-----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, M1kZ9lmKgHd3pumJwML261O8LdXq0Ejx1Z8CJhsf6V+dK1tKmeoskB0pxwVovNAf 0EEI9ZYyoh5vlGoaM2J82g== 0000812187-98-000003.txt : 19980327 0000812187-98-000003.hdr.sgml : 19980327 ACCESSION NUMBER: 0000812187-98-000003 CONFORMED SUBMISSION TYPE: 10KSB PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19971231 FILED AS OF DATE: 19980326 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: 10KSB SEC ACT: SEC FILE NUMBER: 000-16209 FILM NUMBER: 98574777 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) 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 0-16209 ANGELES PARTNERS 16 (Name of small business insurer in its charter) California 95-4106417 (State or other jurisdiction of (I.R.S. 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 Securities registered under Section 12(b) of the Exchange Act: None Securities registered under Section 12(g) of the Exchange Act: Limited Partnership Units (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 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. $2,974,000. State the aggregate market value of the voting partnership interests held by non-affiliates computed by reference to the price at which the partnership interests were sold, or the average bid and asked prices of such partnership interests, 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. PART I ITEM 1. DESCRIPTION OF BUSINESS Angeles Partners 16 (the "Partnership" or "Registrant") is a publicly-held limited partnership organized under the California Uniform Limited Partnership Act pursuant to the Certificate and Restated Agreement of Limited Partnership - (the "Agreement") dated March 24, 1987. The Partnership's General Partner is Angeles Realty Corporation II ("General Partner" or "ARC II"), a California corporation and 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 14,050 units aggregating $14,050,000. 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 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., an affiliate of Insignia, provides day-to-day property management services to all of 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 investment property is located in or near a major urban area and, accordingly, competes for rentals not only with similar properties in its immediate area but with hundreds of similar 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 Registrant's investment in properties:
Date of Property Purchase Type of Ownership Use Whispering Pines Apartments 06/30/89 Fee ownership subject Residential to first trust deed Rental 136 units Silver Ridge Apartments 12/29/87 Fee ownership subject Residential to first mortgage Rental bond payable and 186 units second trust deed
SCHEDULE OF PROPERTIES: (dollar amounts in thousands) Gross Carrying Accumulated Federal Property Value Depreciation Rate Method Tax Basis Whispering Pines $ 5,087 (1) (1) (1) $ 4,813 Apartments Silver Ridge 5,400 (1) (1) (1) 5,332 Apartments Total $ 10,487 $10,145 (1) As a result of adopting the liquidation basis of accounting, the gross carrying values of the properties were adjusted to their net realizable value and will not be depreciated further. See "Note B" of the financial statements included in "Item 7." for a description of the Partnership's former depreciation policy. SCHEDULE OF MORTGAGES: (dollar amounts in thousands)
Principal Principal Balance At Stated Balance December 31, Interest Period Maturity Due At Property/Partnership 1997 Rate Amortized Date Maturity Whispering Pines Apartments First trust deed, in default $ 4,252 (2) 30 yrs 01/97 $ 4,252 Silver Ridge Apartments First mortgage bond payable 4,525 (3) (1) 07/23 4,525 Second trust deed, in default 375 10.00% (1) 12/97 375 Angeles Partners 16 Note payable, in default (5) 859 12.50% (7) (1) 06/97 859 Note payable, in default (5) 2,017 12.25% (7) (1) 06/96 2,017 Working capital loan, in default (6) 1,517 (4) (1) 11/97 1,517 Total $ 13,545 $ 13,545 (1) Interest payments only. (2) 11th District Federal Home Loan Bank Board base rate plus 2.25%, monthly payment varies with interest rate (7.084% at December 31, 1997). (3) Interest only payments based on a variable rate not to exceed 12% (3.40% at December 31, 1997). (4) Interest only payments at the prime rate plus 2% payable from available cash flow, as defined (10.50% at December 31, 1997). (5) Payable to Angeles Mortgage Investment Trust ("AMIT"). (6) Payable to Angeles Acceptance Pool, L.P ("AAP"). (7) Default interest rate of 18.00%.
