-----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, OSF0MD/l1aCQPXRqWFBKgvrv2VzsrwE89jZvdYLCXA4vn3uYn/g+Qtl6vvLu2eNE kGIK2XqaY2P6zPkRgVLU/g== 0000310303-98-000001.txt : 19980807 0000310303-98-000001.hdr.sgml : 19980807 ACCESSION NUMBER: 0000310303-98-000001 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19980630 FILED AS OF DATE: 19980806 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: ANGELES OPPORTUNITY PROPERTIES LTD CENTRAL INDEX KEY: 0000789282 STANDARD INDUSTRIAL CLASSIFICATION: REAL ESTATE [6500] IRS NUMBER: 954052473 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10QSB SEC ACT: SEC FILE NUMBER: 000-16116 FILM NUMBER: 98678642 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 (Mark One) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 1998 [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT For the transition period from.........to......... Commission file number 0-16116 ANGELES OPPORTUNITY PROPERTIES, LTD. (Exact name of small business issuer as specified in its charter) California 95-4052473 (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) (864) 239-1000 (Issuer's telephone number) 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 OPPORTUNITY PROPERTIES, LTD. CONSOLIDATED BALANCE SHEET (Unaudited) (in thousands, except unit data) June 30, 1998 Assets Cash and cash equivalents $ 703 Receivables and deposits 184 Restricted escrows 254 Other assets 150 Investment properties: Land $ 956 Buildings and related personal property 7,386 8,342 Less accumulated depreciation (2,058) 6,284 $ 7,575 Liabilities and Partners' Capital (Deficit) Liabilities Accounts payable $ 20 Tenant security deposit liabilities 30 Accrued property taxes 118 Other liabilities 74 Mortgage notes payable 5,423 Partners' Capital (Deficit): General partner's $ (98) Limited partners' (12,425 units issued 2,008 1,910 and outstanding) $ 7,575 See Accompanying Notes to Consolidated Financial Statements b) ANGELES OPPORTUNITY PROPERTIES, LTD. CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) (in thousands, except unit data) Three Months Ended Six Months Ended June 30, June 30, 1998 1997 1998 1997 Revenues: Rental income $ 581 $ 551 $ 1,153 $ 1,105 Other income 38 36 73 75 Total revenues 619 587 1,226 1,180 Expenses: Operating 274 260 507 492 General and administrative 42 24 72 69 Depreciation 72 72 144 141 Interest 110 110 220 220 Property taxes 59 53 118 104 Total expenses 557 519 1,061 1,026 Equity in income of joint venture -- 6 -- 6 Net income $ 62 $ 74 $ 165 $ 160 Net income allocated to general partner (1%) $ 1 $ 1 $ 2 $ 2 Net income allocated to limited partners (99%) 61 73 163 158 Net income $ 62 $ 74 $ 165 $ 160 Net income per limited partnership unit $ 4.91 $ 5.88 $ 13.12 $ 12.72 Distributions per limited partnership unit $ 19.96 $ 95.61 $ 19.96 $ 95.61 See Accompanying Notes to Consolidated Financial Statements c) ANGELES OPPORTUNITY PROPERTIES, LTD. CONSOLIDATED STATEMENT OF CHANGES IN PARTNERS' CAPITAL (DEFICIT) (Unaudited) (in thousands, except unit data) Limited Partnership General Limited Units Partner Partners Total Original capital contributions 12,425 $ 1 $ 12,425 $ 12,426 Partners' capital (deficit) at December 31, 1997 12,425 $ (98) $ 2,093 $ 1,995 Distributions to partners -- (2) (248) (250) Net income for the six months ended June 30, 1998 -- 2 163 165 Partners' capital (deficit) at June 30, 1998 12,425 $ (98) $ 2,008 $ 1,910 See Accompanying Notes to Consolidated Financial Statements d) ANGELES OPPORTUNITY PROPERTIES, LTD. CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (in thousands) Six Months Ended June 30, 1998 1997 Cash flows from operating activities: Net income $ 165 $ 160 Adjustments to reconcile net income to net cash provided by operating activities: Equity in income of joint venture -- (6) Depreciation 144 141 Amortization of loan costs and discounts 17 15 Change in accounts: Receivables and deposits 82 (14) Other assets 5 (13) Accounts payable 1 (11) Tenant security deposit liabilities (1) (4) Accrued property taxes (106) 19 Other liabilities 16 11 Net cash provided by operating activities 323 298 Cash flows from investing activities: Property improvements and replacements (48) (132) Distributions from joint venture -- 459 Net deposits to restricted escrows (7) (34) Net cash (used in) provided by investing activities (55) 293 Cash flows from financing activities: Payments on mortgage notes payable (12) (10) Distributions to partners (250) (1,210) Net cash used in financing activities (262) (1,220) Net increase (decrease) in cash and cash equivalents 6 (629) Cash and cash equivalents at beginning of period 697 1,836 Cash and cash equivalents at end of period $ 703 $ 1,207 Supplemental disclosure of cash flow information: Cash paid for interest $ 204 $ 205 See Accompanying Notes to Consolidated Financial Statements e) ANGELES OPPORTUNITY PROPERTIES, LTD. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) NOTE A - BASIS OF PRESENTATION The accompanying unaudited financial statements of Angeles Opportunity Properties, Ltd. (the "Partnership") have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-QSB and Item 310(b) of Regulation S-B. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of Angeles Realty Corporation II (the "General Partner"), all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three and six month periods ended June 30, 1998, are not necessarily indicative of the results that may be expected for the fiscal year ending December 31, 1998. 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, 1997. Certain reclassifications have been made to the 1997 information to conform to the 1998 presentation. NOTE B - TRANSACTIONS WITH AFFILIATED PARTIES The Partnership has no employees and is dependent on the General Partner and its affiliates for the management and administration of all partnership activities. Effective February 25, 1998, the General Partner became wholly-owned by Insignia Properties Trust ("IPT"), an affiliate of Insignia Financial Group, Inc. ("Insignia"). On February 25, 1998, the former owner of the Managing General Partner, MAE GP Corporation ("MAE GP"), an affiliate of Insignia, was merged into IPT. The Partnership Agreement provides for certain payments to affiliates for services and as reimbursement of certain expenses incurred by affiliates on behalf of the Partnership. The following transactions with the General Partner and its affiliates were incurred during the six months ended June 30, 1998 and 1997 (in thousands): 1998 1997 Property management fees (included in operating expenses) $60 $57 Reimbursement for services of affiliates, (included in general and administrative expenses) 34 34 For the period of January 1, 1997 to August 31, 1997, the Partnership insured its properties under a master policy through an agency affiliated with the General Partner with an insurer unaffiliated with the General Partner. An affiliate of the 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 General Partner which received payment on these obligations from the agent. The amount of the Partnership's insurance premiums accruing to the benefit of the affiliate of the General Partner by virtue of the agent's obligations was not significant. On March 17, 1998, Insignia entered into an agreement to merge its national residential property management operations, and its controlling interest in IPT, with Apartment Investment and Management Company ("AIMCO"), a publicly traded real estate investment trust. The closing, which is anticipated to happen in September or October of 1998, is subject to customary conditions, including government approvals and the approval of Insignia's shareholders. If the closing occurs, AIMCO will then control the General Partner of the Partnership. NOTE C - INVESTMENT IN JOINT VENTURE The Partnership had a 42.82% interest in a property (the "Joint Venture") owned jointly by the Partnership and an affiliate of Angeles Mortgage Investment Trust ("AMIT"), a real estate investment trust. On June 24, 1997, the Joint Venture sold its sole investment property to an unaffiliated third party for approximately $1,175,000. Upon the sale of the Joint Venture property, the proceeds were distributed to the owners. The Partnership's remaining equity in the Joint Venture was received in November 1997. In November 1992, MAE GP acquired 1,675,113 Class B Common Shares of AMIT. The terms of the Class B Shares provide that they are convertible, in whole or in part, into Class A Common Shares on the basis of one 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 the holder 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 agreed to waive its right to receive dividends and distributions so long as AMIT's option is outstanding). The holder of the Class B Shares is also entitled to vote on the same basis as the holders of Class A Shares, providing the holder 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 such shares would approximate 1.3% 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 which were 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. 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, which provides that the holder of the Class B Shares is permitted to vote those 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. With respect to such matters, the trustees of AMIT are required to vote (pursuant to the irrevocable proxy) the Class B shares (as a single block) in the same manner as a majority of the Class A Shares are voted (to be determined without consideration of the votes of "Excess Class A Shares" (as defined in Section 6.13 of AMIT's Declaration of Trust)). Between its acquisition of the Class B shares (in November 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. In February 1998, MAE GP was merged into IPT, and in connection with that merger, MAE GP dividended all of the Class B Shares to its sole stockholder, Metropolitan Asset Enhancement, L.P. ("MAE"). As a result, MAE, as the holder of the Class B shares, is now subject to the terms of the settlement agreement, option and irrevocable proxy described in the two preceding paragraphs. Neither MAE GP nor MAE has exerted or has any current intention to exert any management control over or participate in the management of AMIT. However, subject to the terms of the proxy described below, MAE may choose to vote the Class B shares or otherwise exercise its rights as a shareholder of AMIT as it deems appropriate in the future. Liquidity Assistance L.L.C., which is an affiliate of the General Partner, MAE and Insignia (which provides property management and partnership administration services to the Partnership), owned 96,800 Class A shares of AMIT at June 30, 1998. These Class A shares represent approximately 2.2% of the total voting power 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 IPT, which was then owned 98% by Insignia and its affiliates. 