-----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, CeN4naDw6zn2P+a4t+ZeeQ8KJ0CEZVWGGKeikGMCTR3RkGeR/S6IwhDKC6vXwU4F 0cmPTP+xquwV7+tyir/9gQ== 0000711642-01-000019.txt : 20010326 0000711642-01-000019.hdr.sgml : 20010326 ACCESSION NUMBER: 0000711642-01-000019 CONFORMED SUBMISSION TYPE: 10KSB PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20001231 FILED AS OF DATE: 20010323 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ANGELES PARTNERS XIV CENTRAL INDEX KEY: 0000759859 STANDARD INDUSTRIAL CLASSIFICATION: REAL ESTATE [6500] IRS NUMBER: 953959771 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10KSB SEC ACT: SEC FILE NUMBER: 000-14284 FILM NUMBER: 1577713 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 0001.txt FORM 10-KSB 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, 2000 [ ]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 0-14248 ANGELES PARTNERS XIV (Name of small business issuer in its charter) California 95-3959771 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 55 Beattie Place, PO Box 1089 Greenville, South Carolina 29602 (Address of principal executive offices) 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 the 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. $5,155,000 State the aggregate market value of the voting partnership interests held by non-affiliates 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, 2000. 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 XIV (the "Partnership" or "Registrant") is a publicly held limited partnership organized under the California Uniform Limited Partnership Act on June 29, 1984, as amended (the "Agreement"). The Partnership's managing general partner is Angeles Realty Corporation II ("ARC II" or the "Managing General Partner"), a California corporation and was a wholly-owned subsidiary of MAE GP Corporation ("MAE GP"). Effective February 25, 1998, MAE GP was merged into Insignia Properties Trust ("IPT"), which is an affiliate of Insignia Financial Group, Inc. ("Insignia"). Effective October 1, 1998, and February 26, 1999, Insignia and IPT, respectively, were merged into Apartment Investment and Management Company ("AIMCO"). Thus the Managing General Partner is now a wholly-owned subsidiary of AIMCO. The Partnership's Non-Managing General Partner is ARCII/AREMCO Partners, Ltd. ARC II and ARCII/AREMCO Partners, Ltd. 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. The Registrant is engaged in the business of operating and holding real estate properties for investment. In 1985 and 1987, during its acquisition phase, the Registrant acquired four existing apartment properties, one office building and one industrial complex. The Registrant continues to own and operate two of the apartment properties. See "Item 2. Description of Properties". Commencing in February 1985, the Registrant offered, pursuant to a Registration Statement filed with the Securities and Exchange Commission, up to 80,000 Units of Limited Partnership Interest (the "Units") at a purchase price of $1,000 per Unit with a minimum purchase of 5 Units ($5,000). The offering terminated in February 1987. Upon termination of the offering, the Registrant had accepted subscriptions for 44,390 Units, for an aggregate $44,390,000. Since its initial offering, the Registrant has not received, nor are limited partners required to make, additional capital contributions. The Managing General Partner contributed capital in the amount of $1,000 for a 1% interest in the Partnership. The Partnership was formed for the purpose of acquiring fee interests in various types of real estate property. The Managing General Partner 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 Partnership 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 have no right to participate in the management or conduct of such business and affairs. Property management and administrative services are provided by affiliates of the Managing General Partner. The real estate business in which the Partnership is engaged is highly competitive. There are other residential properties within the market area of the Partnership'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 the apartments at the Registrant's properties and the rents that may be charged for such apartments. While the Managing General Partner and its affiliates own and/or control a significant number of apartment units in the United States, such units represent an insignificant percentage of total apartment units in the United States and competition for the apartments is local. Both the income and expenses of operating the properties owned by the Partnership are subject to factors outside of the Partnership's control, such as changes in the supply and demand for similar properties resulting from various market conditions, increases/decreases in unemployment or population shifts, changes in the 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 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 property 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. 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 Form 10-KSB. Transfer of Control Pursuant to a series of transactions which closed on October 1, 1998 and February 26, 1999, Insignia and IPT merged into AIMCO, a publicly traded real estate investment trust, with AIMCO being the surviving corporation (the "Insignia Merger"). As a result, AIMCO acquired 100% ownership interest in the Managing General Partner. The Managing General Partner does not believe that this transaction has had or will have a material effect on the affairs and operations of the Partnership. Item 2. Description of Properties The following table sets forth the Registrant's investments in properties: Date of Property Purchase Type of Ownership Use Waterford Square 05/31/85 Fee ownership subject to Apartments Apartments first mortgage (1) 487 units Huntsville, Alabama Fox Crest Apartments 06/30/85 Fee ownership subject to Apartments Waukegan, Illinois first mortgage 245 units (1) Property is held by a Limited Partnership in which the Registrant owns a 99% interest. 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) Waterford Square Apartments $18,190 $12,794 5-20 yrs (1) $ 5,471 Fox Crest Apartments 10,307 7,051 5-20 yrs (1) 3,168 $28,497 $19,845 $ 8,639
(1) Straight line and accelerated See "Note B" of the consolidated financial statements included in "Item 7. Financial Statements" 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 2000 Rate Amortized Date (6) Maturity (6) (in thousands) (in thousands) Waterford Square Apartments 1st mortgage $11,565 7.90% 31 yrs 11/2027 $ 86 Fox Crest Apartments 1st mortgage 5,947 8.00% 30 yrs 05/2003 5,445 Angeles Partners XIV Working capital loan, in default(3) 1,281 (1) (1) 11/1997 1,281 Working capital loan, in default(3) 3,295 (1) (1) 11/1997 3,295 Note payable (2) ("Glenwood") 2,405 12.50% (4) 03/2002 2,405 Note payable (2) ("Waterford Square") 121 12.00% (4) 03/2002 121 Note payable (2) ("Foxcrest") 4,765 12.50% (5) 03/2003 4,765 Total $29,379 $17,398
(1) Interest accrues at prime plus 2%; payments are made based on excess cash flow as defined. (2) Payable to Angeles Mortgage Investment Trust ("AMIT"), an affiliate of the Managing General Partner. (3) These loans were payable to Angeles Acceptance Pool, L.P. ("AAP"). During the year ended December 31, 2000, AAP transferred ownership of the loans to Saticoy Investments Company, LLC ("Saticoy"), a wholly owned entity of The PNL Companies. (4) Payment of excess cash flow only, as defined, due semi-annually. (5) No payments due until maturity. (6) See "Item 7. Financial Statements - Note D" 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 rates and occupancy for 2000 and 1999 for each property are as follows: Average Annual Average Annual Rental Rates Occupancy (per unit) Property 2000 1999 2000 1999 Waterford Square Apartments $6,337 $6,224 97% 95% Fox Crest Apartments 8,326 8,013 97% 96% 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 in the area. The Managing General Partner believes that all of the properties are adequately insured. Each property is an apartment complex which leases its units for terms of one year or less. No residential tenant leases 10% or more of the available rental space. All of the buildings are in good physical condition, subject to normal depreciation and deterioration as is typical for assets of this type and age. Real Estate Taxes and Rates Real estate taxes and rates in 2000 for each property were: 2000 2000 Billing Rate (in thousands) Waterford Square Apartments 176 5.80% Fox Crest Apartments 223 8.07% Capital Improvements Waterford Square Apartments The Partnership made approximately $198,000 in capital improvements at Waterford Square Apartments for the year ended December 31, 2000 consisting primarily of flooring replacements, appliances, HVAC condensing units, and structural improvements. These improvements were funded from operating cash flow and the Partnership's reserves. The Partnership is currently evaluating the capital improvement needs of the property for the upcoming year. The minimum amount to be budgeted is expected to be $275 per unit or $133,925. Additional improvements may be considered and will depend on the physical condition of the property as well as replacement reserves and anticipated cash flow generated by the property. Fox Crest Apartments The Partnership made approximately $303,000 in capital improvements at Fox Crest Apartments for the year ended December 31, 2000 consisting primarily of heating unit upgrades, air conditioning unit replacement, carpet replacements, roof replacement, and electrical improvements. These improvements were funded from operating cash flow and the Partnership's reserves. The Partnership is currently evaluating the capital improvement needs of the property for the upcoming year. The minimum amount to be budgeted is expected to be $275 per unit or $67,375. Additional improvements may be considered and will depend on the physical condition of the property as well as replacement reserves and anticipated cash flow generated by the property. 