Average annual rental rate and occupancy information for 1997 and 1996 for each property: Average Annual Average Annual Rental Rates Occupancy Property 1997 1996 1997 1996 Whispering Pines Apartments $7,761/unit $7,754/unit 96% 86% Silver Ridge Apartments $8,037/unit $7,774/unit 94% 97% Average occupancy at Whispering Pines Apartments increased due to rental concessions being offered, as well as the completion of construction that was impeding access to the property. 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. Real estate taxes and rates in 1997 for each property were: 1997 1997 Billing Rate (in thousands) Whispering Pines Apartments $ 126 2.46% Silver Ridge Apartments 245* 4.79% *Amount per 1996 billings; tax bills for 1997 not yet received. ITEM 3. 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 was not covered by insurance, was 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. In January 1998, the Partnership received a "Site Closure Letter" from the Minnesota Pollution and Control Agency which states that environmental risks have been reduced to minimal levels and that monitoring and remedial efforts may be discontinued. The 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. A mediation hearing was held in December 1996 in which the defendants have tentatively agreed that the claims may be resolved by payment by the defendants to the Partnership. During the second quarter of 1997, a complete settlement of the litigation was concluded. The total amount of the settlement was $340,000. During the third quarter of 1996, AMIT filed a complaint against the Partnership, in the State of Minnesota, demanding payment on the $2,017,000 obligation plus accrued interest. At December 31, 1997, accrued interest on this debt payable to AMIT totaled approximately $329,000. The debt was in default previously due to non-payment of interest and now is in default due to non-payment upon maturity. AMIT has obtained a judgment against the Partnership. On June 19, 1997 a Notice of Sheriff's Execution Sale of Personal and Real Property was filed for the sale of Silver Ridge Apartments. On October 29, 1997, Silver Ridge Apartments was sold at a sheriff's sale to AMIT. Under the laws of the State Minnesota, this foreclosure is subject to a one year right of redemption. On January 30, 1998, the Partnership executed an Agreement for Deed in Lieu of Foreclosure by and between the Partnership, the General Partner and AMIT. Pursuant thereto, the Partnership conveyed the Silver Ridge Apartments, located in Maplewood, Minnesota, to AMIT and thereby waived its one year right of redemption. 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 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 Partnership did not vote on any matter during 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 14,050 Limited Partnership Units aggregating $14,050,000 during its offering period through December 30, 1988, and at December 31, 1997, has 13,993 Limited Partnership Units outstanding held by 1,466 Limited Partners of record. There is no intention to sell additional Limited Partnership Units nor is there an established market for these units. The Partnership has discontinued making cash distributions and does not anticipate any cash being available for distributions upon the liquidation of the Partnership. ITEM 6. MANAGEMENTS' DISCUSSION AND ANALYSIS OR PLAN OF OPERATION This item should be read in conjunction with the financial statements and other items contained elsewhere in this report. Results of Operations As of December 31, 1997, the Partnership adopted the liquidation basis of accounting due to the imminent loss of its investment properties. The Partnership has experienced significant recurring operating losses, is in default on substantially all of its indebtedness and continues to suffer from inadequate liquidity. No other sources of additional financing are available to the Partnership and the General Partner does not have any other plans to remedy the liquidity problems the Partnership is currently experiencing. At December 31, 1997, the Partnership was in default on $2,876,000 of unsecured indebtedness payable to Angeles Mortgage Investment Trust ("AMIT"), plus related accrued interest of approximately $987,000, due to its inability to make interest and principal payments when due. In addition, during January 1998, AMIT purchased the second trust deed, in the amount of $375,000, which is secured by Silver Ridge Apartments and matured in December 1997. The lender obtained a judgment against the Partnership that secured their position on $2,017,000 of this indebtedness ("North Prior debt"). On June 19, 1997, a Notice of Sheriff's Execution Sale of Personal and Real Property was filed for the sale of Silver Ridge Apartments. On October 29, 1997, Silver Ridge Apartments was sold at a sheriff's sale to AMIT. Under the laws of the State of Minnesota, this foreclosure was subject to a one year right of redemption. In January 1998, the Partnership granted to AMIT a Deed in Lieu of Foreclosure on Silver Ridge Apartments thereby waiving its right of redemption. The first mortgage, in the amount of $4,252,000, which is secured by Whispering Pines Apartments, is in default due to nonpayment upon its maturity in January 1997. ARC II is currently marketing this investment property for sale. Monthly payments of principal and interest are still being made and the lender has not initiated foreclosure proceedings. AMIT intends to purchase this first trust deed in April 1998 if the General Partner is unsuccessful in obtaining a purchase agreement. At that time AMIT intends to initiate foreclosure proceedings. The General Partner expects to lose this last investment property in May 1998, and it anticipates that the Partnership will terminate in June 1998. As a result of the decision to liquidate the Partnership, the Partnership changed its basis of accounting for its financial statements at December 31, 1997, from the going concern basis of accounting to the liquidation basis of accounting. Consequently, assets have been valued at estimated net realizable value (including subsequent actual transactions described below) and liabilities are presented at their estimated settlement amounts, including estimated costs associated with carrying out the liquidation. The valuation of assets and liabilities necessarily requires many estimates and assumptions and there are substantial uncertainties in carrying out the liquidation. The actual realization of assets and settlement of liabilities could be higher or lower than amounts indicated and is based upon the General Partner's estimates as of the date of the financial statements. The statement of net liabilities in liquidation as of December 31, 1997, includes approximately $261,000 of costs, net of income, that the General Partner estimates will be incurred during the period of liquidation, based on the assumption that the liquidation process will be completed by June 30, 1998. These costs principally include interest and administrative expenses. Because the success in realization of assets and the settlement of liabilities is based on the General Partner's best estimates, the liquidation period may