-----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, Vne1RXpjVeU+15wMwhb8lzHuf1vTCO9fj0/o59ySmWA1ea/yNI1f+n0EzyClq3YP RFPJDKNtyHJ6UhmlU6CipQ== 0000711642-04-000195.txt : 20040813 0000711642-04-000195.hdr.sgml : 20040813 20040813105704 ACCESSION NUMBER: 0000711642-04-000195 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20040630 FILED AS OF DATE: 20040813 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: 1934 Act SEC FILE NUMBER: 000-16116 FILM NUMBER: 04972305 BUSINESS ADDRESS: STREET 1: 1873 SOUTH BELLAIRE STREET STREET 2: 17TH FLOOR CITY: DENVER STATE: CO ZIP: 80222 BUSINESS PHONE: 3037578101 MAIL ADDRESS: STREET 1: 1873 SOUTH BELLAIRE STREET STREET 2: 17TH FLOOR CITY: DENVER STATE: CO ZIP: 80222 10QSB 1 aopl.txt AOPL UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Form 10-QSB (Mark One) [X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2004 [ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE 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 (I.R.S. Employer incorporation or organization) Identification No.) 55 Beattie Place, PO Box 1089 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 ANGELES OPPORTUNITY PROPERTIES, LTD. CONSOLIDATED BALANCE SHEET (Unaudited) (in thousands, except unit data) June 30, 2004
Assets Cash and cash equivalents $ 2,264 Receivables and deposits 95 Other assets 234 Investment property: Land $ 540 Buildings and related personal property 6,197 6,737 Less accumulated depreciation (2,923) 3,814 $ 6,407 Liabilities and Partners' (Deficiency) Capital Liabilities Accounts payable $ 132 Tenant security deposit liabilities 31 Accrued property taxes 101 Due to affiliates (Note B) 47 Other liabilities 116 Mortgage note payable 5,000 Partners' (Deficiency) Capital: General partner $ (148) Limited partners (12,425 units issued and outstanding) 1,128 980 $ 6,407 See Accompanying Notes to Consolidated Financial Statements
ANGELES OPPORTUNITY PROPERTIES, LTD. CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) (in thousands, except per unit data)
Three Months Ended Six Months Ended June 30, June 30, 2004 2003 2004 2003 (Restated) (Restated) Revenues: Rental income $ 392 $ 412 $ 784 $ 804 Other income 51 43 106 84 Total revenues 443 455 890 888 Expenses: Operating 238 198 414 386 General and administrative 34 33 66 60 Depreciation 65 64 129 127 Interest 91 94 183 188 Property taxes 51 53 100 105 Total expenses 479 442 892 866 (Loss) income from continuing operations (36) 13 (2) 22 (Loss) income from discontinued operations (Notes A & C) (50) (10) (16) 8 Gain on sale of discontinued operations (Note C) 2,410 -- 2,410 -- Net income $ 2,324 $ 3 $ 2,392 $ 30 Net income allocated to general partner (1%) $ 23 $ -- $ 24 $ -- Net income allocated to limited partners (99%) 2,301 3 2,368 30 $ 2,324 $ 3 $ 2,392 $ 30 Per limited partnership unit: (Loss) income from continuing operations $ (2.86) $ 1.05 $ (0.16) $ 1.77 (Loss) income from discontinued operations (3.98) (0.81) (1.29) 0.64 Gain on sale of discontinued operations 192.03 -- 192.03 -- $ 185.19 $ 0.24 $190.58 $ 2.41 Distributions per limited partnership unit $ -- $ 27.69 $ 4.75 $ 27.69 See Accompanying Notes to Consolidated Financial Statements
ANGELES OPPORTUNITY PROPERTIES, LTD. CONSOLIDATED STATEMENT OF CHANGES IN PARTNERS' (DEFICIENCY) CAPITAL (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' deficit at December 31, 2003 12,425 $ (171) $(1,181) $(1,352) Distributions to partners -- (1) (59) (60) Net income for the six months ended June 30, 2004 -- 24 2,368 2,392 Partners' (deficiency) capital at June 30, 2004 12,425 $ (148) $ 1,128 $ 980 See Accompanying Notes to Consolidated Financial Statements
ANGELES OPPORTUNITY PROPERTIES, LTD. CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (in thousands)
Six Months Ended June 30, 2004 2003 Cash flows from operating activities: Net income $ 2,392 $ 30 Adjustments to reconcile net income to net cash (used in) provided by operating activities: Depreciation 176 180 Loss on early extinguishment of debt 71 42 Amortization of loan costs 15 10 Gain on sale of investment property (2,410) -- Change in accounts: Receivables and deposits (65) 5 Other assets (33) (48) Accounts payable 16 (14) Due to affiliates 16 -- Tenant security deposit liabilities (15) 11 Accrued property taxes (187) (147) Other liabilities (32) 43 Net cash (used in) provided by operating activities (56) 112 Cash flows from investing activities: Net proceeds from sale of investment property 4,212 -- Property improvements and replacements (73) (71) Net withdrawals from (deposits to) restricted escrows 95 (17) Net cash provided by (used in) investing activities 4,234 (88) Cash flows from financing activities: Payments on mortgage notes payable (97) (84) Distributions to partners (60) (347) Repayment of mortgage notes payable (2,045) (1,554) Proceeds from mortgage note payable -- 2,096 Loan costs paid -- (84) Advances from affiliates -- 117 Repayment of advances from affiliates -- (117) Net cash (used in) provided by financing activities (2,202) 27 Net increase in cash and cash equivalents 1,976 51 Cash and cash equivalents at beginning of period 288 184 Cash and cash equivalents at end of period $ 2,264 $ 235 Supplemental disclosure of cash flow information: Cash paid for interest $ 199 $ 251 See Accompanying Notes to Consolidated Financial Statements