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, its Managing General Partner and several of their affiliated partnerships and corporate entities. The action purports to assert claims on behalf of a class of limited partners and derivatively on behalf of a number of limited partnerships (including the Partnership) which are named as nominal defendants, challenging, among other things, the acquisition of interests in certain general partner entities by Insignia Financial Group, Inc. ("Insignia") and entities which were, at one time, affiliates of Insignia; past tender offers by the Insignia affiliates to acquire limited partnership units; management of the partnerships by the Insignia affiliates; and the Insignia Merger. The plaintiffs seek monetary damages and equitable relief, including judicial dissolution of the Partnership. On June 25, 1998, the Managing General Partner filed a motion seeking dismissal of the action. In lieu of responding to the motion, the plaintiffs filed an amended complaint. The Managing General Partner filed demurrers to the amended complaint which were heard February 1999. Pending the ruling on such demurrers, settlement negotiations commenced. On November 2, 1999, the parties executed and filed a Stipulation of Settlement, settling claims, subject to court approval, on behalf of the Partnership and all limited partners who owned units as of November 3, 1999. Preliminary approval of the settlement was obtained on November 3, 1999 from the Court, at which time the Court set a final approval hearing for December 10, 1999. Prior to the December 10, 1999 hearing, the Court received various objections to the settlement, including a challenge to the Court's preliminary approval based upon the alleged lack of authority of prior lead counsel to enter the settlement. On December 14, 1999, the Managing General Partner and its affiliates terminated the proposed settlement. In February 2000, counsel for some of the named plaintiffs filed a motion to disqualify plaintiff's lead and liaison counsel who negotiated the settlement. On June 27, 2000, the Court entered an order disqualifying them from the case and an appeal was taken from the order on October 5, 2000. On December 4, 2000, the Court appointed the law firm of Lieff Cabraser Heimann & Bernstein LLP as new lead counsel for plaintiffs and the putative class. Plaintiffs filed a third amended complaint on January 19, 2001 and defendants are scheduled to respond to the complaint by March 2, 2001. On March 2, 2001, the Managing General Partner and its affiliates filed a demurrer to the third amended complaint. The Managing General Partner does not anticipate that costs associated with this case will be material to the Partnership's overall operations. 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 Registrant did not vote on any matter during the quarter ended December 31, 2000. PART II Item 5. Market for the Partnership's Common Equity and Related Security Holder Matters The Partnership, a publicly-held limited partnership, offered and sold 44,390 limited partnership units aggregating $44,390,000. The Partnership currently has 3,310 holders of record owning an aggregate of 43,421 Units. An affiliate of the Managing General Partner owned 10,365 units or 23.87% at December 31, 2000. No public trading market has developed for the Units, and it is not anticipated that such a market will develop in the future. In 2000, the number of Limited Partnership Units decreased by 168 units due to Limited Partners abandoning their Limited Partnership Units. In abandoning his or her Limited Partnership Units, a Limited Partner relinquishes all right, title and interest in the Partnership as of the date of abandonment. However, the Limited Partner is allocated his or her share of loss for that year. The loss per Limited Partnership Unit in the accompanying consolidated statements of operations is calculated based on the number of units outstanding at the beginning of the year. For the year ended December 31, 2000, Waterford Square Apartments, Ltd. (a limited partnership in which the Registrant owns a 99% interest) made a surplus cash distribution of approximately $500,000 of which approximately $5,000 was paid to the Managing General Partner. For the year ended December 31, 1999, an operating distribution of $24,000 was made to certain limited partners. This amount represents payment made to the State of Ohio on behalf of nonresident limited partners for required tax withholdings. Future cash distributions will depend on the levels of net cash generated from operations, the availability of cash reserves and the timing of debt maturities, refinancings, and/or property sales. The Registrant's distribution policy is reviewed on an annual basis. However based on the current default under the working capital loans and the pending maturities of the AMIT loans and the first mortgage loan on Fox Crest, it is unlikely that a distribution will be made by the Registrant in the foreseeable future. In addition to its indirect ownership of the general partner interest in the Partnership, AIMCO and its affiliates currently own 10,365 limited partnership units in the Partnership representing 23.87% of the outstanding units. These units were acquired pursuant to tender offers made by AIMCO or its affiliates. It is possible that AIMCO or its affiliates will make one or more additional offers to acquire additional limited partnership interests in the Partnership for cash or in exchange for units in the operating partnership of AIMCO. Under the Partnership Agreement, unitholders holding a majority of the Units are entitled to take action with respect to a variety of matters, which would include without limitation, voting on certain amendments to the Partnership Agreement and voting to remove the Managing General Partner. 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. 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 disclosures 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 consolidated financial statements and other items contained elsewhere in this report. Results of Operations The Partnership's net loss for the year ended December 31, 2000 was approximately $2,083,000 compared to a net loss of approximately $1,940,000 for the year ended December 31, 1999. The increase in net loss for the year ended December 31, 2000 as compared to the year ended December 31, 1999 was primarily due to an increase in total expenses which was partially offset by an increase in total revenues. The increase in total revenues for the year ended December 31, 2000 was due to an increase in rental income and, to a lesser extent, an increase in other income. Rental income increased due primarily to increased average occupancy and increased average annual rental rates at both Waterford Square Apartments and Fox Crest Apartments. Other income increased due to an increase in utility charges at Fox Crest Apartments and increased interest income due to higher average cash balances in interest bearing accounts. The increase in total expenses for the year ended December 31, 2000 was primarily the result of increases in interest, depreciation, property tax, and general and administrative expenses. Interest expense increased due to interest accruing on the defaulted Saticoy notes. The increase in depreciation expense is due to capital improvements and replacements made at the properties over the past year. Property tax expense increased due to an increase in the assessed value at both Waterford Square Apartments and Fox Crest Apartments. General and administrative expenses increased primarily due to an increase in the cost of services provided by the Managing General Partner and its affiliates. This increase was partially offset