be shorter than projected or it may be extended beyond the projected period. At December 31, 1997, in accordance with the liquidation basis of accounting, assets were adjusted to their estimated net realizable value and liabilities were adjusted to their settlement amount and include all estimated costs associated with carrying out the liquidation. The net adjustment required to convert to the liquidation basis of accounting was a decrease in net liabilities of approximately $1,678,000 which is included in the Statement of Changes in Partners' Capital (Deficit)/Net Liabilities In Liquidation. The adjustments are summarized as follows: (Increase) Decrease in Net Liabilities (in thousands) Adjustment from book value of property and improvements to estimated net realizable value $ 2,157 Adjustment to record estimated costs associated with the liquidation (Note A) (261) Adjustment of other assets and liabilities (218) Net decrease in net liabilities $ 1,678 Prior to adopting the liquidation basis of accounting, the Partnership realized a net loss of approximately $383,000 for the year ended December 31, 1997, versus a net loss of approximately $499,000 for the year ended December 31, 1996. The decrease in net loss for the year ended December 31, 1997, is attributable to an increase in total revenues, primarily attributable to the income from the settlement of certain litigation (see discussion below), partially offset by an increase in expenses. Rental income increased due to an increase in occupancy at Whispering Pines Apartments, along with an increase in rental rates at both Whispering Pines Apartments and Silver Ridge Apartments. Operating expenses increased for the year ended December 31, 1997, due to an increase in advertising and maintenance expenses. The increase in advertising is a result of concessions being offered at Whispering Pines Apartments in an effort to increase occupancy. Maintenance expense increased due to an interior painting project at Silver Ridge Apartments. Also, interest expense increased for the year ended December 31, 1997, due to the assessment of a late charge on the $859,000 note payable to AMIT ("Angola debt") due to the maturity of the note on June 30, 1997, along with the increasing default interest charged on the $2,017,000 note payable to AMIT ("North Prior debt"). 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 was not covered by insurance, was 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. In January 1998, the Partnership received a "Site Closure Letter" from the Minnesota Pollution and Control Agency which states that environmental risks have been reduced to minimal levels and that monitoring and remedial efforts may be discontinued. The remaining funds in the escrow account will be used to pay down Partnership debt to AMIT. The Partnership was the plaintiff in a lawsuit filed against the fuel distributor, among others, for damages sustained as a result of the above. A mediation hearing was held in December 1996 in which the defendants agreed that the claims may be resolved by payment by the defendants to the Partnership. During the second quarter of 1997, a complete settlement of the litigation was concluded. The total amount of the settlement was $340,000 and is included in total revenues at December 31, 1997. These funds were remitted to AMIT and were applied to the principal balance ($11,000) and accrued interest ($329,000) on the North Prior debt. For the year ended December 31, 1997, the Partnership recognized a loss on disposal of property of approximately $127,000. This loss resulted from a roof replacement project at Silver Ridge Apartments. These roofs were not fully depreciated at the time of the write-off. Included in operating expense for the year ended December 31, 1997, is approximately $9,000 of major repairs and maintenance comprised mainly of major landscaping expenses. Included in operating expense for the year ended December 31, 1996, is approximately $16,000 of major repairs and maintenance comprised mainly of exterior building repairs. LIQUIDITY AND CAPITAL RESOURCES The Partnership's primary source of cash is from the operations of its properties and from financing placed on such properties. Cash from these sources is utilized for property operations, capital improvements, and/or repayment of debt. The financial statements have been prepared assuming the Partnership will liquidate during 1998 (see "Note A" to the financial statements). The Partnership has incurred recurring operating losses, is in default on substantially all of its indebtedness and continues to suffer from inadequate liquidity. In addition, there are no identified capital resources available to the Partnership. At December 31, 1997, the Partnership had cash and cash equivalents of $479,000 versus $529,000 at December 31, 1996. For the year ended December 31, 1997, net cash decreased by approximately $50,000 compared to an increase of approximately $123,000 for the year ended December 31, 1996. Net cash provided by operating activities increased for the year ended December 31, 1997, compared to the year ended December 31, 1996, primarily due to the decrease in net loss and a lesser decrease in other liabilities. The decrease in other liabilities reflects the payments for the clean up of the fuel oil contamination at North Prior Industrial Complex. Net cash used in investing activities increased for the year ended December 31, 1997, versus the year ended December 31, 1996, due primarily to an increase in property improvements and replacements resulting from the roof replacement project at Silver Ridge Apartments. Net cash used in financing activities increased for the year ended December 31, 1997, as compared to the year ended December 31, 1996, despite a decrease in principal payments, due to additions to notes payable in 1996. The additions to notes payable of approximately $44,000 were recorded as a result of the costs incurred by AMIT in pursuit of the collection of the North Prior debt. No such activity occurred during the year ended December 31, 1997. The mortgage indebtedness of approximately $13,545,000 consists of, (1) a first mortgage of approximately $4,252,000, which is in default due to its maturity in January 1997 (2) a second trust deed and a working capital loan with principal balances of approximately $375,000 and $1,517,000, respectively, which are in default due to their maturity in December and November 1997, respectively; and (3) a first mortgage bond payable in the principal amount of $4,525,000 due July 2023. The Partnership also has unsecured debt to AMIT in the amount of approximately $859,000 and $2,017,000 which is in default due to their maturity in June 1997 and June 1996, respectively. As mentioned previously, the Partnership granted AMIT a Deed in Lieu of Foreclosure for Silver Ridge Apartments in January 1998. Total mortgage indebtedness secured by this property amounted to $4,900,000 at December 31, 1997. The Partnership has discontinued making cash distributions and does not anticipate any cash being available for distributions upon the liquidation 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 to be materially different from any future