-----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, RVf//AtRt3N5kVk5/fTqCrCgz6CMedo0LwF4FJWUUx9WLRCbu06HdtNBQ1wnK3TK 0J/oWkPVsAQ8y7jggBAjvw== 0000700951-98-000001.txt : 19980326 0000700951-98-000001.hdr.sgml : 19980326 ACCESSION NUMBER: 0000700951-98-000001 CONFORMED SUBMISSION TYPE: 10KSB PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19971231 FILED AS OF DATE: 19980325 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: 10KSB SEC ACT: SEC FILE NUMBER: 000-16116 FILM NUMBER: 98573343 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 10KSB 1 FORM 10-KSB.-ANNUAL OR TRANSITIONAL REPORT UNDER SECTION 13 OR 15(d) (As last amended by 34-31905, eff. 4/26/93) 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, 1997 [ ] 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 0-16116 ANGELES OPPORTUNITY PROPERTIES, LTD. (Name of small business issuer in its charter) California (State or other jurisdiction of 95-4052473 incorporation or organization) (I.R.S. Employer Identification No.) One Insignia Financial Plaza P.O. Box 1089 Greenville, South Carolina 29602 (Address of principal executive offices) (864) 239-1000 Issuer's telephone number Securities registered under Section 12(b) of the Exchange Act: None Securities registered under Section 12(g) of the Exchange Act: Units of Limited Partnership Interest (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 is not contained in this form, and no disclosure will be contained, to the best of registrant's knowledge in definitive proxy or information statements incorporated by reference in Part III of this Form 10-KSB or any amendment to this Form 10-KSB. [X] State issuer's revenues for its most recent fiscal year. $2,399,000 State the aggregate market value of the voting stock held by non-affiliates computed by reference to the price at which the stock was sold, or the average bid and asked prices of such stock, as of a specified date within the past 60 days. Market value information for Registrant's Partnership Interests is not available. Should a trading market develop for these Interests, it is the General Partner's belief that the aggregate market value of the voting partnership interests would not exceed $25,000,000. DOCUMENTS INCORPORATED BY REFERENCE NONE PART I ITEM 1. DESCRIPTION OF BUSINESS Angeles Opportunity Properties, Ltd. (the "Partnership") is a publicly-held limited partnership organized under the California Uniform Limited Partnership Act pursuant to a Certificate and Agreement of Limited Partnership (hereinafter referred to as the "Agreement") dated June 29, 1984, as amended. The Partnership's general partner is Angeles Realty Corporation II (the "General Partner"), a California corporation, which is a wholly-owned subsidiary of MAE GP Corporation ("MAE GP"). Effective February 25, 1998, MAE GP was merged into Insignia Properties Trust ("IPT"), which is an affiliate of Insignia Financial Group, Inc. ("Insignia"). Thus the General Partner is now a wholly-owned subsidiary of IPT. On March 17, 1998, Insignia entered into an agreement to merge its national residential property management operations, and its controlling interest in Insignia Properties Trust, with Apartment Investment and Management Company ("AIMCO"), a publicly traded real estate investment trust. The closing, which is anticipated to happen in the third quarter 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. The Partnership, through its public offering of Limited Partnership units, sold 12,425 units aggregating $12,425,000. The 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 property. The Partnership presently owns two investment properties. The Partnership's 42.82% ownership interest in a joint venture property was liquidated during 1997 upon the sale of the sole investment property of the joint venture. The General Partner of the Partnership intends to maximize the operating results and, ultimately, the net realizable value of each of the Partnership's properties in order to achieve the best possible return for the investors. Such results may best be achieved through property sales, refinancings, debt restructurings or relinquishment of the assets. The Partnership intends to evaluate each of its holdings periodically to determine the most appropriate strategy for each of the assets. The Partnership has no full time employees. The 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. Insignia Residential Group, L.P. provides day-to-day management services for the Partnership's investment properties. The business in which the Partnership is engaged is highly competitive, and the Partnership is not a significant factor in its industry. Each of its apartment properties is located in or near a major urban area and, accordingly, competes for rentals not only with similar apartment properties in its immediate area but with hundreds of similar apartment properties throughout the urban area. Such competition is primarily on the basis of location, rents, services and amenities. In addition, the Partnership competes with significant numbers of individuals and organizations (including similar partnerships, real estate investment trusts and financial institutions) with respect to the sale of improved real properties, primarily on the basis of the prices and terms of such transactions. ITEM 2. DESCRIPTION OF PROPERTIES: The following table sets forth the Partnership's investments in properties: Date of Property Purchase Type of Ownership Use Lake Meadows Apartments 3/31/88 Fee ownership subject to a Residential Rental first and second mortgage 96 units Lakewood Apartments 11/01/89 Fee ownership subject to Residential Rental a first mortgage 256 units SCHEDULE OF PROPERTIES (IN THOUSANDS): Gross Carrying Accumulated Federal Property Value Depreciation Rate Method Tax Basis Lake Meadows Apts. $ 2,326 $ 590 5-40 yrs S/L $ 1,789 Lakewood Apts. 5,968 1,324 5-40 yrs S/L 5,345 $ 8,294 $ 1,914 $ 7,134 See "Note A" of the financial statements included in "Item 7" for a description of the Partnership's depreciation policy. SCHEDULE OF MORTGAGES (IN THOUSANDS): Principal Principal Balance At Stated Balance December 31, Interest Period Maturity Due At Property 1997 Rate Amortized Date Maturity Lake Meadows Apts. 1st mortgage $ 1,651 7.83% (1) 10/2003 $ 1,489 2nd mortgage 54 7.83% (2) 10/2003 54 Lakewood Apartments 1st mortgage 3,750 7.33% (2) 11/2003 3,750 5,455 Unamortized discount (23) Total $ 5,432 $ 5,293 (1) The principal balance is being amortized over 343 months with a balloon payment due October 15, 2003. (2) Interest only payments. SCHEDULE OF RENTAL RATES AND OCCUPANCY: Average Annual Average Rental Rates Occupancy Property 1997 1996 1997 1996 Lake Meadows Apartments $6,852/unit $6,573/unit 97% 96% Lakewood Apartments 6,456/unit 6,208/unit 98% 94% The General Partner attributes the increase in occupancy at the Partnership's properties to exterior rehabilitation projects, including exterior painting, which were completed in 1996 and to effective marketing by property management. Additionally, occupancy at Lakewood Apartments was low in 1996 due to highway construction in front of the property in 1996 which made it difficult to attract new tenants. 