by reduced legal costs due to the settlement of a legal matter during 1999. Included in general and administrative expenses for the years ended December 31, 2000 and 1999 are management reimbursements to the Managing General Partner allowed under the Partnership Agreement. In addition, 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. As part of the ongoing business plan of the Partnership, the Managing General Partner continues to monitor the rental market environment of its investment properties to assess the feasibility of increasing rents, maintaining or increasing occupancy levels and protecting the Partnership from increases in expenses. As part of this plan, the Managing General Partner attempts to protect the Partnership from the burden of inflation-related increases in expenses by increasing rents and maintaining a high overall occupancy level. However, 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, 2000, the Partnership had cash and cash equivalents of approximately $1,497,000 as compared to approximately $1,210,000 at December 31, 1999. The increase in cash and cash equivalents of approximately $287,000 is primarily due to approximately $1,306,000 of cash provided by operating activities, partially offset by approximately $394,000 of cash used in investing activities, and approximately $625,000 of cash used in financing activities. Cash used in investing activities consisted of property improvements and replacements, partially offset by net receipts from restricted escrows. Cash used in financing activities consisted primarily of payments of principal on the mortgages encumbering the Registrant's properties and a principal payment on the Waterford Square note payable to AMIT and, to a lesser extent, a distribution to the Managing General Partner from Waterford Square Apartments, Ltd. The Registrant invests its working capital reserves in a money market account. The accompanying consolidated financial statements have been prepared assuming the Partnership will continue as a going concern. The Partnership continues to incur recurring operating losses and suffers from inadequate liquidity. Recourse indebtedness of approximately $4,576,000, plus accrued interest of approximately $3,711,000 is in default at December 31, 2000, as a result of nonpayment of interest and principal upon its maturity in November 1997. These loans were payable to Angeles Acceptance Pool, L.P. ("AAP"). During the year ended December 31, 2000, AAP transferred ownership of the loans to Saticoy Investments Company, LLC ("Saticoy"), a wholly owned entity of The PNL Companies. This indebtedness is recourse to the Partnership. The Partnership does not have the means with which to satisfy this obligation and Saticoy has a judgment against the Partnership for this debt. No other sources of additional financing have been identified by the Partnership, nor does the Managing General Partner have any other plans to remedy the liquidity problems the Partnership is currently experiencing. The Managing General Partner anticipates that the Fox Crest Apartments and Waterford Square Apartments will generate sufficient cash flows during 2001 to meet all property operating expenses, property debt service requirements and to fund capital expenditures. However, these cash flows will be insufficient to provide debt service for the unsecured Partnership indebtedness. If the Managing General Partner is unsuccessful in its efforts to restructure these loans, then it may be forced to liquidate the Partnership. As a result of the above, there is substantial doubt about the Partnership's ability to continue as a going concern. The financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or amounts and classifications of liabilities that may result from these uncertainties. With respect to the Partnership's two apartment complexes, the sufficiency of existing liquid assets to meet future liquidity and capital expenditure requirements is directly related to the level of capital expenditures required at the properties to adequately maintain the physical assets and other operating needs of the Partnership and to comply with Federal, state, and local legal and regulatory requirements. The Partnership is currently evaluating the capital improvement needs of each of its properties for the upcoming year. The minimum amount to be budgeted for the Partnership is expected to be $275 per unit or $201,300. Additional improvements may be considered and will depend on the physical condition of the property as well as replacement reserves and anticipated cash flow generated by the property. The existing first mortgage indebtedness, working capital loans and amounts due to AMIT are thought to be in excess of the value of the properties. (Pursuant to a series of transactions, affiliates of the Managing General Partner acquired ownership interests in AMIT as follows: On September 17, 1998, AMIT was merged with and into IPT, effective February 26, 1999, IPT was merged into AIMCO. Accordingly, AIMCO is the current holder of the AMIT loans.) Two AMIT Notes in the aggregate amount of approximately $2,526,000 plus related accrued interest of approximately $985,000 mature in March 2002; these notes are recourse to the Partnership only. These loans require monthly payments of excess cash flow, as defined in the terms of the promissory notes. The Partnership's other remaining note to AMIT for approximately $4,765,000, plus accrued interest at 12.5% per annum compounded monthly, is due March 2003 and does not require any payments until maturity. Accrued interest on this note as of December 31, 2000 is approximately $3,836,000. The first mortgage loan encumbering Waterford Square Apartments, which is guaranteed by HUD, is scheduled to mature November 2027, at which time a balloon payment of $86,000 is due. Likewise, the first mortgage loan encumbering Fox Crest Apartments is scheduled to mature in May 2003, at which time a balloon payment of $5,445,000 is due. The Registrant is current in its payments on both of these mortgages. The Managing General Partner will 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 Registrant will risk losing such properties through foreclosure. For the year ended December 31, 2000, Waterford Square Apartments, Ltd. (a limited partnership in which the Registrant owns a 99% interest) made a surplus cash distribution of approximately $500,000 of which approximately $5,000 was paid to the Managing General Partner. For the year ended December 31, 1999, an operating distribution of $24,000 was made to certain limited partners. This amount represents payment made to the State of Ohio on behalf of nonresident limited partners for required tax withholdings. Future cash distributions will depend on the levels of net cash generated from operations, the availability of cash reserves and the timing of debt maturities, refinancings, and/or property sales. The Registrant's distribution policy is reviewed on an annual basis. However based on the current default under the working capital loans and the pending maturities of the AMIT loans and the first mortgage loan on Fox Crest, it is unlikely that a distribution will be made by the Registrant in the foreseeable future. In addition to its indirect ownership of the general partner interest in the Partnership, AIMCO and its affiliates currently own 10,365 limited partnership units in the Partnership representing 23.87% of the outstanding units. These units were acquired pursuant to tender offers made by AIMCO or its affiliates. It is possible that AIMCO or its affiliates will make one or more additional offers to acquire additional limited partnership interests in the Partnership for cash or in exchange for units in the operating partnership of AIMCO. Under the Partnership Agreement, unitholders holding a majority of the Units are entitled to take action with respect to a variety of matters, which would include without limitation, voting on certain amendments to the Partnership Agreement and voting to remove the Managing General Partner. 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. Item 7. Financial Statements ANGELES PARTNERS XIV LIST OF FINANCIAL STATEMENTS Report of Ernst & Young, LLP, Independent Auditors Consolidated Balance Sheet - December 31, 2000 Consolidated Statements of Operations - Years ended December 31, 2000 and 1999 Consolidated Statements of Changes in Partners' Deficit - Years ended December 31, 2000 and 1999 Consolidated Statements of Cash Flows - Years ended December 31, 2000 and 1999 Notes to Consolidated Financial Statements Report of Ernst & Young LLP, Independent Auditors The Partners Angeles Partners XIV We have audited the accompanying consolidated balance sheet of Angeles Partners XIV as of December 31, 2000, 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, 2000. 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 auditing standards generally accepted in the United States. 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 XIV at December 31, 2000, and the consolidated results of its operations and its cash flows for each of the two years in the period ended December 31, 2000, in conformity with accounting principles generally accepted in the United States. The accompanying consolidated financial statements have been prepared assuming that Angeles Partners XIV will continue as a going concern. As more fully described in Note A, the Partnership continues to incur recurring operating losses and suffers from inadequate liquidity. It is in default on unsecured indebtedness of $4,576,000, plus related accrued interest of $3,711,000, due to non-payment upon maturity of the debt in November 1997. These conditions raise substantial doubt about the Partnership's ability to continue as a going concern. Management's plans in regard to these matters are also described in Note A. The financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classification of liabilities that may result from the outcome of this uncertainty. /s/ERNST & YOUNG LLP Greenville, South Carolina March 2, 2001 ANGELES PARTNERS XIV CONSOLIDATED BALANCE SHEET (in thousands, except unit data) December 31, 2000