results, performance or achievements of the Partnership 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 or revisions to any forward-looking statements contained herein to reflect any change in the Partnership's expectations with regard thereto or any change in events, conditions or circumstances on which any such statement is based. ITEM 7. FINANCIAL STATEMENTS ANGELES PARTNERS 16 LIST OF FINANCIAL STATEMENTS Report of Ernst & Young LLP, Independent Auditors Statement of Net Liabilities in Liquidation - December 31, 1997 Statements of Operations - Years ended December 31, 1997 and 1996 Statements of Changes in Partners' Deficit/Net Liabilities in Liquidation - Years ended December 31, 1997 and 1996 Statements of Cash Flows - Years ended December 31, 1997 and 1996 Notes to Financial Statements Report of Ernst & Young LLP, Independent Auditors The Partners Angeles Partners 16 We have audited the statement of net liabilities in liquidation of Angeles Partners 16 as of December 31, 1997, and the related statements of operations, changes in partners' deficit/net liabilities in liquidation 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. As more fully described in Note A, due to the imminent disposal of its investment properties, the General Partner has decided, effective December 31, 1997, to liquidate the Partnership. As a result, the Partnership has changed its basis of accounting as of December 31, 1997 from a going concern basis to a liquidation basis. In our opinion, the financial statements referred to above present fairly, in all material respects, the net liabilities in liquidation of Angeles Partners 16 at December 31, 1997, and the 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 K, as to which the date is March 17, 1998 ANGELES PARTNERS 16 STATEMENT OF NET LIABILITIES IN LIQUIDATION December 31, 1997 (in thousands) Assets Cash and cash equivalents $ 479 Receivables and deposits 323 Restricted escrows 1,264 Investment properties 10,487 12,553 Liabilities Accounts payable 31 Tenant security deposits 69 Accrued taxes 383 Accrued interest 1,783 Other liabilities 815 Notes payable, including $9,020 in default 13,545 Estimated costs during the period of liquidation 261 16,887 Net liabilities in liquidation $ (4,334) See Accompanying Notes to Financial Statements ANGELES PARTNERS 16 STATEMENTS OF OPERATIONS (in thousands, except unit data) Years Ended December 31, 1997 1996 Revenues: Rental income $ 2,380 $ 2,302 Other income 254 228 Income from settlement of litigation 340 -- Total revenues 2,974 2,530 Expenses: Operating 1,113 1,025 General and administrative 131 139 Depreciation 308 297 Interest 1,304 1,194 Property taxes 374 374 Loss on disposal of property 127 -- Total expenses 3,357 3,029 Net loss $ (383) $ (499) Net loss allocated to general partner (1%) $ (4) $ (5) Net loss allocated to limited partners (99%) (379) (494) Net loss $ (383) $ (499) Net loss per limited partnership unit: $ (27.10) $ (35.20) See Accompanying Notes to Financial Statements ANGELES PARTNERS 16 STATEMENTS OF CHANGES IN PARTNERS' DEFICIT/ NET LIABILITIES IN LIQUIDATION (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 (going concern basis) 14,033 $ (169) $ (4,961) $ (5,130) Abandoned limited partnership units (40) -- -- -- Net loss for the year ended December 31, 1996 -- (5) (494) (499) Partners' deficit at December 31, 1996 (going concern basis) 13,993 (174) (5,455) (5,629) Net loss for the year ended December 31, 1997 -- (4) (379) (383) Partners deficit at December 31, 1997 (going concern basis) 13,993 (178) (5,834) (6,012) Adjustment to liquidation basis 1,678 Net liabilities in liquidation at December 31, 1997 $ (4,334) See Accompanying Notes to Financial Statements
ANGELES PARTNERS 16 STATEMENTS OF CASH FLOWS (in thousands)
Years Ended December 31, 1997 1996 Cash flows from operating activities: Net loss $ (383) $ (499) Adjustments to reconcile net loss to net cash provided by operating activities: Depreciation 308 297 Amortization of loan costs 9 9 Loss on disposal of property 127 -- Change in accounts: Receivables and deposits (8) 111 Other assets (13) -- Accounts payable (6) (2) Tenant security deposit liabilities 4 2 Accrued taxes (22) (37) Accrued interest 452 511 Other liabilities (93) (283) Net cash provided by operating activities 375 109 Cash flows from investing activities: Property improvements and replacements (321) (62) Net (deposits to) withdrawals from restricted escrows (21) 130 Net cash (used in) provided by investing activities (342) 68 Cash flows from financing activities: Additions to notes payable -- 44 Payments on notes payable (83) (98) Net cash used in financing activities (83) (54) Net (decrease) increase in cash and cash equivalents (50) 123 Cash and cash equivalents at beginning of period 529 406 Cash and cash equivalents at end of period $ 479 $ 529 Supplemental disclosure of cash flow information: Cash paid for interest $ 843 $ 674 Interest on notes transferred to notes payable $ -- $ 807 See Accompanying Notes to Financial Statements
ANGELES PARTNERS 16 Notes to Financial Statements December 31, 1997 NOTE A - BASIS OF PRESENTATION As of December 31, 1997, Angeles Partners 16 (the "Partnership" or "Registrant") adopted the liquidation basis of accounting due to the imminent loss of its investment properties. The Partnership has experienced significant recurring operating losses, is in default on substantially all of its indebtedness and continues to suffer from inadequate liquidity. No other sources of additional financing are available to the Partnership and Angeles Realty Corporation II ("ARC II" or the "General Partner") does not have any other plans to remedy the liquidity problems the Partnership is currently experiencing. At December 31, 1997, the Partnership was in default on $2,876,000 of unsecured indebtedness payable to Angeles Mortgage Investment Trust ("AMIT"), plus related accrued interest of approximately $987,000, due to its inability to make interest and principal payments when due. In addition, during January 1998, AMIT purchased the second trust deed, in the amount of $375,000, which is secured by Silver Ridge Apartments and matured in December 1997. The lender obtained a judgment against the Partnership that secured their position on $2,017,000 of this indebtedness ("North Prior debt"). On June 19, 1997, a Notice of Sheriff's Execution Sale of Personal and Real Property was filed for the sale of Silver Ridge Apartments. On October 29, 1997, Silver Ridge Apartments was sold at a sheriff's sale to AMIT. Under the laws of the State of Minnesota, this foreclosure was subject to a one year right of redemption. In January 1998, the Partnership granted to AMIT a Deed in Lieu of Foreclosure on Silver Ridge Apartments thereby waiving its right of redemption. The first mortgage, in the amount of $4,252,000, which is secured by Whispering Pines Apartments, is in default due to nonpayment upon its maturity in January 1997. ARC II is currently marketing this investment property for sale. Monthly payments of principal and interest are still being made and the lender has not initiated foreclosure proceedings. AMIT intends to purchase this first trust deed in April 1998 if the General