ANGELES OPPORTUNITY PROPERTIES, LTD. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) Note A - Basis of Presentation The accompanying unaudited consolidated financial statements of Angeles Opportunity Properties, Ltd. (the "Partnership" or the "Registrant") 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" and a subsidiary of Apartment Investment and Management Company ("AIMCO"), a publicly traded real estate investment trust), 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, 2004, are not necessarily indicative of the results that may be expected for the fiscal year ending December 31, 2004. For further information, refer to the consolidated financial statements and footnotes thereto included in the Partnership's Annual Report on Form 10-KSB for the fiscal year ended December 31, 2003. In accordance with Statement of Financial Accounting Standards ("SFAS") No. 144, the consolidated statements of operations for the three and six months ended June 30, 2003 have been restated to reflect the operations of Lake Meadows Apartments as (loss) income from discontinued operations due to its sale in June 2004. 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. The Partnership Agreement provides for certain payments to affiliates for services and reimbursement of certain expenses incurred by affiliates on behalf of the Partnership. Affiliates of the General Partner are entitled to receive 5% of gross receipts from both of the Partnership's properties as compensation for providing property management services. The Partnership paid to such affiliates approximately $62,000 for both the six months ended June 30, 2004 and 2003, which is included in operating expenses and (loss) income from discontinued operations. An affiliate of the General Partner received reimbursement of accountable administrative expenses amounting to approximately $41,000 and $29,000 for the six months ended June 30, 2004 and 2003, respectively, which is included in general and administrative expenses. At June 30, 2004, the Partnership owed approximately $47,000 in reimbursements which is included in due to affiliates. Subsequent to June 30, 2004, this amount was paid, in full. During the six months ended June 30, 2003, an affiliate of the General Partner advanced the Partnership approximately $117,000 to assist in paying the property taxes of the two investment properties. These advances were repaid during the six months ended June 30, 2003. There were no such advances or repayments during the six months ended June 30, 2004 and there was no balance outstanding at June 30, 2004. Interest was charged at the prime rate plus 2% and was approximately $2,000 for the six months ended June 30, 2003. The Partnership insures its properties up to certain limits through coverage provided by AIMCO which is generally self-insured for a portion of losses and liabilities related to workers compensation, property casualty and vehicle liability. The Partnership insures its properties above the AIMCO limits through insurance policies obtained by AIMCO from insurers unaffiliated with the General Partner. During the six months ended June 30, 2004 and 2003, the Partnership was charged by AIMCO and its affiliates approximately $21,000 and $32,000, respectively, for insurance coverage and fees associated with policy claims administration. Note C- Sale of Investment Property On June 25, 2004, the Partnership sold Lake Meadows Apartments to an unrelated third party for net proceeds of approximately $4,212,000 after payment of closing costs. The Partnership realized a gain of approximately $2,410,000 as a result of the sale. The Partnership used approximately $2,045,000 of the net proceeds to repay the mortgage encumbering the property. In addition the Partnership recorded a loss on early extinguishment of debt of approximately $71,000 as a result of unamortized loan costs being written off and lender fees paid by the buyer. This amount is included in (loss) income from discontinued operations in the accompanying consolidated statement of operations. In accordance with SFAS 144, the accompanying statements of operations for the three and six months ended June 30, 2003 have been restated to reflect the operations of Lake Meadows as discontinued operations. Included in (loss) income from discontinued operations for the six months ended June 30, 2004 and 2003 is approximately $371,000 and $380,000, respectively, of revenue generated by the property. Note D - Mortgages Notes Payable During May 2003, the Partnership refinanced the first and second mortgages encumbering Lake Meadows Apartments. The refinancing replaced a first mortgage of $1,500,000 and a second mortgage of $54,000 with a new mortgage of $2,096,000. Total capitalized loan costs were approximately $84,000 during the six months ended June 30, 2003. The Partnership recognized a loss on the early extinguishment of debt of approximately $42,000 due to the write-off of unamortized loan costs on the old loans. Initially the May 2003 refinancing of Lake Meadows Apartments was under an interim credit facility ("Interim Credit Facility") which also provided for the refinancing of several other properties. The Interim Credit Facility created separate loans for each property refinanced thereunder, which loans were not cross-collateralized or cross-defaulted with each other. During the term of the Interim Credit Facility, Lake Meadows Apartments was required to make interest-only payments. The first month's interest rate for Lake Meadows Apartments was 2.78%. As of June 1, 2003, the loan on Lake Meadows Apartments was transferred to a different lender. The credit facility ("Permanent Credit Facility") with the new lender has a maturity date of September 1, 2007 with an option for the Partnership to elect one five-year extension. The Permanent Credit Facility also created separate loans for each property refinanced thereunder, which loans are not cross-collateralized or cross-defaulted with each other. Each note under the Permanent Credit Facility is initially a variable rate loan, and after three years the Partnership has the option of converting the note to a fixed rate loan. The interest rate on the variable rate loans is 85 basis points over the Fannie Mae discounted mortgage-backed security index and the rate resets monthly. Each loan automatically renews at the end of each month. In addition, monthly principal payments are required based on a 30-year amortization schedule, using the interest rate in effect during the first month that the property is on the Permanent Credit Facility. The loans may be prepaid without penalty. The Partnership repaid this loan during June 2004 from the proceeds of the sale of Lake Meadows Apartments. Note E - Subsequent