Assets Cash and cash equivalents $ 1,497 Receivables and deposits 283 Restricted escrows 94 Other assets 337 Investment properties (Notes D and G): Land $ 2,243 Buildings and related personal property 26,254 28,497 Less accumulated depreciation (19,845) 8,652 $ 10,863 Liabilities and Partners' Deficit Liabilities Accounts payable $ 121 Tenant security deposit liabilities 134 Accrued property taxes 278 Accrued interest (included $3,711 in default) 8,648 Due to affiliates (Note F) 1,660 Other liabilities 266 Notes payable, including $4,576 in default (Notes D and G) 29,379 Partners' Deficit General partners $ (684) Limited partners (43,421 units issued and outstanding) (28,939) (29,623) $ 10,863
See Accompanying Notes to Consolidated Financial Statements ANGELES PARTNERS XIV CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands, except unit data)
Years Ended December 31, 2000 1999 Revenues: Rental income $ 4,920 $ 4,689 Other income 235 168 Total revenues 5,155 4,857 Expenses: Operating 1,691 1,680 General and administrative 303 251 Depreciation 1,362 1,233 Interest 3,469 3,245 Property taxes 413 388 Total expenses 7,238 6,797 Net loss $(2,083) $(1,940) Net loss allocated to general partners (1%) $ (21) $ (19) Net loss allocated to limited partners (99%) (2,062) (1,921) $(2,083) $(1,940) Net loss per limited partnership unit $(47.31) $(44.07)
See Accompanying Notes to Consolidated Financial Statements ANGELES PARTNERS XIV CONSOLIDATED STATEMENT OF CHANGES IN PARTNERS' DEFICIT (in thousands, except unit data)
Limited Partnership General Limited Units Partners Partners Total Original capital contributions 44,390 $ 1 $ 44,390 $ 44,391 Partners' deficit at December 31, 1998 43,589 $ (639) $(24,932) $(25,571) Net loss for the year ended December 31, 1999 -- (19) (1,921) (1,940) Distribution to partners -- -- (24) (24) Partners' deficit at December 31, 1999 43,589 (658) (26,877) (27,535) Net loss for the year ended December 31, 2000 -- (21) (2,062) (2,083) Distribution to partners -- (5) -- (5) Abandonment of Limited Partnership Units (Note H) (168) -- -- -- Partners' deficit at December 31, 2000 43,421 $ (684) $(28,939) $(29,623)
See Accompanying Notes to Consolidated Financial Statements ANGELES PARTNERS XIV CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands)
Year Ended December 31, 2000 1999 Cash flows from operating activities: Net loss $(2,083) $(1,940) Adjustments to reconcile net loss to net cash provided by operating activities: Depreciation 1,362 1,233 Amortization of discounts and loan costs 28 33 Change in accounts: Receivables and deposits (30) 129 Other assets (14) (24) Accounts payable (7) 83 Tenant security deposit liabilities 27 19 Accrued property taxes 13 (50) Accrued interest 1,813 1,728 Due to affiliates 205 113 Other liabilities (8) 189 Net cash provided by operating activities 1,306 1,513 Cash flows from investing activities: Property improvements and replacements (501) (1,029) Net receipts from restricted escrows 107 153 Net cash used in investing activities (394) (876) Cash flows from financing activities: Principal payments on notes payable (620) (286) Distribution to partners (5) (24) Net cash used in financing activities (625) (310) Net increase in cash and cash equivalents 287 327 Cash and cash equivalents at beginning of year 1,210 883 Cash and cash equivalents at end of year $ 1,497 $ 1,210 Supplemental disclosure of cash flow information: Cash paid for interest $ 1,572 $ 1,425
See Accompanying Notes to Consolidated Financial Statements ANGELES PARTNERS XIV NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2000 Note A - Going Concern The accompanying consolidated financial statements have been prepared assuming Angeles Partners XIV (the "Partnership" or "Registrant") will continue as a going concern. The Partnership continues to incur recurring operating losses and suffers from inadequate liquidity. The Partnership has unsecured working capital loans in the amount of approximately $4,576,000 plus related accrued interest of approximately $3,711,000 that is in default at December 31, 2000 as a result of non-payment of interest and principal upon its maturity in November 1997. These loans were payable to Angeles Acceptance Pool, L.P. ("AAP"). During the year ended December 31, 2000, AAP transferred ownership of the loans to Saticoy Investments Company, LLC ("Saticoy"), a wholly owned entity of The PNL Companies. This indebtedness is recourse to the Partnership. The Partnership does not have the means with which to satisfy this obligation, and Saticoy has a judgment against the Partnership for this debt. The Partnership realized a net loss of approximately $2,083,000 for the year ended December 31, 2000. The Managing General Partner expects the Partnership to continue to incur such losses from operations. The Partnership generated cash from operations of approximately $1,306,000 during the year ended December 31, 2000; however, this was primarily the result of accruing interest of approximately $1,813,000 on its indebtedness and, to a lesser extent, $205,000 for services provided by affiliates. No other sources of additional financing have been identified by the Partnership, nor does the Managing General Partner have any other plans to remedy the liquidity problems the Partnership is currently experiencing. The Managing General Partner anticipates that Fox Crest Apartments and Waterford Square Apartments will generate sufficient cash flows for the next twelve months to meet all property operating expenses, property debt service requirements and to fund capital expenditures. However, these cash flows will be insufficient to provide debt service for the unsecured Partnership indebtedness. As a result of the above, there is substantial doubt about the Partnership's ability to continue as a going concern. The consolidated financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or amounts and classifications of liabilities that may result from these uncertainties. Note B - Organization and Significant Accounting Policies Organization: The Partnership is a California limited partnership organized in June 1984, to acquire and operate residential and commercial real estate properties. The Partnership's managing general partner is Angeles Realty Corporation II ("ARC II" or "Managing General Partner") an affiliate of Insignia Financial Group, Inc. ("Insignia") and wholly-owned subsidiary of MAE GP Corporation ("MAE GP"). Effective February 25, 1999, MAE GP was merged into Insignia Properties Trust ("IPT"). Effective October 1, 1998 and February 26, 1999, Insignia and IPT, respectively, were merged into Apartment Investment and Management Company ("AIMCO"). Thus the Managing General Partner is now a wholly-owned subsidiary of AIMCO. The Partnership's Non-Managing General Partner is ARCII/AREMCO Partners, Ltd. ARC II and ARC II/AREMCO Partners, Ltd. are herein collectively referred to as the "General Partners". The Partnership commenced operations on June 29, 1984, and completed its acquisition of apartment and commercial properties on December 20, 1985. As of December 31, 2000 the Partnership continues to operate two apartment properties, one in Illinois and the other in Alabama. The Partnership Agreement provides that the Partnership will terminate on December 31, 2035 unless terminated prior to such date. Principles of Consolidation: The consolidated financial statements include all of the accounts of the Partnership and its 99% limited partnership interest in Waterford Square Apartments, Ltd. The general partner of the consolidated partnership is the Managing General Partner. The Managing General Partner may be removed by the Registrant; therefore, this consolidated partnership is controlled and consolidated by the Registrant. All significant interpartnership balances have been eliminated. Allocations and Distributions to Partners: In accordance with the Agreement, any gain from the sale or other disposition of Partnership assets will be allocated first to the General Partners to the extent of the amount of any Incentive Interest (as defined below) to which the General Partners is entitled. Any gain remaining after said allocation will be allocated to the Limited Partners in proportion to their interests in the Partnership; provided that the gain shall first be allocated to Partners with negative account balances, in proportion to such balances, in an amount equal to the sum of such negative capital account balances. The Partnership will allocate other profits and losses 1% to the General Partners and 99% to the Limited Partners. 