPERTIES AND ACCUMULATED DEPRECIATION Initial Cost To Partnership Cost Buildings Capitalized and Related (Removed) Personal Net Subsequent Description Encumbrances Land Property to Acquisition (in thousands) Investment Properties Briarwood Apartments $ 1,585 $ 136 $ 1,409 $ 322 Chambers Ridge Apartments 5,478 527 7,823 1,636 Cooper Point Plaza 3,906 1,689 5,319 1,857 Gateway Gardens Apartments 6,390 255 6,206 1,355 Hunters Glen Apartments-IV 8,267 1,552 8,324 1,414 Hunters Glen Apartments-V 8,947 1,820 9,759 1,553 Hunters Glen Apartments-VI 9,313 1,981 10,620 1,567 Pickwick Place Apartments 6,383 603 6,552 2,471 Southpointe Apartments 11,017 663 8,616 859 Twin Lake Towers Apartments 11,052 1,115 12,806 1,604 Totals $ 72,338 $10,341 $77,434 $ 14,638
Gross Amount At Which Carried At December 31, 1998 (in thousands) Buildings And Related Personal Accumulated Date Depreciable Description Land Property Total Depreciation Acquired Life-Years Briarwood Apartments $ 136 $ 1,731 $ 1,867 $ 1,190 06/25/85 10-20 Chambers Ridge Apartments 527 9,459 9,986 6,796 07/26/84 10-20 Cooper Point Plaza 1,689 7,176 8,865 5,406 12/14/84 10-20 Gateway Gardens Apartments 255 7,561 7,816 5,358 12/21/84 10-20 Hunters Glen Apartments - IV 1,552 9,738 11,290 6,846 01/31/85 10-40 Hunters Glen Apartments - V 1,820 11,312 13,132 7,991 01/31/85 10-40 Hunters Glen Apartments - VI 1,981 12,187 14,168 8,607 01/31/85 10-40 Pickwick Place Apartments 603 9,023 9,626 5,712 05/11/84 10-20 Southpointe Apartments 663 9,475 10,138 6,890 06/12/85 10-20 Twin Lake Towers Apartments 1,115 14,410 15,525 10,479 03/30/84 10-20 Totals $10,341 $92,072 $102,413 $ 65,275
The depreciable lives included above are for the buildings and components. The depreciable lives for related personal property are for 5 to 7 years. Reconciliation of "Investment Properties and Accumulated Depreciation": Years Ended December 31, 1998 1997 (in thousands) Investment Properties Balance at beginning of year $100,619 $ 99,165 Property improvements 2,281 1,671 Disposal of assets (487) (217) Balance at end of year $102,413 $100,619 Accumulated Depreciation Balance at beginning of year $ 60,629 $ 55,811 Additions charged to expense 4,995 4,965 Disposal of assets (349) (147) Balance at end of year $ 65,275 $ 60,629 The aggregate cost of the real estate for Federal income tax purposes at December 31, 1998 and 1997, is $111,389,000 and $109,505,000 respectively. The accumulated depreciation taken for Federal income tax purposes at December 31, 1998 and 1997, is $75,321,000 and $71,406,000, respectively. NOTE G - INVESTMENT IN JOINT VENTURE Condensed balance sheet information of the Joint Venture at December 31, 1998, is as follows (in thousands): Assets Cash $ 118 Other assets 169 Investment properties, net 2,036 Total $ 2,323 Liabilities and Partners' Capital Note payable to AMIT (Note E) $ 1,567 Other liabilities 671 Partners' capital 85 Total $ 2,323 The condensed statements of operations of the Joint Venture for the years ended December 31, 1998 and 1997, are summarized as follows: Years Ended December 31, 1998 1997 (in thousands) Revenue $ 1,667 $ 1,628 Costs and expenses (1,681) (1,535) Net (loss) income $ (14) $ 93 The Partnership recognized its 44.5% equity loss of approximately $6,000 and equity income of approximately $42,000 in the Joint Venture for the years ended December 31, 1998 and 1997, respectively. The Princeton Meadows Golf Course property had an underground fuel storage tank that was removed in 1992. This fuel storage tank caused contamination to the area. Management installed monitoring wells in the area where the tank was formerly buried. Some samples from these wells indicated lead and phosphorous readings that were higher than the range prescribed by the New Jersey Department of Environmental Protection ("DEP"). The Joint Venture notified DEP of the findings when they were first discovered. However, DEP did not give any directives as to corrective action until late 1995. In November 1995, representatives of the Joint Venture and the New Jersey DEP met and developed a plan of action to clean-up the contamination site at Princeton Meadows Golf Course. The Joint Venture has engaged an engineering firm to conduct consulting and compliance work and a second firm to perform the field work necessary for the clean-up. Field work is in process, with skimmers having been installed at three test wells on the site. These skimmers are in place to detect any residual fuel that may still be in the ground. The expected completion date of field work was to be sometime in 1999. The Joint Venture originally recorded a liability of $199,000 for the costs of the clean-up. For the year ended December 31, 1997, the Joint Venture recorded an additional liability of approximately $45,000 as an adjustment to estimated costs remaining to complete the clean-up. At December 31, 1998, the balance in the liability for clean-up costs is $54,000. Upon sale of the Golf Course, as noted below, the Joint Venture received documents from the Purchaser releasing the Joint Venture from any further responsibility or liability with respect to the clean-up. On February 26, 1999, the Joint Venture sold the Princeton Meadows Golf Course to an unaffiliated third party for gross sale proceeds of $5,100,000. The Joint Venture received net proceeds of $3,452,000 after payment of closing costs, resulting in a gain on sale of approximately $2,932,000. The Partnership's 1999 pro-rata share of this gain is expected to be approximately $1,305,000. Furthermore, as a result of the sale, unamortized loan costs in the amount of $6,500 were written off. This resulted in an extraordinary loss on early extinguishment of debt of approximately $6,500. The Partnership's 1999 pro-rata share of this extraordinary loss is expected to be approximately $3,000. NOTE H - CASUALTIES A net casualty gain of $352,000 has been recorded in 1998 due to fires at Pickwick Place and Hunters Glen V and VI and water damage at Southpointe. In June, 1998, a fire at Pickwick Place extensively damaged 12 apartment units. The undepreciated value of the units of approximately $80,000 was written off and netted with the insurance proceeds received of approximately $449,000, for a net casualty gain of $369,000. In May, 1998, there were two smaller fires at Hunters Glen V and VI which resulted in damages of approximately $3,000 and $4,000, respectively. Finally, in February, 1998, there was some water damage at Southpointe which resulted in a net loss of $10,000 after the receipt of insurance proceeds. During October 1997, there was a fire on the balcony of a unit at Pickwick Place Apartments. The fire caused smoke and water damage to four units in the building. Expected insurance proceeds to be received as a result of this casualty approximate the estimated repair costs of $60,000, resulting in no gain or loss being recorded. NOTE I _ LOSS ON DISPOSAL OF PROPERTIES For the year ended December 31, 1998, a loss on disposal of properties was recorded at Chambers Ridge Apartments and Twin Lake Towers Apartments for approximately $35,000 and $23,000, respectively, as the result of re-roofing projects at both investment properties. The losses occurred due to the write- off of the old roofs that were not fully depreciated upon completion of the new roofing projects. For the year ended December 31, 1997, a loss on disposal of properties of approximately $70,000 was recorded as the result of balcony replacements at Twin Lake Towers and carport replacements at Pickwick Place for approximately $37,000 and $33,000, respectively. NOTE J _ SUBSEQUENT EVENTS On January 4, 1999, the Registrant sold Cooper Point Plaza to an unaffiliated third party for net sales proceeds of approximately $2,011,000 after payment of closing costs. The Registrant realized a gain of approximately $2,400,000 on the sale and a related $556,000 extraordinary loss on early extinguishment of debt. On February 26, 1999, the Joint Venture sold the Princeton Meadows Golf Course to an unaffiliated third party for gross sale proceeds of $5,100,000. The Joint Venture received net proceeds of $3,452,000 after payment of closing costs, resulting in a gain on sale of approximately $2,932,000. The Partnership's 1999 pro-rata share of this gain is expected to be approximately $1,305,000. Furthermore, as a result of the sale, unamortized loan costs in the amount of $6,500 were written off. This resulted in an extraordinary loss on early extinguishment of debt of approximately $6,500. The Partnership's 1999 pro-rata share of this extraordinary loss is expected to be approximately $3,000. NOTE K _ SEGMENT REPORTING Description of the types of products and services from which the reportable segment derives its revenues: As defined by SFAS No. 131, "Disclosures about Segments of an Enterprise and Related Information", the Partnership has one reportable segment: residential properties. This segment consists of nine apartment complexes located in six states in the United States. The Partnership rents apartment units to people for terms that are typically less than twelve months. Measurement of segment profit or loss: The Partnership evaluates performance based on net income. The accounting policies of the reportable segment are the same as those described in the summary of significant accounting policies. Factors management used to identify the Partnership's reportable segment: The Partnership's reportable segment consists of investment properties that offer similar products and services. Although each of the investment properties are managed separately, they have been aggregated into one segment as they provide services with similar types of products and customers. Segment information for the years 1998 and 1997 is shown in the tables below. The "Other" column includes partnership administration related items and income and expense not allocated to the reportable segment. 1998 RESIDENTIAL OTHER TOTALS (in thousands) Rental income $19,902 $ 737 $20,639 Other income 1,170 250 1,420 Interest expense 5,964 450 6,414 Depreciation 4,641 354 4,995 General and administrative expense -- 760 760 Casualty gain 352 -- 352 Loss on disposal of property (58) -- (58) Equity in loss of JV -- (6) (6) Segment profit (loss) 277 (961) (684) Total assets 39,066 10,477 49,543 Capital expenditures for investment properties 2,281 -- 2,281 RESIDENTIAL OTHER TOTALS 1997 (in thousands) Rental income $19,030 $ 802 $19,832 Other income 1,068 216 1,284 Interest expense 6,030 462 6,492 Depreciation 4,584 381 4,965 General and administrative expense -- 509 509 Loss on disposal of property (70) -- (70) Equity in income of JV -- 42 42 Segment loss (1,320) (705) (2,025) Total assets 41,112 10,253 51,365 Capital expenditures (write-offs) for investment properties 1,687 (16) 1,671 NOTE L _ 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. in the Superior Court of the State of California for the County of San Mateo. The plaintiffs named as defendants, among others, the Partnership, the Managing General Partner and several of their affiliated partnerships and corporate entities. The complaint 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 the acquisition by Insignia Financial Group, Inc. ("Insignia") and entities which were, at one time, affiliates of Insignia ("Insignia Affiliates") of interests in certain general partner entities, past tender offers by Insignia Affiliates to acquire limited partnership units, the management of partnerships by Insignia Affiliates as well as a recently announced agreement between Insignia and Apartment Investment and Management Company. The complaint seeks 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 have filed an amended complaint. The Managing General Partner has filed demurrers to the amended complaint which were heard during February 1999. No ruling on such demurrers has been received. The Managing General Partner does not anticipate that costs associated with this case, if any, to be material to the Partnership's overall operations. On July 30, 1998, certain entities claiming to own limited partnership interests in certain limited partnerships whose general partners were, at the time, affiliates of Insignia filed a complaint entitled EVEREST PROPERTIES, LLC. V. INSIGNIA FINANCIAL GROUP, INC., ET AL. in the Superior Court of the State of California, county of Los Angeles. The action involves 44 real estate limited partnership (including the Partnership) in which the plaintiffs allegedly own interests and which Insignia Affiliates allegedly manage or control (the "Subject Partnerships"). This case was settled on March 3, 1999. The Partnership is responsible for a portion of the settlement costs. The expense will not have a material effect on the Partnership's operations. In July 1998, a limited partner of the Partnership commenced an action in the Circuit Court for Jackson County, Missouri entitled BOND PURCHASE LLC V. ANGELES PARTNERS XII, ET AL. The complaint claims that the Partnership and an affiliate of the Managing General Partner breached certain contractual and fiduciary duties allegedly owed to the claimant and seeks damages and injunctive relief. The Managing General Partner believes the claim to be without merit and intends to vigorously defend the claim. The Managing General Partner is unable to determine the costs associated with this claim at this time. The Partnership is unaware of any other pending or outstanding litigation that is not of a routine nature arising in the ordinary course of business. ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANT ON ACCOUNTING AND FINANCIAL DISCLOSURES There were no disagreements with Ernst & Young, LLP regarding the 1998 or 1997 audits of the Partnership's financial statements. PART III ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT Angeles Realty Corporation II ("ARC II" or the "Managing General Partner"), is a wholly-owned subsidiary of MAE GP Corporation (MAE GP). Effective February 25, 1998, MAE GP was merged into Insignia Properties Trust ("IPT"), which was an affiliate of Insignia Financial Group, Inc. ("Insignia"). Effective, October 1, 1998 and February 26, 1999, Insignia and IPT were respectively merged into Apartment Investment and Management Company ("AIMCO"). Thus the Managing General Partner is now a wholly-owned subsidiary of AIMCO. The names of the directors and executive officers of ARC II, their ages and the nature of all positions with ARC II presently held by them are as follows: Name Age Position Patrick J. Foye 41 Executive Vice President and Director Timothy R. Garrick 42 Vice President _ Accounting and Director Patrick J. Foye has been Executive Vice President and Director of the Managing General Partner since October 1, 1998. Mr. Foye has served as Executive Vice President of AIMCO since May 1998. Prior to joining AIMCO, Mr. Foye was a partner in the law firm of Skadden, Arps, Slate, Meagher & Flom LLP from 1989 to 1998 and was Managing Partner of the firm's Brussels, Budapest and Moscow offices from 1992 through 1994. Mr. Foye is also Deputy Chairman of the Long Island Power Authority and serves as a member of the New York State Privatization Council. He received a B.A. from Fordham College and a J.D. from Fordham University Law School. Timothy R. Garrick has served as Vice President-Accounting of AIMCO and Vice President-Accounting and Director of the Managing General Partner since October 1, 1998. Prior to that date, Mr. Garrick served as Vice President-Accounting Services of Insignia Financial Group since June of 1997. From 1992 until June of 1997, Mr. Garrick served as Vice President of Partnership Accounting and from 1990 to 1992 as an Asset Manager for Insignia Financial Group. From 1984 to 1990, Mr. Garrick served in various capacities with U.S. Shelter Corporation. From 1979 to 1984, Mr. Garrick worked on the audit staff of Ernst & Whinney. Mr. Garrick received his B.S. Degree from the University of South Carolina and is a Certified Public Accountant. ITEM 10. EXECUTIVE COMPENSATION None of the directors and officers of the Managing General Partner received any renumeration from the Registrant. ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT Except as noted below, no person or entity was known by the Registrant to be the beneficial owner of more than 5% of the Limited Partnership units of the Registrant as of December 31, 1998. Number of Entity Units Percentages Cooper River Properties LLC (an affiliate of AIMCO) 4,607 10.302% Broad River Properties LLC (an affiliate of AIMCO) 8,002 17.894% Insignia Properties, LP (an affiliate of AIMCO) 1,804 4.034% AIMCO Properties LP (an affiliate of AIMCO) 2,182 4.879% Cooper River Properties LLC, Broad River Properties, Insignia Properties LP and AIMCO Properties LP are indirectly ultimately owned by AIMCO. The business address for all except AIMCO Properties LP is 55 Beattie Place, Greenville, SC 29602. The business address for AIMCO Properties LP is 1873 South Bellaire Street, 17th Floor, Denver, Colorado 80222. On October 1, 1998, Insignia Financial Group, Inc. merged into AIMCO, a real estate investment trust, whose Class A Common Shares are listed on the New York Stock Exchange. As a result of such merger, AIMCO and AIMCO Properties, L.P., a Delaware limited partnership and the operating partnership of AIMCO ("AIMCO OP") acquired indirect control of the Managing General Partner. AIMCO and its affiliates currently own 37.109% of the limited partnership interests in the Partnership. AIMCO is presently considering whether it will engage in an exchange offer for additional limited partnership interests in the Partnership. There is a substantial likelihood that, within a short period of time, AIMCO OP will offer to acquire limited partnership interests in the Partnership for cash or preferred units or common units of limited partnerships interests in AIMCO OP. While such an exchange offer is possible, no definite plans exist as to when or whether to commence such an exchange offer, or as to the terms of any such exchange offer, and it is possible that none will occur. A registration statement relating to these securities has been filed with the Securities and Exchange Commission but has not yet become effective. These securities may not be sold nor may offers to buy be accepted prior to the time the registration statement becomes effective. This Form 10-KSB shall not constitute an offer to sell or the solicitation of an offer to buy nor shall there be any sale of these securities in any state in which such offer, solicitation or sale would be unlawful prior to the registration or qualification under the securities laws of any such state. The Partnership knows of no contractual arrangements, the operation of the terms of which may at a subsequent date result in a change in control of the Partnership, except for: Article 12.1 of the Agreement, which provides that upon a vote of the Limited Partners holding more than 50% of the then outstanding Limited Partnership Units the General Partners may be expelled from the Partnership upon 90 days written notice. In the event that successor general partners have been elected by Limited Partners holding more than 50% of the then outstanding Limited Partnership Units and if said Limited Partners elect to continue the business of the Partnership, the Partnership is required to pay in cash to the expelled Managing General Partner an amount equal to the accrued and unpaid management fee described in Article 10 of the Agreement and to purchase the General Partners' interest in the Partnership on the effective date of the expulsion, which shall be an amount equal to the difference between (i) the balance of the General Partners' capital account and (ii) the fair market value of the share of Distributable Net Proceeds to which the General Partners would be entitled. Such determination of the fair market value of the share of Distributable Net Proceeds is defined in Article 12.2(ii) of the Agreement. ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS No transactions have occurred between the Partnership and any officer or director of ARC II. 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) certain payments to affiliates for services and (ii) reimbursement of certain expenses incurred by affiliates on behalf of the Partnership. The following amounts owed to the Managing General Partner and affiliates for the years ended December 31, 1998 and 1997, were paid or accrued: 1998 1997 (in thousands) Property management fees (included in Operating expenses) $1,034 $ 1,029 Partnership management fee (included in general and administrative expense) (1) 135 -- Reimbursement for services of affiliates (included in operating and general and Administrative expenses and investment Property) 504 431 (1) 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. Included in reimbursements for services of affiliates for the year ended December 31, 1998 and 1997, is approximately $56,000 and $70,000, respectively, of construction oversight reimbursements. During the years ended December 31, 1998 and 1997 affiliates of the Managing General Partner, were entitled to receive 5% of the gross receipts from all of the Registrant's properties (except Southpointe which is 3%) as compensation for providing property management services. The Registrant paid to such affiliates $1,016,000 and $1,006,000 for the years ended December 31, 1998 and 1997 respectively. During the year ended December 31, 1997 and for the nine months ended September 30, 1998, affiliates of the Managing General Partner were entitled to varying percentages of gross receipts from the Registrant's commercial property as compensation for providing management services. These services were performed by affiliates of the Managing General Partner during 1997 and for the nine months ended September 30, 1998. The Registrant paid to such affiliates $18,000 and $23,000 for the nine months ended September 30, 1998 and for the year ended December 31, 1997, respectively. Effective October 1, 1998 (the effective date of the Insignia Merger), these services for the commercial property were performed by an unrelated party. Affiliates of the Managing General Partner received reimbursement of accountable administrative expenses amounting to approximately $504,000 and $431,000 for the years ended December 31, 1998 and 1997, respectively. Angeles Mortgage Investment Trust ("AMIT"), a real estate investment trust, provides financing (the "AMIT Loans") to the Princeton Meadows Golf Course Joint Venture. The AMIT Loan had a principal balance of $1,567,000 at December 31, 1998, accrues interest at a rate of 12.5% per annum and matures on September 1, 2000, at which time the outstanding balance and any unpaid interest is due. Interest expense on the debt secured by the Joint Venture was approximately $196,000 for both of the years ended December 31, 1998 and 1997, respectively. Accrued interest was $18,000 at December 31, 1998. Pursuant to a series of transactions, affiliates of the Managing General Partner acquired ownership interests in AMIT. On September 17, 1998, AMIT was merged with and into Insignia Properties Trust ("IPT"), the entity which controlled the Managing General Partner. Effective February 26, 1999, IPT was merged into AIMCO. As a result, AIMCO is the current holder of the AMIT Loan. On February 26, 1999, Princeton Meadows Golf Course was sold to an unaffiliated third party. Upon closing, the AMIT principal balance of $1,567,000 plus accrued interest of approximately $17,000 was paid off. The Partnership was permitted to make advances to the Joint Venture as deemed appropriate by the Managing General Partner. These advances did not bear interest and did not have stated terms of repayment. At December 31, 1998, the amount of advances receivable from the Joint Venture was approximately $149,000. On April 14, 1998, an affiliate of the Managing General Partner (the "Purchaser") commenced a tender offer for limited partnership interests in the Partnership. The Purchaser offered to purchase up to 18,500 of the outstanding units of limited partnership interest in the Partnership at $500 per Unit, net to the seller in cash. The Purchaser acquired 8,002 units at $500 per Unit pursuant to this tender offer or 17.894% of the outstanding limited partnership units. On August 13, 1998, the purchaser commenced a second tender offer for limited partnership interests in the Partnership. The Purchaser offered up to 12,000 of the outstanding units of limited partnership interest in the Partnership at $600 per Unit, net to the seller in cash. In connection with this tender offer, the Purchaser acquired 4,607 units at $600 per Unit or 10.302% of the outstanding limited partnership units. As a result of these purchases, AIMCO currently owns, through its affiliates, a total of 16,595 limited partnership units or 37.109% of the outstanding limited partnership units. Consequently, AIMCO could be in a position to significantly influence all voting decisions with respect to the Registrant. Under the Partnership Agreement, unitholders holding a majority of the Units are entitled to take action with respect to a variety of matters. When voting on matters, AIMCO would in all likelihood vote the Units it acquired in a manner favorable to the interest of the Managing General Partner because of their affiliation with the Managing General Partner. For the period from January 1, 1997 to August 31, 1997, the Partnership insured its properties under a master policy through an agency affiliated with the Managing General Partner with an insurer unaffiliated with the Managing General Partner. An affiliate of the Managing General Partner acquired, in the acquisition of a business, certain financial obligations from an insurance agency which was later acquired by the agent who placed the current year's master policy. The agent assumed the financial obligations of the affiliate of the Managing General Partner which receives payments on these obligations from the agent. The amount of the Partnership's insurance premiums that accrued to the benefit of the affiliate of the Managing General Partner by virtue of the agent's obligations was not significant. PART IV ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits: See Exhibit Index contained herein. (b) Reports on Form 8-K filed during the fourth quarter of 1997. Current Report on Form 8-K dated October 1, 1998 filed on October 16, 1998 disclosing Change in Control of Registrant from Insignia Financial Group, Inc. to AIMCO. SIGNATURES In accordance with Section 13 or 15(d) of the Exchange Act, the Registrant has caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. Angeles Partners XII (A California Limited Partnership) (Registrant) By: Angeles Realty Corporation II Managing General Partner By: /s/ Patrick J. Foye Patrick J. Foye Executive Vice President By: /s/ Timothy R. Garrick Timothy R. Garrick Vice President - Accounting Date: March 31, 1999 In accordance with the Exchange Act, this Report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the date indicated. /s/ Patrick J. Foye Executive Vice President Date: March 31, 1999 Patrick J. Foye and Director /s/ Timothy R. Garrick Vice President _ Accounting Date: March 31, 1999 Timothy R. Garrick and Director EXHIBIT INDEX Exhibit Number Description of 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. 