Event Subsequent to June 30, 2004, approximately $2,087,000 (approximately $2,066,000 to the limited partners or $166.28 per limited partnership unit) was distributed to the partners related to the sale of Lake Meadows in June 2004. Note F - Contingencies 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. (the "Nuanes action") in the Superior Court of the State of California for the County of San Mateo. The plaintiffs named as defendants, among others, the Partnership, its General Partner and several of their affiliated partnerships and corporate entities. The action purported to assert claims on behalf of a class of limited partners and derivatively on behalf of a number of limited partnerships (including the Partnership) that are named as nominal defendants, challenging, among other things, the acquisition of interests in certain General Partner entities by Insignia Financial Group, Inc. ("Insignia") and entities that were, at one time, affiliates of Insignia; past tender offers by the Insignia affiliates to acquire limited partnership units; management of the partnerships by the Insignia affiliates; and the series of transactions which closed on October 1, 1998 and February 26, 1999 whereby Insignia and Insignia Properties Trust, respectively, were merged into AIMCO. The plaintiffs sought monetary damages and equitable relief, including judicial dissolution of the Partnership. In addition, during the third quarter of 2001, a complaint (the "Heller action") was filed against the same defendants that are named in the Nuanes action, captioned Heller v. Insignia Financial Group. On or about August 6, 2001, plaintiffs filed a first amended complaint. The Heller action was brought as a purported derivative action, and asserted claims for, among other things, breach of fiduciary duty, unfair competition, conversion, unjust enrichment, and judicial dissolution. On January 8, 2003, the parties filed a Stipulation of Settlement in proposed settlement of the Nuanes action and the Heller action. In general terms, the proposed settlement provides for certification for settlement purposes of a settlement class consisting of all limited partners in this Partnership and others (the "Partnerships") as of December 20, 2002, the dismissal with prejudice and release of claims in the Nuanes and Heller litigation, payment by AIMCO of $9.9 million (which shall be distributed to settlement class members after deduction of attorney fees and costs of class counsel and certain costs of settlement) and up to $1 million toward the cost of independent appraisals of the Partnerships' properties by a Court appointed appraiser. An affiliate of the General Partner has also agreed to make at least one round of tender offers to purchase all of the partnership interests in the Partnerships within one year of final approval, if it is granted, and to provide partners with the independent appraisals at the time of these tenders. The proposed settlement also provided for the limitation of the allowable costs which the General Partner or its affiliates will charge the Partnerships in connection with this litigation and imposes limits on the class counsel fees and costs in this litigation. On April 11, 2003, notice was distributed to limited partners providing the details of the proposed settlement. On June 13, 2003, the Court granted final approval of the settlement and entered judgment in both the Nuanes and Heller actions. On August 12, 2003, an objector ("Objector") filed an appeal seeking to vacate and/or reverse the order approving the settlement and entering judgment thereto. On November 24, 2003, the Objector filed an application requesting the Court order AIMCO to withdraw settlement tender offers it had commenced, refrain from making further offers pending the appeal and auction any units tendered to third parties, contending that the offers did not conform with the terms of the Settlement. Counsel for the Objector (on behalf of another investor) had alternatively requested the Court take certain action purportedly to enforce the terms of the settlement agreement. On December 18, 2003, the Court heard oral argument on the motions and denied them both in their entirety. On January 28, 2004, Objector filed his opening brief in his pending appeal. On April 23, 2004, the General Partner and its affiliates filed a response brief in support of the settlement and the judgment thereto. Plaintiffs have also filed a brief in support of the settlement. On June 4, 2004, Objector filed a reply to the briefs submitted by the General Partner and Plaintiffs. No hearing has been scheduled in the matter. The General Partner does not anticipate that any costs to the Partnership, whether legal or settlement costs, associated with these cases will be material to the Partnership's overall operations. On August 8, 2003 AIMCO Properties L.P., an affiliate of the General Partner, was served with a complaint in the United States District Court, District of Columbia alleging that AIMCO Properties L.P. willfully violated the Fair Labor Standards Act ("FLSA") by failing to pay maintenance workers overtime for all hours worked in excess of forty per week. On March 5, 2004 Plaintiffs filed an amended complaint also naming NHP Management Company, which is also an affiliate of the General Partner. The complaint is styled as a Collective Action under the FLSA and seeks to certify state subclasses in California, Maryland, and the District of Columbia. Specifically, the plaintiffs contend that AIMCO Properties L.P. failed to compensate maintenance workers for time that they were required to be "on-call". Additionally, the complaint alleges AIMCO Properties L.P. failed to comply with the FLSA in compensating maintenance workers for time that they worked in responding to a call while "on-call". The defendants have filed an answer to the amended complaint denying the substantive allegations. Some discovery has taken place and settlement negotiations continue. Although the outcome of any litigation is uncertain, AIMCO