-----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, Ok65xrMZT5NHpz1Kbskg3bQvmjztdalcQGptCdtU5Guax2uQDLUbLAgU8+Jswu4g PhOWBalZ9O3hnVzcOizjGg== 0000812187-96-000002.txt : 19960509 0000812187-96-000002.hdr.sgml : 19960509 ACCESSION NUMBER: 0000812187-96-000002 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19960331 FILED AS OF DATE: 19960508 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: ANGELES PARTNERS 16 CENTRAL INDEX KEY: 0000812187 STANDARD INDUSTRIAL CLASSIFICATION: REAL ESTATE [6500] IRS NUMBER: 954106417 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10QSB SEC ACT: 1934 Act SEC FILE NUMBER: 000-16209 FILM NUMBER: 96557999 BUSINESS ADDRESS: STREET 1: ONE INSIGNIA FINANCIAL PLZ STREET 2: PO BOX 1089 CITY: GREENVILLE STATE: SC ZIP: 29602 BUSINESS PHONE: 8032391000 MAIL ADDRESS: STREET 1: ONE INSIGNIA FINANCIAL PLAZA STREET 2: P.O. BOX 1089 CITY: GREENVILLE STATE: SC ZIP: 29602 10QSB 1 FORM 10-QSB.--QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Quarterly or Transitional Report (As last amended by 34-32231, eff. 6/3/93.) U.S. Securities and Exchange Commission Washington, D.C. 20549 Form 10-QSB [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 1996 [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT For the transition period.........to......... Commission file number 0-16209 ANGELES PARTNERS 16 (Exact name of small business issuer as specified in its charter) California 95-4106417 (State or other jurisdiction of (IRS Employer incorporation or organization) Identification No.) One Insignia Financial Plaza, P.O. Box 1089 Greenville, South Carolina 29602 (Address of principal executive offices) (Zip Code) Issuer's telephone number (864) 239-1000 Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No PART I - FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS a) ANGELES PARTNERS 16 BALANCE SHEET (Unaudited) (in thousands, except unit data) March 31, 1996 Assets Cash and cash equivalents: Unrestricted $ 519 Restricted--tenant security deposits 64 Accounts receivable 13 Escrow for taxes 159 Restricted escrows (Note D) 1,312 Other assets 220 Investment properties: Land $ 1,076 Buildings and related personal property 10,616 11,692 Less accumulated depreciation (3,079) 8,613 $ 10,900 Liabilities and Partners' Deficit Liabilities Accounts payable $ 29 Tenant security deposits 64 Accrued taxes 395 Accrued interest 1,815 Other liabilities (Note D) 1,149 Notes payable, including $1,879 in default 12,673 Partners' Deficit General partner $ (170) Limited partners (14,033 units issued and outstanding) (5,055) (5,225) $ 10,900 See Accompanying Notes to Financial Statements b) ANGELES PARTNERS 16 STATEMENTS OF OPERATIONS (Unaudited) (in thousands, except unit data) Three Months Ended March 31, 1996 1995 Revenues: Rental income $ 591 $ 922 Other income 53 46 Total revenues 644 968 Expenses: Operating 215 297 General and administrative 37 44 Maintenance 34 65 Depreciation 73 161 Interest 322 472 Property taxes 121 276 Bad debt recovery -- (4) Total expenses 802 1,311 Loss before gain on sale of investment property (158) (343) Gain on sale of investment property 64 -- Net loss $ (94) $ (343) Net loss allocated to general partner (1%) $ (1) $ (3) Net loss allocated to limited partners (99%) (93) (340) Net loss $ (94) $ (343) Net loss per limited partnership unit: $ (6.63) $(24.23) See Accompanying Notes to Financial Statements c) ANGELES PARTNERS 16 STATEMENT OF CHANGES IN PARTNERS' DEFICIT (Unaudited) (in thousands, except unit data)
Limited Partnership General Limited Units Partner Partners Total Original capital contributions 14,050 $ 1 $14,050 $14,051 Partners' deficit at December 31, 1995 14,033 $ (169) $(4,962) $(5,131) Net loss for the three months ended March 31, 1996 -- (1) (93) (94) Partners' deficit at March 31, 1996 14,033 $ (170) $(5,055) $(5,225) See Accompanying Notes to Financial Statements
d) ANGELES PARTNERS 16 STATEMENTS OF CASH FLOWS (Unaudited) (in thousands)
Three Months Ended March 31, 1996 1995 Cash flows from operating activities: Net loss $ (94) $ (343) Adjustments to reconcile net loss to net cash provided by operating activities: Depreciation 73 161 Amortization of loan costs and leasing commissions 2 13 Gain on sale of investment property (64) -- Bad debt recovery -- (4) Change in accounts: Restricted cash (1) 11 Accounts receivable 126 (46) Escrows for taxes 65 57 Other assets -- (39) Accounts payable (11) (3) Tenant security deposit liabilities 2 1 Accrued taxes (46) 109 Accrued interest 189 330 Other liabilities (44) 43 Net cash provided by operating activities 197 290 Cash flows from investing activities: Property improvements and replacements (6) (9) Deposits to restricted escrows (94) (49) Withdrawals from restricted escrows 155 4 Net cash provided by (used in) investing activities 55 (54) Cash flows used in financing activities: Payments on notes payable (139) (12) Net increase in cash 113 224 Cash at beginning of period 406 1,773 Cash at end of period $ 519 $ 1,997 Supplemental disclosure of cash flow information: Cash paid for interest $ 131 $ 135 See Accompanying Notes to Financial Statements