10.1 Purchase and Sale Agreement with Exhibits - Twin Lake Towers Apartments filed in Form 8K dated March 30, 1984, incorporated herein by reference. 10.2 Purchase and Sale Agreement with Exhibits - Pickwick Place Apartments filed in Form 8K dated May 11, 1984, incorporated herein by reference. 10.3 Purchase and Sale Agreement with Exhibits - Chambers Ridge Apartments filed in Form 8K dated July 26, 1984, incorporated herein by reference. 10.4 Purchase and Sale Agreement with Exhibits - Park Village Plaza filed in Form 8K dated December 21, 1984, incorporated herein by reference. 10.5 Purchase and Sale Agreement with Exhibits - Gateway Gardens Apartments filed in Form 8K dated December 21, 1984, incorporated herein by reference. 10.6 Purchase and Sale Agreement with Exhibits - Hunters Glen Apartments I, II, III filed in Form 8K dated February 1, 1985, incorporated herein by reference. 10.7 Purchase and Sale Agreement with Exhibits - Meadows Apartments filed in Form 8K dated June 12, 1985, incorporated herein by reference. 10.8 Purchase and Sale Agreement with Exhibits - Briarwood Apartments filed in Form 8K dated June 25, 1985, incorporated herein by reference. 10.9 Purchase and Sale Agreement with Exhibits - dated July 26, 1992 between Princeton Golf Course Joint Venture and Lincoln Property Company No. 199 filed in Form 10Q dated August 13, 1992, incorporated herein by reference. 10.10 Princeton Golf Course Joint Venture Agreement with Exhibits - dated August 21, 1991 between the Partnership, Angeles Partners XI and Angeles Income Properties, Ltd. II filed in Form 10Q dated August 13, 1992, incorporated herein by reference. 10.11 Stock Purchase Agreement dated November 24, 1992 showing the purchase of 100% of the outstanding stock of Angeles Realty Corporation II by IAP GP Corporation, a subsidiary of MAE GP Corporation, filed in Form 8-K dated December 31, 1992, which is incorporated herein by reference. 10.12 Contracts related to refinancing of debt (a) First Deeds of Trust and Security Agreements dated September 30, 1993 between AP XII Associates Limited Partnership, a South Carolina Limited Partnership and Lexington Mortgage Company, a Virginia Corporation, securing Briarwood. (b) Second Deeds of Trust and Security Agreements dated September 30, 1993 between AP XII Associates Limited Partnership, a South Carolina Limited Partnership and Lexington Mortgage Company, a Virginia Corporation, securing Briarwood. (c) First Assignments of Leases and Rents dated September 30, 1993 between AP XII Associates Limited Partnership, a South Carolina Limited Partnership and Lexington Mortgage Company, a Virginia Corporation, securing Briarwood. (d) Second Assignments of Leases and Rents dated September 30, 1993 between AP XII Associates Limited Partnership, a South Carolina Limited Partnership and Lexington Mortgage Company, a Virginia Corporation, securing Briarwood. (e) First Deeds of Trust Notes dated September 30, 1993 between AP XII Associates Limited Partnership, a South Carolina Limited Partnership and Lexington Mortgage Company, a Virginia Corporation securing Briarwood. (f) Second Deeds of Trust Notes dated September 30, 1993 between AP XII Associates Limited Partnership, a South Carolina Limited Partnership and Lexington Mortgage Company, a Virginia Corporation securing Briarwood. 10.13 Contracts related to refinancing of debt (a) First Deeds of Trust and Security Agreements dated September 30, 1993 between AP XII Associates Limited Partnership, a South Carolina Limited Partnership and Lexington Mortgage Company, a Virginia Corporation, securing Twin Lake Towers. (b) Second Deeds of Trust and Security Agreements dated September 30, 1993 between AP XII Associates Limited Partnership, a South Carolina Limited Partnership and Lexington Mortgage Company, a Virginia Corporation, securing Twin Lake Towers. (c) First Assignments of Leases and Rents dated September 30, 1993 between AP XII Associates Limited Partnership, a South Carolina Limited Partnership and Lexington Mortgage Company, a Virginia Corporation, securing Twin Lake Towers. (d) Second Assignments of Leases and Rents dated September 30, 1993 between AP XII Associates Limited Partnership, a South Carolina Limited Partnership and Lexington Mortgage Company, a Virginia Corporation, securing Twin Lake Towers. (e) First Deeds of Trust Notes dated September 30, 1993 between AP XII Associates Limited Partnership, a South Carolina Limited Partnership and Lexington Mortgage Company, a Virginia Corporation securing Twin Lake Towers. (f) Second Deeds of Trust Notes dated September 30, 1993 between AP XII Associates Limited Partnership, a South Carolina Limited Partnership and Lexington Mortgage Company, a Virginia Corporation securing Twin Lake Towers. 10.14 Contracts related to refinancing of debt (a) First Deeds of Trust and Security Agreements dated September 30, 1993 between AP XII Associates Limited Partnership, a South Carolina Limited Partnership and Lexington Mortgage Company, a Virginia Corporation, securing Hunters Glen. (b) Second Deeds of Trust and Security Agreements dated September 30, 1993 between AP XII Associates Limited Partnership, a South Carolina Limited Partnership and Lexington Mortgage Company, a Virginia Corporation, securing Hunters Glen. (c) First Assignments of Leases and Rents dated September 30, 1993 between AP XII Associates Limited Partnership, a South Carolina Limited Partnership and Lexington Mortgage Company, a Virginia Corporation, securing Hunters Glen. (d) Second Assignments of Leases and Rents dated September 30, 1993 between AP XII Associates Limited Partnership, a South Carolina Limited Partnership and Lexington Mortgage Company, a Virginia Corporation, securing Hunters Glen. (e) First Deeds of Trust Notes dated September 30, 1993 between AP XII Associates Limited Partnership, a South Carolina Limited Partnership and Lexington Mortgage Company, a Virginia Corporation securing Hunters Glen. (f) Second Deeds of Trust Notes dated September 30, 1993 between AP XII Associates Limited Partnership, a South Carolina Limited Partnership and Lexington Mortgage Company, a Virginia Corporation securing Hunters Glen. 10.15 Contracts related to refinancing of debt. (a) First Deeds of Trust and Security Agreements dated September 30, 1993 between AP XII Associates Limited Partnership, a South Carolina Limited Partnership and Lexington Mortgage Company, a Virginia Corporation, securing Chambers Ridge. (b) Second Deeds of Trust and Security Agreements dated September 30, 1993 between AP XII Associates Limited Partnership, a South Carolina Limited Partnership and Lexington Mortgage Company, a Virginia Corporation, securing Chambers Ridge. (c) First Assignments of Leases and Rents dated September 30, 1993 between AP XII Associates Limited Partnership, a South Carolina Limited Partnership and Lexington Mortgage Company, a Virginia Corporation, securing Chambers Ridge. (d) Second Assignments of Leases and Rents dated September 30, 1993 between AP XII Associates Limited Partnership, a South Carolina Limited Partnership and Lexington Mortgage Company, a Virginia Corporation, securing Chambers Ridge. (e) First Deeds of Trust Notes dated September 30, 1993 between AP XII Associates Limited Partnership, a South Carolina Limited Partnership and Lexington Mortgage Company, a Virginia Corporation securing Chambers Ridge. (f) Second Deeds of Trust Notes dated September 30, 1993 between AP XII Associates Limited Partnership, a South Carolina Limited Partnership and Lexington Mortgage Company, a Virginia Corporation securing Chambers Ridge. 10.16 Contracts related to refinancing of debt (a) First Deeds of Trust and Security Agreements dated September 30, 1993 between AP XII Associates Limited Partnership, a South Carolina Limited Partnership and Lexington Mortgage Company, a Virginia Corporation, securing Gateway Gardens. (b) Second Deeds of Trust and Security Agreements dated September 30, 1993 between AP XII Associates Limited Partnership, a South Carolina Limited Partnership and Lexington Mortgage Company, a Virginia Corporation, securing Gateway Gardens. (c) First Assignments of Leases and Rents dated September 30, 1993 between AP XII Associates Limited Partnership, a South Carolina Limited Partnership and Lexington Mortgage Company, a Virginia Corporation, securing Gateway Gardens. (d) Second Assignments of Leases and Rents dated September 30, 1993 between AP XII Associates Limited Partnership, a South Carolina Limited Partnership and Lexington Mortgage Company, a Virginia Corporation, securing Gateway Gardens. (e) First Deeds of Trust Notes dated September 30, 1993 between AP XII Associates Limited Partnership, a South Carolina Limited Partnership and Lexington Mortgage Company, a Virginia Corporation securing Gateway Gardens. (f) Second Deeds of Trust Notes dated September 30, 1993 between AP XII Associates Limited Partnership, a South Carolina Limited Partnership and Lexington Mortgage Company, a Virginia Corporation securing Gateway Gardens. 10.17 Reinstatement and Modification Agreement dated December 31, 1997, between Angeles Partners XII, a California limited partnership, and Chase Manhattan Bank, successor by merger to Chemical Bank. 10.18 Purchase and Sale Agreement dated January 4, 1999, between Cooper Point Plaza, LLC and Angeles Partners XII for sale of Cooper Pointe Plaza filed with Form 10-KSB for the year ended December 31, 1998. 16.1 Letter from the Registrant's former independent accountant regarding its concurrence with the statements made by the Registrant is incorporated by reference to the Exhibit filed with Form 8-K dated September 1, 1993. 27 Financial Data Schedule is filed as an Exhibit to this report. EX-27 2
5 This schedule contains summary financial information extracted from Angeles Partners XII 1998 Year-End 10-KSB and is qualified in its entirety by reference to such 10-KSB filing. 0000720392 ANGELES PARTNERS XII 1,000 12-MOS DEC-31-1998 DEC-31-1998 7,611 0 1,985 0 0 0 102,413 (65,275) 49,543 0 71,351 0 0 0 (25,949) 49,543 0 22,411 0 0 23,089 0 6,414 0 0 0 0 0 0 (684) (15.14) 0 Registran has an unclassified balance sheet. Multiplier is 1.
EX-10.18 3 CONTRACT OF SALE (COOPER POINT PLAZA) THIS CONTRACT OF SALE (this "Contract") is made and entered into by and between ANGELES PARTNERS XII, a California limited partnership ("Seller"), and COOPER POINT PLAZA, LLC, a Utah limited liability company ("Purchaser"). ARTICLE I. SALE OF THE PROPERTY 1.1 Property. For the consideration and upon and subject to the terms, provisions and conditions of this Contract, Seller agrees to sell to Purchaser, and Purchaser agrees to purchase from Seller, all of the following described property (collectively, the "Property"): (a) That certain tract or parcel of land (the "Land") located in Thurston County, Washington, more particularly described on Exhibit A attached hereto and made a part hereof for all purposes, together with all improvements, structures and fixtures, if any, located on the Land (the "Improvements"), and all rights, titles and interests of Seller appurtenant to the Land and Improvements, including, without limitation, appurtenant easements, adjacent roads, highways and rights-of-way; (b) All tangible personal property of any kind (the "Personalty") owned by Seller and attached to or located on the Land or Improvements, including, without limitation, those items of tangible personal property set forth on the Personal Property Schedule attached hereto as Schedule 1.1(b); (c) All of Seller's rights, titles and interests (as lessor) under any leases or other agreements demising space in or providing for the use or occupancy of the Improvements or Land listed on Schedule 1.1(c) hereto (which, together with any other leases which may be entered into between the Effective Date and the Closing Date, are herein collectively referred to as the "Tenant Leases"), and all unapplied deposits, whether security or otherwise ("Deposits"), paid by tenants ("Tenants") under the Tenant Leases; and (d) All of Seller's rights, titles and interests in and to all warranties, guaranties and bonds in effect at Closing, and in and to all service, management, maintenance