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) First, to the Partners in proportion to their interests until the Limited Partners have received proceeds equal to their Original Capital Investment; (ii) Second, to the Partners until Limited Partners have received distributions from all sources equal to their 6% Cumulative Distribution, (iii) Third, to the General Partners until it has received its cumulative distributions equal to 3% of the aggregate Disposition Prices of all properties, mortgages or other investments sold ("Initial Incentive Interest") and (iv) Thereafter, 85% to the Limited Partners in proportion to their interests and 15% to the General Partners ("Final Incentive Interest"). Cash and Cash Equivalents: Cash and cash equivalents includes cash on hand, in banks, and money market accounts. At certain times, the amount of cash deposited at a bank may exceed the limit on insured deposits. Cash balances included approximately $1,247,000 at December 31, 2000 that are maintained by the affiliated management company on behalf of affiliated entities in cash concentration accounts. Tenant 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. Advertising Costs: Advertising costs, of approximately $60,000 in 2000 and approximately $76,000 in 1999, are charged to expense as they are incurred and are included in operating expenses in the accompanying consolidated statements of operations. Investment Properties: Investment properties consist of two apartment complexes and are stated at cost. Acquisition fees are capitalized as a cost of real estate. In accordance with Statement of Financial Accounting Standards ("SFAS") 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. Costs of apartment properties that have been permanently impaired have been written down to appraised value. No adjustment for impairment of value was recorded for the years ended December 31, 2000 or 1999. Depreciation: Depreciation is provided by the straight-line method over the estimated lives of the apartment properties and related personal property. For Federal income tax purposes, the accelerated cost recovery method is used (1) for real property over 15 years for additions prior to March 16, 1984, 18 years for additions after March 15, 1984 and before May 9, 1985, and 19 years for additions after May 8, 1985, and before January 1, 1987, and (2) for personal property over 5 years for additions after December 31, 1986, the modified accelerated cost recovery method is used for depreciation of (1) real property over 27 1/2 years and (2) personal additions over 5 years. Loan Costs: Loan costs of approximately $356,000, at December 31, 2000, which are included in other assets on the accompanying consolidated balance sheet, are being amortized on a straight-line basis over the lives of the loans. At December 31, 2000, accumulated amortization of approximately $121,000 is also included in other assets on the accompanying consolidated balance sheet. Leases: The Partnership generally leases apartment units for twelve-month terms or less. 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: 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 first mortgages, after discounting the scheduled loan payments to maturity, approximates its carrying balance. The Managing General Partner believes that it is not appropriate to use the Partnership's incremental borrowing rate for debt to affiliates or debt that is in default as there is no market in which the Partnership could obtain similar financing. Segment Reporting: SFAS No. 131, "Disclosure about Segments of an Enterprise and Related Information" 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. As defined in SFAS No. 131, the Partnership has only one reportable segment. The Managing General Partner believes that segment-based disclosures will not result in a more meaningful presentation than the consolidated financial statements as currently presented. 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. Note C - Transfer of Control Pursuant to a series of transactions which closed on October 1, 1998 and February 26, 1999, Insignia and IPT merged into AIMCO, a publicly traded real estate investment trust, with AIMCO being the surviving corporation (the "Insignia Merger"). As a result, AIMCO acquired 100% ownership interest in the Managing General Partner. The Managing General Partner does not believe that this transaction has had or will have a material effect on the affairs and operations of the Partnership. Note D - Notes Payable The principle terms of notes payable are as follows:
Monthly Principal Principal Payment Stated Balance Balance At Including Interest Maturity Due At December 31, Property Interest Rate Date Maturity 2000 (in thousands) (in thousands) Waterford Square Apartments 1st mortgage $87 7.90% 11/2027 $ 86 $11,565 Fox Crest Apartments 1st mortgage 56 8.00% 05/2003 5,445 5,947 Angeles Partners XIV Working capital loan, in default(3) (1) (1) 11/1997 1,281 1,281 Working capital loan, in default(3) (1) (1) 11/1997 3,295 3,295 Note payable (2) ("Glenwood") (4) 12.50% 03/2002 2,405 2,405 Note payable (2) ("Waterford Square") (4) 12.00% 03/2002 121 121 Note payable (2) ("Foxcrest") (5) 12.50% 03/2003 4,765 4,765 Total $17,398 $29,379
(1) Interest accrues at prime plus 2%; payments are based on excess cash flow as defined. (2) Payable to AMIT, an affiliate of the Managing General Partner. (3) These loans were payable to Angeles Acceptance Pool, L.P. ("AAP"). During the year ended December 31, 2000, AAP transferred ownership of the loans to Saticoy Investments Company, LLC ("Saticoy"), a wholly owned entity of The PNL Companies. (4) Payments of excess cash flow only, as defined, due semi-annually. (5) No payments due until maturity. In June 1996, the Waterford Square note and the Glenwood note, both held by AMIT, were restructured, adding previously accrued delinquent interest and late charges of approximately $874,000 to the original note amounts. The notes provided for the accrual of interest on the unpaid balance at 12.0% (Waterford Square note) and 12.5% (Glenwood note). In July 1998, the lender agreed to extend the maturity date on these notes to March 2002. At the time of the granting of the extension, an additional $28,000 in loan costs was added to the principal. Mortgage notes payable totaling approximately $17,512,000 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 include prepayment penalties if repaid prior to maturity. Further the properties may not be sold subject to existing indebtedness. Scheduled principal payments of notes payable subsequent to December 31, 2000, are as follows (in thousands): 2001 $ 4,910 2002 2,887 2003 10,438 2004 164 2005 177 Thereafter 10,803 Total $29,379 Note E - Income Taxes The Partnership has received a ruling from the Internal Revenue Service that it is to be classified as a partnership for Federal income tax purposes. Taxable income or loss of the Partnership is reported in the income tax returns of its partners. Accordingly, 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 loss (in thousands, except unit data): 2000 1999 Net loss as reported $(2,083) $(1,940) Add (deduct): Depreciation differences 117 113 Unearned income (2) 21 Other 418 (10) Federal taxable loss $(1,550) $(1,816) Federal taxable loss per limited partnership unit $(33.11) $(41.23) The following is a reconciliation between the Partnership's reported amounts and Federal tax basis of net assets and liabilities (in thousands): Net liabilities as reported $(29,623) Land and buildings (16) Accumulated depreciation 12 Syndication and distribution costs 6,047 Other (242) Net liabilities - Federal tax basis $(23,822) Note F - 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 payments were made or accrued to the Managing General Partner and affiliates during the year ended December 31, 2000 and 1999. 