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 General Partner believes that all of the properties are adequately insured. The multi- family residential properties' lease terms are for one year or less. No residential tenant leases 10% or more of the available rental space. Schedule of Real Estate Taxes and Rates: (dollar amounts in thousands) 1997 1997 Billing Rate Lake Meadows Apartments $ 55 2.56% Lakewood Apartments 169 2.95% ITEM 3. LEGAL PROCEEDINGS 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. 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 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS The Unit holders of the Registrant did not vote on any matter during the fourth quarter of the fiscal year covered by this report. PART II ITEM 5. MARKET FOR THE PARTNERSHIP'S COMMON EQUITY AND RELATED SECURITY HOLDER MATTERS The Partnership, a publicly-held limited partnership, sold 12,425 Limited Partnership Units during its offering period through June 25, 1988, and currently has 1,724 Limited Partners of record. There is no intention to sell additional Limited Partnership Units nor is there an established market for these Units. Total cash distributed was approximately $1,961,000 for the year ended December 31, 1997, consisting of approximately $1,930,000 to the limited partners and approximately $31,000 to the General Partner. Total cash distributed was approximately $303,000 for the year ended December 31, 1996, consisting of $297,000 to the limited partners and approximately $6,000 to the General Partner. The distribution made in 1997 consisted primarily of cash proceeds from the refinancing of Lakewood Apartments in 1996 and receipts from the 1997 sale of the joint venture property. The cash distribution in 1996 was from cash generated by operations. Future cash distributions will depend on the levels of net cash generated from operations, refinancings, property sales, and the availability of cash reserves. Cash distributions per limited partnership unit have been declared and paid during the two years ended December 31, 1997 and 1996 as follows: Declaration Date Amount Per Unit November 15, 1997 $ 59.76 May 15, 1997 95.61 May 15, 1996 23.90 ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION 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 realized net income for the year ended December 31, 1997, of approximately $314,000 versus approximately $396,000 for the year ended December 31, 1996. The decrease in net income for the year ended December 31, 1997 is primarily attributable to bad debt recovery recorded by the Partnership in 1996 as a result of the foreclosure of the property owned by Rolling Greens Communities, Ltd. This decrease in net income was partially offset by an increase in revenues and a decrease in operating expense and general and administrative expenses. Revenues increased due to the increase in occupancy levels. The General Partner attributes the increase in occupancy at the Partnership's properties to exterior rehabilitation projects, including exterior painting, which were completed in 1996 and to effective marketing by property management. Additionally, occupancy at Lakewood Apartments was low in 1996 due to highway construction in front of the property in 1996 which made it difficult to attract new tenants. In addition, interest income increased due to higher cash balances from the sale of the sole Joint Venture property during 1997. Operating expense decreased as a result of an exterior painting project in 1996 at Lakewood Apartments property in order to enhance the appearance of the property. The decrease in general and administrative expenses is primarily due to a decrease in General Partner expense reimbursements. In addition, during the year ended December 31, 1996 the Partnership realized an extraordinary loss of $139,000, as a result of the refinancing of Lakewood Apartments. The increase in equity in income of Joint Venture is the result of the write down of the investment property of the sole Joint Venture property to fair market value during 1996. Included in operating expense in 1997 is approximately $55,000 of major repairs and maintenance comprised of parking lot repairs, major landscaping and window coverings. Included in operating expense in 1996 is approximately $180,000 of major repairs and maintenance comprised of exterior painting, parking lot repairs, major landscaping, and exterior building repairs. 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. Capital Resources and Liquidity At December 31, 1997, the Partnership had cash and cash equivalents of approximately $697,000 as compared to approximately $1,836,000 at December 31, 1996. The net decrease and increase in cash and cash equivalents for the years ended December 31, 1997 and 1996 is $1,139,000 and $756,000, respectively. Net cash provided by operating activities increased for the year ended December 31, 1997, as compared to the year ended December 31, 1996, primarily due to an increase in accrued property taxes due to the timing of payments and the bad debt recovery in 1996 mentioned above. Partially offsetting the increase was a decrease in receivables and deposits due to tax and insurance escrow payments. Net cash provided by investing activities increased due to distributions from the joint venture funded by cash proceeds received in 1997 relating to the sale of the sole Joint Venture property. Net cash used in financing activities increased due to increased