and similar contracts listed on Schedule 1.1(d) hereto and other service contracts entered into in accordance with the terms of this Contract (collectively, the "Service Contracts") that Purchaser is required to assume as contemplated by Section 5.2 hereof, relating to the Land, the Improvements or the Personalty, to the extent the same are assignable (the "Contracts"). ARTICLE II. PURCHASE PRICE 2.1 Purchase Price. The total Purchase Price (herein so called) to be paid by Purchaser to Seller for the Property shall be an amount equal to Six Million Two Hundred Thousand and No/100 Dollars ($6,200,000.00). The Purchase Price shall be payable in cash or Current Funds (defined below) at the Closing (hereinafter defined). ARTICLE III. EARNEST MONEY DEPOSIT 3.1 Amount and Timing. Within two (2) business days after the Effective Date (hereinafter defined), Purchaser shall deliver to Thurston County Title Company, located at 105 E. 8th Avenue, Olympia, Washington 98501 (the "Title Company"), Twenty-Five Thousand and No/100 Dollars ($25,000.00) (the "Initial Deposit") in cash or Current Funds, to be held by the Title Company in escrow to be applied or disposed of by the Title Company as is provided in this Contract. In the event Purchaser fails to deposit the Initial Deposit with the Title Company as herein provided, Seller may, at its option, terminate this Contract prior to the making of the Initial Deposit, in which event neither Seller nor Purchaser shall have any further obligations hereunder except for provisions of this Contract which expressly survive the termination of this Contract. Not later than twenty (20) days after the expiration of the Inspection Period (as hereinafter defined), Purchaser shall deposit with the Title Company an additional earnest money deposit in the amount of One Hundred Twenty-Five Thousand and No/100 Dollars ($125,000.00) (the "Subsequent Deposit") in cash or Current Funds to be held by the Title Company in escrow to be applied or disposed of by the Title Company as provided in this Contract. If the Purchaser does not terminate this Contract pursuant to Section 5.2 hereof and fails to deposit the Subsequent Deposit on or before the twentieth (20th) day after the end of the Inspection Period, then Seller may, at its option, terminate this Contract prior to the making of such Subsequent Deposit, in which event the Title Company shall pay the Initial Deposit to Seller and thereafter neither Seller nor Purchaser shall have any further rights or obligations hereunder except for provisions of this Contract which expressly survive the termination of this Contract. The term "Earnest Money Deposit", as used in this Contract, shall mean (i) the Initial Deposit prior to deposit of the Subsequent Deposit, and (ii) both the Initial Deposit and the Subsequent Deposit combined after the deposit of the Subsequent Deposit, in each case, together with all interest earned thereon. As used in this Contract, the term "Current Funds" shall mean wire transfers, certified funds or a cashier's check in a form acceptable to the Title Company which would permit the Title Company to immediately disburse such funds. 3.2 Application and Interest. If the purchase and sale hereunder is consummated, then the Earnest Money Deposit shall be applied to the Purchase Price at Closing. In all other events, the Earnest Money Deposit shall be disposed of by the Title Company as provided in this Contract. The Earnest Money Deposit shall be invested in an interest-bearing account with a financial institution and in a manner, reasonably acceptable to Purchaser. All interest earned on the Earnest Money Deposit is part of the Earnest Money Deposit, to be applied or disposed of in the same manner as the Earnest Money Deposit under this Contract. ARTICLE IV. TITLE AND SURVEY 4.1 Title Commitment. Not later than fifteen (15) days after the Effective Date, Purchaser shall have obtained and furnished to Seller a current Commitment for Title Insurance for the Land and Improvements (the "Title Commitment") issued by the Title Company. The Title Commitment shall set forth the state of title to the Property, including a list of conditions or exceptions to title affecting the Property that would appear in an Owner's Policy of Title Insurance, if one were issued. The Title Commitment shall contain the expressed commitment of the Title Company to issue the Title Policy (hereinafter defined) to Purchaser in the amount of the Purchase Price, insuring the title to the Property specified in the Title Commitment. At such time as the Title Commitment is furnished to Purchaser, the Title Company also shall furnish to Purchaser copies of instruments or documents (the "Exception Documents") that create or evidence conditions or exceptions to title affecting the Property, as described in the Title Commitment. 4.2 Survey. Seller has previously provided to Purchaser a copy of the latest survey of the Land and Improvements in Seller's possession (the "Seller's Survey"). Purchaser shall, not later than five (5) days after the Effective Date, order and promptly after receipt thereof deliver to Seller, a survey of the Property that is otherwise sufficient for Purchaser and the Title Company, and that is certified to Seller, Purchaser and the Title Company (the "Purchaser's Survey"). Purchaser shall pay all fees, costs and expenses of preparation and delivery of the Purchaser's Survey. For purposes of Section 4.3 below, Purchaser's Survey shall be deemed received on the earlier of (i) the date it is delivered to Purchaser or (ii) twenty (20) days after the Effective Date. 4.3 Review of Title and Survey. Purchaser shall have until twenty (20) days after receipt of the last of the Title Commitment, Exception Documents, copies of the Tenant Leases listed on Schedule 1.1(c), and Purchaser's Survey in which to notify Seller in writing (the "Title Objection Notice") of any objections Purchaser has to any matters shown or referred to in the Title Commitment, the Exception Documents or on the Purchaser's Survey; provided, that Purchaser shall not object to current real estate taxes and assessments, all of which shall be Permitted Exceptions hereunder. Any title encumbrances, exceptions or other matters which are set forth in the Title Commitment, the Exception Documents or on the Purchaser's Survey, and to which Purchaser does not object within the aforementioned twenty (20) day period, shall be deemed to be permitted exceptions to the status of Seller's title (such encumbrances, exceptions or other acceptable matters, together with such other matters concerning title to the Property or matters shown on the Purchaser's Survey included pursuant to other provisions of this Contract, shall be referred to as the "Permitted Exceptions"). 4.4 Objections to Status of Title and Survey. If Purchaser properly objects to any item shown or referred to in the Title Commitment, Exception Documents, or Purchaser's Survey within the twenty (20) day period set forth in Section 4.3, Seller shall be given until ten (10) days after receipt of the Title Objection Notice to notify Purchaser whether or not Seller will cure, prior to Closing and at Seller's option and sole discretion but without any obligation to do so, any objection to the condition of title raised by Purchaser. If Seller notifies Purchaser that it elects not to cure any such objections or fails to notify Purchaser within such time period, then Purchaser may, at its option exercisable within the earlier of (i) five (5) days following the date of receipt by Purchaser of written notice from Seller stating that Seller is unable or unwilling to cure such objections, or (ii) five (5) days after the end of Seller's ten (10) day response period, either (a) accept such title as Seller can deliver, in which case all exceptions to title set forth in the Title Commitment, Exception Documents, and Purchaser's Survey which are not removed or which Seller has not agreed to remove shall be deemed to be Permitted Exceptions, or (b) terminate this Contract by notice in writing to Seller in which event the Title Company shall return the Earnest Money Deposit to Purchaser and neither party shall have any further rights, duties or obligations hereunder, except for provisions of this Contract which expressly survive termination of this Contract. In the event Purchaser fails to notify Seller, within such applicable five (5) day period, that Purchaser has elected to proceed under either subpart (a) or (b) of the immediately preceding sentence, Purchaser shall be deemed to have elected to proceed under subpart (b), and this Contract shall terminate as provided in such subpart (b). If Seller notifies Purchaser that it elects to cure any such objections it will use reasonable efforts to do so, but shall not be obligated to cure such objections; provided, that if Seller is unable to cure by Closing any objections which it has notified Purchaser that it will cure, then Purchaser may, at its option, either (x) accept such title as Seller can deliver in which case the parties shall proceed with Closing and all exceptions to title set forth in the Title Commitment, Exception Documents and Purchaser's Survey which are not removed shall be deemed to be Permitted Exceptions, or (y) terminate this Contract by notice in writing to Seller at Closing, in which event the Title Company shall return the Earnest Money Deposit to Purchaser and neither party shall have any further rights, duties or obligations hereunder except for provisions of this Contract which expressly survive termination of this Contract. 4.5 Other Permitted Exceptions. The Permitted Exceptions shall include those matters shown in the Title Commitment and the Survey which become Permitted Exceptions pursuant to sections 4.3 and 4.4 above and, in addition, the following: (a) the Tenant Leases; (b) real property taxes and assessments for the year in which Closing occurs and subsequent years; and (c) liens and encumbrances arising after the date hereof to which Purchaser consents in writing. Notwithstanding anything else to the contrary herein, Seller covenants to remove, at its expense, all monetary liens encumbering the Property which have been created by Seller on or before Closing. ARTICLE V. INSPECTION BY PURCHASER 5.1 Inspection Period. Purchaser shall have a period of time commencing on the Effective Date and expiring at 5:00 p.m., Olympia, Washington, time on the sixtieth (60th) day thereafter (the "Inspection Period") within which to examine the Property and to conduct its feasibility study thereof. The Inspection Period shall be inclusive of the Effective Date. Seller agrees that, during the Inspection Period, Seller will provide Purchaser and Purchaser's agents access to any of Seller's books and records regarding the Property (which shall not include partnership data or materials relating to partnership issues) which are located at Seller's offices in Federal Way, Washington, and to the Property during normal business hours to conduct soil and engineering, hazardous waste, marketing, feasibility, zoning and other studies or tests and to otherwise determine the feasibility of the Property for Purchaser's intended use. From and after the Effective Date, Seller will permit Purchaser to contact Tenants, provided, that (i) Purchaser shall give Seller advance notice prior to contacting Tenants, (ii) Seller shall have the right to approve any correspondence to any Tenants, (iii) Seller shall be provided with all correspondence and information from Tenants to Purchaser, and (iv) Purchaser covenants not to disrupt Tenants or the business operations of any Tenants (other than to a de minimis extent. Notwithstanding the foregoing, (a) the costs and expenses of Purchaser's investigation shall be borne solely by Purchaser, (b) prior to the expiration of the Inspection Period, Purchaser shall restore the Property to the condition which existed prior to Purchaser's entry thereon and investigation thereof to the extent the condition of the Property was affected by or as a result of the actions of Purchaser or its agents, contractors or representatives, (c) Purchaser shall not interfere, interrupt or disrupt the operation of Seller's business on the Property and, further, such access by Purchaser and/or its agents shall be subject to the rights of Tenants under Tenant Leases, (d) in the event the transaction contemplated by this Contract does not close for any reason, Purchaser shall deliver to Seller a descriptive listing of all tests, reports and inspections conducted by Purchaser with respect to the Property and, if Seller pays Purchaser the cost of preparation of such reports, will deliver copies thereof to Seller, (e) Purchaser shall not permit any mechanic's or materialman's liens or any other liens to attach to the Property by reason of the performance of any work or the purchase of any materials by Purchaser or any other party in connection with any studies or tests conducted pursuant to this Section 5.1, (f) Purchaser shall give notice to Seller a reasonable time prior to entry onto the Property and shall permit Seller to have a representative present during all investigations and