-----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, La/FwieYQCQPenKl5IBOCdAoH0GHHWkMcbeBAhbOWTevJjxnp6YnZXv6dJHpg34i 5Fmvo0TVRkjucDXQ/vdgjg== 0000759859-97-000005.txt : 19971114 0000759859-97-000005.hdr.sgml : 19971114 ACCESSION NUMBER: 0000759859-97-000005 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19970930 FILED AS OF DATE: 19971112 SROS: NONE 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: 10QSB SEC ACT: SEC FILE NUMBER: 000-14284 FILM NUMBER: 97713806 BUSINESS ADDRESS: STREET 1: ONE INSIGNIA FINANCIAL PLZ STREET 2: PO BOX 1089 CITY: GREENVILLE STATE: SC ZIP: 29602 BUSINESS PHONE: 8032391000 MAIL ADDRESS: STREET 1: ONE INSIGNIA FINANCIAL PLAZA STREET 2: P.O. BOX 1089 CITY: GREENVILLE STATE: SC ZIP: 29602 10QSB 1 FORM 10-QSB-QUARTERLY OR TRANSITIONAL REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 QUARTERLY OR TRANSITIONAL REPORT U.S. Securities and Exchange Commission Washington, D.C. 20549 FORM 10-QSB [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 1997 or [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT For the transition period.........to......... Commission file number 0-14248 ANGELES PARTNERS XIV (Exact name of small business issuer as specified in its charter) California 95-3959771 (State or other jurisdiction of (IRS Employer incorporation or organization) Identification No.) One Insignia Financial Plaza Greenville, South Carolina 29602 (Address of principal executive offices) (Zip Code) Issuer's telephone number (864) 239-1000 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 PART I - FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS a) ANGELES PARTNERS XIV CONSOLIDATED BALANCE SHEET (Unaudited) (in thousands, except unit data) September 30, 1997 Assets Cash and cash equivalents: Unrestricted $ 643 Restricted--tenant security deposits 92 Accounts receivable, net of allowance for doubtful accounts of $7 6 Escrows for taxes and insurance 386 Restricted escrows 359 Other assets 426 Investment properties: Land $ 3,209 Buildings and related personal property 37,706 40,915 Less accumulated depreciation (24,450) 16,465 $ 18,377 Liabilities and Partners' Deficit Liabilities Accounts payable $ 39 Tenant security deposits 109 Accrued taxes 519 Accrued interest 4,329 Due to affiliates 1,161 Other liabilities 70 Notes payable, including $3,870 in default 44,055 Partners' Deficit General partners $ (702) Limited partners (44,390 units issued and 43,897 units outstanding) (31,203) (31,905) $ 18,377 See Accompanying Notes to Consolidated Financial Statements b) ANGELES PARTNERS XIV CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) (in thousands, except unit data) Three Months Ended Nine Months Ended September 30, September 30, 1997 1996 1997 1996 Revenues: Rental income $ 1,397 $ 1,523 $ 4,164 $ 5,041 Other income 34 77 106 156 Total revenues 1,431 1,600 4,270 5,197 Expenses: Operating 377 571 1,228 1,603 General and administrative 20 109 198 322 Maintenance 173 183 501 580 Depreciation 306 483 909 1,637 Interest 1,177 1,175 3,495 3,781 Property taxes 99 121 333 389 Bad debt recovery, net (4) (4) (22) (15) Total expenses 2,148 2,638 6,642 8,297 Loss before gain on sale of investment property and extraordinary item (717) (1,038) (2,372) (3,100) Gain on sale of investment property -- 131 -- 626 Loss before extraordinary item (717) (907) (2,372) (2,474) Extraordinary gain on extinguishment of debt -- -- -- 1,126 Net loss $ (717) $ (907) $ (2,372) $ (1,348) Net loss allocated to general partners (1%) $ (7) $ (9) $ (24) $ (13) Net loss allocated to limited partners (99%) (710) (898) (2,348) (1,335) Net loss $ (717) $ (907) $ (2,372) $ (1,348) Per limited partnership unit: Loss before extraordinary item $ (16.17) $ (20.34) $ (53.49) $ (55.49) Extraordinary item -- -- -- 25.26 Net loss $ (16.17) $ (20.34) $ (53.49) $ (30.23) See Accompanying Notes to Consolidated Financial Statements c) ANGELES PARTNERS XIV CONSOLIDATED STATEMENT OF CHANGES IN PARTNERS' DEFICIT (Unaudited) (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, 1996 43,897 $ (678) $ (28,855) $ (29,533) Net loss for the nine months ended September 30, 1997 -- (24) (2,348) (2,372) Partners' deficit at September 30, 1997 43,897 $ (702) $ (31,203) $ (31,905) See Accompanying Notes to Consolidated Financial Statements