Properties, L.P. does not believe that the ultimate outcome will have a material adverse effect on its financial condition or results of operations taken as a whole. Similarly, the General Partner does not believe that the ultimate outcome will have a material adverse effect on the Partnership's financial condition or results of operations taken as a whole. The Partnership is unaware of any other pending or outstanding litigation matters involving it or its investment properties that are not of a routine nature arising in the ordinary course of business. As previously disclosed, the Central Regional Office of the United States Securities and Exchange Commission is conducting an investigation relating to certain matters. AIMCO believes the areas of investigation include AIMCO's miscalculated monthly net rental income figures in third quarter 2003, forecasted guidance, accounts payable, rent concessions, vendor rebates, and capitalization of expenses and payroll. AIMCO is cooperating fully. AIMCO does not believe that the ultimate outcome will have a material adverse effect on its consolidated financial condition or results of operations taken as a whole. Similarly, the General Partner does not believe that the ultimate outcome will have a material adverse effect on the Partnership's consolidated financial condition or results of operations taken as a whole. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS The matters discussed in this report contain certain forward-looking statements, including, without limitation, statements regarding future financial performance and the effect of government regulations. Actual results may differ materially from those described in the forward-looking statements and will be affected by a variety of risks and factors including, without limitation: national and local economic conditions; the terms of governmental regulations that affect the Registrant and interpretations of those regulations; the competitive environment in which the Registrant operates; financing risks, including the risk that cash flows from operations may be insufficient to meet required payments of principal and interest; real estate risks, including variations of real estate values and the general economic climate in local markets and competition for tenants in such markets; litigation, including costs associated with prosecuting and defending claims and any adverse outcomes, and possible environmental liabilities. Readers should carefully review the Registrant's financial statements and the notes thereto, as well as the risk factors described in the documents the Registrant files from time to time with the Securities and Exchange Commission. The Partnership's investment property consists of one apartment complex. The following table sets forth the average occupancy for the property for the six months ended June 30, 2004 and 2003: Average Occupancy Property 2004 2003 Lakewood Apartments 89% 92% Tomball, Texas The General Partner attributes the decrease in occupancy at Lakewood Apartments to an increase in the credit standards for tenants. The Partnership's financial results are dependent upon a number of factors including the ability to attract and maintain tenants at the investment property, interest rates on mortgage loans, costs incurred to operate the investment property, general economic conditions and weather. As part of the ongoing business plan of the Partnership, the General Partner monitors the rental market environment of its investment property 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, the General Partner may use rental concessions and rental rate reductions to offset softening market conditions, accordingly, there is no guarantee that the General Partner will be able to sustain such a plan. Further, a number of factors which are outside the control of the Partnership such as the local economic climate and weather can adversely or positively impact the Partnership's financial results. Results from Operations The Partnership's net income for the three and six months ended June 30, 2004 was approximately $2,324,000 and $2,392,000, respectively, compared to net income of approximately $3,000 and $30,000 for the three and six month periods ended June 30, 2003, respectively. The increase in net income for the three and six month periods is due to the recognition of a gain on the sale of Lake Meadows Apartments during the six months ended June 30, 2004. In accordance with Statement of Financial Accounting Standards ("SFAS") No. 144, the consolidated statements of operations for the three and six months ended June 30, 2003 have been restated to reflect the operations of Lake Meadows Apartments as (loss) income from discontinued operations due to its sale in June 2004. On June 25, 2004, the Partnership sold Lake Meadows Apartments to an unrelated third party for net proceeds of approximately $4,212,000 after payment of closing costs. The Partnership realized a gain of approximately $2,410,000 as a result of the sale. The Partnership used approximately $2,045,000 of the net proceeds to repay the mortgage encumbering the property. In addition the Partnership recorded a loss on early extinguishment of debt of approximately $71,000 as a result of unamortized loan costs being written off and lender fees paid by the buyer. This amount is included in (loss) income from discontinued operations in the accompanying consolidated statement of operations. Included in (loss) income from discontinued operations for the six months ended June 30, 2004 and 2003 is approximately $371,000 and $380,000, respectively, of revenue generated by the property. Excluding the gain on sale and the discontinued operations, the Partnership's net loss from continuing operations for the three and six months ended June 30, 2004 was approximately $36,000 and $2,000 compared to income from continuing operations of approximately $13,000 and $22,000 for the corresponding periods in 2003. The decrease in income from continuing operations for the three month period is due to a decrease