inspections conducted with respect to the Property, and (g) Purchaser shall take all reasonable actions and implement all protections necessary to ensure that all actions taken in connection with the investigations and inspections of the Property, and all equipment, materials and substances generated, used or brought onto the Property pose no material threat to the safety of persons or the environment and cause no damage to the Property or other property of Seller or other persons. All information made available by Seller to Purchaser in accordance with this Contract or obtained by Purchaser in the course of its investigations shall be treated as confidential information by Purchaser, and, prior to the purchase of the Property by Purchaser, Purchaser shall use its best efforts to prevent its agents and employees from divulging such information to any unrelated third parties except as reasonably necessary to third parties engaged by Purchaser for the limited purpose of analyzing and investigating such information for the purpose of consummating the transaction contemplated by this Contract, including Purchaser's attorneys and representatives, prospective lenders and engineers. Purchaser shall indemnify, defend and hold Seller harmless for, from and against any and all claims, liabilities, causes of action, damages, liens, losses, costs and expenses (including, without limitation, attorneys' fees) incident to, resulting from or in any way arising out of any of Purchaser's and its agents', contractors and representatives activities on the Property, including, without limitation, any tests or inspections conducted by Purchaser or its agents, contractors or representatives on the Property; provided, that Purchaser shall not be obligated to Seller for any economic losses suffered by Seller solely as a result of Purchaser's discovery of pre-existing conditions on the Property. The agreements contained in this Section 5.1 shall survive the Closing and not be merged therein and shall also survive any termination of this Contract. 5.2 Approval of Inspections. If Purchaser determines, in its sole and absolute discretion, at any time prior to the expiration of the Inspection Period, that the Property (including the Tenant Leases) is satisfactory to Purchaser, then Purchaser may deliver, within such Inspection Period, written notice to Seller and the Title Company that the Property is acceptable to Purchaser, such notice to be given in accordance with the provisions of Section 13.1 hereof, in which event this Contract shall continue in full force and effect. If Purchaser does not timely deliver written notice of acceptance within such Inspection Period, Purchaser shall be deemed to have disapproved the condition of the Property, thereby terminating this Contract pursuant to this Section 5.2, in which event the Title Company shall return the Earnest Money Deposit to Purchaser and neither party shall have any further rights, liabilities or obligations hereunder, except for provisions of this Contract which by their terms expressly survive the termination of this Contract as aforesaid. Prior to the end of the Inspection Period, Purchaser shall deliver written notice (the "Service Contract Termination Notice") to Seller of any Service Contracts which Purchaser does not wish to assume; provided, that Purchaser shall be required to assume any Service Contracts (other than Service Contracts with entities, controlling, controlled by, or under common control with Seller) which are not terminable by notice within the time between Seller's receipt of such Service Contract Termination Notice and the Closing Date (hereinafter defined). Any Service Contracts which Purchaser does not specify be terminated in the Service Contract Termination Notice delivered prior to the end of the Inspection Period, and any Service Contracts (other than Service Contracts with entities controlling, controlled by or under common control with Seller) specified in the Service Contract Termination Notice which cannot be terminated without penalty prior to the Closing Date, shall be deemed approved by Purchaser and shall be assumed by Purchaser at Closing; provided, however, that if Purchaser requests in the Service Contract Termination Notice the termination of any Service Contracts which cannot be terminated prior to the Closing Date, then Seller shall deliver notice of termination, subject to any requirement of notice under such Service Contracts, promptly after its receipt of the Service Contract Termination Notice and Purchaser shall assume such Service Contracts, subject to such notice of termination, at Closing. 5.3 Matters to be Delivered by Seller. Seller has previously delivered to Purchaser or, no later than ten (10) days from the Effective Date, Seller shall deliver to Purchaser, the following items (collectively, the "Submission Matters"): (a) A current rent roll for the Property; (b) A copy of all Tenant Leases with respect to the Property, including all amendments thereto; (c) Copies of any and all Service Contracts or other Contracts in Seller's possession relating to the ownership and operation of the Property; (d) Copies of the most recent real estate and personal property tax statements in Seller's possession with respect to the Property; (e) Any environmental studies regarding the Property which Seller has in its possession or is reasonably available to Seller at a minimal charge; and (f) Either copies of insurance policies maintained by Seller with respect to the Property or certificates or other evidence of insurance indicating the coverage available under such policies. From the Effective Date through the Closing Date, Purchaser shall have reasonable access, during normal business hours, to books and records relating to the Property. ARTICLE VI. REPRESENTATIONS AND WARRANTIES; DISCLAIMERS AND WAIVERS 6.1 Representations and Warranties of Purchaser. Purchaser and each of the persons executing this Contract on its behalf represents and warrants to Seller as of the date hereof and as of the Closing Date as follows (which representations and warranties shall survive the Closing for a period of 180 days): (a) Purchaser is a limited liability company duly organized and validly existing under the laws of the State of Utah; (b) Purchaser has full right and authority to enter into this Contract and to consummate the transactions contemplated herein; (c) each of the persons executing this Contract on behalf of Purchaser is authorized to do so; and (d) this Contract constitutes a valid and legally binding obligation of Purchaser, enforceable in accordance with its terms. 6.2 Representations and Warranties of Seller. Seller represents and warrants to Purchaser as of the date hereof and as of the Closing Date as follows: (a) Seller is a limited partnership validly existing and duly organized under the laws of the State of California; b) Seller has full right and authority to enter into this Contract and to consummate the transactions contemplated herein; (c) each of the persons executing this Contract on behalf of Seller is authorized to do so; (d) this Contract constitutes a valid and legally binding obligation of Seller, enforceable in accordance with its terms; and (e) Seller has no current actual knowledge of litigation, administrative or other proceeding (including any bankruptcy proceeding), order or judgment pending or outstanding, or threatened against the Property or Seller. The representations and warranties of Seller hereunder shall survive the Closing for a period of one hundred eighty (180) days. As used herein, the term Seller's "current actual knowledge" shall mean and refer to only the current actual knowledge of the Designated Representative (as hereinafter defined) of the Seller and shall not be construed to refer to the knowledge of any other partner, officer, director, agent, employee or representative of the Seller, or any affiliate of the Seller, or to impose upon such Designated Representative any duty to investigate the matter to which such actual knowledge or the absence thereof pertains, or to impose upon such Designated Representative any individual personal liability. As used herein, the term "Designated Representative" shall refer to Suzanne Milat. 6.3 NO ADDITIONAL REPRESENTATIONS OR WARRANTIES OF SELLER. PURCHASER ACKNOWLEDGES AND AGREES THAT, EXCEPT AS EXPRESSLY SPECIFIED IN SECTION 6.2 OF THIS CONTRACT OR THE DEED TO BE DELIVERED AT CLOSING, SELLER HAS NOT MADE, AND SELLER HEREBY SPECIFICALLY DISCLAIMS, ANY WARRANTY, GUARANTY OR REPRESENTATION, ORAL OR WRITTEN, PAST, PRESENT OR FUTURE, OF, AS TO, OR CONCERNING, (a) THE NATURE AND CONDITION OF THE PROPERTY, INCLUDING, WITHOUT LIMITATION, THE WATER, SOIL AND GEOLOGY, AND THE SUITABILITY THEREOF AND OF THE PROPERTY FOR ANY AND ALL ACTIVITIES AND USES WHICH PURCHASER MAY ELECT TO CONDUCT THEREON; (b) THE EXISTENCE, NATURE AND EXTENT OF ANY RIGHT-OF-WAY, LEASE, RIGHT TO POSSESSION OR USE, LIEN, ENCUMBRANCE, LICENSE, RESERVATION, CONDITION OR OTHER MATTER AFFECTING TITLE TO THE PROPERTY; OR (c) WHETHER THE USE OR OPERATION OF THE PROPERTY COMPLIES WITH ANY AND ALL LAWS, ORDINANCES OR REGULATIONS OF ANY GOVERNMENT OR OTHER REGULATORY BODY. PURCHASER AGREES TO ACCEPT THE PROPERTY AND ACKNOWLEDGES THAT THE SALE OF THE PROPERTY AS PROVIDED FOR HEREIN IS MADE BY SELLER, ON AN "AS IS, WHERE IS, AND WITH ALL FAULTS" BASIS. PURCHASER EXPRESSLY ACKNOWLEDGES THAT EXCEPT AS OTHERWISE EXPRESSLY SPECIFIED IN SECTION 6.2 OF THIS CONTRACT AND EXCEPT FOR ANY WARRANTY OF TITLE CONTAINED IN THE DEED TO BE DELIVERED BY SELLER TO PURCHASER AT CLOSING, SELLER MAKES NO REPRESENTATION OR WARRANTY OF ANY KIND, ORAL OR WRITTEN, EXPRESS OR IMPLIED, OR ARISING BY OPERATION OF LAW, WITH RESPECT TO THE PROPERTY, INCLUDING, BUT NOT LIMITED TO, ANY WARRANTIES OR REPRESENTATIONS AS TO HABITABILITY, MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, TITLE (OTHER THAN SELLER'S WARRANTY OF TITLE TO BE SET FORTH IN THE DEED), ZONING, TAX CONSEQUENCES, PHYSICAL OR ENVIRONMENTAL CONDITION, UTILITIES, OPERATING HISTORY OR PROJECTIONS, VALUATION, GOVERNMENTAL APPROVALS, THE COMPLIANCE OF THE PREMISES WITH GOVERNMENTAL LAWS, THE TRUTH, ACCURACY OR COMPLETENESS OF ANY INFORMATION (INCLUDING, WITHOUT LIMITATION, THE SUBMISSION MATTERS) PROVIDED BY OR ON BEHALF OF SELLER TO PURCHASER, OR ANY OTHER MATTER OR THING REGARDING THE PROPERTY. PURCHASER ACKNOWLEDGES THAT EXCEPT AS EXPRESSLY SPECIFIED IN ANY WRITTEN INSTRUMENT DELIVERED BY SELLER TO PURCHASER, SELLER MAKES NO REPRESENTATION OR WARRANTY OF ANY KIND, ORAL OR WRITTEN, EXPRESS OR IMPLIED, OR ARISING BY OPERATION OF LAW REGARDING OR WITH RESPECT TO ANY SUCH INFORMATION (INCLUDING, WITHOUT LIMITATION, THE SUBMISSION MATTERS) PROVIDED OR TO BE PROVIDED BY SELLER REGARDING THE PROPERTY. FURTHER, AND WITHOUT IN ANY WAY LIMITING ANY OTHER PROVISION OF THIS CONTRACT, SELLER HAS MADE AND MAKES NO REPRESENTATION, WARRANTY OR GUARANTY, AND HEREBY SPECIFICALLY DISCLAIMS ANY WARRANTY, GUARANTY OR REPRESENTATION, ORAL OR WRITTEN, PAST, PRESENT OR FUTURE, WITH RESPECT TO THE PRESENCE OR DISPOSAL ON OR BENEATH THE PROPERTY (OR ANY PARCEL IN PROXIMITY THERETO) OF HAZARDOUS SUBSTANCES OR MATERIALS WHICH ARE CATEGORIZED AS HAZARDOUS OR TOXIC UNDER ANY LOCAL, STATE OR FEDERAL LAW, STATUTE, ORDINANCE, RULE OR REGULATION PERTAINING TO ENVIRONMENTAL OR SUBSTANCE REGULATION, CONTAMINATION, CLEANUP OR DISCLOSURE (INCLUDING, WITHOUT LIMITATION, ASBESTOS) AND SHALL HAVE NO LIABILITY TO PURCHASER THEREFOR. WITHOUT LIMITATION OF THE PRECEDING SENTENCE, SELLER SPECIFICALLY DISCLAIMS ANY REPRESENTATION, WARRANTY OR GUARANTY REGARDING THE ACCURACY OF ANY ENVIRONMENTAL REPORTS WHICH MAY BE INCLUDED WITHIN THE SUBMISSION MATTERS. BY ACCEPTANCE OF THIS CONTRACT AND THE DEED TO BE DELIVERED BY SELLER AT THE CLOSING, PURCHASER ACKNOWLEDGES THAT PURCHASER'S OPPORTUNITY FOR INSPECTION AND INVESTIGATION OF THE PROPERTY (AND OTHER PARCELS IN PROXIMITY THERETO) WILL BE ADEQUATE TO ENABLE PURCHASER TO MAKE PURCHASER'S OWN DETERMINATION WITH RESPECT TO THE PRESENCE OR DISPOSAL ON OR BENEATH THE PROPERTY (AND OTHER PARCELS IN PROXIMITY THERETO) OF SUCH HAZARDOUS SUBSTANCES OR MATERIALS, AND PURCHASER ACCEPTS THE RISK OF THE PRESENCE OR DISPOSAL OF ANY SUCH SUBSTANCES OR MATERIALS. PURCHASER AGREES THAT SHOULD ANY CLEANUP, REMEDIATION OR REMOVAL OF HAZARDOUS SUBSTANCES OR OTHER ENVIRONMENTAL CONDITIONS ON THE PROPERTY BE REQUIRED AFTER THE DATE OF CLOSING, SUCH CLEAN-UP, REMOVAL OR REMEDIATION SHALL BE THE RESPONSIBILITY OF AND SHALL BE PERFORMED AT THE SOLE COST AND EXPENSE OF PURCHASER. PURCHASER, AND ANYONE CLAIMING, BY, THROUGH OR UNDER PURCHASER, HEREBY FULLY RELEASES, DISCHARGES, AND HOLDS HARMLESS SELLER, ITS EMPLOYEES, OFFICERS, DIRECTORS, PARTNERS, REPRESENTATIVES AND AGENTS, AND THEIR RESPECTIVE PERSONAL REPRESENTATIVES, HEIRS, SUCCESSORS AND ASSIGNS FROM ANY COST, LOSS, LIABILITY, DAMAGE, EXPENSE, DEMAND, ACTION OR CAUSE OF ACTION ARISING FROM OR RELATED TO ANY CONSTRUCTION DEFECTS, ERRORS, OMISSION, OR OTHER CONDITIONS AFFECTING THE PROPERTY; PROVIDED, THAT THIS SHALL NOT RELEASE SELLER FROM CLAIMS ARISING, IF ANY, AS A RESULT OF ANY WRITTEN REPRESENTATION OR WARRANTY OF SELLER BEING FALSE WHEN MADE. PURCHASER FURTHER ACKNOWLEDGES AND AGREES THAT THIS RELEASE SHALL BE GIVEN FULL FORCE AND EFFECT ACCORDING TO EACH OF ITS EXPRESSED TERMS AND PROVISIONS, INCLUDING, BUT NOT LIMITED TO, THOSE RELATING TO UNKNOWN AND SUSPECTED CLAIMS, DAMAGES AND CAUSES OF ACTION. THIS COVENANT RELEASING SELLER SHALL BE BINDING UPON PURCHASER, ITS PERSONAL REPRESENTATIVES, HEIRS, SUCCESSORS AND ASSIGNS. THE PROVISIONS OF THIS SECTION 6.3 (INCLUDING, WITHOUT LIMITATION, THE WAIVER AND RELEASE OF CLAIMS CONTAINED HEREIN) SHALL SURVIVE THE CLOSING OR EARLIER TERMINATION OF THIS CONTRACT. 