distributions to partners in 1997; also the Partnership did not refinance any long term borrowing in 1997. Until 1993, the Partnership's assets included a note receivable ("Note") of $1,850,000 from Rolling Greens Communities, Ltd. ("Borrower") collateralized by a first trust deed on undeveloped commercial and mobile home park land adjacent to Rolling Greens Communities ("Rolling Greens"). The note required interest only payments computed at a 12.5% rate per annum with a maturity date of June 1997. The note was in default due to nonpayment and had been written down in 1993 to $1,070,000 which was the estimated value of the collateral less the estimated cost to dispose of such collateral. During 1992, a refinancing of the first mortgage on Rolling Greens was consummated. As a concession to the new first mortgage holder, Angeles Corporation ("Angeles"), a former affiliate of the General Partner and/or its affiliates, released or caused to be released a lien on the developed portion of the mobile home park, retaining a lien upon undeveloped commercial and park zoned land as security for the Note. The Partnership was informed and believes that the release of the lien was without consideration to the Partnership. Proceeds from the refinanced first mortgage and an additional $450,000 that the Partnership advanced to the Borrower in 1992 under this Note included in the note amount of $1,850,000 were used by the Borrower to pay off (i) third trust deed financing that had been provided by Angeles Mortgage Investment Trust ("AMIT"), a real estate investment trust, and (ii) unsecured advances payable to Angeles. Subsequent to the refinancing of the first mortgage discussed above, the developed portion of Rolling Greens was sold to a third party and a note receivable was received by the Partnership as consideration. On April 29, 1994, the Partnership, the Borrower and AMIT entered into an agreement as to the distribution of the sales proceeds generated by the sale of certain real estate owned by the Borrower. On August 29, 1994, the Partnership received approximately $1,061,000 in proceeds as a partial settlement from the above described Note. During 1995, the Partnership and an affiliate of AMIT initiated foreclosure proceedings under the terms of the Note, against the Borrower, relating to the remaining security for the Note. On June 6, 1996, the collateralized property was foreclosed upon, the Partnership and AMIT became joint owners of an approximately 8,000 square foot retail strip shopping center and over 150 acres of land with 42.82% and 57.18% ownership, respectively (see "Note F" for further information). The Partnership recorded a bad debt recovery of approximately $539,000, which was its proportionate share of the fair value of the property foreclosed. On June 24, 1997 the Joint Venture sold the sole investment property to an unaffiliated third party. Upon the sale the proceeds were distributed to the owners. 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 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 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 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 Insignia Properties Trust ("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 and intends 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 as it deems appropriate in the future. Liquidity Assistance L.L.C., which is an affiliate of the General Partner, MAE and Insignia Financial Group, Inc. ("Insignia") (which provides property management and partnership administration services to the Partnership), owned 96,800 Class A shares of AMIT at December 31, 1997. 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 Insignia Properties Trust, an entity then 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 (including MAE) would own approximately 57% of post-merger IPT when this transaction is consummated. 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 $5,432,000 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. Total cash distributed was approximately $1,961,000 for the year ended December 31, 1997, consisting of approximately $1,930,000 to the limited partners and approximately $31,000 to the General Partner. Total cash distributed was approximately $303,000 for the year ended December 31, 1996, consisting of $297,000 to the limited partners and approximately $6,000 to the General Partner. The distribution made in 1997 consisted primarily of cash proceeds from the refinancing of Lakewood Apartments in 1996 and receipts from the 1997 sale of the joint venture property. The cash distribution in 1996 was from cash generated by operations. 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 not 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 annual 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 annual report. The Partnership expressly disclaims any obligation or undertaking to release publicly any updates of 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. ITEM 7. FINANCIAL STATEMENTS ANGELES OPPORTUNITY PROPERTIES, LTD. LIST OF FINANCIAL STATEMENTS Report of Ernst & Young LLP, Independent Auditors Consolidated Balance Sheet - December 31, 1997 Consolidated Statements of Operations - Years ended December 31, 1997 and 1996 Consolidated Statements of Changes in Partners' Capital (Deficit) - Years ended December 31, 1997 and 1996 Consolidated Statements of Cash Flows - Years ended December 31, 1997 and 1996 Notes to Consolidated Financial Statements Report of Ernst & Young LLP, Independent Auditors The Partners Angeles Opportunity Properties, Ltd. We have audited the accompanying consolidated balance sheet of Angeles Opportunity Properties, Ltd. as of December 31, 1997, and the related consolidated statements of operations, changes in partners' capital (deficit) and cash flows for each of the two years in the period ended December 31, 1997. These financial statements are the responsibility of the Partnership's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by the Partnership's management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Angeles Opportunity Properties, Ltd. at December 31, 1997, and the consolidated results of its operations and its cash flows for each of the two years in the period ended December 31, 1997, in conformity with generally accepted accounting principles. /S/ ERNST & YOUNG