in total revenues and an increase in total expenses. The decrease in income from continuing operations for the six month period is due to an increase in total expenses partially offset by an increase in total revenues. Total revenues for the three month period decreased due to a decrease in rental income partially offset by an increase in other income. Total revenue for the six month period increased due to an increase in other income partially offset by a decrease in rental income. Rental income for both periods decreased due to a decrease in occupancy partially offset by an increase in the average rental rate at Lakewood Apartments. Other income for both periods increased due to increases in utilities reimbursements and lease cancellation fees, partially offset by a decrease in late charges. Total expenses for the three and six month periods increased due to an increase in operating expenses. Operating expenses increased due to increases in property and maintenance expenses. Property expense increased due to an increase in utilities at the investment property. Maintenance expenses increased due to increases in contract labor and repairs and supplies. Included in general and administrative expenses for 2004 and 2003 are management reimbursements to the General Partner as allowed under the Partnership Agreement. Also included in general and administrative expenses are costs associated with the quarterly and annual communications with investors and regulatory agencies and the annual audit required by the Partnership Agreement. Liquidity and Capital Resources At June 30, 2004, the Partnership had cash and cash equivalents of approximately $2,264,000 compared to approximately $235,000 at June 30, 2003. Cash and cash equivalents increased approximately $1,976,000 from December 31, 2003 due to approximately $4,234,000 of cash provided by investing activities, partially offset by approximately $56,000 and $2,202,000 of cash used in operating and financing activities, respectively. Cash provided by investing activities consisted of net proceeds from the sale of Lake Meadows Apartments and net withdrawals from restricted escrows held by the mortgage lender partially offset by property improvements and replacements. Cash used in financing activities consisted of the repayment of the mortgage encumbering Lake Meadows Apartments, principal payments made on the mortgages encumbering the investment properties, and distributions to partners. The Partnership invests its working capital reserves in interest bearing accounts. 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 property to adequately maintain the physical assets and other operating needs of the Partnership and to comply with Federal, state, and local legal and regulatory requirements. The General Partner monitors developments in the area of legal and regulatory compliance. For example, the Sarbanes-Oxley Act of 2002 mandates or suggests additional compliance measures with regard to governance, disclosure, audit and other areas. In light of these changes, the Partnership expects that it will incur higher expenses related to compliance, including increased legal and audit fees. Capital improvements planned for the Partnership's property are detailed below. Lake Meadows Apartments During the six months ended June 30, 2004, the Partnership completed approximately $36,000 of capital improvements at Lake Meadows Apartments, consisting primarily of floor covering replacements and parking lot resurfacing. These improvements were funded from operating cash flow. Lake Meadows Apartments was sold on June 25, 2004. Lakewood Apartments During the six months ended June 30, 2004, the Partnership completed approximately $37,000 of capital improvements at Lakewood Apartments, consisting primarily of parking lot resurfacing, structural upgrades, plumbing fixtures and floor covering and appliance replacements. These improvements were funded from operating cash flow. The Partnership evaluates the capital improvement needs of the property during the year and currently expects to complete an additional $104,000 in capital improvements during the remainder of 2004. Additional capital improvements may be considered and will depend on the physical condition of the property as well as the anticipated cash flow generated by the property. Additional capital expenditures will be incurred only to the extent of cash available from operations and from the Partnership's reserves. To the extent that such budgeted capital improvements are completed, the Partnership's distributable cash flow, if any, may be adversely affected at least in the short term. The Partnership's assets are thought to be sufficient for any near-term needs (exclusive of capital improvements) of the Partnership. The mortgage indebtedness encumbering Lakewood Apartments of approximately $5,000,000 matures in January 2022, at which time the loan is scheduled to be fully amortized. The Partnership distributed the following amounts during the six months ended June 30, 2004 and 2003 (in thousands, except per unit data):
Six Months Per Limited Six Months Per Limited Ended Partnership Ended Partnership June 30, 2004 Unit June 30, 2003 Unit Operations $ 60 $ 4.75 $ -- $ -- Refinancing (1) -- -- 347 27.69 $ 60 $ 4.75 $ 347 $27.69