6.4 No Reliance on Documents. Except as expressly stated in Section 6.2 hereof or in any written instrument delivered by Seller to Purchaser in connection herewith, Seller makes no representation or warranty as to the truth, accuracy or completeness of any materials, data or information (including, without limitation, the Submission Matters) delivered by Seller to Purchaser in connection with the transaction contemplated hereby. ARTICLE VII. CONDITIONS PRECEDENT TO PURCHASER'S AND SELLER'S PERFORMANCE 7.1 Conditions to Purchaser's Obligations. Purchaser's obligation under this Contract to purchase the Property is subject to the fulfillment of each of the following conditions (any or all of which may be waived by Purchaser): (a) The representations and warranties of Seller contained herein shall be true, accurate and correct as of the Closing Date; (b) Seller shall be ready, willing and able to deliver title to the Property in accordance with the terms and conditions of this Contract; (c) The obligations of Seller specified in Section 7.3 hereof shall have been satisfied; (d) Seller shall have delivered all the documents and other items required pursuant to Section 8.2(a), and shall have performed, in all material respects, all other covenants, undertakings and obligations, and complied with all conditions required by this Contract to be performed or complied with by Seller at or prior to the Closing; (e) The Title Company is in a position to issue to Purchaser the Title Policy with all endorsements available within the State of Washington which are required by Purchaser; and (f) Seller shall have delivered the Estoppel Certificates (hereinafter defined) in accordance with Section 7.3 hereof, which shall be in full force and effect as of Closing. 7.2 Conditions to Seller's Obligations. Seller's obligation under this Contract to sell the Property to Purchaser is subject to the fulfillment of each of the following conditions (all or any of which may be waived by Seller): (a) the representations and warranties of Purchaser contained herein shall be true, accurate and correct as of the Closing Date; and (b) Purchaser shall have delivered the funds required hereunder and all the documents to be executed by Purchaser set forth in Section 8.2(b) and shall have performed, in all material respects, all other covenants, undertakings and obligations, and complied with all conditions required by this Contract to be performed or complied with by Purchaser at or prior to Closing. 7.3 Estoppel Certificates. Seller shall use reasonable efforts to obtain and deliver to Purchaser promptly upon receipt thereof, Estoppel Certificates (herein so called), in the form attached hereto as Exhibit F, with such changes thereto as are reasonably requested by or acceptable to Purchaser, from all Tenants. In the event that Seller is unable to obtain Estoppel Certificates from PAPA Associates and Western Drug Distributors, Inc. d/b/a Drug Emporium (collectively, the "Major Tenants"), then Purchaser may, during the ten (10) day period following Seller's notification to Purchaser of Seller's failure to secure said Estoppel Certificate(s), terminate this Contract and the Earnest Money Deposit shall thereupon be returned to Purchaser as its sole remedy; provided, however, that the presence of non-material (in Purchaser's reasonable opinion) exceptions, qualifications or modifications in any Estoppel Certificate delivered by any of the Major Tenants, shall not permit Purchaser to terminate this Contract. In the event that Purchaser so terminates this Contract, neither party shall have any further rights, duties or obligations hereunder except for provisions of this Contract which expressly survive the termination of this Contract. If any Tenants, other than Major Tenants, do not execute and deliver the Estoppel Certificates contemplated hereunder on or before the Closing Date, then, at Closing, at Purchaser's election, Seller shall provide Purchaser with a certificate (herein called the "Seller's Certificate"), setting forth Seller's certification that, with respect to each of the Leases for which a Tenant other than a Major Tenant did not deliver an Estoppel Certificate, (i) the copy of such Lease (and all amendments and modifications thereto) previously provided by Seller to Purchaser is true, correct and complete, (ii) Seller has not received any rent thereunder for more than one month in advance, and (iii) Seller has neither received nor given any written notice of default under such Lease (or, if so, describing the nature thereof). ARTICLE VIII. CLOSING 8.1 Time and Place. The consummation of the purchase and sale of the Property (the "Closing") shall take place at the office of the Title Company (it being contemplated that the Closing will occur by the delivery of Closing documents into escrow with the Title Company) on the thirtieth (30th) day after the end of the Inspection Period, or at such earlier date and time as Purchaser and Seller may mutually agree (the "Closing Date"). 8.2 Items to be Delivered at the Closing. (a) Seller. At the Closing, Seller shall deliver, or cause to be delivered, to the Title Company for recording or delivery to Purchaser, as applicable, each of the following items: (i) An extended coverage form ALTA Owner Policy of Title Insurance, together with all endorsements requested by Purchaser which are legally available in the State of Washington and are available with respect to the Property, dated no earlier than the date of the filing of the deed described in Section 8.2(a)(ii) hereof, issued by the Title Company, and insuring Purchaser's title in the amount of the Purchase Price, subject only to the Permitted Exceptions (the "Title Policy"). (ii) A Bargain and Sale Deed duly executed and acknowledged by Seller in the form attached hereto as Exhibit B and made a part hereof for all purposes (with such reasonable changes thereto as may be required by the Title Company in order to comply with the laws of the State of Washington) sufficient to convey to Purchaser good and marketable title to the Land and Improvements free and clear of all liens and encumbrances except for the Permitted Exceptions (and none of the Permitted Exceptions shall be deemed to render title unmarketable). (iii) An Assignment and Assumption of Leases (the "Assignment of Leases") duly executed and acknowledged by Seller in the form attached hereto as Exhibit C and made a part hereof for all purposes. (iv) A Blanket Conveyance, Bill of Sale and Assignment ("Bill of Sale") duly executed by Seller in the form attached hereto as Exhibit D and made a part hereof for all purposes, to which is attached an itemized list of all material items of tangible personal property owned by Seller and attached to or used in connection with the Land or Improvements (the "Personal Property Schedule"). (v) The Estoppel Certificates and/or Seller's Certificate as required pursuant to Section 7.3 hereof. (vi) All original Tenant Leases that are in Seller's possession and copies of all Tenant Leases with respect to which Seller does not have originally executed counterparts in its possession, which shall be certified by Seller as being all Tenant Leases then in effect with respect to the Property, together with related Tenant files and records, together with letters addressed to the Tenants of the Property (the "Notice Letters") in the form attached hereto as Exhibit G and made a part hereof for all purposes, or in such other form as may be mutually agreed upon by Seller and Purchaser. (vii) Original counterparts of all Contracts that are in Seller's possession and which are to be assumed by Purchaser, together with letters addressed to the service providers thereunder in the form attached hereto as Exhibit H (the "Service Contract Notice Letters"), duly executed by Seller. (viii) A Non-Foreign Affidavit in the form attached hereto as Exhibit E and made a part hereof for all purposes. (ix) All amounts owing to Purchaser by Seller under Article IX hereof. (x) Evidence satisfactory to Purchaser and the Title Company that the person or persons executing this Contract and the closing documents on behalf of Seller have full right, power and authority to do so. (xi) A rent roll prepared with respect to the Property in the form normally prepared by Seller which shall be certified, to Seller's knowledge, as being true and correct in all material respects as of a date not more than ten (10) business days prior to Closing. (xii) Other items reasonably requested by the Title Company for the sale of the Property in accordance with this Contract or for administrative requirements for consummating the Closing. (b) Purchaser. At the Closing, Purchaser shall deliver to the Title Company, for recording or delivery to Seller, as applicable, each of the following items: (i) The Purchase Price in Current Funds. (ii) The Assignment of Leases, duly executed and acknowledged by Purchaser. (iii) The Bill of Sale, duly executed by Purchaser. (iv) Such additional funds in cash or Current Funds, as may be necessary to cover Purchaser's share of the closing costs and prorations hereunder. (v) Evidence satisfactory to Seller and the Title Company that the person or persons executing this Contract and the closing documents on behalf of Purchaser have full right, power and authority to do so. (vi) The Notice Letters duly executed by Purchaser. (vii) Other items reasonably requested by the Title Company for the sale of the Property in accordance with this Contract or for administrative requirements for consummating the Closing. (viii) A Certificate, in form reasonably satisfactory to Seller (but not to be recorded or in recordable form), confirming that the matters specified in Section 6.3 hereof shall survive the Closing and filing of the Bargain and Sale Deed hereunder. 8.3 Costs of Closing. Seller shall pay (i) the cost of providing standard ALTA coverage with respect to the Title Policy, and (ii) all excise taxes, transfer taxes or similar taxes, fees or assessments to be paid in connection with the conveyance of the Property to Purchaser. Purchaser shall pay (a) any costs, including, without limitation, recording costs, loan fees and attorneys' fees, relating to (i) any financing obtained by the Purchaser for the purchase of the Property, and/or (ii) any documentary stamp taxes, deed taxes, transfer taxes, intangible taxes, mortgage taxes or other similar taxes, fees or assessments incurred in connection with any such financing, and (b) the cost of obtaining extended coverage and any endorsements with respect to the ALTA Title Policy, if Purchaser elects to obtain such extended coverage and/or endorsements. The Seller and Purchaser shall each pay one-half of all escrow fees of the Title Company and recording costs with respect to recordation of the documents required to convey the Property to Purchaser. All other expenses incurred by Seller and Purchaser with respect to the Closing, including, but not limited to, the attorneys fees and costs and expenses incurred in connection with negotiating, preparing and closing the transaction contemplated by this Contract, shall be borne and paid exclusively by the party incurring same, unless otherwise expressly provided in this Contract. 