e) ANGELES PARTNERS 16 NOTES TO FINANCIAL STATEMENTS (Unaudited) Note A - Going Concern The financial statements have been prepared assuming that Angeles Partners 16 (the "Partnership") will continue as a going concern. The Partnership has incurred recurring operating losses and continues to suffer from inadequate liquidity. In addition, there are limited identified capital resources available to the Partnership. As a result, the Partnership has not had cash available to perform the substantial rehabilitation necessary at each of the investment properties. The Partnership is in default on $1,879,000 of its indebtedness, plus related accrued interest of $1,303,000 due to its inability to make interest and principal payments when due. The debt is unsecured debt of the Partnership payable to Angeles Mortgage Investment Trust ("AMIT") (See "Note C"). The Partnership is presently paying non-debt related expenses of the properties, is current on its mortgages secured by the remaining two investment properties and is negotiating forbearance agreements with AMIT on the debt in default. As a result of the above conditions, there is substantial doubt about the Partnership's ability to continue as a going concern. The financial statements do not include any adjustments to reflect the possible future effects on the recoverability or classification of assets or amounts or classification of liabilities that may result from these uncertainties. Note B - Basis of Presentation The accompanying unaudited financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-QSB and Item 310(b) of Regulation S-B. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of the General Partner, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three month period ended March 31, 1996, are not necessarily indicative of the results that may be expected for the fiscal year ending December 31, 1996. For further information, refer to the financial statements and footnotes thereto included in the Partnership's annual report on Form 10-KSB for the fiscal year ended December 31, 1995. Certain reclassifications have been made to the 1995 balances to conform to the 1996 presentation. Note C - 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 amounts were paid to the General Partner and affiliates during the three months ended March 31, 1996 and 1995: 1996 1995 (in thousands) Property management fees $31 $30 Reimbursement for services of affiliates 14 21 The Partnership insures 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 were later acquired by the agent who placed the current year's 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. In November 1992, Angeles Acceptance Pool, L.P. ("AAP"), a Delaware limited partnership was organized to acquire and hold the obligations evidencing the working capital loan previously provided to the Partnership by Angeles Capital Investments, Inc. ("ACII"). Angeles Corporation ("Angeles") is the 99% limited partner of AAP and Angeles Acceptance Directives, Inc. ("AAD"), an affiliate of the General Partner, was, until April 14, 1995, the 1% general partner of AAP. On April 14, 1995, as part of a settlement of claims between affiliates of the General Partner and Angeles, AAD resigned as general partner of AAP and simultaneously received a 1/2% limited partner interest in AAP. An affiliate of Angeles now serves as the general partner of AAP. The AAP working capital loan funded the Partnership's operating deficits in prior years. Total indebtedness, including accrued interest of $473,000, was $1,990,000 at March 31, 1996, with monthly interest only payments at the prime rate plus 2% from available cash flow. Principal is to be paid the earlier of i) the availability of funds, ii) the sale of one or more properties owned by the Partnership generating excess proceeds, or iii) November 25, 1997. Total interest expense for this loan was $39,000 and $41,000 for the three months ended March 31, 1996 and 1995, respectively. Note C - Transactions with Affiliated Parties (continued) AMIT currently holds two unsecured notes receivable from the Partnership. Total indebtedness of $1,879,000 is in default at March 31, 1996, due to non-payment. Total interest expense on this financing was $155,000 and $108,000 for the three months ended March 31, 1996 and 1995, respectively. Accrued interest was $1,303,000 at March 31, 1996. MAE GP Corporation ("MAE GP"), an affiliate of the General Partner, owns 1,675,113 Class B Shares of AMIT. MAE GP has the option to convert these Class B Shares, in whole or in part, into Class A Shares on the basis of 1 Class A Share for