Partner is unsuccessful in obtaining a purchase agreement. At that time AMIT intends to initiate foreclosure proceedings. The General Partner expects to lose this last investment property in May 1998, and it anticipates that the Partnership will terminate in June 1998. As a result of the decision to liquidate the Partnership, the Partnership changed its basis of accounting for its financial statements at December 31, 1997, from the going concern basis of accounting to the liquidation basis of accounting. Consequently, assets have been valued at estimated net realizable value (including subsequent actual transactions described below) and liabilities are presented at their estimated settlement amounts, including estimated costs associated with carrying out the liquidation. The valuation of assets and liabilities necessarily requires many estimates and assumptions and there are substantial uncertainties in carrying out the liquidation. The actual realization of assets and settlement of liabilities could be higher or lower than amounts indicated and is based upon the General Partner's estimates as of the date of the financial statements. The statement of net liabilities in liquidation as of December 31, 1997, includes approximately $261,000 of costs, net of income, that the General Partner estimates will be incurred during the period of liquidation, based on the assumption that the liquidation process will be completed by June 30, 1998. These costs principally include interest and administrative expenses. Because the success in realization of assets and the settlement of liabilities is based on the General Partner's best estimates, the liquidation period may be shorter than projected or it may be extended beyond the projected period. NOTE B - ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES Organization: The Partnership is a California limited partnership organized on March 24, 1987, to acquire fee or other equity interests in, or long-term leasehold interests in, improved residential, commercial or industrial properties. The Partnership's General Partner is ARC II, a California corporation and 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 Fitchburg, Wisconsin and Maplewood, Minnesota. Allocations to Partners: In accordance with the Partnership 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 Interests (as defined below) to which the General Partner is entitled. Any gain remaining after said allocation will be allocated to the General Partner and 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. 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 the Limited Partners have received distributions from all sources equal to their 6% Cumulative Distribution; (iii) Third, to the General Partner until it has received an amount equal to 3% of the aggregate disposition price of all properties ("Initial Incentive Interest") and (iv) Fourth, to the Partners according to their Interests in the Partnership until the Limited Partners have received distributions from all sources equal to their 10% Cumulative Distribution and, thereafter, until certain of the Limited Partners receive additional priority returns ranging from 1.5% to 4.5% per annum on their Adjusted Capital Investment (not compounded) as set forth in the Partnership Agreement and (v) thereafter, 85% to the Partners in proportion to their interests and 15% ("Final Incentive Interest") to the General Partner. Depreciation: Depreciation was calculated by the straight-line method over the estimated lives of the investment properties and related personal property through December 31, 1997. No depreciation will be recorded under the liquidation basis of accounting. 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: Cash and cash equivalents includes cash on hand and in banks, money market funds and certificates of deposit with original maturities of less than 90 days. At certain times, the amount of cash deposited at a bank may exceed the limit on insured deposits. Loan Costs: Loan costs were being amortized on a straight line basis over the lives of the related loans. At December 31, 1997, these loan costs were written off in the adjustment to liquidation basis because the Partnership determined that these intangible assets no longer have value. Leases: The Partnership generally leases apartment units for twelve-month terms or less. Tenant 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. Advertising Costs: Advertising costs, approximately $51,000 in 1997 and approximately $45,000 in 1996, are charged to expense as they are incurred and are included in operating expenses in the statements of operations. Investment Properties: Investment properties were 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. As a result of the Partnership adopting the liquidation basis of accounting, the investment properties were adjusted to their estimated net realizable values at December 31, 1997. The effect of adoption was to increase the carrying value of the investment properties by approximately $2,157,000. 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. Reclassifications: Certain reclassifications have been made to the 1996 balances to conform to the 1997 presentation. NOTE C - ADJUSTMENT TO LIQUIDATION BASIS OF ACCOUNTING At December 31, 1997, in accordance with the liquidation basis of accounting, assets were adjusted to their estimated net realizable value and liabilities were adjusted to their estimated settlement amount and include all estimated costs associated with carrying out the liquidations. The net adjustment required to convert to the liquidation basis of accounting was a decrease in net liabilities of approximately $1,678,000. The adjustments are summarized as follows: (Increase) Decrease in Net Liabilities (in thousands) Adjustment from book value of property and improvements to estimated net realizable value $ 2,157 Adjustment to record estimated costs associated with the liquidation (Note A) (261) Adjustment of other assets and liabilities (218) Net decrease in net liabilities $ 1,678 NOTE D - NOTES PAYABLE The principle terms of notes payable are as follows: (dollar amounts in thousands)
Monthly Principal Payment Stated Balance Balance at Including Interest Maturity Due at December 31, Property/Partnership Interest Rate Date Maturity 1997 Whispering Pines Apartments First trust deed, in default $ 32 (1) Jan. 1997 $ 4,252 $ 4,252 Silver Ridge Apartments First mortgage bond payable 15 (3) July 2023 4,525 4,525 Second trust deed, in default 3 10.00% Dec. 1997 375 375 Angeles Partners 16 Note payable, in default (4) 22 12.50% (6) June 1997 859 859 Note payable, in default (4) 30 12.25% (6) June 1996 2,017 2,017 Working capital loan, in default (5) 14 (2) Nov. 1997 1,517 1,517 $ 116 $13,545 $ 13,545 (1) 11th District Federal Home Loan Bank Board base rate plus 2.25%, monthly payment varies with interest rate (7.084% at December 31, 1997). (2) Interest only payments at the prime rate plus 2% payable from available cash flow, as defined (10.50% at December 31, 1997). (3) Interest only payments based on a variable rate not to exceed 12% (3.40% at December 31, 1997) (4) Payable to AMIT. (5) Payable to AAP. (6) Default interest rate of 18.00%.