8.4 Prorations. All normal and customarily proratable items, including, without limitation, rents (including, without limitation, base rents, additional rents, percentage rents and common area maintenance charges), operating expenses, tenant improvement costs and leasing commissions, personal property taxes, other operating expenses and fees, and payments relating to any agreements affecting the Property which survive the Closing, shall be prorated as of the Closing Date, Seller being charged and credited for all of same attributable to the period up to the Closing Date (and credited for any amounts paid by Seller attributable to the period on or after the Closing Date) and Purchaser being responsible for, and credited or charged, as the case may be, for all of same attributable to the period on and after the Closing Date. All unapplied Deposits under Tenant Leases, if any, shall be transferred by Seller to Purchaser at the Closing. Any real estate ad valorem or similar taxes for the Property, or any installment of assessments payable in installments which installment is payable in the year of Closing, shall be prorated to the date of Closing, based upon actual days involved. In connection with the proration of real property taxes or installments of assessments, such proration shall be based upon the assessed valuation and tax rate figures for the year in which the Closing occurs to the extent the same are available; provided, that in the event that actual figures (whether for the assessed value of the Property or for the tax rate) for the year of Closing are not available at the Closing Date, the proration shall be made using figures from the preceding year for the figures which are unavailable for the year of Closing. The proration shall be final and unadjustable except as provided in the following paragraph. The provisions of this Section 8.4 shall survive the Closing. If any of the items subject to proration under the foregoing provisions of this Section 8.4 cannot be prorated at the Closing because of the unavailability of the information necessary to compute such proration, or if any errors or omissions in computing prorations at the Closing are discovered subsequent to the Closing, then such item shall be reapportioned and such errors and omissions corrected as soon as practicable after the Closing Date and the proper party reimbursed, which obligation shall survive the Closing for a period (the "Proration Period") from the Closing Date until one (1) year after the Closing Date. Neither party hereto shall have the right to require a recomputation of a Closing proration or a correction of an error or omission in a Closing proration unless within the Proration Period one of the parties hereto (i) has obtained the previously unavailable information or has discovered the error or omission, and (ii) has given notice thereof to the other party together with a copy of its good faith recomputation of the proration and copies of all substantiating information used in such recomputation. The failure of a party to obtain any previously unavailable information or discover an error or omission with respect to an item subject to proration hereunder and to give notice thereof as provided above within the Proration Period shall be deemed a waiver of its right to cause a recomputation or a correction of an error or omission with respect to such item after the Closing Date. Any base rents, common area maintenance charges and other rent items that have accrued, but have not yet been paid shall be prorated in accordance with estimates based upon the prior years' information (or reasonable estimates of Seller if no such prior years' information is available), and shall be subsequently readjusted and reapportioned upon receipt. Purchaser shall pay Seller for percentage rents, common area maintenance charges and other rent items that have accrued, but are not yet due and payable, at Closing. 8.5 Possession and Closing. Possession of the Property shall be delivered to Purchaser by Seller at the Closing, subject to the Permitted Exceptions and the rights of the Tenants under their Tenant Leases, and shall circulate the Service Contract Notice Letters which have not been forwarded previously by Seller prior to Closing. Purchaser shall make its own arrangements for the provision of public utilities to the Property and Seller shall terminate its contracts with such utility companies that provide services to the Property. 8.6 Delinquent Rent. (a) Application of Delinquent Rent. If on the Closing Date any Tenant is in arrears in the payment of any rent under any Tenant Lease (the "Delinquent Rent") payable by it, any Delinquent Rent received by Purchaser and Seller from such Tenant after the Closing shall be applied to amounts due and payable by such Tenant during the following periods in the following order of priority: (A) first, to the period of time after the Closing Date, and (B) second, to the period of time before the Closing Date. If Delinquent Rent or any portion thereof received by Seller or Purchaser after the Closing are due and payable to the other party by reason of this allocation, the appropriate sum, less a proportionate share of any reasonable attorneys' fees and costs and expenses expended in connection with the collection thereof, shall be promptly paid to the other party. The provisions of this Section 8.6(a) shall survive the Closing. (b) Collection of Delinquent Rent. After the Closing, Seller shall continue to have the right, in its own name, to demand payment of and to collect Delinquent Rent owed to Seller by any Tenant, which right shall include, without limitation, the right to continue or commence legal actions or proceedings against any Tenant (provided, that Seller shall not commence any legal actions or proceedings against any Tenant which continues as a Tenant at the Property after Closing without the prior consent of Purchaser, which will not be unreasonably withheld or delayed), and the delivery of the Assignment of Leases [as defined in Section 8.2(a)(iii)] shall not constitute a waiver by Seller of such right. Purchaser agrees to cooperate with Seller at no cost or liability to Purchaser in connection with all efforts by Seller to collect such Delinquent Rent and to take all steps, whether before or after the Closing Date, as may be necessary to carry out the intention of the foregoing, including, without limitation, the delivery to Seller, upon demand, of any relevant books and records (including, without limitation, rent statements, receipted bills and copies of tenant checks used in payment of such rent), the execution of any and all consents or other documents, and the undertaking of any act reasonably necessary for the collection of such Delinquent Rent by Seller; provided, however, that Purchaser's obligation to cooperate with Seller pursuant to this sentence shall not obligate Purchaser to terminate any Tenant Lease with an existing Tenant or evict any existing Tenant from the Property. The provisions of this Section 8.6(b) shall survive the Closing. ARTICLE IX. CONDEMNATION OR CASUALTY 9.1 Condemnation. (a) In the event that all or any substantial portion of the Property is condemned or taken by eminent domain or conveyed by deed in lieu thereof, or if any condemnation proceeding is commenced for all or any substantial portion of the Property, prior to Closing, Purchaser may elect to terminate this Contract by written notice thereof to Seller within fifteen (15) days after Seller notifies Purchaser of, or Purchaser learns of, the condemnation, threat of condemnation, taking or deed in lieu or institution of such condemnation proceeding. Seller agrees to provide Purchaser with notice of any condemnation or eminent domain action with respect to the Property promptly after Seller receives notice thereof. If Purchaser does not terminate this Contract as aforesaid, then both parties shall proceed to close the transaction contemplated herein pursuant to the terms hereof, in which event Seller shall, except as limited in Section 9.1(b) hereof, deliver to Purchaser at the Closing any proceeds actually received or entitled to be received by Seller attributable to the Property from such condemnation, eminent domain proceeding or deed in lieu thereof and assign its interest in and to any such proceeds, and there shall be no reduction in the Purchase Price. (b) For the purpose of this Section 9.1(a), a "substantial portion" of the Property shall be deemed to be any portion of the Property with either a fair market value or replacement cost in an amount equal to or greater than $300,000.00. The foregoing provision shall survive the Closing. 9.2 Casualty. (a) In the event that all or any substantial portion of the Property shall be damaged or destroyed by fire or other casualty prior to Closing, Purchaser may terminate this Contract by written notice thereof to Seller within fifteen (15) days after Seller notifies Purchaser of the casualty. Seller agrees to provide Purchaser with notice of any casualty with respect to any substantial portion of the Property promptly after Seller receives notice thereof. If Purchaser does not terminate this Contract as aforesaid, then both parties shall proceed to close the transaction contemplated herein pursuant to the terms hereof, in which event Seller shall, except as limited in Section 9.2(b) hereof, deliver to Purchaser at the Closing any insurance proceeds actually received by Seller attributable to the Property from such casualty (except for proceeds previously used to repair the Property) and assign to Purchaser all of Seller's right, title and interest in and to any claims which Seller may have under the insurance policies covering the Property, and there shall be no reduction in the Purchase Price, but Purchaser shall receive a credit at Closing in the amount of any deductible amount under Seller's insurance policy applicable with respect to such casualty which Seller has not expended toward repairs with respect to such casualty. In the event less than a substantial portion of the Property shall be damaged or destroyed by fire or other casualty prior to Closing, then the parties shall proceed in accordance with the third sentence in this Section 9.2(a). (b) For the purposes of Section 9.2(a), a "substantial portion" of the Property shall be deemed to be any portion of the Property with either a fair market value or replacement cost in an amount equal to or greater than $300,000.00. The foregoing provision shall survive the Closing. ARTICLE X. DEFAULTS AND REMEDIES 10.1 Default by Purchaser. IF SELLER SHALL NOT BE IN DEFAULT HEREUNDER AND PURCHASER REFUSES OR FAILS TO CONSUMMATE THE CLOSING UNDER THIS CONTRACT FOR REASONS OTHER THAN AS EXPRESSLY SET FORTH IN SECTION 4.4, SECTION 5.2 OR ARTICLE IX HEREOF OR OTHER THAN DUE TO A FAILURE OF A CONDITION PRECEDENT TO PURCHASER'S OBLIGATION TO CLOSE AS SET FORTH IN SECTION 7.1 HEREOF, SELLER SHALL, AS ITS SOLE AND EXCLUSIVE REMEDY, TERMINATE THIS CONTRACT IN WHICH EVENT NEITHER PARTY SHALL HAVE ANY FURTHER RIGHTS, DUTIES, OR OBLIGATIONS HEREUNDER EXCEPT FOR PROVISIONS OF THIS CONTRACT WHICH EXPRESSLY SURVIVE THE TERMINATION HEREOF, AND SELLER SHALL BE ENTITLED TO RECEIVE AND RETAIN THE EARNEST MONEY DEPOSIT AS LIQUIDATED DAMAGES (SELLER AND PURCHASER HEREBY ACKNOWLEDGING THAT THE AMOUNT OF DAMAGES IN THE EVENT OF PURCHASER'S DEFAULT IS DIFFICULT OR IMPOSSIBLE TO ASCERTAIN BUT THAT SUCH AMOUNT IS A FAIR ESTIMATE OF SUCH DAMAGE). NOTWITHSTANDING ANYTHING CONTAINED IN THIS SECTION TO THE CONTRARY, IN THE EVENT OF ANY OTHER DEFAULT BY PURCHASER UNDER THIS CONTRACT WHICH SURVIVES THE CLOSING OR TERMINATION OF THIS CONTRACT, INCLUDING, WITHOUT LIMITATION, BREACH OF ANY COVENANT, REPRESENTATION OR INDEMNITY, SELLER SHALL HAVE ANY AND ALL RIGHTS AND REMEDIES AVAILABLE AT LAW OR IN EQUITY BY REASON OF SUCH DEFAULT. BY INITIALING IN THE SPACE PROVIDED BELOW, SELLER AND PURCHASER EXPRESSLY ACKNOWLEDGE THAT THEY HAVE READ, UNDERSTOOD AND AGREED TO THE FOREGOING, THAT THEY HAVE BEEN ADVISED BY LEGAL COUNSEL OF THEIR CHOICE OF THE LEGAL EFFECT OF THE FOREGOING, AND THAT THEY HAVE AGREED THAT THE TERMS OF THE FOREGOING ARE EQUITABLE AND FAIR. SELLER: PURCHASER: ____________ [PLEASE INITIAL] ____________ 10.2 Default by Seller. If Purchaser shall not be in default of its obligations under Section 8.2(b) hereof and if Seller refuses or fails to consummate the Closing under this Contract other than due to a termination permitted hereunder or a failure of a condition precedent to Seller's obligation to close as set forth in Section 7.2 hereof, Purchaser may, at Purchaser's sole option, as its sole and exclusive remedies, either (a) terminate this Contract in which event neither party shall have any further rights, duties or obligations hereunder except for provisions of this Contract which expressly survive the termination hereof, and Purchaser shall be entitled to a refund of the Earnest Money Deposit, or (b) enforce specific performance of this Contract against Seller. In no event shall Seller be liable to Purchaser for any damages, including, without limitation, any actual, punitive, speculative or consequential damages or damages for loss of opportunity or lost profit. 