(1) Proceeds from the refinancing of Lake Meadows Apartments in May 2003. Subsequent to June 30, 2004, approximately $2,087,000 (approximately $2,066,000 to the limited partners or $166.28 per limited partnership unit) was distributed to the partners related to the sale of Lake Meadows in June 2004. Future cash distributions will depend on the levels of net cash generated from operations, the availability of cash reserves, and the timing of debt maturities, refinancings, and/or property sales. The Partnership's cash available for distribution is reviewed on a monthly basis. There can be no assurance that the Partnership will generate sufficient funds from operations after required capital expenditures to permit additional distributions to its partners during the remainder of 2004 or subsequent periods. Other In addition to its indirect ownership of the general partner interest in the Partnership, AIMCO and its affiliates owned 6,370 limited partnership units (the "Units") in the Partnership representing 51.27% of the outstanding Units at June 30, 2004. A number of these Units were acquired pursuant to tender offers made by AIMCO or its affiliates. It is possible that AIMCO or its affiliates will acquire additional Units in exchange for cash or a combination of cash and units in AIMCO Properties, L.P., the operating partnership of AIMCO, either through private purchases or tender offers. Pursuant to the Partnership Agreement, unit holders holding a majority of the Units are entitled to take action with respect to a variety of matters that include, but are not limited to, voting on certain amendments to the Partnership Agreement and voting to remove the General Partner. As a result of its ownership of 51.27% of the outstanding Units, AIMCO and its affiliates are in a position to control all such voting decisions with respect to the Partnership. Although the General Partner owes fiduciary duties to the limited partners of the Partnership, the General Partner also owes fiduciary duties to AIMCO as its sole stockholder. As a result, the duties of the General Partner, as general partner, to the Partnership and its limited partners may come into conflict with the duties of the General Partner to AIMCO, as its sole stockholder. Critical Accounting Policies and Estimates The consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States which require the Partnership to make estimates and assumptions. The Partnership believes that of its significant accounting policies, the following may involve a higher degree of judgment and complexity. Impairment of Long-Lived Assets Investment property is recorded at cost, less accumulated depreciation, unless considered impaired. If events or circumstances indicate that the carrying amount of the property may be impaired, the Partnership will make an assessment of its recoverability by estimating the undiscounted future cash flows, excluding interest charges, of the property. If the carrying amount exceeds the aggregate future cash flows, the Partnership would recognize an impairment loss to the extent the carrying amount exceeds the fair value of the property. Real property investments are subject to varying degrees of risk. Several factors may adversely affect the economic performance and value of the Partnership's investment property. These factors include, but are not limited to, changes in the national, regional and local economic climate; local conditions, such as an oversupply of multifamily properties; competition from other available multifamily property owners and changes in market rental rates. Any adverse changes in these factors could cause impairment of the Partnership's assets. Revenue Recognition The Partnership generally leases apartment units for twelve-month terms or less. Rental income attributable to leases is recognized monthly as it is earned. The Partnership evaluates all accounts receivable from residents and establishes an allowance, after the application of security deposits, for accounts greater than 30 days past due on current tenants and all receivables due from former tenants. The Partnership will offer rental concessions during particularly slow months or in response to heavy competition from other similar complexes in the area. Any concessions given at the inception of the lease are amortized over the life of the lease. ITEM 3. CONTROLS AND PROCEDURES (a) Disclosure Controls and Procedures. The Partnership's management, with the participation of the principal executive officer and principal financial officer of the General Partner, who are the equivalent of the Partnership's principal executive officer and principal financial officer, respectively, has evaluated the effectiveness of the Partnership's disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the "Exchange Act")) as of the end of the period covered by this report. Based on such evaluation, the principal executive officer and principal financial officer of the General Partner, who are the equivalent of the Partnership's principal executive officer and principal financial officer, respectively, have concluded that, as of the end of such period, the Partnership's disclosure controls and procedures are effective. (b) Internal Control Over Financial Reporting. There have not been any changes in the Partnership's internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the fiscal quarter to which this report relates that have materially affected, or are reasonably likely to materially affect, the Partnership's internal control over financial reporting. 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. (the "Nuanes action") in the Superior Court of the State of California for the County of San Mateo. The plaintiffs named as defendants, among others, the Partnership, its General Partner and several of their affiliated partnerships and corporate entities. The action purported to assert claims on behalf of a class of limited partners and derivatively on behalf of a number of limited partnerships (including the Partnership) that are named as nominal defendants, challenging, among other things, the acquisition of interests in certain General Partner entities by Insignia Financial Group, Inc. ("Insignia") and entities that were, at one time, affiliates of Insignia; past tender offers by the Insignia affiliates to acquire limited partnership units; management of the partnerships by the Insignia affiliates; and the series of transactions which closed on October 1, 1998 and February 26, 1999 whereby Insignia and Insignia Properties Trust, respectively, were merged into AIMCO. The plaintiffs sought monetary damages and equitable relief, including judicial dissolution of the Partnership. In addition, during the third quarter of 2001, a complaint (the "Heller action") was filed against the same