The first mortgage notes payable are nonrecourse and are secured by pledge of certain of the Partnership's investment properties and by pledge of revenues from the respective investment properties. Certain of the notes include prepayment penalties if repaid prior to maturity. The Partnership is in default on approximately $9,020,000 of its indebtedness, plus related accrued interest of approximately $1,767,000 due to maturity. Scheduled principal payments of notes payable subsequent to December 31, 1997, are as follows (dollar amounts in thousands): 1998 $ 9,020 1999 -- 2000 -- 2001 -- 2002 -- Thereafter 4,525 $ 13,545 NOTE E - 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 loss and Federal taxable loss: 1997 1996 (in thousands) Net loss as reported $ (383) $ (499) Add (deduct): Roof replacement 127 -- Environmental clean-up costs (63) (269) Depreciation differences (70) (72) Unearned income (3) (15) Miscellaneous 85 97 Federal taxable loss $ (307) $ (758) Federal taxable loss per limited partnership unit $ (21.70) $ (53.48) The following is a reconciliation between the Partnership's reported amounts and Federal tax basis of net liabilities: Net liabilities in liquidation, as reported $ (4,334) Land and buildings 3,005 Accumulated depreciation (3,347) Syndication and distribution costs 2,043 Estimated costs of liquidation 261 Accrued environmental clean-up costs 759 Prepaid rent 100 Other 266 Net liabilities - Federal tax basis $ (1,287) NOTE F - 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 as reimbursement of certain expenses incurred by affiliates on behalf of the Partnership. The following payments were paid or accrued to the General Partner and affiliates in 1997 and in 1996: 1997 1996 (in thousands) Property management fees (included in operating expenses) $ 129 $ 122 Reimbursements for services of affiliates (included in operating and general and administrative expenses and investment property) 86 67 Included in "Reimbursements for services of affiliates" for 1997 is approximately $7,000 in reimbursements for construction oversight costs. For the period from January 1, 1996, to August 31, 1997, the Partnership insured its properties under a master policy through an agency and insurer unaffiliated with the 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 master policy. The 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 that accrued to the benefit of the affiliate of the General Partner by virtue of the agent's obligations was not significant. In November 1992, AAP, a Delaware limited partnership, was organized to acquire and hold the obligations evidencing the working capital 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 approximately $751,000, was approximately $2,267,000 at December 31, 1997, all of which is in default due to nonpayment at maturity in November 1997. Total interest expense for this loan was approximately $161,000 and $156,000 for the years ended December 31, 1997 and 1996, respectively. At December 31, 1997, AMIT holds one secured and two unsecured notes receivable from the Partnership. Total indebtedness from the two unsecured notes, including accrued interest of approximately $987,000, is approximately $3,863,000 all of which is in default at December 31, 1997, due to maturity. Subsequent to December 31, 1997, a second trust deed of $375,000 and related accrued interest of approximately $3,000 was purchased by AMIT. This second trust deed matured December 1997. Total interest expense paid or accrued to AMIT was $619,000 and $514,000 for the years ended December 31, 1997 and 1996, respectively. As discussed in "Note A", in January 1998, the Partnership granted AMIT a Deed in Lieu of Foreclosure on Silver Ridge Apartments. This transfer of the investment property to AMIT effectively reduced the amounts owed to AMIT by approximately $992,000. AMIT assumed the first mortgage of approximately $4,525,000 secured by the property. 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 of AMIT 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 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 grant of the option and as part of the settlement, MAE GP also executed an irrevocable proxy in favor of AMIT, which provides that the holder of the Class B shares is permitted to vote those shares on all matters except those involving transactions between AMIT and MAE GP affiliated borrowers or the election of any MAE GP affiliate as an officer or trustee of AMIT. With respect to such matters, the trustees of AMIT are required to vote (pursuant to the irrevocable proxy) the Class B shares (as a single block) in the same manner as a majority of the Class A shares are voted (to be determined without consideration of the votes of "Excess Class A Shares" (as defined in Section 6.13 of AMIT's Declaration of Trust)). Between its acquisition of the Class B shares (in November 1992) and March 31, 1995, MAE GP declined to vote these shares. Since that date, MAE GP voted its shares at the 1995 and 1996 annual meetings in connection with the election of trustees and other matters. In February 1998, MAE GP was merged into Insignia Properties Trust ("IPT"), an affiliate of Insignia Financial Group, Inc. ("Insignia"), 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 (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 IPT, an entity then owned 98% by Insignia and its affiliates. On July 18, 1997, IPT, Insignia and MAE GP entered into a definitive merger agreement pursuant to which (subject to shareholder approval and certain other conditions, including the receipt by AMIT of a fairness opinion from its investment bankers) AMIT would be merged with and into IPT, with each Class A share and Class B share being converted into 1.625 and 0.0332 common shares of IPT, respectively. The foregoing exchange ratios are subject to adjustment to account for dividends paid by AMIT from January 1, 1997 and dividends paid by IPT from February 1, 1997. It is anticipated that Insignia and its affiliates (including MAE) would own approximately 57% of post-merger IPT when this transaction is consummated. NOTE G - INVESTMENT PROPERTIES AND ACCUMULATED DEPRECIATION
Initial Cost To Partnership (in thousands) Cost Buildings Capitalized Adjustment and Related (Removed) to Personal Subsequent to Liquidation Description Encumbrances Land Property Acquisition Basis Whispering Pines Apartments $ 4,252 $ 579 $ 5,211 $ (312) $ (391) Silver Ridge Apartments 4,900 642 6,244 (464) (1,022) Angeles Partners 16 4,393 -- -- -- -- Totals $ 13,545 $1,221 $ 11,455 $ (776) $(1,413)
At December 31, 1997 (in thousands) Buildings And Related Personal Accumulated Date Depreciable Description Land Property Total Depreciated Acquired Life-Years Whispering Pines Apartments $ 509 $ 4,578 $ 5,087 (1) 06/30/89 (1) Silver Ridge Apartments 567 4,833 5,400 (1) 12/29/87 (1) Totals $1,076 $ 9,411 $10,487 (1) As a result of adopting the liquidation basis of accounting, the gross carrying values of the properties were adjusted to their net realizable value and will not be depreciated further.