every 49 Class B Shares. These Class B Shares entitle MAE GP to receive 1.2% of the distributions of net cash distributed by AMIT. These Class B Shares also entitle MAE GP to vote on the same basis as Class A Shares which allows MAE GP to vote approximately 37% of the total shares (unless and until converted to Class A Shares at which time the percentage of the vote controlled represented by the shares held by MAE GP would approximate 1.2% of the vote). Between the date of acquisition of these shares (November 24, 1992) and March 31, 1995, MAE GP declined to vote these shares. Since that date, MAE GP voted its shares at the 1995 annual meeting in connection with the election of trustees and other matters. MAE GP has not exerted, and continues to decline to exert, any management control over or participate in the management of AMIT. MAE GP may choose to vote these shares as it deems appropriate in the future. In addition, Liquidity Assistance, LLC, ("LAC"), an affiliate of the General Partner and an affiliate of Insignia Financial Group, Inc., which provides property management and partnership administration services to the Partnership, owns 63,200 Class A Shares of AMIT. These Class A Shares entitle LAC to vote approximately 1.5% of the total shares. As part of a settlement of certain disputes with AMIT, MAE GP granted to AMIT an option to acquire the Class B Shares owned by it. This option can be exercised at the end of 10 years or when all loans made by AMIT to partnerships affiliated with MAE GP as of November 9, 1994, (which is the date of execution of a definitive Settlement Agreement) have been paid in full, but in no event prior to November 9, 1997. AMIT delivered to MAE GP cash in the sum of $250,000 at closing, which occurred April 14, 1995, as payment for the option. Upon exercise of the option, AMIT would remit to MAE GP an additional $94,000. Note C - Transactions with Affiliated Parties (continued) Simultaneously with the execution of the option, MAE GP executed an irrevocable proxy in favor of AMIT the result of which is MAE GP will be able to vote the Class B Shares on all matters except those involving transactions between AMIT and MAE GP affiliated borrowers or the election of any MAE GP affiliate as an officer or trustee of AMIT. On those matters, MAE GP granted to the AMIT trustees, in their capacity as trustees of AMIT, proxies with regard to the Class B Shares instructing such trustees to vote said Class B Shares in accordance with the vote of the majority of the Class A Shares voting to be determined without consideration of the votes of "Excess Class A Shares" as defined in Section 6.13 of the Declaration of Trust of AMIT. Note D - Sale of Investment Property On June 12, 1995, the Partnership sold the North Prior Industrial Park to an unrelated party, recognizing a gain on the sale of $1,010,000. The net proceeds of $10,325,000, were used to pay the first mortgage and related accrued interest, to pay AMIT in partial satisfaction of a recourse second mortgage, and to fund restricted escrows. The holder of the first mortgage forgave $56,000, which the Partnership recognized as an extraordinary gain on extinguishment of debt. The unpaid balance of the note payable to AMIT is now unsecured Partnership debt (see "Note C"). As required by the sales agreement, the Partnership established three escrows as described below: Tenant Improvements Escrow - This escrow was being held pending completion of tenant improvements that were begun by the receiver prior to the sale. At March 31, 1996, the escrow balance had been expended. All funds were used for the improvement projects and the residual, or $56,000, was used to reduce the debt to AMIT. Environmental Escrow - This escrow was established for costs associated with fuel oil contamination at the property. In January 1993, a local fuel oil distributor pumped fuel oil into a testing well instead of into the storage tank at North Prior Industrial Park. The Partnership notified the necessary authorities and engaged an environmental engineering firm to develop a plan of action to clean up the site. The cost of the clean up, which is not covered by insurance, is estimated to be approximately $900,000 over a five year period. A liability has been recorded to cover the estimated costs to clean-up the site and is included in "Other Liabilities", and the funds have been set aside in an escrow account. The Partnership entered into an agreement with the buyer of the property limiting Note D - Contingencies (continued) the Partnership's liability with regard to the clean up of this site to the balance of the escrow account. This agreement will terminate when the Partnership receives a "Site Closure Letter" from the Minnesota Pollution and Control Agency. Upon receipt of this letter, any remaining funds in the escrow account will be used to pay down the AMIT debt discussed above. Attorney Fee Escrow - This escrow is being held for attorney fees relating to the environmental issue described above. At March 31, 1996, the balance in this account is $95,000. All funds are expected to be used for attorney fees; however, any remaining funds will be used to reduce the debt to AMIT. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS The Partnership's investment properties consist of two apartment complexes. The following table sets forth the average occupancy of the properties for the three months ended March 31, 1996 and 1995: Property 1996 1995 Whispering Pines Apartments Fitchburg, Wisconsin (1) 90% 95% Silver Ridge Apartments Maplewood, Minnesota 99% 92% (1) Decrease in occupancy due to increased home sales in the area. New home construction and low interest rates for home buyers has made renting less appealing and thereby decreased occupancy. The Partnership realized a net loss of $94,000 for the three months ended March 31, 1996, versus a net loss of $343,000 for the three months ended March 31, 1995. The decrease in net loss for the three months ended March 31, 1996, as compared to the three months ended March 31, 1995, is primarily due to the sale of North Prior Industrial Park on June 12, 1995. Rental income decreased for the three months ended March 31, 1996, as compared to the three months ended March 31, 1995, due to the sale of North Prior Industrial Park on June 12, 1995, resulting in the loss of rental revenue relating to this property. Also contributing to the decrease in rental income was the decrease in occupancy at Whispering Pines Apartments, which was partially offset by an increase in occupancy at Silver Ridge Apartments. For the three months ended March 31, 1996, versus the three months ended March 31, 1995, the Partnership realized decreases in the following expense categories: operating, maintenance, depreciation, interest and property tax. These decreases are due to the sale of North Prior Industrial Park. These decreases were partially offset by a slight increase in interest expense at Whispering Pines Apartments due to higher interest expense resulting from a fluctuating interest rate on the mortgage. As mentioned previously, the Partnership sold North Prior Industrial Park on June 12, 1995. The net proceeds were used to pay the first mortgage and related accrued interest. As a result of the sale, tenant receivable balances were written off due to the doubts regarding the collectibility of such amounts. However, during the three months ended March 31, 1996, $8,000 in receivables were collected and the funds were remitted to AMIT to reduce the principal balance. In addition, during the three months ended March 31, 1996, the tenant improvement projects were completed, as required by the sale of the property (see "Note D"), and funds remaining in the escrow account were also remitted to AMIT to reduce the principal balance. The funds remitted amounted to $56,000. As a result of these transactions, the Partnership recognized an additional $64,000 gain on the sale of the investment property during the three months ended March 31, 1996. As part of the ongoing business plan of the Partnership, the General Partner monitors the rental market environment of each of its investment properties to assess the feasibility of increasing rents, maintaining or increasing occupancy levels and protecting the Partnership from increases in expenses. As part of this plan, the General Partner attempts to protect the Partnership from the burden of inflation-related increases in expenses by increasing rents and maintaining a high overall occupancy level. However, due to changing market conditions, which can result in the use of rental concessions and rental reductions to offset softening market conditions, there is no guarantee that the General Partner will be able to sustain such a plan. At March 31, 1996, the Partnership had unrestricted cash of $519,000 versus $1,997,000 at March 31, 1995. Net cash provided by operating activities decreased primarily due to a decrease in accrued taxes and a lesser increase in accrued interest. Net cash provided by investing activities increased due to increased withdrawals from the restricted escrows. Net cash used in financing activities increased slightly due to increased payments on the notes payable to AMIT. The financial statements have been prepared assuming the Partnership will continue as a going concern. The Partnership has incurred recurring operating losses and continues to suffer from inadequate liquidity. In addition, there are limited identified capital resources available to the Partnership. As a result, the Partnership has not had cash available to perform the substantial rehabilitation necessary at each of the investment properties. The Partnership is in default on $1,879,000 of its indebtedness due