d) ANGELES PARTNERS XIV CONSOLIDATED STATEMENT OF CASH FLOWS (Unaudited) (in thousands) Nine Months Ended September 30, 1997 1996 Cash flows from operating activities: Net loss $ (2,372) $ (1,348) Adjustments to reconcile net loss to net cash provided by operating activities: Depreciation 909 1,637 Amortization of mortgage discounts, loan costs and leasing commissions 42 96 Extraordinary gain on extinguishment of debt -- (1,126) Gain on sale of investment property -- (626) Bad debt recovery, net (22) (15) Change in accounts: Restricted cash (4) 9 Accounts receivable 87 30 Escrows for taxes and insurance (120) 219 Other assets 17 (32) Accounts payable (5) 41 Tenant security deposit liabilities 6 (33) Accrued taxes 120 (32) Accrued interest 2,290 1,783 Due to affiliates 107 221 Other liabilities (5) 31 Net cash provided by operating activities 1,050 855 Cash flows from investing activities: Property improvements and replacements (261) (195) Proceeds from sale of investment property -- 5,995 Deposits to restricted escrows (75) (129) Withdrawals from restricted escrows 57 66 Net cash (used in) provided by investing activities (279) 5,737 Cash flows from financing activities: Principal payments on notes payable (591) (336) Repayments of loans -- (12,620) Loan costs paid -- (148) Additions to notes payable 145 6,700 Net cash used in financing activities (446) (6,404) Net increase in unrestricted cash and cash equivalents 325 188 Unrestricted cash and cash equivalents at beginning of period 318 223 Unrestricted cash and cash equivalents at end of period $ 643 $ 411 Supplemental disclosure of cash flow information: Cash paid for interest $ 1,116 $ 1,921 Supplemental disclosure of non-cash investing and financing activities: Interest on notes transferred to notes payable $ 655 $ 2,477 Mortgage debt canceled upon sale of investment property $ -- $ 1,126 See Accompanying Notes to Consolidated Financial Statements e) ANGELES PARTNERS XIV NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) NOTE A - GOING CONCERN The accompanying financial statements have been prepared assuming Angeles Partners XIV (the "Partnership" or the "Registrant") will continue as a going concern. The Partnership continues to incur recurring operating losses and suffers from inadequate liquidity. Non-recourse indebtedness of approximately $3,870,000 is in default at September 30, 1997, due to nonpayment of interest and principal when due. In addition, indebtedness of $11,981,000, plus related accrued interest, matures in November and December 1997. The Partnership does not have the means with which to satisfy this indebtedness when it matures. The Partnership incurred a net loss of approximately $2,372,000 for the nine months ended September 30, 1997, and Angeles Realty Corporation II (the "Managing General Partner") expects the Partnership to continue incurring such losses. The Partnership generated cash from operations of approximately $1,050,000 during the nine months ended September 30, 1997; however, this was primarily the result of accruing interest of approximately $2,290,000 on its indebtedness and approximately $107,000 for services provided by affiliates. The Dayton Industrial Complex has four remaining buildings at September 30, 1997. The Partnership is in default on Building 53's and Building 59's non- recourse first mortgages, in the amount of approximately $3,870,000, due to nonpayment of interest and principal when due. The lenders on Buildings 53 and 59 of the Dayton Industrial Complex initiated foreclosure proceedings on September 30, 1997 and December 27, 1996, respectively. The Managing General Partner does not intend to contest these foreclosure proceedings. The Partnership expects to lose both of these buildings to foreclosure in 1997. The first mortgage secured by Building 55 and the second mortgages secured by Buildings 41, 53 and 59, which total approximately $7,405,000 and are all non- recourse to the Partnership, mature in December 1997. The estimated fair value of these buildings is less than the indebtedness, and the Managing General Partner anticipates losing these buildings when the indebtedness matures. The Dayton Industrial Complex has not generated any operating cash for the Partnership since it was purchased nor has the Partnership expended any cash to support the property. The Managing General Partner does not intend to use any Partnership funds to support this property. The Partnership has unsecured working capital loans to Angeles Acceptance Pool, L.P. ("AAP") in the amount of approximately $4,576,000, plus related accrued interest, that is due November 25, 1997. This indebtedness is recourse to the Partnership. Upon maturity, the Partnership will not have the means with which to satisfy this obligation. 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 during 1997 to meet all property operating expenses, 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 terminate 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. NOTE B - BASIS OF PRESENTATION The accompanying unaudited financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-QSB and Item 310(b) of Regulation S-B. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of the Managing General Partner, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three and nine month periods ended September 30, 1997, are not necessarily indicative of the results that may be expected for the fiscal year ending December 31, 1997. For further information, refer to the financial statements and footnotes thereto included in the Partnership's annual report on Form 10-KSB for the fiscal year ended December 31, 1996. Effective October 1, 1996, the Dayton Industrial Complex buildings were classified as an investment property "held for disposal". Accordingly, the buildings have been recorded at the lower of carrying amount or fair value, less costs to sell, and no additional depreciation expense will be recorded during the period the assets are held for disposal. Certain reclassifications have been made to the 1996 information to conform to the 1997 presentation. NOTE C - 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 payments to affiliates for services and as reimbursement of certain expenses incurred by affiliates on behalf of the Partnership. The following amounts were paid or accrued to the Managing General Partner and affiliates during each of the nine months ended September 30, 1997 and 1996: 1997 1996 (in thousands) Property management fees $186 $173 Reimbursement for services of affiliates, including $1,161 accrued at September 30, 1997 112 222 Included in reimbursement for services of affiliates is approximately $5,000 and $1,000 in construction oversight costs for the period ended September 30, 1997 and 1996, respectively. For the period from January 1, 1996, to August 31, 1997, the Partnership insured its properties under a master policy through an agency and 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 master policy. The agent assumed the financial obligations to the affiliate of the Managing General Partner who receives payment 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. In November 1992, AAP, a Delaware limited partnership, was organized to acquire and hold the obligations evidencing the working capital loans previously provided to the Partnership by Angeles Capital Investments, Inc. ("ACII"). Angeles Corporation ("Angeles") is the 99% limited partner of AAP and Angeles Acceptance Directives, Inc.("AAD"), an affiliate of the Managing General Partner, 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 Managing General Partner and Angeles, AAD resigned as general partner of AAP and simultaneously received a 1/2% limited partner interest in AAP. An affiliate of Angeles now serves as the general partner of AAP. These working capital loans funded the Partnership's operating deficits in prior years. Total indebtedness was approximately $4,576,000, plus accrued interest, at September 30, 1997, with monthly interest accruing at prime plus two percent. Interest is to be paid based on excess cash flow, as defined. Principal is to be paid the earlier of i) the availability of funds, ii) the sale of one or more properties owned by the Partnership, or iii) November 25, 1997. Upon maturity on November 25, 1997, the Partnership will not have the means with which to satisfy this maturing debt obligation. Total interest expense for this loan was approximately $363,000 and approximately $353,000 for the nine months ended September 30, 1997 and 1996, respectively. Accrued interest payable was approximately $2,150,000 at September 30, 1997. AMIT currently holds notes receivable from the Partnership in the aggregate amount of approximately $7,138,000 ("Glenwood Note" = $1,915,000, "Waterford Square Note" = $459,000 and "Fox Crest Note" = $4,764,000). Total interest expense on this financing was approximately $759,000 and approximately $743,000 for the nine months ended September 30, 1997 and 1996, respectively. Accrued interest payable was approximately $1,402,000 at September 30, 1997. MAE GP Corporation ("MAE GP"), an affiliate of the Managing General Partner, owns 1,675,113 Class B Shares of AMIT. The terms of the Class B Shares provide that they are convertable, in whole or in part, into Class A Shares on the basis of 1 Class A Share for every 49 Class B Shares (however, in connection with the settlement agreement described in the following paragraph, MAE GP has agreed not to convert the Class B Shares so long as AMIT's option is outstanding). These Class B Shares entitle MAE GP to receive 1% of the distributions of net cash distributed by AMIT (however, in connection with the settlement agreement described in the following paragraph, MAE GP has agreed to waive its right to receive dividends and