LLP Greenville, South Carolina February 25, 1998, except for Note I, as to which the date is March 17, 1998 ANGELES OPPORTUNITY PROPERTIES, LTD. CONSOLIDATED BALANCE SHEET (in thousands, except unit data) December 31, 1997 Assets Cash and cash equivalents $ 697 Receivables and deposits 266 Restricted escrows 247 Other assets 169 Investment properties (Notes B and G): Land $ 956 Buildings and related personal property 7,338 8,294 Less accumulated depreciation (1,914) 6,380 $ 7,759 Liabilities and Partners' Capital (Deficit) Liabilities Accounts payable $ 19 Tenant security deposit liabilities 31 Accrued property taxes 224 Other liabilities 58 Mortgage notes payable (Notes B and G) 5,432 Partners' Capital (Deficit): General partner's $ (98) Limited partners' (12,425 units issued and outstanding) 2,093 1,995 $ 7,759 See Accompanying Notes to Consolidated Financial Statements ANGELES OPPORTUNITY PROPERTIES, LTD. CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands, except unit data) Years Ended December 31, 1997 1996 Revenues: Rental income $ 2,246 $ 2,089 Other income 153 119 Bad debt recovery (Note E) -- 539 Total revenues 2,399 2,747 Expenses: Operating 998 1,079 General and administrative 142 177 Depreciation 287 271 Interest 440 435 Property taxes 222 205 Total expenses 2,089 2,167 Income before equity in income of joint venture and extraordinary loss 310 580 Equity in income (loss) of joint venture (Note F) 4 (45) Income before extraordinary item 314 535 Extraordinary loss on debt refinancing (Note B) -- (139) Net income $ 314 $ 396 Net income allocated to general partner (1%) $ 3 $ 4 Net income allocated to limited partners (99%) 311 392 Net income $ 314 $ 396 Per limited partnership unit: Income before extraordinary item $ 25.03 $ 42.62 Extraordinary loss -- (11.07) Net income $ 25.03 $ 31.55 See Accompanying Notes to Consolidated Financial Statements ANGELES OPPORTUNITY PROPERTIES, LTD. CONSOLIDATED STATEMENTS OF CHANGES IN PARTNERS' CAPITAL (DEFICIT) (in thousands, except unit data)
Limited Partnership General Limited Units Partner's Partners' Total Original capital contributions 12,425 $ 1 $ 12,425 $ 12,426 Partners' (deficit) capital at December 31, 1995 12,425 $ (68) $ 3,617 $ 3,549 Net income for the year ended December 31, 1996 -- 4 392 396 Distributions to partners -- (6) (297) (303) Partners' (deficit) capital at December 31, 1996 12,425 (70) 3,712 3,642 Net income for the year ended December 31, 1997 -- 3 311 314 Distributions to partners -- (31) (1,930) (1,961) Partners' (deficit) capital at December 31, 1997 12,425 $ (98) $ 2,093 $ 1,995 See Accompanying Notes to Consolidated Financial Statements
ANGELES OPPORTUNITY PROPERTIES, LTD. CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands) Years Ended December 31, 1997 1996 Cash flows from operating activities: Net income $ 314 $ 396 Adjustments to reconcile net income to net cash provided by operating activities: Equity in (income) loss of joint venture (4) 45 Depreciation 287 271 Amortization of discounts and loan costs 30 30 Extraordinary loss on debt refinancing -- 139 Bad debt recovery -- (539) Change in accounts: Receivables and deposits (129) 131 Other assets 3 (1) Accounts payable (14) 3 Tenant security deposit liabilities (6) (6) Accrued property taxes 137 (111) Other liabilities 3 (34) Net cash provided by operating activities 621 324 Cash flows from investing activities: Property improvements and replacements (222) (243) Distributions from Joint Venture 498 -- (Deposits to) withdrawals from restricted escrows (47) 51 Net cash provided by (used in) investing activities 229 (192) Cash flows from financing activities: Proceeds from long term borrowing -- 3,750 Repayment of mortgage note payable -- (2,528) Payments on mortgage notes payable (21) (124) Costs paid to extinguish debt -- (51) Loan costs (7) (120) Distributions to partners (1,961) (303) Net cash (used in) provided by financing activities (1,989) 624 Net (decrease) increase in cash and cash equivalents (1,139) 756 Cash and cash equivalents at beginning of period 1,836 1,080 Cash and cash equivalents at end of period $ 697 $ 1,836 Supplemental disclosure of cash flow information: Cash paid for interest $ 409 $ 405 See Accompanying Notes to Consolidated Financial Statements ANGELES OPPORTUNITY PROPERTIES, LTD. Notes to Consolidated Financial Statements December 31, 1997 NOTE A - ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES Organization: Angeles Opportunity Properties, Ltd. ("Partnership") is a California limited partnership organized in June 1984 to acquire and operate residential and commercial real estate properties. The Partnership's general partner is Angeles Realty Corporation II ("ARC II" or the "General Partner"), which is a wholly-owned subsidiary of MAE GP Corporation ("MAE GP"). Effective February 25, 1998, MAE GP was merged into Insignia Properties Trust ("IPT"), which is an affiliate of Insignia Financial Group, Inc. ("Insignia"). Thus the General Partner is now a wholly-owned subsidiary of IPT. As of December 31, 1997, the Partnership operates two residential properties located in Texas. Principles of Consolidation: The consolidated financial statements of the Partnership include its 99% limited partnership interests in AOP GP LP, New Lake Meadows LP and Lakewood AOPL Ltd. The Partnership may remove the General Partner of each of these 99% owned partnerships; therefore, the partnerships are controlled and consolidated by the Partnership. All significant interpartnership balances have been eliminated. Joint Venture: The Partnership accounted for its 42.82% investment in a property owned jointly with an affiliate of Angeles Mortgage Investment Trust ("AMIT") using the equity method of accounting. See "Note F". Allocations to Partners: Allocations of Profits and Losses - In accordance with the Partnership Agreement ("the Agreement"), any gain from the sale or other disposition of Partnership assets will be allocated first to the General Partner to the extent of the amount of any Incentive Interest (as defined below) to which the General Partner 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 Partner and 99% to the Limited Partners. For financial reporting purposes, net income (loss) is allocated 1% to the General Partner and 99% to the Limited Partners. Distributions - Except as