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 (including MAE) would own approximately 57% of post-merger IPT if this transaction is consummated. For the six month period ended June 30, 1997, the Joint Venture had total revenues, total expenses, gain on sale and net income of approximately $34,000, $31,000, $11,000 and $14,000, respectively. The Partnership's equity interest in the net income of the Joint Venture was approximately $6,000. NOTE D - DISTRIBUTIONS The Partnership distributed cash from operations of approximately $248,000 and $2,000 to the limited partners and General Partner, respectively during the six months ended June 30, 1998. During the six months ended June 30, 1997, the Partnership distributed approximately $1,188,000 to the limited partners and approximately $22,000 to the General Partner from cash generated by the refinancing of Lakewood Apartments. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS The Partnership's investment properties consist of two apartment complexes. The following table sets forth the average occupancy of the properties for the six months ended June 30, 1998 and 1997: Average Occupancy Property 1998 1997 Lake Meadows Apartments Garland, Texas 98% 96% Lakewood Apartments Tomball, Texas 96% 98% The Partnership's net income for the three and six month periods ended June 30, 1998, was approximately $62,000 and $165,000 compared to net income of approximately $74,000 and $160,000 for the three and six month periods ended June 30, 1997. The increase in net income for the six month period ended June 30, 1998 is attributable to an increase in rental income partially offset by increases in operating and property tax expenses. Rental income increased as a result of increased rental rates at both investment properties and an increase in occupancy at Lake Meadows Apartments. The increase in operating expense is primarily the result of increased maintenance costs at Lakewood Apartments. Property tax expense increased due to an increase in the assessed value by the taxing authority for Lakewood Apartments. Included in operating expense for the six months ended June 30, 1998 is approximately $21,000 of major repairs and maintenance comprised primarily of exterior building repairs and landscaping. For the six months ended June 30, 1997, approximately $35,000 of major repairs and maintenance, comprised primarily of parking lot repairs and major landscaping, were included in operating expense. As part of the ongoing business plan of the Partnership, the General Partner monitors the rental market environment of each 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 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 General Partner will be able to sustain such a plan. At June 30, 1998, the Partnership had cash and cash equivalents of approximately $703,000 compared to approximately $1,207,000 at June 30, 1997. The net increase in cash and cash equivalents for the six months ended June 30, 1998 was approximately $6,000. The net decrease in cash and cash equivalents was approximately $629,000 for the six months ended June 30, 1997. Net cash provided by operating activities increased primarily due to a reduction in receivables and deposits and a decrease in cash used for accounts payable due to the timing of payments. This increase in cash provided was partially offset by an increase in cash used for payment of accrued property taxes. Net cash provided by investing activities decreased due to distributions from the joint venture being included in the 1997 investing activities, partially offset by a decrease in property improvements and replacements due to a parking lot project at Lakewood Apartments being included in 1997 additions. Net cash used in financing activities decreased primarily due to the decrease in distributions to partners during the six months ended June 30, 1998. 