2000 1999 (in thousands) Property management fees (included in operating expenses) $ 282 $ 268 Reimbursement for services of affiliates (included in investment properties and general and administrative expenses) 205 137 Due to affiliate 1,660 1,455 During the years ended December 31, 2000 and 1999, affiliates of the Managing General Partner were entitled to receive 5% of gross receipts from both of the Registrant's residential properties as compensation for providing property management services. The Registrant paid to such affiliates approximately $282,000 and $268,000 for the years ended December 31, 2000 and 1999, respectively. Affiliates of the Managing General Partner were to receive reimbursement of accountable administrative expenses amounting to approximately $205,000 and $137,000 for the years ended December 31, 2000 and 1999, respectively. The Partnership owed the affiliates approximately $1,660,000 and $1,455,000 at December 31, 2000 and 1999, respectively. In November 1992, AAP, a Delaware limited partnership which controlled the working capital loans previously provided by Angeles Capital Investment, Inc. ("ACII"), was organized. Angeles Corporation ("Angeles") is the 99% limited partner of AAP and Angeles Acceptance Directives, Inc. ("AAD"), which was wholly-owned by IPT, and was, until April 14, 1995, the 1% general partner of AAP. On April 14, 1995, as part of a settlement of claims between affiliates of the General Partner and Angeles, AAD resigned as general partner of AAP and simultaneously received a 0.5% limited partner interest in AAP. An affiliate of Angeles now serves as the general partner of AAP. The AAP working capital loans funded the Partnership's operating deficits in prior years. Total indebtedness was approximately $4,576,000, plus accrued interest of approximately $3,711,000 at December 31, 2000, with monthly interest accruing at prime plus two percent. Upon maturity on November 25, 1997, the Partnership did not have the means with which to satisfy this maturing debt obligation. Total interest expense for this loan was approximately $518,000 and $432,000 for the years ended December 31, 2000 and 1999, respectively. During the year ended December 31, 2000, AAP transferred ownership of the loans to Saticoy, a wholly owned entity of The PNL Companies which is an unrelated party. Angeles Mortgage Investment Trust ("AMIT") provided additional financing (the "AMIT Loans") to the Partnership. 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 IPT, the entity which controlled the Managing General Partner. Effective February 26, 1999, IPT was merged into AIMCO. Thus, AIMCO is the current holder of the AMIT loans. The principal balance on the AMIT Loans totals approximately $7,291,000 at December 31, 2000, accrues interest at rates of 12% to 12.5% per annum and is recourse to the Partnership. Two of the three notes totaling $2,526,000 originally matured in March 1998. The Managing General Partner negotiated with AMIT to extend this indebtedness and in the second quarter of 1998, executed an extension through March 2002. The remaining note with a principal balance of approximately $4,765,000 matures in March 2003. Total interest expense on the AMIT Loans was approximately $1,467,000 and $1,299,000 for the years ended December 31, 2000 and 1999, respectively. Accrued interest was approximately $4,821,000 at December 31, 2000. In addition to its indirect ownership of the general partner interest in the Partnership, AIMCO and its affiliates currently own 10,365 limited partnership units in the Partnership representing 23.87% of the outstanding units. These units were acquired pursuant to tender offers made by AIMCO or its affiliates. It is possible that AIMCO or its affiliates will make one or more additional offers to acquire additional limited partnership interests in the Partnership for cash or in exchange for units in the operating partnership of AIMCO. Under the Partnership Agreement, unitholders holding a majority of the Units are entitled to take action with respect to a variety of matters, which would include without limitation, voting on certain amendments to the Partnership Agreement and voting to remove the Managing General Partner. 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. Note G - Investment Properties and Accumulated Depreciation Initial Cost To Partnership (in thousands) Buildings Cost and Related Capitalized Personal Net Subsequent Description Encumbrances Land Property to Acquisition Waterford Square Apartments $11,565 $ 1,382 $13,479 $ 3,329 Fox Crest Apartments 5,947 861 8,198 1,248 Angeles Partners XIV 11,867 -- -- -- Totals $29,379 $ 2,243 $21,677 $ 4,577
Gross Amount At Which Carried At December 31, 2000 (in thousands) Buildings And Related Personal Accumulated Date Depreciable Description Land Property Total Depreciation Acquired Life-Years Waterford Square Apartments $ 1,382 $16,808 $18,190 $12,794 05/31/85 5-20 yrs Fox Crest Apartments 861 9,446 10,307 7,051 06/30/85 5-20 yrs Totals $ 2,243 $26,254 $28,497 $19,845
The depreciable lives included above are for the building and components. The depreciable lives for related personal property are for 3 to 7 years. Reconciliation of "Investment Properties and Accumulated Depreciation": Years Ended December 31, 2000 1999 (in thousands) Investment Properties Balance at beginning of year $27,996 $26,967 Property improvements 501 1,029 Balance at end of year $28,497 $27,996 Accumulated Depreciation Balance at beginning of year $18,483 $17,250 Additions charged to expense 1,362 1,233 Balance at end of year $19,845 $18,483 The aggregate cost of the investment properties for Federal income tax purposes at December 31, 2000 and 1999, is approximately $28,472,000 and $27,975,000, respectively. The accumulated depreciation taken for Federal income tax purposes at December 31, 2000 and 1999, is approximately $19,833,000 and $18,589,000, respectively. Note H - Abandonment of Limited Partnership Units In 2000, the number of Limited Partnership Units decreased by 168 units due to Limited Partners abandoning their Limited Partnership Units. In abandoning his or her Limited Partnership Units, a Limited Partner relinquishes all right, title and interest in the Partnership as of the date of abandonment. However, the Limited Partner is allocated his or her share of loss for that year. The loss per Limited Partnership Unit in the accompanying consolidated statements of operations is calculated based on the number of units outstanding at the beginning of the year. Note I - 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, its Managing General Partner and several of their affiliated partnerships and corporate entities. The action purports to assert claims on behalf of a class of limited partners and derivatively on behalf of a number of limited partnerships (including the Partnership) which are named as nominal defendants, challenging, among other things, the acquisition of interests in certain general partner entities by Insignia Financial Group, Inc. ("Insignia") and entities which were, at one time, affiliates of Insignia; past tender offers by the Insignia affiliates to acquire limited partnership units; management of the partnerships by the Insignia affiliates; and the Insignia Merger. The plaintiffs seek monetary damages and equitable relief, including judicial dissolution of the Partnership. On June 25, 1998, the Managing General Partner filed a motion seeking dismissal of the action. In lieu of responding to the motion, the plaintiffs filed an amended complaint. The Managing General Partner filed demurrers to the amended complaint which were heard February 1999. Pending the ruling on such demurrers, settlement negotiations commenced. On November 2, 1999, the parties executed and filed a Stipulation of Settlement, settling claims, subject to court approval, on behalf of the Partnership and all limited partners who owned units as of November 3, 1999. Preliminary approval of the settlement was obtained on November 3, 1999 from the Court, at which time the Court set a final approval hearing for December 10, 1999. Prior to the December 10, 1999 hearing, the Court received various objections to the settlement, including a challenge to the Court's preliminary approval based upon the alleged lack of authority of prior lead counsel to enter the settlement. On December 14, 1999, the Managing General Partner and its affiliates terminated the proposed settlement. In February 2000, counsel for some of the named plaintiffs filed a motion to disqualify plaintiff's lead and liaison counsel who negotiated the settlement. On June 27, 2000, the Court entered an order disqualifying them from the case and an appeal was taken from the order on October 5, 2000. On December 4, 2000, the Court appointed the law firm of Lieff Cabraser Heimann & Bernstein LLP as new lead counsel for plaintiffs and the putative class. Plaintiffs filed a third amended complaint on January 19, 2001 and defendants are scheduled to respond to the complaint by March 2, 2001. On March 2, 2001, the Managing General Partner and its affiliates filed a demurrer to the third amended complaint. The Managing General Partner does not anticipate that costs associated with this case will be material to the Partnership's overall operations. 