discussed below, the Partnership will allocate distributions 1% to the General Partner 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 applicable to the property; (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 Partner until it has received its cumulative distributions in an amount equal to 3% of the aggregate disposition prices of all real properties, mortgages or other investments sold (Initial Incentive Interest); (iv) Fourth, to the Partners until the Limited Partners have received distributions equal to their 4% (not compounded) Cumulative Distribution, with certain Limited Partners receiving priority distributions ranging from 2% to 6% per annum (not compounded); and (v) Fifth, thereafter, 76% to the Partners in proportion to their interests and 24% to the General Partner (Final Incentive Interest). Depreciation: Depreciation is provided by the straight-line method over the estimated lives of the investment properties and related personal property. For Federal income tax purposes, the accelerated cost recovery method is used (1) for real property over 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 prior to January 1, 1987. As a result of the Tax Reform Act of 1986, for additions after December 31, 1986, the alternative depreciation system is used for depreciation of (1) real property additions over 40 years, and (2) personal property additions over 6-20 years. Cash and Cash Equivalents: Includes cash on hand and in banks, demand deposits, money market funds, and certificates of deposit with original maturities less than 90 days. At certain times, the amount of cash deposited at a bank may exceed the limit on insured deposits. Investment Properties: Investment properties are stated at cost. Acquisition fees are capitalized as a cost of real estate. 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. Loan Costs: Loan costs of approximately $217,000 are included in other assets in the accompanying balance sheet and are being amortized on a straight-line basis over the lives of the loans. At December 31, 1997, accumulated amortization is approximately $58,000. 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. Leases: The Partnership generally leases apartment units for twelve-month terms or less. The Partnership recognizes income as earned on its leases. In addition, the 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 to expense as incurred. Restricted Escrows: Capital Improvement - In conjunction with the refinancing of the Lake Meadows Apartments mortgage note payable in 1993, the Partnership established a "Capital Improvement Escrow" for certain capital improvements. At December 31, 1997, the balance in the account was approximately $29,000. During the fourth quarter of 1996, the Partnership refinanced Lakewood Apartments mortgage note payable (see "Note B"), funding a "Capital Improvement Escrow" in the amount of approximately $126,000, which was the balance at December 31, 1997. Reserve Account - A General Reserve Account was also established with the refinancing of the Lake Meadows Apartments mortgage note payable. These funds were earmarked for necessary repairs and replacements of existing improvements, debt service, out-of-pocket expenses incurred for ordinary and necessary administrative tasks, and payment of real property taxes and insurance premiums. The Partnership was required to deposit net operating income (as defined in the mortgage note) from the financed property to the reserve account until the reserve account equaled $400 per apartment unit or $38,400. At December 31, 1997, this reserve totaled approximately $42,000 which includes interest earned on these funds. Replacement Reserves - The Partnership maintains a replacement reserve with the holder of the mortgage note payable on Lakewood Apartments. These funds are available for the maintenance of the property. The balance at December 31, 1997 was approximately $50,000. Advertising Costs: Advertising costs of approximately $51,000 in 1997 and $56,000 in 1996 are charged to expense as incurred and are included in operating expenses. 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. Fair Value of Financial Instruments: The Partnership believes that the carrying amount of its financial instruments (except for long term debt) approximates their fair value due to the short term maturity of these instruments. The fair value of the Partnership's long term debt, after discounting the scheduled loan payments at an estimated borrowing rate currently available to the Partnership, approximates its carrying balance. Reclassification: Certain reclassifications have been made to the 1996 balances to conform to the 1997 presentation. NOTE B - NOTES PAYABLE The principle terms of notes payable are as follows (in thousands): Monthly Principal Principal Payment Stated Balance Balance At Including Interest Maturity Due At December 31, Property Interest Rate Date Maturity 1997 Lake Meadows Apts. 1st mortgage $ 13 7.83% 10/2003 $ 1,489 $ 1,651 2nd mortgage (a) (b) 7.83% 10/2003 54 54 Lakewood Apartments 1st mortgage (a) 23 7.33% 11/2003 3,750 3,750 5,455 Unamortized discount (23) Totals $ 36 $ 5,293 $ 5,432 (a) Interest only payments. (b) Monthly payment is less than $1,000. The Partnership exercised an interest rate buy-down option for Lake Meadows when the debt was refinanced in 1993, reducing the stated rate from 8.13% to 7.83%. The fee for the interest rate reduction amounted to $35,000 and is being amortized as a loan discount on the interest method over the life of the loan. The discount fee is reflected as a reduction of the mortgage notes payable and increases the effective rate of the debt to 8.13%. During 1996, the Partnership refinanced the mortgage encumbering Lakewood Apartments. The total mortgage principal indebtedness refinanced was approximately $2,528,000. As a result of the refinancing, the Partnership paid approximately $51,000 in prepayment penalties and wrote off approximately $88,000 in unamortized loan costs, resulting in an extraordinary loss of approximately $139,000. The refinancing replaced the aforementioned indebtedness, which carried an interest rate of 10.38% with a maturity date of March, 2008. The new mortgage indebtedness of $3,750,000 carries an interest rate of 7.33% and has interest only payments until maturity at November, 