defendants that are named in the Nuanes action, captioned Heller v. Insignia Financial Group. On or about August 6, 2001, plaintiffs filed a first amended complaint. The Heller action was brought as a purported derivative action, and asserted claims for, among other things, breach of fiduciary duty, unfair competition, conversion, unjust enrichment, and judicial dissolution. On January 8, 2003, the parties filed a Stipulation of Settlement in proposed settlement of the Nuanes action and the Heller action. In general terms, the proposed settlement provides for certification for settlement purposes of a settlement class consisting of all limited partners in this Partnership and others (the "Partnerships") as of December 20, 2002, the dismissal with prejudice and release of claims in the Nuanes and Heller litigation, payment by AIMCO of $9.9 million (which shall be distributed to settlement class members after deduction of attorney fees and costs of class counsel and certain costs of settlement) and up to $1 million toward the cost of independent appraisals of the Partnerships' properties by a Court appointed appraiser. An affiliate of the General Partner has also agreed to make at least one round of tender offers to purchase all of the partnership interests in the Partnerships within one year of final approval, if it is granted, and to provide partners with the independent appraisals at the time of these tenders. The proposed settlement also provided for the limitation of the allowable costs which the General Partner or its affiliates will charge the Partnerships in connection with this litigation and imposes limits on the class counsel fees and costs in this litigation. On April 11, 2003, notice was distributed to limited partners providing the details of the proposed settlement. On June 13, 2003, the Court granted final approval of the settlement and entered judgment in both the Nuanes and Heller actions. On August 12, 2003, an objector ("Objector") filed an appeal seeking to vacate and/or reverse the order approving the settlement and entering judgment thereto. On November 24, 2003, the Objector filed an application requesting the Court order AIMCO to withdraw settlement tender offers it had commenced, refrain from making further offers pending the appeal and auction any units tendered to third parties, contending that the offers did not conform with the terms of the Settlement. Counsel for the Objector (on behalf of another investor) had alternatively requested the Court take certain action purportedly to enforce the terms of the settlement agreement. On December 18, 2003, the Court heard oral argument on the motions and denied them both in their entirety. On January 28, 2004, Objector filed his opening brief in his pending appeal. On April 23, 2004, the General Partner and its affiliates filed a response brief in support of the settlement and the judgment thereto. Plaintiffs have also filed a brief in support of the settlement. On June 4, 2004, Objector filed a reply to the briefs submitted by the General Partner and Plaintiffs. No hearing has been scheduled in the matter. The General Partner does not anticipate that any costs to the Partnership, whether legal or settlement costs, associated with these cases will be material to the Partnership's overall operations. On August 8, 2003 AIMCO Properties L.P., an affiliate of the General Partner, was served with a complaint in the United States District Court, District of Columbia alleging that AIMCO Properties L.P. willfully violated the Fair Labor Standards Act ("FLSA") by failing to pay maintenance workers overtime for all hours worked in excess of forty per week. On March 5, 2004 Plaintiffs filed an amended complaint also naming NHP Management Company, which is also an affiliate of the General Partner. The complaint is styled as a Collective Action under the FLSA and seeks to certify state subclasses in California, Maryland, and the District of Columbia. Specifically, the plaintiffs contend that AIMCO Properties L.P. failed to compensate maintenance workers for time that they were required to be "on-call". Additionally, the complaint alleges AIMCO Properties L.P. failed to comply with the FLSA in compensating maintenance workers for time that they worked in responding to a call while "on-call". The defendants have filed an answer to the amended complaint denying the substantive allegations. Some discovery has taken place and settlement negotiations continue. Although the outcome of any litigation is uncertain, AIMCO Properties, L.P. does not believe that the ultimate outcome will have a material adverse effect on its financial condition or results of operations taken as a whole. Similarly, the General Partner does not believe that the ultimate outcome will have a material adverse effect on the Partnership's financial condition or results of operations taken as a whole. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K a) Exhibits: See Exhibit Index attached. b) Reports on Form 8-K: None filed during the quarter ended June 30, 2004. 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 General Partner By: /s/Martha L. Long Martha L. Long Senior Vice President By: /s/Stephen B. Waters Stephen B. Waters Vice President Date: August 13, 2004 ANGELES OPPORTUNITY PROPERTIES, LTD. EXHIBIT INDEX Exhibit Number Description of Exhibit 2.1 Agreement and Plan of Merger, dated as of October 1, 1998, by and between AIMCO and IPT, filed in Form 8-K on October 16, 1998. 3.1 Amendment 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, incorporated herein by reference 10.3 Joint Venture Agreement - Lakewood Project Joint Venture filed in Form 8K 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 8K 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 10.10 Multifamily Note dated December 6, 2001, between Lakewood AOPL and GMAC Commercial Mortgage Corporation, a California Corporation, refinancing the mortgage encumbering Lakewood Apartments filed in Form 10-KSB dated December 31, 2002 and is incorporated herein by reference. 