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 None. 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"), was a wholly-owned subsidiary of MAE GP Corporation ("MAE GP"). Effective February 25, 1998, MAE GP was merged into Insignia Properties Trust ("IPT"). 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 names and ages of, as well as the positions and offices held by, the present executive officers and director of ARC II are set forth below. There are no family relationships between or among any officers or directors. Name Age Position Patrick J. Foye 43 Executive Vice President and Director Martha L. Long 41 Senior Vice President and Controller 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. Martha L. Long has been Senior Vice President and Controller of the Managing General Partner since October 1998 as a result of the acquisition of Insignia Financial Group, Inc. As of February 2001, Ms. Long was also appointed head of the service business for AIMCO. From June 1994 until January 1997, she was the Controller for Insignia, and was promoted to Senior Vice President - Finance and Controller in January 1997, retaining that title until October 1998. From 1988 to June 1994, Ms. Long was Senior Vice President and Controller for The First Savings Bank, FSB in Greenville, South Carolina. One or more of the above persons are also directors and/or officers of a general partner (or general partner of a general partner) of limited partnerships which either have a class of securities registered pursuant to Section 12(g) of the Securities Exchange Act of 1934, or are subject to the reporting requirements of Section 15(d) of such Act: Further, one or more of the above persons are also directors and/or officers of Apartment Investment and Management Company and the general partner of AIMCO Properties, L.P., entities that have a class of securities registered pursuant to Section 12(g) of the Securities Exchange Act of 1934, or are subject to the reporting requirements of Section 15 (d) of such Act. The executive officers and director of the Managing General Partner fulfill the obligations of the Audit Committee and oversee the Partnership's financial reporting process on behalf of the Managing General Partner. Management has the primary responsibility for the financial statements and the reporting process including the systems of internal controls. In fulfilling its oversight responsibilities, the executive officers and director of the Managing General Partner reviewed the audited financial statements with management including a discussion of the quality, not just the acceptability, of the accounting principles, the reasonableness of significant judgments, and the clarity of disclosures in the financial statements. The executive officers and director of the Managing General Partner reviewed with the independent auditors, who are responsible for expressing an opinion on the conformity of those audited financial statements with generally accepted accounting principles, their judgments as to the quality, not just the acceptability, of the Partnership's accounting principles and such other matters as are required to be discussed with the Audit Committee or its equivalent under generally accepted auditing standards. In addition, the Partnership has discussed with the independent auditors the auditors' independence from management and the Partnership including the matters in the written disclosures required by the Independence Standards Board and considered the compatibility of non-audit services with the auditors' independence. The executive officers and director of the Managing General Partner discussed with the Partnership's independent auditors the overall scope and plans for their audit. In reliance on the reviews and discussions referred to above, the executive officers and director of the Managing General Partner have approved the inclusion of the audited financial statements in the Form 10-KSB for the year ended December 31, 2000 for filing with the Securities and Exchange Commission. The Managing General Partner has reappointed Ernst & Young LLP as independent auditors to audit the financial statements of the Partnership for the current fiscal year. Fees for the last fiscal year were annual audit services of approximately $37,000 and non-audit services (principally tax-related) of approximately $19,000. Item 10. Executive Compensation No compensation or remuneration was paid by the Partnership to any officer or director of ARC II. The Partnership has no plan, nor does the Partnership presently propose a plan, which will result in any remuneration being paid to any officer or director upon termination of employment. However, certain fees and other payments have been made to the Partnership's Managing General Partner and its affiliates, as described in "Item 12.". 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 December 31, 2000. Entity Number of Units Percentage AIMCO Properties LP 10,365 23.87% (an affiliate of AIMCO) AIMCO Properties LP is indirectly ultimately controlled by AIMCO. Its business address is 2000 South Colorado Blvd., Denver, Colorado 80222. 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 Managing General Partner may be expelled from the Partnership upon 90 days written notice. In the event that a successor general partner has 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 Managing General Partner's 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 Managing General Partner's capital account and (ii) the fair market value of the share of Distributable Net Proceeds to which the Managing General Partner would be entitled. Such determination of the fair market value of the share of Distributable Net Proceeds is defined in Article 12.2(b) of the Agreement. Item 12. Certain Relationships and Related Transactions 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 payments were made to the Managing General Partner and affiliates during the year ended December 31, 2000 and 1999. 2000 1999 (in thousands) Property management fees $ 282 $ 268 Reimbursement for services of affiliates 205 137 Due to affiliate 1,660 1,455 During the years ended December 31, 2000 and 1999, affiliates of the Managing General Partner were entitled to receive 5% of gross receipts from both of the Registrant's residential properties as compensation for providing property management services. The Registrant paid to such affiliates approximately $282,000 and $268,000 for the years ended December 31, 2000 and 1999, respectively. Affiliates of the Managing General Partner received reimbursement of accountable administrative expenses amounting to approximately $205,000 and $137,000 for the years ended December 31, 2000 and 1999, respectively. The Partnership owed the affiliates approximately $1,660,000 and $1,455,000 at December 31, 2000 and 1999, respectively. In November 1992, AAP, a Delaware limited partnership which controled the working capital loans previously provided by Angeles Capital Investment, Inc. ("ACII"), was organized. Angeles Corporation ("Angeles") is the 99% limited partner of AAP and Angeles Acceptance Directives, Inc. ("AAD"), which was wholly-owned by IPT, and was, until April 14, 1995, the 1% general partner of AAP. On April 14, 1995, as part of a settlement of claims between affiliates of the General Partner and Angeles, AAD resigned as general partner of AAP and simultaneously received a 0.5% limited partner interest in AAP. An affiliate of Angeles now serves as the general partner of AAP. The AAP working capital loans funded the Partnership's operating deficits in prior years. Total indebtedness was approximately $4,576,000, plus accrued interest of approximately $3,711,000 at December 31, 2000, with monthly interest accruing at prime plus two percent. Upon maturity on November 25, 1997, the Partnership did not have the means with which to satisfy this maturing debt obligation. Total interest expense for this loan was approximately $518,000 and $432,000 for the years ended December 31, 2000 and 1999, respectively. During the year ended December 31, 2000, AAP transferred ownership of the loans to Saticoy Investments Company, LLC, a wholly owned entity of The PNL Companies which is an unrelated party. Angeles Mortgage Investment Trust ("AMIT") provided additional financing (the "AMIT Loans") to the Partnership. 