to its inability to make interest and principal payments when due. The debt is unsecured debt of the Partnership payable to AMIT. The Partnership is presently paying non-debt related expenses of the properties, is current on its mortgages secured by its two remaining investment properties and is negotiating forbearance agreements with AMIT on the debt in default. As a result of the above conditions, there is substantial doubt about the Partnership's ability to continue as a going concern. The financial statements do not include any adjustments to reflect the possible future effects on the recoverability or classification of assets or amounts or classification of liabilities that may result from these uncertainties. The sufficiency of existing liquid assets to meet future liquidity and capital expenditure requirements is directly related to the level of capital expenditures required at the properties to adequately maintain the physical assets and other operating needs of the Partnership. Such assets are currently thought to be sufficient for any near-term needs of the Partnership. The mortgage indebtedness of $12,673,000 consists of a first mortgage of $4,377,000, which is being amortized over 30 years and is due January 1997, a second trust deed and a working capital loan with principal balances of $375,000 and $1,517,000, respectively, (interest only) with maturity dates in November and December 1997, and a first mortgage bond payable in the principal amount of $4,525,000 (interest only) due July 2023. This Partnership also has unsecured debt to AMIT in the amount of $859,000 and $1,020,000 (interest only) with maturity dates of June 1997 and June 1996, respectively, which is in default. Future cash distributions will depend on the levels of net cash generated from operations, refinancings and property sales. At this time, the General Partner does not anticipate making a cash distribution during fiscal 1996. PART II - OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS In January 1993, a local fuel oil distributor pumped fuel oil into a testing well instead of into the storage tank at North Prior Industrial Park. The Partnership notified the necessary authorities and engaged an environmental engineering firm to develop a plan of action to clean up the site. The cost of the clean up, which is not covered by insurance, is estimated to be approximately $900,000 over a five year period. A liability has been recorded to cover the estimated costs to clean up the site and the funds have been set aside in an escrow account. The Partnership entered into an Environmental Undertaking and Indemnity Agreement with the buyer of the property limiting the Partnership's liability with regard to the clean up of this site to the balance of the escrow account. This agreement will terminate when the Partnership receives a "Site Closure Letter" from the Minnesota Pollution and Control Agency. Upon receipt of this letter, any remaining funds in the escrow account will be used to pay down Partnership debt to AMIT. In January 1995, the holder of the first mortgage, along with the former receiver, initiated two separate lawsuits against the Partnership, among others, for damages sustained as a result of the above. In June 1995, the suit with the former holder of the first mortgage was dismissed. During November 1995, the Partnership was removed as the defendant and became the Plaintiff in the lawsuit initiated by the former receiver in a suit filed against the fuel distributor, among others. The former receiver was removed as Plaintiff in the suit due to it no longer being a party- in-interest. The Registrant is unaware of any other pending or outstanding litigation that is not of a routine nature. The General Partner of the Registrant believes that all such pending or outstanding litigation will be resolved without a material adverse effect upon the business, financial condition, or operations of the Partnership. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K a) Exhibits: Exhibit 27, Financial Data Schedule, is filed as an exhibit to this report. b) Reports on Form 8-K: None filed during the three months ended March 31, 1996. SIGNATURES In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. ANGELES PARTNERS 16 By: Angeles Realty Corporation II General Partner By: /s/Carroll D. Vinson Carroll D. Vinson President By: /s/Robert D. Long Robert D. Long Vice President/CAO Date: May 8, 1996 EX-27 2
5 This schedule contains summary financial information extracted from Angeles Partners 16 1996 First Quarter 10-QSB and is qualified in its entirety by reference to such 10-QSB filing. 0000812187 ANGELES PARTNERS 16 1,000 3-MOS DEC-31-1996 MAR-31-1996 519 0 13 0 0 2,067 11,692 3,079 10,900 488 12,673 0 0 0 (5,225) 10,900 0 644 0 0 802 0 322 (94) 0 (94) 0 0 0 (94) (6.63) 0
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