2003. Total capitalized loan costs incurred for the refinancing was approximately $120,000 and is being amortized over the life of the loan. The mortgage notes payable are nonrecourse and are secured by pledge of the Partnership's rental properties and by pledge of revenues from the respective rental properties. Certain of the notes include prepayment penalties if repaid prior to maturity. Scheduled principal payments of mortgage notes payable subsequent to December 31, 1997, are as follows (in thousands): 1998 $ 23 1999 25 2000 27 2001 30 2002 32 Thereafter 5,318 $ 5,455 NOTE C - INCOME TAXES 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 income and Federal taxable income (in thousands, except unit data): 1997 1996 Net income as reported $ 314 $ 396 Add (deduct): Depreciation differences 51 49 Unearned income 41 (23) Miscellaneous (4) (7) Income from Rolling Green (47) 47 Federal taxable income $ 355 $ 462 Federal taxable income per limited partnership unit $ 28.28 $ 36.78 The following is a reconciliation between the Partnership's reported amounts and Federal tax basis of net assets and liabilities (in thousands): Net assets as reported $ 1,995 Land and buildings 202 Accumulated depreciation 552 Syndication and distribution costs 1,838 Other (2) Net assets - Federal tax basis $ 4,585 NOTE D - 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. 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 transactions with the General Partner and its affiliates were incurred in 1997 and 1996 (in thousands): 1997 1996 Property management fees (included in operating expenses) $ 117 $ 107 Reimbursement for services of affiliates, including $11,000 and $31,000 of construction services reimbursements in 1997 and 1996, respectively, (included in general and administrative, operating expense and investment properties) 94 144 In addition, during 1997 and 1996, the Partnership paid approximately $5,500 and $21,000, respectively, to affiliates of the General Partner for reimbursement of services related to the Lakewood loan refinancing (see "Note B"). These charges have been capitalized as loan costs, and will be amortized over the life of the loan. For the period of January 1, 1996 to August 31, 1997, the Partnership insured its properties under a master policy through an agency and 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 current agent assumed the financial obligations to the affiliate of the General Partner who receives 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 is not significant. See "Note E" for discussion of transactions with AMIT. NOTE E - NOTE RECEIVABLE Until 1993, the Partnership's assets included a note receivable ("Note") of $1,850,000 from Rolling Green Communities, Ltd. ("Borrower") collateralized by a first trust deed on undeveloped commercial and mobile home park land adjacent to Rolling Green Communities ("Rolling Greens"). The note required interest only payments computed at a 12.5% rate per annum with a maturity date of June 1997. The note was in default due to nonpayment and had been written down in 1993 to $1,070,000 which was the estimated value of the collateral less the estimated cost to dispose of such collateral. During 1992, a refinancing of the first mortgage on Rolling Greens was consummated. As a concession to the new first mortgage holder, Angeles Corporation ("Angeles"), a former affiliate of the General Partner and/or its affiliates, released or caused to be released a lien on the developed portion of the mobile home park, retaining a lien upon undeveloped commercial and park zoned land as security for the Note. The Partnership was informed and believes that the release of the lien was without consideration to the Partnership. Proceeds from the refinanced first mortgage and an additional $450,000 that the Partnership advanced to the Borrower in 1992 under this Note included in the note amount of $1,850,000 were used by the Borrower to pay off (i) third trust deed financing that had been provided by AMIT, a real estate investment trust, and (ii) unsecured advances payable to Angeles. Subsequent to the refinancing of the first mortgage discussed above, the developed portion of Rolling Greens was sold to a third party and a note receivable was received by the Partnership as consideration. On April 29, 1994, the Partnership, the Borrower and AMIT entered into an agreement as to the distribution of the sales proceeds generated by the sale of certain real estate owned by the Borrower. On August 29, 1994, the Partnership received approximately $1,061,000 in proceeds as a partial settlement from the above described Note. During 1995, the Partnership and an affiliate of AMIT initiated foreclosure proceedings under the terms of the Note, against the Borrower, relating to the remaining security for the Note. On June 6, 1996, the collateralized property was foreclosed upon and the Partnership and AMIT became joint owners of an approximately 8,000 square foot retail strip shopping center and over 150 acres of land with 42.82% and 57.18% ownership, respectively (see "Note F" for further information). The Partnership recorded a bad debt recovery of approximately $539,000, which was its proportionate share of the fair value of the property foreclosed. On June 24, 1997, the Joint Venture sold its sole investment property to an unaffiliated third party. 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 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 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 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 Insignia Properties Trust ("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 and intends 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 as it deems appropriate in the future. Liquidity Assistance L.L.C., which is an affiliate of the General Partner, MAE and Insignia Financial Group, Inc. ("Insignia") (which provides property management and partnership administration services to the Partnership), owned 96,800 Class A shares of AMIT at December 31, 1997. 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 Insignia Properties Trust, an entity then 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 (including MAE) would own approximately 57% of post-merger IPT when this transaction is consummated. NOTE F - INVESTMENT IN JOINT VENTURE The Partnership had a 42.82% interest in a property owned jointly by the Partnership and an affiliate of AMIT ("Joint Venture"). The Partnership's equity interest in income of the Joint Venture for the period ended December 31, 1997 was approximately $4,000. The Partnership's equity interest in loss of the Joint Venture for the period ended December 31, 1996 was approximately $45,000. The Joint Venture's sole investment property was sold on June 24, 1997 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. NOTE G - INVESTMENT PROPERTIES AND ACCUMULATED DEPRECIATION (IN THOUSANDS) Initial Cost To Partnership Buildings Cost and Related Capitalized Personal Subsequent to Description Encumbrances Land Property Acquisition Lake Meadows $ 1,682(1) $ 473 $ 1,584 $ 269 Lakewood 3,750 483 3,491 1,994 Totals $ 5,432 $ 956 $ 5,075 $ 2,263 (1) Net of a $23 unamortized discount