distributions so long as AMIT's option is outstanding). These Class B Shares also entitle MAE GP to vote on the same basis as Class A Shares, providing MAE GP with approximately 39% of the total voting power of AMIT (unless and until converted to Class A Shares, in which case the percentage of the vote controlled represented by the shares held by MAE GP would approximate 1.3% of the vote). Between the date of acquisition of these shares (November 24, 1992) and March 31, 1995, MAE GP declined to vote these shares. Since that date, MAE GP voted its shares at the 1995 and 1996 annual meetings in connection with the election of trustees and other matters. MAE GP has not exerted and continues to decline to exert any management control over or participate in the management of AMIT. Subject to the terms of the proxy described below, MAE GP may choose to vote these shares as it deems appropriate in the future. In addition, Liquidity Assistance L.L.C., an affiliate of the Managing General Partner and an affiliate of Insignia Financial Group, Inc. ("Insignia"), which provides property management and partnership administration services to the Partnership, owns 96,800 Class A Shares of AMIT at September 30, 1997. These Class A Shares represent approximately 2.2% of the total voting power of AMIT. As part of a settlement of certain disputes with AMIT, MAE GP granted to AMIT an option to acquire the Class B shares owned by it. This option can be exercised at the end of 10 years or when all loans made by AMIT to partnerships affiliated with MAE GP as of November 9, 1994 (which is the date of execution of a definitive Settlement Agreement) have been paid in full, but in no event prior to November 9, 1997. In connection with such settlement, AMIT delivered to MAE GP cash in the sum of $250,000 at closing (which occurred April 14, 1995) as payment for the option. If and when the option is exercised, AMIT will be required to remit to MAE GP an additional $94,000. Simultaneously with the execution of the option and as part of the settlement, MAE GP executed an irrevocable proxy in favor of AMIT, the result of which is that MAE GP is permitted to vote the Class B Shares on all matters except those involving transactions between AMIT and MAE GP affiliated borrowers or the election of any MAE GP affiliate as an officer or trustee of AMIT. On those matters, MAE GP is obligated to deliver to the AMIT trustees, in their capacity as trustees of AMIT, proxies with regard to the Class B Shares instructing such trustees to vote said Class B Shares in accordance with the vote of the majority of the Class A Shares voting to be determined without consideration of the votes of "Excess Class A Shares" (as defined in Section 6.13 of the Declaration of Trust of AMIT). On April 3, 1997, Insignia and AMIT entered into a non-binding agreement in principle contemplating, among other things, a business combination of AMIT and Insignia Properties Trust, an entity owned 98% by Insignia and its affiliates ("IPT"). On July 18, 1997, IPT, Insignia and MAE GP entered into a definitive merger agreement pursuant to which (subject to shareholder approval and certain other conditions, including the receipt by AMIT of a fairness opinion from its investment bankers) AMIT would be merged with and into IPT, with each Class A Share and Class B Share being converted into 1.625 and 0.0332 common shares of IPT, respectively. The foregoing exchange ratios are subject to adjustment to account for dividends paid by AMIT from January 1, 1997 and dividends paid by IPT from February 1, 1997. It is anticipated that Insignia (and its affiliates) and MAE GP (and its affiliates) would own approximately 53.1% and 2.3%, respectively, of post-merger IPT when this transaction is consummated. The Partnership has agreed to pay Miller Valentine Realty ("MV") property management fees, leasing commissions, and financing fees and sales commissions upon the refinancing or sale of the properties. The Partnership will receive the first $3,000,000 of excess cash from operations, refinancings or sales of the properties less unrefunded arrearages. Thereafter, the agreement provides that MV shall receive, as incentive for providing property management, leasing and asset management services to the Partnership, two-thirds of the next $12,000,000 of excess cash proceeds generated by the properties. Cash in excess of $15,000,000 shall be shared equally by MV and the Partnership. The agreement contemplates that the properties will be sold at an opportune time but no later than 10 years after commencement of the agreements (March 2, 1992). In addition, the agreement contains an option for MV to buy the properties five years