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 various properties to adequately maintain the physical assets and other operating needs of the Partnership. Such assets are currently thought to be sufficient for any near-term needs of the Partnership. The mortgage indebtedness of approximately $5,423,000, net of discount, is interest only or is being amortized over 343 months with balloon payments due at the maturity dates of October and November 2003, at which time the properties will either be refinanced or sold. The Partnership distributed cash from operations of approximately $248,000 and $2,000 to the limited partners and General Partner, respectively during the six months ended June 30, 1998. During the six months ended June 30, 1997, the Partnership distributed approximately $1,188,000 to the limited partners and approximately $22,000 to the General Partner from cash generated by the refinancing of Lakewood Apartments. Future cash distributions will depend on the levels of net cash generated from operations, refinancings, property sales, and the availability of cash reserves. Year 2000 The Partnership is dependent upon the General Partner and Insignia for management and administrative services. Insignia has completed an assessment and will have to modify or replace portions of its software so that its computer systems will function properly with respect to dates in the year 2000 and thereafter (the "Year 2000 Issue"). The project is estimated to be completed no later than December 31, 1998, which is prior to any anticipated impact on its operating systems. The General Partner believes that with modifications to existing software and conversions to new software, the Year 2000 Issue will not pose significant operational problems for its computer systems. However, if such modifications and conversions are not made, or are not completed timely, the Year 2000 Issue could have a material impact on the operations of the Partnership. Other Certain items discussed in this quarterly report may constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 (the "Reform Act") and as such may involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of the Partnership to be materially different from any future results, performance or achievements expressed or implied by such forward- looking statements. Such forward-looking statements speak only as of the date of this quarterly report. The Partnership expressly disclaims any obligation or undertaking to release publicly any updates or revisions to any forward-looking statements contained herein to reflect any change in the Partnership's expectations with regard thereto or any change in events, conditions or circumstances on which any such statement is based. PART II - OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS In March 1998, several putative unit holders of limited partnership units of the Partnership commenced an action entitled Rosalie Nuanes, et al. v. Insignia Financial Group, Inc., et al. in the Superior Court of the State of California for the County of San Mateo. The plaintiffs named as defendants, among others, the Partnership, the General Partner and several of their affiliated partnerships and corporate entities. The complaint purports to assert claims on behalf of a class of limited partners and derivatively on behalf of a number of limited partnerships (including the Partnership) which are named as nominal defendants, challenging the acquisition by Insignia and its affiliates of interests in certain general partner entities, past tender offers by Insignia affiliates as well as a recently announced agreement between Insignia and AIMCO. The complaint seeks monetary damages and equitable relief, including judicial dissolution of the Partnership. The General Partner believes the action to be without merit, and intends to vigorously defend it. On June 24, 1998, the General Partner filed a motion seeking dismissal of the action. In January 1998, the Partnership and its General Partner were named as defendants in a lawsuit brought by a limited partner of the Partnership alleging that the General Partner has failed to perform its contractual obligations under the Partnership Agreement. The General Partner believes that there is no merit to the suit and intends to vigorously defend it. In May 1998, the Partnership and its General Partner were named as respondents in a Petition in Los Angeles Superior Court. The Petition, brought by a limited partner of the Partnership, seeks performance by the General Partner of certain alleged contractual obligations under the Partnership Agreement and compliance with certain alleged statutory requirements. In July 1998, the parties reached an agreement with the plaintiff that this action would be dismissed with prejudice, with each side to bear its own costs. The Partnership is unaware of any other pending or outstanding litigation that is not of a routine nature. The 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, is filed as an exhibit to this report. b) Reports on Form 8-K: None filed during the quarter ended June 30, 1998. 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 OPPORTUNITY PROPERTIES, LTD. By: Angeles Realty Corporation II Its General Partner By: /s/Carroll D. Vinson Carroll D. Vinson President and Director By: /s/Robert D. Long, Jr. Robert D. Long, Jr. Vice President/CAO Date: August 6, 1998 EX-27 2
5 This schedule contains summary financial information extracted from Angeles Opportunity Properties, Ltd. 1998 Second Quarter 10-QSB and is qualified in its entirety by reference to such 10-QSB filing. 0000789282 ANGELES OPPORTUNITY PROPERTIES, LTD. 1,000 6-MOS DEC-31-1998 JUN-30-1998 703 0 184 0 0 0 8,342 (2,058) 7,575 0 5,423 0 0 0 1,910 7,575 0 1,226 0 0 1,061 0 220 0 0 0 0 0 0 165 13.12 0 Registrant has an unclassified balance sheet. Multiplier is 1.
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