Gross Amount At Which Carried At December 31, 1997 Buildings And Related Personal Accumulated Date Depreciable Description Land Property Total Depreciation Acquired Life-Years Lake Meadows $473 $ 1,853 $ 2,326 $ 590 3/31/88 5-40 Lakewood 483 5,485 5,968 1,324 11/01/89 5-40 Totals $956 $ 7,338 $ 8,294 $ 1,914
The depreciable lives for buildings and building components are for 10 to 40 years. The depreciable lives for related personal property are for 5 to 7 years. Reconciliation of "Investment Properties and Accumulated Depreciation": Years Ended December 31, 1997 1996 Investment Properties Balance at beginning of year $ 8,072 $ 7,992 Property improvements 222 80 Balance at End of Year $ 8,294 $ 8,072 Accumulated Depreciation Balance at beginning of year $ 1,627 $ 1,356 Additions charged to expense 287 271 Balance at End of Year $ 1,914 $ 1,627 The aggregate cost of the real estate for Federal income tax purposes at December 31, 1997 and 1996 is approximately $8,496,000 and $8,274,000, respectively. Accumulated depreciation for Federal income tax purposes at December 31, 1997 and 1996 is approximately $1,362,000 and $1,125,000, respectively. NOTE H - LITIGATION 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. 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. NOTE I - SUBSEQUENT EVENT On March 17, 1998, Insignia entered into an agreement to merge its national residential property management operations, and its controlling interest in Insignia Properties Trust, with Apartment Investment and Management Company ("AIMCO"), a publicly traded real estate investment trust. The closing, which is anticipated to happen in the third quarter 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. 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 The names of the directors and executive officers of Angeles Realty Corporation II ("ARC II"), the Partnership's General Partner, their ages and the nature of all positions with ARC II presently held by them are as follows: Name Age Position Carroll D. Vinson 57 President and Director Robert D. Long, Jr. 30 Vice President and Chief Accounting Officer William H. Jarrard, Jr. 51 Vice President Daniel M. LeBey 32 Secretary Kelley M. Buechler 40 Assistant Secretary Prior to February 25, 1998 ARC II 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. Thus the General Partner is now a wholly-owned subsidiary of IPT. Carroll D. Vinson has been President and Director of the General Partner and President of Metropolitan Asset Enhancement, L.P. ("MAE"), and subsidiaries since December 1, 1992. He has acted as Chief Operating Officer of IPT, an affiliate of the General Partner, since May 1997. During 1993 to August 1994, Mr. Vinson was affiliated with Crisp, Hughes & Co. (regional CPA firm) and engaged in various other investment and consulting activities which included portfolio acquisitions, asset dispositions, debt restructurings and financial reporting. Briefly, in early 1993, Mr. Vinson served as President and Chief Executive Officer of Angeles Corporation, a real estate investment firm. From 1991 to 1993, Mr. Vinson was employed by Insignia in various capacities including Managing Director - President during 1991. Robert D. Long, Jr. has been the Vice President and Chief Accounting Officer of the General Partner since August 1994. Mr. Long joined MAE, an affiliate of Insignia, in September 1993. Since 1994 he has acted as Vice President and Chief Accounting Officer of the MAE subsidiaries. Mr. Long was an accountant for Insignia until joining MAE in 1993. Prior to joining Insignia, Mr. Long was an auditor for the State of Tennessee and was associated with the accounting firm of Harsman Lewis and Associates. William H. Jarrard, Jr. has been Vice President of the General Partner since December 1, 1992. He has acted as Senior Vice President of IPT, parent of the General Partner, since May 1997. Mr. Jarrard previously acted as Managing Director - Partnership Administration of Insignia From January 1991 through September 1997 and served as Managing Director - Partnership Administration and Asset Management of Insignia from July 1994 until January 1996. Daniel M. LeBey has been Secretary of the General Partner since January 29, 1998 and Insignia's Assistant Secretary since April 30, 1997. Since July 1996 he has also served as Insignia's Associate General Counsel. From September 1992 until June 1996, Mr. LeBey was an attorney with the law firm of Alston & Bird LLP, Atlanta, Georgia. Kelley M. Buechler has been Assistant Secretary of the General Partner since December 1, 1992 and Assistant Secretary of Insignia since 1991. ITEM 10. EXECUTIVE COMPENSATION No direct form of compensation or remuneration was paid by the Partnership to any officer or director of the General Partner. 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, reimbursements and other payments have been made to the Partnership's General Partner and its affiliates, as described in Item 12 below. ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT As of January 1, 1998 no person was known to own of record or beneficially more than five percent of the Limited Partnership Units of the Partnership. On March 17, 1998, Insignia entered into an agreement to merge its national residential property management operations, and its controlling interest in Insignia Properties Trust, with Apartment Investment and Management Company ("AIMCO"), a publicly traded real estate investment trust. The closing, which is anticipated to happen in the third quarter 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. 