after the commencement date of the agreement. The Managing General Partner does not anticipate that there will be any proceeds available to the Partnership. Should the Partnership elect not to sell, it would be obligated to purchase MV's incentive interest based on the offered purchase price. The Partnership intends to maintain ownership of the Dayton properties only as long as they are under the management of MV. There is no certainty as to the future of the Dayton properties otherwise. NOTE D - SALE OF PROPERTIES On April 8, 1996, the Partnership sold Buildings 45 and 52 of the Dayton Industrial Complex to an unaffiliated party for net sales proceeds of $4,188,000, after payment of closing costs. The Partnership realized a gain of $495,000 on the sales and a related $1,126,000 extraordinary gain on the early extinguishment of debt. The extraordinary gain was the result of forgiveness of debt. On August 7, 1996, the Partnership sold Building 63 of the Dayton Industrial Complex to an unaffiliated party for net sales proceeds of $1,807,000, after payment of closing costs. The Partnership realized a gain of $131,000 on the sale. NOTE E - REFINANCINGS In April 1996, the Partnership refinanced the mortgage encumbering Fox Crest Apartments. The previous mortgage indebtedness, which carried a stated interest rate of 10.25%, was in default due to its maturity date in August 1994. The new mortgage indebtedness of $6,700,000 carries a stated interest rate of 8.00% with a balloon payment due May 2003. In April 1996, the Fox Crest Note, held by AMIT, was restructured, adding previously accrued delinquent interest and late charges of $1,764,000 to the original note amount. The $4,764,000 note is a term loan which matures the earlier of March 2003, the date of sale or refinance of Fox Crest Apartments, the occurrence of a default under the terms of the mortgage encumbering Fox Crest Apartment, or a sale or refinance of the Partnership's beneficiary interest in the trust which owns Fox Crest Apartments. The note provides for interest at 12.5%. 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 $874,000 to the original note amount. The $459,000 and $1,915,000 notes provide semi-annual payments of excess cash flow, as defined, and mature the earlier of March 1998, the date of sale of Waterford Square Apartments, the occurrence of a default under the terms of the mortgage encumbering Waterford Square Apartments, or a sale or refinance of the Partnership's beneficiary interest in Waterford Square Apartments, Ltd. The notes provide for the accrual of interest on the unpaid balance at 12.0% (Waterford Square Note) and 12.5% (Glenwood Note). In October 1996, the Partnership refinanced the mortgage encumbering Waterford Square Apartments. The total mortgage indebtedness refinanced was $11,855,000, of which $11,762,000 represented principal. The new indebtedness of $11,999,000, which is guaranteed by HUD, carries a stated interest rate of 7.90% and matures in November 2027. NOTE F - CASUALTY During September 1997, there were two separate kitchen fires at Fox Crest Apartments. The damage to the affected units was minor and the total estimated costs to repair the damage approximates the total insurance proceeds to be received, therefore no casualty gain or loss is expected to occur. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION The Partnership's investment properties consist of two apartment complexes and one commercial property. The following table sets forth the average occupancy of the properties for the nine months ended September 30, 1997 and September 30, 1996. Property 1997 1996 Waterford Square Apartments Huntsville, Alabama (1) 91% 87% Fox Crest Apartments Waukegan, Illinois 96% 95% Dayton Industrial Complex Dayton, Ohio (2) 69% 72% 1) Waterford Square Apartments experienced an increase in occupancy due to an improvement in the rental market in the Huntsville area. As the market in this area continues to improve, the Managing General Partner anticipates that Waterford Square Apartments' occupancy will continue to climb. 