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 IPT, the entity which controlled the Managing General Partner. Effective February 26, 1999, IPT was merged into AIMCO. Thus, AIMCO is the current holder of the AMIT loans. The principal balance on the AMIT Loans totals approximately $7,291,000 at December 31, 2000, accrues interest at rates of 12% to 12.5% per annum and is recourse to the Partnership. Two of the three notes totaling $2,526,000 originally matured in March 1998. The Managing General Partner negotiated with AMIT to extend this indebtedness and in the second quarter of 1998, executed an extension through March 2002. The remaining note with a principal balance of approximately $4,765,000 matures in March 2003. Total interest expense on the AMIT Loans was approximately $1,467,000 and $1,299,000 for the years ended December 31, 2000 and 1999, respectively. Accrued interest was approximately $4,821,000 at December 31, 2000. In addition to its indirect ownership of the general partner interest in the Partnership, AIMCO and its affiliates currently own 10,365 limited partnership units in the Partnership representing 23.87% of the outstanding units. These units were acquired pursuant to tender offers made by AIMCO or its affiliates. It is possible that AIMCO or its affiliates will make one or more additional offers to acquire additional limited partnership interests in the Partnership for cash or in exchange for units in the operating partnership of AIMCO. Under the Partnership Agreement, unitholders holding a majority of the Units are entitled to take action with respect to a variety of matters, which would include without limitation, voting on certain amendments to the Partnership Agreement and voting to remove the Managing General Partner. 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. PART IV Item 13. Exhibits and Reports on Form 8-K (a) Exhibits required by Item 601 of regulation S-B: Refer to Exhibit Index in this report. (b) Reports on Form 8-K: No reports were filed during the quarter ended December 31, 2000. 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 XIV (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/Martha L. Long Martha L. Long Senior Vice President and Controller Date: 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 on the date indicated. /s/Patrick J. Foye Executive Vice President Date: Patrick J. Foye and Director /s/Martha L. Long Senior Vice President Date: Martha L. Long and Controller ANGELES PARTNERS XIV EXHIBIT INDEX Exhibit Number Description of Exhibit 3.1 Amended Certificate and Agreement of Limited Partnership filed in Form S-11 dated December 24, 1984 incorporated herein by reference. 10.1 Agreement of Purchase and Sale of Real Property with Exhibits - Waterford Square Apartments filed in Form 8-K dated May 31, 1985 incorporated herein by reference. 10.2 Agreement of Purchase and Sale of Real Property with Exhibits - Fox Crest Apartments filed in Form 8-K dated June 30, 1985 incorporated herein by reference. 10.3 Agreement of Purchase and Sale of Real Property with Exhibits - Dayton Industrial Complex filed in Form 8-K dated December 20, 1985 incorporated herein by reference. 10.4 Agreement of Purchase and Sale of Real Property with Exhibits - Camelot Village Apartments filed in Form 8-K dated March 31, 1987 incorporated herein by reference. 10.5 Agreement of Purchase and Sale of Real Property with Exhibits - Glenwood Plaza Shopping Center filed in Form 8-K dated March 31, 1987 incorporated herein by reference. 10.6 Glenwood Plaza Shopping Center financing disclosed in notes to financial statements filed in Form 10-Q dated June 30, 1988, incorporated herein by reference. 10.7 Promissory note - Waterford Square Apartments financing disclosed in notes to financial statements filed in Form 10-K dated December 31, 1989 incorporated herein by reference. 10.8 Promissory note - Fox Crest Apartments financing disclosed in notes to financial statements filed in Form 10-K dated December 31, 1989 incorporated herein by reference. 10.9 Sale agreement - Cascades Apartments filed in Form 8-K, Exhibit I, dated August 28, 1991, incorporated herein by reference. 10.10 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. 10.11 Agreement of Purchase and Sale of Real Property with Exhibits Camelot Village Apartments and Glenwood Plaza Shopping Center filed in Form 8-K dated July 15, 1993 incorporated herein by reference. 10.12 Agreement of Purchase and Sale of Real Property with Exhibits Building 54 of the Dayton Industrial Complex Shopping Center filed in Form 8-K dated December 28, 1994 incorporated herein by reference. 10.13 Agreement of Purchase and Sale of Real Property with Exhibits Building 47 of the Dayton Industrial Complex Shopping Center filed in Form 8-K dated August 31, 1995 incorporated herein by reference. 10.14 Purchase Agreement - Building 45 of the Dayton Industrial Complex - between the Partnership and Miller-Valentine Partners, dated December 31, 1995. 10.15 Amendment to and Assignment of Purchase Agreement - Building 45 of the Dayton Industrial Complex - between the Partnership, Miller-Valentine Partners and Mid-States Development Company, dated April 8, 1996. 10.16 Assignment of Permits, Etc. - Building 45 of the Dayton Industrial Complex - between the Partnership and Mid-States Development Company, dated April 8, 1996. 10.17 Assignment and Assumption of Leases and Security Deposits - Building 45 of the Dayton Industrial Complex - between the Partnership and Mid-States Development Company, dated April 8, 1996. 10.18 Assignment of Warranties - Building 45 of the Dayton Industrial Complex - between the Partnership and Mid-States Development Company, dated April 8, 1996. 10.19 Bill of Sale and Assignment - Building 45 of the Dayton Industrial Complex - between the Partnership and Mid-States Development Company, dated April 8, 1996. 10.20 Limited Warranty Deed - Building 45 of the Dayton Industrial Complex - between the Partnership and Mid-States Development Company, dated April 8, 1996. 10.21 Purchase Agreement - Building 52 of the Dayton Industrial Complex - between the Partnership and Miller-Valentine Partner, dated December 31, 1995. 10.22 Assignment of Purchase Agreement - Building 52 of the Dayton Industrial Complex - between the Partnership, Miller-Valentine Partners and Mid-States Development Company, dated April 8, 1996. 10.23 Assignment of Permits, Etc. - Building 52 of the Dayton Industrial Complex - between the Partnership, Miller-Valentine Partners and Mid-States Development Company,dated April 8,1996 10.24 Assignment of Assumption of Leases and Security Deposits - Building 52 of the Dayton Industrial Complex - between the Partnership, Miller-Valentine Partners and Mid-States Development Company, dated April 8, 1996. 10.25 Assignment of Warranties - Building 52 of the Dayton Industrial Complex - between the Partnership, Miller-Valentine Partners and Mid-States Development Company, dated April 8, 1996. 10.26 Bill of Sale and Assignment - Building 52 of the Dayton Industrial Complex - between the Partnership, Miller-Valentine Partners and Mid-States Development Company, dated April 8, 1996. 10.27 Limited Warranty Deed - Building 52 of the Dayton Industrial Complex - between the Partnership, Miller-Valentine Partners and Mid-States Development Company, dated April 8, 1996. 10.28 Purchase Agreement - between Angeles Partners XIV and ABMD, LTD., dated July 30, 1996. 10.29 Assignment of Service Agreements - between Angeles Partners XIV to ABMD, LTD. 10.30 Assignment of Licenses and Permits - between Angeles Partners XIV to ABMD, LTD. 10.31 Assignment of Warranties and Guarantees - by Angeles Partners XIV to ABMD, LTD. 10.32 Bill of Sale and Assignment - between Angeles Partners XIV to ABMD, LTD. 10.33 Limited Warranty Deed - by Angeles Partners XIV to ABMD, LTD. 10.34 Assignment and Assumption of Leases and Subleases - by Angeles Partners XIV to ABMD, LTD. 10.35 Mortgage Note between Washington Capital Associates, Inc. and Waterford Square Apartments, a California general partnership, dated October 28, 1996. 10.36 Rider to Mortgage Note by Waterford Square Apartments, a California general partnership, to the order of Washington Capital Associates, Inc. dated as of October 28, 1996. 10.37 Assignment of Warranties - Building 41 of the Dayton Industrial Complex - between the Partnership and Mid-States Development Company, dated June 12, 1998. 10.38 Assignment of Permits - Building 41 of the Dayton Industrial Complex - between the Partnership and Mid-States Development Company, dated June 12, 1998. 10.39 Purchase Agreement - Building 41 of the Dayton Industrial Complex - between the Partnership and Mid-States Development Company, dated June 12, 1998. 10.40 Closing Statement - Building 41 of the Dayton Industrial Complex - between the Partnership and Mid-States Development Company, dated June 12, 1998. 10.41 Journal Entry Confirming Sale, Ordering Deed and Distributing Sale Proceeds - between The Traveler's Insurance Company and the Partnership, dated June 12, 1998. 10.42 Agreement of Purchase and Sale - Building 55 of the Dayton Industrial Complex - between Angeles Partners XIV and Shopsmith Inc., dated December 31, 1998 filed in 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. -----END PRIVACY-ENHANCED MESSAGE-----