Reconciliation of "Investment Properties and Accumulated Depreciation": Years Ended December 31, 1997 1996 (in thousands) Investment Properties Balance at beginning of year $ 11,747 $ 11,685 Property improvements 321 62 Adjustments to liquidation basis (1,413) -- Dispositions (168) -- Balance at end of Year $ 10,487 $ 11,747 Accumulated Depreciation Balance at beginning of year $ 3,303 $ 3,006 Additions charged to expense 308 297 Adjustments to liquidation basis (3,570) -- Dispositions (41) -- Balance at end of Year $ -- $ 3,303 The aggregate cost of the real estate for Federal income tax purposes at December 31, 1997 and 1996, is $13,492,000 and $13,169,000. The accumulated depreciation taken for Federal income tax purposes at December 31, 1997 and 1996, is $3,347,000 and $2,968,000. NOTE H - ENVIRONMENTAL ESCROW In 1995, the Partnership sold the North Prior Industrial Park to an unrelated party. As required by the sales agreement, the Partnership established three escrows, one of which has not been expended at December 31, 1997. 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 was not covered by insurance, was 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. At December 31, 1997, the balance remaining in this account was approximately $872,000. The Partnership entered into an 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. In January 1998, the Partnership received a "Site Closure Letter" from the Minnesota Pollution and Control Agency which states that environmental risks have been reduced to minimal levels and that monitoring and remedial efforts may be discontinued for the present. The General Partner has not decreased the accrual for this liability as it believes the obligation has not been satisfied. The Partnership expects to receive any remaining funds in the escrow account in 1998. They will be used to pay down the AMIT debt discussed above (see "Note D"). NOTE I - LEGAL SETTLEMENT The Partnership was the plaintiff in a lawsuit filed against the fuel oil distributor for damages sustained as discussed in "Note H" above. A mediation hearing was held in December 1996 in which the defendants agreed that the claims may be resolved by payment by the defendants to the Partnership. During the second quarter of 1997, a complete settlement of the litigation was concluded. The total amount of the settlement was $340,000 and is included in total revenues at December 31, 1997. These funds were remitted to AMIT and were applied to the principal balance ($11,000) and accrued interest ($329,000) on the North Prior debt. NOTE J - ABANDONMENT OF LIMITED PARTNERSHIP UNITS In 1996, the number of Limited Partnership Units decreased by 40 units due to limited partners abandoning their units. In abandoning his or her Limited Partnership Units, a limited partner relinquishes all right, title and interest in the Partnership as of the date of abandonment. However, during the year of abandonment, the Limited Partner will still be allocated his or her share of the income or loss for that entire year. The loss per limited partnership unit in the accompanying statements of operations is calculated based on the number of units outstanding at the beginning of the year. NOTE K - 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 There were no disagreements with Ernst & Young LLP regarding the 1997 or 1996 audits of the Partnership's financial statements. PART III ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT Angeles Realty Corporation II ("ARC II" or the "General Partner"), is a wholly- owned subsidiary of MAE GP Corporation (MAE GP), an affiliate of Insignia Financial Group, Inc. ("Insignia"). Effective February 25, 1998, MAE GP was merged into Insignia Properties Trust ("IPT"), which is an affiliate of Insignia. Thus the Managing General Partner is now a wholly-owned subsidiary of IPT. The names of the directors and executive officers of ARC II, 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 Carroll D. Vinson has been President and Director of the General Partner and President of Metropolitan Asset Enhancement, L.P. ("MAE"), and subsidiaries since August 1994. He has acted as Chief Operating Officer of IPT, 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 Vice President of the General Partner since August 1994. Mr. Long joined MAE 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 1992. He has acted as Senior Vice President of IPT 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 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 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 ARC II. 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, certain fees 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, 1997, no person owned of record more than 5% of the Limited Partnership Units of the Partnership nor was any person known by the Partnership to own of record and beneficially, or beneficially only, more than 5% of such securities. 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. 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 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 as reimbursement of certain expenses incurred by affiliates on behalf of the Partnership. The following payments were paid or accrued to the General Partner and affiliates in 1997 and in 1996: 1997 1996 (in thousands) Property management fees $ 129 $ 122 Reimbursements for services of affiliates 86 67 Included in "Reimbursements for services of affiliates" for 1997 is approximately $7,000 in reimbursements for construction oversight costs. For the period from January 1, 1996, to August 31, 1997, the Partnership insured its properties under a master policy through an agency and insurer unaffiliated with the 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 master policy. The 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 that accrued to the benefit of the affiliate of the General Partner by virtue of the agent's obligations was not significant. In November 1992, AAP, a Delaware limited partnership, was organized to acquire and hold the obligations evidencing the working capital 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 approximately $751,000, was approximately $2,267,000 at December 31, 1997, all of which is in default due to maturity. This loan requires monthly interest only payments at prime plus 2% paid 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 approximately $161,000 and $156,000 for the years ended December 31, 1997 and 1996, respectively. At December 31, 1997, AMIT holds one secured and two unsecured notes receivable from the Partnership. Total indebtedness from the two unsecured notes, including accrued interest of approximately $987,000, is approximately $3,863,000 all of which is in default at December 31, 1997, due to maturity. Subsequent to December 31, 1997, a second trust deed of $375,000 and related accrued interest of approximately $3,000 was purchased by AMIT. Total interest expense paid or accrued to AMIT was $619,000 and $514,000 for the years ended December 31, 1997 and 