2) Dayton Industrial Complex has been adversely affected by the build-up of commercial space in the area. The Partnership realized net losses of approximately $717,000 and approximately $2,372,000 for the three and nine months ended September 30, 1997, respectively, versus net losses of approximately $907,000 and approximately $1,348,000 for the three and nine months ended September 30, 1996, respectively. The increase in net loss for the nine months ended September 30, 1997, versus the corresponding period of 1996, can be attributed to the gain recognized on the sale of investment properties and the gain recognized on the extinguishment of debt as a result of the sales of Buildings 45, 52, and 63 in the Dayton Industrial Complex, which occurred during the second and third quarters of 1996 (See "Note D"). The loss before the gain on sale of investment property and extraordinary gain decreased primarily due to the overall decrease in expenses as a result of the sales of the three buildings in the Dayton Industrial Complex in 1996. Historically, these buildings had not generated any operating income for the Partnership. Rental income decreased for the nine months ended September 30, 1997, versus the nine months ended September 30, 1996, due to the aforementioned sales and also due to the decrease in occupancy at the Daytona Industrial Complex for the remaining buildings, but was partially offset by increases in rental income at Fox Crest Apartments and Waterford Square Apartments due to increases in occupancy and average annual rental rates at both of these investment properties. The sale of Buildings 45, 52 and 63 in the Dayton Industrial Complex is also the primary reason for the decreases in operating, maintenance, depreciation, interest and property tax expense for the nine months ended September 30, 1997, as compared to the nine months ended September 30, 1996. Contributing to the decrease in operating expense was a decrease in concessions offered at Waterford Square Apartments. General and administrative expenses decreased primarily due to a decrease in reimbursements for services of affiliates and decreased professional fees. Due to the aforementioned sales, total maintenance expense decreased, however maintenance expense at Waterford Square Apartments and Fox Crest Apartments increased due to interior painting completed at both of the investment properties during the nine months ended September 30, 1997. Also, concrete repairs were made to sidewalks, stairways and ramps at Fox Crest Apartments and new light fixtures were installed at Waterford Square Apartments. The $1,729,000 write-down of the buildings in the Dayton Industrial Complex, during the fourth quarter of 1996, contributed to the decrease in depreciation. The decrease in interest expense, resulting from the sales, was partially offset by an increase in interest expense on the defaulted debt and due to interest accruing on increased debt balances as unpaid interest is added to principal (see discussion below). Interest expense at Fox Crest Apartments and Waterford Square Apartments decreased due to lower interest rates obtained through the refinancings of the mortgage debt secured by these properties in 1996. Included in maintenance expense for the nine months ended September 30, 1997, is $28,000 of major repairs and maintenance mainly comprised of parking lot repairs. For the nine months ended September 30, 1996, $2,000 of major repairs and maintenance comprised of exterior building improvements and window covering replacements were included in maintenance expense. The Managing General Partner continues to monitor the rental market environment at its investment properties to assess the feasibility of increasing rents, maintaining or increasing occupancy levels and protecting the Partnership from increases in expenses. The Managing General Partner expects to be able, at a minimum, to continue protecting the Partnership from inflation-related increases in expenses by increasing rents and increasing the overall occupancy level. However, rental concessions and rental reductions needed to offset softening market conditions could affect the ability to sustain such a plan. At September 30, 1997, the Partnership held unrestricted cash and cash equivalents of approximately $643,000 compared to approximately $411,000 at September 30, 1996. Net cash provided by operating activities increased as a result of increases in accrued interest and accrued taxes, offset partially by an increase in escrows for taxes and insurance. The increase in accrued interest is primarily due to the accrual of default interest, along with interest accruing on increased debt balances at Dayton Industrial Complex as accrued interest is added to the principal on all of the 2nd mortgages secured by this property. The increase in escrows for taxes and insurance and the increase in accrued taxes is due to the timing of the payments of the investment properties' property tax bills. Net cash used in investing activities in 1997 resulted from an increase in property improvements and replacements. Net cash provided by investing activities in 1996 resulted from the recognition of proceeds received from the sale of the three buildings at the Dayton Industrial Complex during the nine months ended September 30, 1996. Net cash used