10.3 Attorneys Fees. If it shall be necessary for either Purchaser or Seller to employ an attorney to enforce its rights pursuant to this Contract, the non-prevailing party shall reimburse the prevailing party for its reasonable attorneys fees. ARTICLE XI. BROKERAGE COMMISSIONS 11.1 Brokerage Commission. Seller and Purchaser represent each to the other that each has had no dealings with any broker, finder or other party concerning the purchase of the Property except Insignia Retail Group, Inc. (the "Broker"). Seller hereby agrees to pay at Closing commissions due to Broker arising out of any agreement executed by Seller; provided, however, that Seller's obligation to pay, and Broker's right to receive, this commission or any other amount with respect to this Contract or the Property is expressly conditioned upon Closing the sale of the Property and Seller's receipt of the Purchase Price under this Contract. Broker shall have no right to receive this commission or any other amount with respect to this Contract or the Property unless and until Closing shall be final and fully consummated and the Purchase Price has been paid as provided in this Contract. Seller agrees to indemnify Purchaser and hold Purchaser harmless from any loss, liability, damage, cost or expense (including, without limitation, reasonable attorneys fees) arising out of any claim to any broker's, finder, or other fee in connection with this transaction by any party claiming by, through or under Seller (including, without limitation, the Broker). Purchaser agrees to indemnify Seller and hold Seller harmless from any loss, liability, damage, cost or expense (including, without limitation, reasonable attorneys fees) arising out of any claim to any broker's, finder, or other fee in connection with this transaction by any party claiming by, through or under Purchaser. Notwithstanding anything to the contrary contained herein, the indemnities set forth in this Article XI shall survive the Closing. ARTICLE XII. OPERATION OF THE PROPERTY PRIOR TO THE CLOSING Between the Effective Date and the Closing Date, Seller shall (a) operate and manage the Property in the same manner done by Seller prior to the date hereof, and, without the prior written consent of Purchaser, Seller shall not (i) enter into any Service Contract that cannot be terminated with thirty (30) days notice, (ii) enter into any lease or other agreement concerning use of or rights in the Property, (iii) amend or agree to terminate any Tenant Lease, or (iv) mortgage or encumber the Property; (b) advise Purchaser of the commencement of, or notice received regarding, any litigation, condemnation or other judicial or administrative proceedings affecting the Property of which Seller has current actual knowledge; and (c) maintain insurance on the Property with commercially reasonable coverages and amounts. Seller agrees to cooperate with Purchaser, at no cost to Seller, in order for Purchaser to procure a waiver of the furniture use provision covering Building 600. Furthermore, Seller agrees to cooperate with Purchaser, at no cost to Seller, to procure certain entitlements issued by governmental entities with respect to the Property, including execution of documents by Seller requested by Purchaser for Purchaser's procurement of such entitlements necessary for Purchaser use, rehabilitation and remodeling of the Property in connection with permits or approvals to be issued by such governmental authorities including execution of documents and applications which are reasonably acceptable to Seller in connection therewith; provided, that no entitlements shall become effective until Closing. ARTICLE XIII. MISCELLANEOUS 13.1 Notices. Any notice provided or permitted to be given under this Contract must be in writing and may be served by (a) depositing same in the United States mail, addressed to the party to be notified, postage prepaid and registered or certified with return receipt requested, (b) delivering the same in person to such party via a hand delivery service, Federal Express or any other nationally recognized courier service that provides a return receipt showing the date of actual delivery of same to the addressee thereof, or (c) facsimile transmission with confirmation of receipt to the party sending same, if a copy is deposited in the United States Mail as provided in 13.1(a) above. Notice given in accordance herewith shall be effective upon receipt at the address of the addressee. For purposes of notice, the addresses of the parties shall be as follows: If to Seller: Angeles Partners XII c/o Insignia Financial Group, Inc. One Insignia Financial Plaza Greenville, South Carolina 29602 Attention: James A. Gray Facsimile No.: 864/239-1066 Telephone No.: 864/239-1369 With a copy to:Insignia Retail Group, Inc. 130 Newport Center Drive, Suite 130 Newport Beach, California 92660 Attention: Cody M. Small Facsimile No.: 949/644-1088 Telephone No.: 949/644-3420 And a copy to: Liechty & McGinnis, P.C. 10440 North Central Expressway, Suite 1100 Dallas, Texas 75231 Attention: Lorne O. Liechty, Esq. Facsimile No.: 214/265-0615 Telephone No.: 214/265-0008 If to Purchaser:Cooper Point Plaza, LLC 433 North Camden Drive, Suite 1070 Beverly Hills, California 90210 Attention: Sam Rosenwald Facsimile No.: 310/274-4017 Telephone No.: 310/278-5333 With a copy to:Cerruti & Adams, a limited company 139 E. South Temple, Suite 520 Salt Lake City, Utah 84111-1171 Attention: Thomas E. K. Cerruti Facsimile No.: 801/359-1980 Telephone No.: 801/359-1986 If to Title Company: Thurston County Title Company 105 E. 8th Avenue Olympia, Washington 98501 Attention: Scott Euteneier Facsimile No.: 360/786-9315 Telephone No.: 360/943-7300 13.2 GOVERNING LAW. THIS CONTRACT IS BEING EXECUTED AND DELIVERED, AND IS INTENDED TO BE PERFORMED IN, THE STATE OF WASHINGTON, AND THE LAWS OF SUCH STATE SHALL GOVERN THE VALIDITY, CONSTRUCTION, ENFORCEMENT AND INTERPRETATION OF THIS CONTRACT. 13.3 Entirety and Amendments. This Contract embodies the entire agreement between the parties and supersedes all prior agreements and understandings, if any, relating to the transaction described herein, and may be amended or supplemented only by an instrument in writing executed by the party against whom enforcement is sought. 13.4 Parties Bound. Subject to the provisions of Section 13.5 hereof, this Contract shall be binding upon and inure to the benefit of Seller and Purchaser, and their respective heirs, personal representatives, successors and assigns. 13.5 Assignment. This Contract may be assigned by Purchaser to any person or entity controlling, controlled by or under common control with Purchaser without the prior written consent of Seller. Any assignment of this Contract by Purchaser other than as provided foregoing shall, at Seller's option, be null and void and of no effect. In the event Seller consents to an assignment of this Contract by Purchaser, Purchaser shall not be released from any liability or obligations hereunder. 13.6 Headings. Headings used in this Contract are used for reference purposes only and do not constitute substantive matter to be considered in construing the terms of this Contract. 13.7 Survival. Except as otherwise expressly provided herein, no representations, warranties, covenants, acknowledgments or agreements contained in this Contract shall survive the Closing of this Contract and the delivery of the Bargain and Sale Deed by Seller to Purchaser. 13.8 Interpretation. The parties acknowledge that each party and its counsel have reviewed this Contract, and the parties hereby agree that the normal rule of construction to the effect that any ambiguities are to be resolved against the drafting party shall not be employed in the interpretation of this Contract or any amendments or exhibits hereto. In case any one or more of the provisions contained in this Contract shall for any reason be held to be invalid, illegal or unenforceable in any respect, such invalidity, illegality or unenforceability shall not affect any other provisions hereof, and this Contract shall be construed as if such invalid, illegal or unenforceable provisions had never been contained herein. When the context in which words are used in this Contract indicates that such is the intent, words in the singular number shall include the plural and vice versa, and words in the masculine gender shall include the feminine and neuter genders and vice versa. 13.9 Exhibits. All references to "Exhibits" contained herein are references to exhibits attached hereto, all of which are hereby made a part hereof for all purposes. 13.10 Time of Essence. It is expressly agreed by the parties hereto that time is of the essence with respect to this Contract and Closing hereunder. 13.11 Multiple Counterparts. This Contract may be executed in a number of identical counterparts. If so executed, each of such counterparts is to be deemed an original for all purposes, and all such counterparts shall, collectively, constitute one agreement, but, in making proof of this Contract, it shall not be necessary to produce or account for more than one such counterpart. 13.12 Risk of Loss. Risk of loss or damage to the Property, or any part thereof, by fire or any other casualty from the date this Contract is fully executed up to the time of Closing will be on the Seller and, thereafter, will be on the Purchaser. 13.13 Effective Date. As used herein, the term "Effective Date" shall mean for all purposes in this Contract the date on which the Title Company acknowledges receipt of an original of the Contract executed by Purchaser and Seller with all changes, if any, to the printed portion of this Contract initialed by Purchaser and Seller. 13.14 Business Days. All references to "business days" contained herein are references to normal working business days, i.e., Monday through Friday of each calendar week, exclusive of federal and national bank holidays. In the event that any event hereunder is to occur, or a time period is to expire, on a date which is not a business day, such event shall occur or such time period shall expire on the next succeeding business day. 13.15 No Recordation of Contract. In no event shall this Contract or any memorandum hereof be recorded in the public records of the place in which the Property is situated, and any such recordation or attempted recordation shall constitute a breach of this Contract by the party responsible for such recordation or attempted recordation. 13.16 Section 1031 Exchange. Purchaser's acquisition of the Property may be the acquisition of replacement property in a qualifying exchange of like- kind property under Section 1031 of the Internal Revenue Code, as amended (the "Exchange"), pursuant to Purchaser's separate exchange agreement with a qualified intermediary (the "Intermediary"). Seller agrees to cooperate with Purchaser (without liability or cost to Seller) in the completion of the Exchange. Such cooperation shall include (i) the assignment of this Contract by Purchaser to the Intermediary, and the acknowledgment of such assignment by Seller, (ii) the acceptance of the Purchase Price from the Intermediary, (iii) the conveyance of the Property to Purchaser pursuant to a written direction of the Intermediary, and (iv) the reassignment of this Contract to Purchaser from the Intermediary immediately following the completion of the Exchange, and the acknowledgment by Seller of such reassignment. In consideration for the cooperation of Seller, Seller shall not be liable for any acts or omissions (except for its willful misconduct) arising from its relationship with the Intermediary in accordance with this Contract. Upon receipt of title to the Property by Purchaser and payment of the consideration payable to the Seller or for its benefit, under this Contract, Seller shall not have any further obligations or responsibilities under this paragraph and Purchaser agrees to fully indemnify Seller from any resulting liability to third parties (including, but not limited to, the Intermediary) which indemnity shall be effective from and after the date of this Contract, shall not merge with the Bargain and Sale Deed and shall survive the Closing of this transaction. Purchaser shall in all events be responsible for all costs and expenses related to the Section 1031 exchange and shall fully indemnify, defend and hold Seller harmless for, from and against any and all liability, claims, damages, expenses (including, without limitation, reasonable attorneys and paralegal fees other than those incurred prior to Closing to review documents to facilitate the Section 1031 exchange), taxes, fees, proceedings and causes of action of any kind or nature whatsoever arising out of, connected with or in any manner related to such Section 1031 exchange that would not have been incurred by Seller if the transaction did not involve a Section 1031 Exchange. The provisions of the immediately preceding sentence shall survive Closing and the sale of the Property to Purchaser. Any Section 1031 exchange shall be consummated on behalf of Purchaser in such a manner that Seller shall not be required to acquire title to any real property in connection therewith. 13.17 Disclaimer. PURCHASER HEREBY ACKNOWLEDGES THAT PURCHASER IS AND SHALL BE SOLELY RESPONSIBLE FOR COMPLIANCE WITH ALL LAWS, RULES AND REGULATIONS RELATED TO THE EXCHANGE. FURTHER, PURCHASER ACKNOWLEDGES THAT NEITHER SELLER NOR ANY OF ITS AGENTS, REPRESENTATIVES OR AFFILIATES HAS ADVISED PURCHASER, AND NO SUCH PERSON OR ENTITY HAS ANY OBLIGATION OR DUTY TO ADVISE PURCHASER, WITH RESPECT TO WHETHER THE TRANSACTION CONTEMPLATED BY THIS CONTRACT COMPLIES WITH THE LAWS, RULES AND REGULATIONS APPLICABLE TO THE EXCHANGE. FURTHER, PURCHASER ACKNOWLEDGES THAT IT HAS RELIED UPON ITS OWN TAX AND LEGAL COUNSEL IN DETERMINING COMPLIANCE WITH ALL LAWS, RULES AND REGULATIONS APPLICABLE TO THE EXCHANGE. THE PROVISIONS OF THIS SECTION 13.17 SHALL SURVIVE THE CLOSING OR TERMINATION OF THIS CONTRACT. IN WITNESS WHEREOF, the undersigned have executed this Contract effective as of the Effective Date. SELLER: ANGELES PARTNERS XII, a California general partnership By: Angeles Realty Corporation II, a California corporation, its general partner By: Robert D. Long, Jr. Its: Vice President Dated:July 28, 1998 PURCHASER: COOPER POINT PLAZA, LLC, a Utah limited liability company By:_____________________________________ Its:_____________________________________ Dated:__________________________________ -----END PRIVACY-ENHANCED MESSAGE-----