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 as follows: Article 12.1 of the Agreement, which provides that upon a vote of the Limited Partners holding more than 50% of the then outstanding Limited Partnership Units the General 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 General Partner an amount equal to the accrued and unpaid management fee described in Article 10 of the Agreement and to purchase the 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 General Partner's capital account and (ii) the fair market value of the share of Distributable Net Proceeds to which the 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 No transactions have occurred between the Partnership and any officer or director of ARC II. The Partnership has no employees and is dependent on the 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 transactions with the General Partner and its affiliates were incurred in 1997 and 1996 (in thousands): 1997 1996 Property management fees $ 117 $ 107 Reimbursement for services of affiliates, including $11,000 and $31,000 of construction services reimbursements in 1997 and 1996, respectively 94 144 In addition, during 1997 and 1996, the Partnership paid approximately $5,500 and $21,000, respectively, to affiliates of the General Partner for reimbursement of services related to the Lakewood loan refinancing (see "Note B"). These charges have been capitalized as loan costs, and will be amortized over the life of the loan. For the period of January 1, 1996 to August 31, 1997, the Partnership insured its properties under a master policy through an agency and 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 current agent assumed the financial obligations to the affiliate of the General Partner who receives 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 is not significant. ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits: Exhibit 27, Financial Data Schedule, is filed as an exhibit to this report (b) No Reports on Form 8-K were filed during the fourth quarter of 1997. 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 OPPORTUNITY PROPERTIES, LTD. (A California Limited Partnership) (Registrant) By: Angeles Realty Corporation II Its General Partner By: /s/Carroll D. Vinson President and Director Date: March 25, 1998 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/ Carroll D. Vinson President and Director March 25, 1998 Carroll D. Vinson /s/ Robert D. Long, Jr. Vice President/CAO March 25, 1998 Robert D. Long, Jr. ANGELES OPPORTUNITY PROPERTIES, LTD. EXHIBIT INDEX Exhibit Number Description of Exhibit 3.1 Amended Certificate and Agreement of the Limited Partnership filed in the Partnership's prospectus dated July 7, 1986 which is incorporated herein by reference. 10.1 Purchase and Sale Agreement with Exhibits - Lake Meadows Apartments filed in Form 8K dated March 31, 1988, and is incorporated herein by reference. 10.2 Purchase and Sale Agreement with Exhibits - Oquendo Warehouses filed in form 8K dated April 26, 1988, and is incorporated herein by reference. 10.3 Joint Venture Agreement - Lakewood Project Joint Venture filed in From 10K dated December 31, 1990, and is incorporated herein by reference. 10.4 General Partnership Agreement - AOPL-AMIT Rolling Greens Joint Venture dated December 28, 1989, filed in Form 10K dated December 31, 1990, and is incorporated herein by reference. 10.5 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 8K dated December 31, 1992, which is incorporated herein by reference. 10.6 Contracts related to the refinancing of debt. (a) First Deeds of Trust and Security Agreements dated September 30, 1993 between New Lake Meadows, L.P. and Lexington Mortgage Company, a Virginia Corporation, securing Lake Meadows Apartments. (b) Second Deeds of Trust and Security Agreements dated September 30, 1993 between New Lake Meadows, L.P. and Lexington Mortgage Company, a Virginia Corporation, securing Lake Meadows Apartments. (c) First Assignments of Leases and Rents dated September 30, 1993 between New Lake Meadows, L.P. and Lexington Mortgage Company, a Virginia Corporation, securing Lake Meadows Apartments. (d) Second Assignments of Leases and Rents dated September 30, 1993 between New Lake Meadows, L.P. and Lexington Mortgage Company, a Virginia Corporation, securing Lake Meadows Apartments. (e) First Deeds of Trust Notes dated September 30, 1993 between New Lake Meadows, L.P. and Lexington Mortgage Company, relating to Lake Meadows Apartments. (f) Second Deeds of Trust Notes dated September 30, 1993 between New Lake Meadows, L.P. and Lexington Mortgage Company, relating to Lake Meadows Apartments. 10.7 Commercial Contract to Buy Real Estate between Angeles Opportunity Properties, Ltd. and Paul Willet, Mark Nagle and Kim Nagle dated August 1, 1994, documenting the sale of Oquendo Warehouse located at 3550 West Quail Avenue. 10.8 Contract of Sale between Angeles Opportunity Properties, Ltd. and Roberts Ranch Venture L.P. dated March 30, 1995, documenting the sale of Oquendo Warehouse located at 3655 West Quail and 3600 West Oquendo. 27 Financial Data Schedule 10.9 Multifamily Note dated November 1, 1996, between Lakewood AOPL and Lehman Brothers Holdings Inc., a Delaware Corporation, securing Lakewood Apartments. 99.1 Partnership prospectus filed in registration statement dated June 26, 1987, which is incorporated herein by reference. 99.2 Agreement of Limited Partnership for AOP GP Limited Partnership, L.P. and Angeles Opportunity Properties, Ltd. entered into on September 9, 1993. 99.3 Agreement of Limited Partnership for New Lake Meadows, L.P. between AOP GP Limited Partnership, L.P. and Angeles Opportunity Properties, Ltd. entered into on September 9, 1993. EX-27 2
5 This schedule contains summary financial information extracted from Angeles Opportunity Properties, Ltd. 1997 Year-End 10-KSB and is qualified in its entirety by reference to such 10-KSB filing. 0000789282 ANGELES OPPORTUNITY PROPERTIES, LTD. 1,000 12-MOS DEC-31-1997 DEC-31-1997 697 0 0 0 0 0 8,294 (1,914) 7,759 0 5,432 0 0 0 1,995 7,759 0 2,399 0 0 2,089 0 440 0 0 0 0 0 0 314 25.03 0 Registrant has an unclassified balance sheet. Multiplier is 1.
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