in financing activities decreased due to the repayments of loans which occurred as a result of the refinance of Fox Crest Apartments and the sales of Buildings 45, 52, and 63 at the Dayton Industrial Complex during 1996. This was partially offset by the decrease in additions to notes payable. In 1996, the refinance of Fox Crest Apartments led to an addition to notes payable of $6,700,000. During 1997, an advance from the lender to cover operating expenses for Building 59 of the Dayton Industrial Complex led to an addition to notes payable of approximately $145,000. The accompanying 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. Non- recourse indebtedness of approximately $3,870,000 is in default at September 30, 1997, due to non-payment of interest and principal when due. In addition, indebtedness of approximately $11,981,000, plus related accrued interest, matures in November and December 1997. The Partnership does not have the means with which to satisfy this indebtedness when it matures. The Dayton Industrial Complex has four remaining buildings at September 30, 1997. The Partnership is in default on Building 53's and Building 59's non- recourse first mortgages, in the amount of approximately $3,870,000, due to nonpayment of interest and principal when due. The lenders on Buildings 53 and 59 of the Dayton Industrial Complex initiated foreclosure proceedings on September 30, 1997 and December 27, 1996, respectively. The Managing General Partner does not intend to contest these foreclosure proceedings. The Partnership expects to lose both of these buildings to foreclosure in 1997. The first mortgage secured by Building 55 and the second mortgages secured by Buildings 41, 53 and 59, which total approximately $7,405,000 and are all non- recourse to the Partnership, mature in December 1997. The estimated fair value of these buildings is less than the indebtedness, and the Managing General Partner anticipates losing these buildings when the indebtedness matures. The Dayton Industrial Complex has not generated any operating cash for the Partnership since it was purchased nor has the Partnership expended any cash to support the property. The Managing General Partner does not intend to use any Partnership funds to support this property. The Partnership has unsecured working capital loans to AAP in the amount of approximately $4,576,000, plus related accrued interest that is due November 25, 1997. This indebtedness is recourse to the Partnership. Upon maturity, the Partnership will not have the means with which to satisfy this obligation. 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 1997 to meet all property operating expenses, 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 terminate 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. PART II - OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS On December 27, 1996, the lender on Building 59 of the Dayton Industrial Complex initiated foreclosure proceedings. The Managing General Partner does not intend to contest this foreclosure and anticipates that this property will be lost in 1997. On September 30, 1997, the lender on Building 53 of the Dayton Industrial Complex initiated foreclosure proceedings. The Managing General Partner does not intend to contest this foreclosure and anticipates that this property will be lost in 1997. The Partnership is unaware of any other pending or outstanding litigation that is not of a routine nature. The Managing General Partner of the Partnership believes that all such other pending or outstanding litigation will be resolved without a material adverse effect upon the business, financial condition, or operations of the Partnership. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K a) Exhibits: Exhibit 27, Financial Data Schedule. b) Reports on Form 8-K: No reports on form 8-K were filed during the quarter ended September 30, 1997. SIGNATURES In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. ANGELES PARTNERS XIV By: Angeles Realty Corporation II Managing General Partner By: /s/ Carroll D. Vinson Carroll D. Vinson President By: /s/ Robert D. Long, Jr. Robert D. Long, Jr. Vice President/CAO Date: November 12, 1997 EX-27 2
5 This schedule contains summary financial information extracted from Angeles Partners XIV 1997 Third Quarter 10-QSB and is qualified in its entirety by reference to such 10-QSB filing. 0000759859 ANGELES PARTNERS XIV 1,000 9-MOS DEC-31-1997 SEP-30-1997 643 0 6 7 0 0 40,915 24,450 18,377 0 44,055 0 0 0 (31,905) 18,377 0 4,270 0 0 6,642 0 3,495 (2,372) 0 (2,372) 0 0 0 (2,372) (53.49) 0 Registrant has an unclassified balance sheet. Multiplier is 1.
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