10.11 a) Multifamily Note dated May 16, 2003 between Angeles Opportunity Partners, Ltd. and GMAC Commercial Mortgage Corporation. 10.11 b) Guaranty dated May 16, 2003 by AIMCO Properties, L.P. for the benefit of GMAC Commercial Mortgage Corporation. 10.11 c) Completion/Repair and Security Agreement dated May 16, 2003 between New Lake Meadows, L.P. and GMAC Commercial Mortgage Corporation. 10.11 d) Replacement Reserve and Security Agreement dated May 16, 2003 between New Lake Meadows, L.P. and GMAC Commercial Mortgage Corporation. 10.12 Purchase and Sale Contract between Registrant and Wyndmere Capital, Inc., dated April 15, 2004. 10.13 Amendment to Purchase and Sale Contract between Registrant and Wyndmere Capital, Inc., dated May 13, 2004. 10.14 Second Amendment to Purchase and Sale Contract between Registrant and Wyndmere Capital, Inc., dated May 27, 2004. 10.15 Third Amendment to Purchase and Sale Contract between Registrant and Wyndmere Capital, Inc., dated June 9, 2004. 10.16 Assignment of Purchase and Sale Contract between Wyndmere Capital Inc., and Lake Meadows Partners, Ltd., dated June 15, 2004 31.1 Certification of equivalent of Chief Executive Officer pursuant to Securities Exchange Act Rules 13a-14(a)/15d-14(a), as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. 31.2 Certification of equivalent of Chief Financial Officer pursuant to Securities Exchange Act Rules 13a-14(a)/15d-14(a), as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. 32.1 Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. 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. Exhibit 31.1 CERTIFICATION I, Martha L. Long, certify that: 1. I have reviewed this quarterly report on Form 10-QSB of Angeles Opportunity Properties, Ltd.; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the small business issuer as of, and for, the periods presented in this report; 4. The small business issuer's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the small business issuer and have: (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the small business issuer, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; (b) Evaluated the effectiveness of the small business issuer's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and (c) Disclosed in this report any change in the small business issuer's internal control over financial reporting that occurred during the small business issuer's most recent fiscal quarter (the small business issuer's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the small business issuer's internal control over financial reporting; and 5. The small business issuer's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the small business issuer's auditors and the audit committee of the small business issuer's board of directors (or persons performing the equivalent functions): (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the small business issuer's ability to record, process, summarize and report financial information; and (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the small business issuer's internal control over financial reporting. Date: August 13, 2004 /s/Martha L. Long Martha L. Long Senior Vice President of Angeles Realty Corporation II, equivalent of the chief executive officer of the Partnership Exhibit 31.2 CERTIFICATION I, Stephen B. Waters, certify that: 1. I have reviewed this quarterly report on Form 10-QSB of Angeles Opportunity Properties, Ltd.; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the small business issuer as of, and for, the periods presented in this report; 4. The small business issuer's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the small business issuer and have: (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the small business issuer, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; (b) Evaluated the effectiveness of the small business issuer's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and (c) Disclosed in this report any change in the small business issuer's internal control over financial reporting that occurred during the small business issuer's most recent fiscal quarter (the small business issuer's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the small business issuer's internal control over financial reporting; and 5. The small business issuer's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the small business issuer's auditors and the audit committee of the small business issuer's board of directors (or persons performing the equivalent functions): (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the small business issuer's ability to record, process, summarize and report financial information; and (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the small business issuer's internal control over financial reporting. Date: August 13, 2004 /s/Stephen B. Waters Stephen B. Waters Vice President of Angeles Realty Corporation II, equivalent of the chief financial officer of the Partnership Exhibit 32.1 Certification of CEO and CFO Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 In connection with the Quarterly Report on Form 10-QSB of Angeles Opportunity Properties, Ltd. (the "Partnership"), for the quarterly period ended June 30, 2004 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), Martha L. Long, as the equivalent of the chief executive officer of the Partnership, and Stephen B. Waters, as the equivalent of the chief financial officer of the Partnership, each hereby certifies, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to the best of his knowledge: (1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Partnership. /s/Martha L. Long Name: Martha L. Long Date: August 13, 2004 /s/Stephen B. Waters Name: Stephen B. Waters Date: August 13, 2004 This certification is furnished with this Report pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and shall not be deemed filed by the Partnership for purposes of Section 18 of the Securities Exchange Act of 1934, as amended. -----END PRIVACY-ENHANCED MESSAGE-----