1996, respectively. As discussed in "Note A", in January 1998, the Partnership granted AMIT a Deed in Lieu of Foreclosure on Silver Ridge Apartments. This transfer of the investment property to AMIT effectively reduced the amounts owed to AMIT by approximately $992,000. AMIT assumed the first mortgage of approximately $4,525,000 secured by the property. In November 1992, MAE GP Corporation ("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 of AMIT 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 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 grant of the option and as part of the settlement, MAE GP also executed an irrevocable proxy in favor of AMIT, which provides that the holder of the Class B shares is permitted to vote those shares on all matters except those involving transactions between AMIT and MAE GP affiliated borrowers or the election of any MAE GP affiliate as an officer or trustee of AMIT. With respect to such matters, the trustees of AMIT are required to vote (pursuant to the irrevocable proxy) the Class B shares (as a single block) in the same manner as a majority of the Class A shares are voted (to be determined without consideration of the votes of "Excess Class A Shares" (as defined in Section 6.13 of AMIT's Declaration of Trust)). Between its acquisition of the Class B shares (in November 1992) and March 31, 1995, MAE GP declined to vote these shares. Since that date, MAE GP voted its shares at the 1995 and 1996 annual meetings in connection with the election of trustees and other matters. In February 1998, MAE GP was merged into Insignia Properties Trust ("IPT"), an affiliate of Insignia Financial Group, Inc. ("Insignia"), 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 (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 IPT, an entity then owned 98% by Insignia and its affiliates. On July 18, 1997, IPT, Insignia and MAE GP entered into a definitive merger agreement pursuant to which (subject to shareholder approval and certain other conditions, including the receipt by AMIT of a fairness opinion from its investment bankers) AMIT would be merged with and into IPT, with each Class A share and Class B share being converted into 1.625 and 0.0332 common shares of IPT, respectively. The foregoing exchange ratios are subject to adjustment to account for dividends paid by AMIT from January 1, 1997 and dividends paid by IPT from February 1, 1997. It is anticipated that Insignia and its affiliates (including MAE) would own approximately 57% of post-merger IPT when this transaction is consummated. 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 13. EXHIBITS AND REPORTS ON FORM 8-K (a) See Exhibit Index contained herein. (b) Reports on Form 8-K filed during the fourth quarter of 1997: None. A Form 8-K was filed on January 30, 1998, reporting Deed in Lieu of Foreclosure between the Partnership and Angeles Mortgage Investment Trust. 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 PARTNERS 16 (A California Limited Partnership) (Registrant) By: Angeles Realty Corporation II General Partner By: /s/ Carroll D. Vinson Carroll D. Vinson President and Director Date: March 26, 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 dates indicated. /s/ Carroll D. Vinson President and Director Date: March 26, 1998 Carroll D. Vinson /s/ Robert D. Long, Jr. Vice President and Date: March 26, 1998 Robert D. Long, Jr. Chief Accounting Officer EXHIBIT INDEX Exhibit Number Description of Exhibits 3.1 Amended Certificate and Agreement of the Limited Partnership's filed in the Partnership's prospectus dated June 15, 1987 which is incorporated herein by reference. 10.1 Agreement of Purchase and Sale of Property with Exhibits - Angola Beach, filed in Form 8K dated December 29, 1987, which is incorporated herein by reference. 10.2 Amendment of Contract - Angola Beach filed in Form 8K dated December 29, 1987, which is incorporated herein by reference. 10.3 Agreement of Purchase and Sale of Property - Silver Ridge filed in Form 8K dated December 29, 1987, which is incorporated herein by reference. 10.4 Contract of Sale with Exhibits - Angola Estates, file in Form 8K dated January 12, 1988, which is incorporated herein by reference. 10.5 First Trust Deed - Angola Beach, filed in Form 10Q dated September 30, 1988, which is incorporated herein by reference. 10.6 Agreement of Purchase and Sale of Property - North Prior filed in Form 8K dated January 18, 1989, which is incorporated herein by reference. 10.7 Agreement of Purchase and Sale of Property - Whispering Pines filed in Form 8K dated July 19, 1989, which is incorporated herein by reference. 10.8 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 8-K dated December 31, 1992, which is incorporated herein by reference. 10.9 Agreement of Purchase and Sale of Property - Angola Beach and Angola Estates Mobile Home Park filed in Form 8K dated May 20, 1993, which is incorporated herein by reference. 10.10 Letter from the Registrant's former independent accountant regarding its concurrence with the statements made by the Registrant is incorporated by reference to the exhibit filed with Form 8K dated September 1, 1993. 10.11 Purchase Agreement with Exhibits between Angeles Partners 16 and North Prior, L.L.C. dated March 3, 1993, documenting the sale of North Prior Industrial Park. 10.12 First Amendment to Purchase Agreement with Exhibits between Angeles Partners 16 and North Prior, L.L.C. dated June 12, 1995, documenting the sale of North Prior Industrial Park. 10.13 Assignment and Assumption of Leases with Exhibits between Angeles Partners 16 and North Prior, L.L.C. dated June 12, 1995. 10.14 Assignment and Assumption of Service Contracts with Exhibits between Angeles Partners 16 and North Prior Industrial, L.L.C. dated June 12, 1995. 10.15 Assignment of Permits and Warranties with Exhibits between Angeles Partners 16 and North Prior, L.L.C. dated June 12, 1995. 10.16 Assignment of Rents and Leases with Exhibits between Angeles Partners 16 and Towle Real Estate Company dated June 12, 1995. 10.17 Assignment of Service Contracts with Exhibits between Angeles Partners 16 and Towle Real Estate Company dated June 12, 1995. 10.18 Assignment of Permits and Warranties with Exhibits between Angeles Partners 16 and Towle Real Estate Company dated June 12, 1995. 10.19 Deed in Lieu of Foreclosure between Angeles Partners 16, a California partnership, Angeles Realty Corporation II, a California corporation and Angeles Mortgage Investment Trust, a California business trust, as of January 30, 1998. 27 Financial Data Schedule, is filed as an exhibit to this report. EX-27 2
5 This schedule contains summary financial information extracted from Angeles Partners 16 1997 Year-End 10-KSB and is qualified in its entirety by reference to such 10-KSB filing. 0000812187 ANGELES PARTNERS 16 1,000 12-MOS DEC-31-1997 DEC-31-1997 479 0 323 0 0 0 10,487 0 12,553 0 13,545 0 0 0 0 12,553 0 2,974 0 0 3,357 0 1,304 0 0 0 0 0 0 (383) (27.10) 0 Registrant has an unclassified balance sheet. Multiplier is 1.
EX-10.19 3 AGREEMENT FOR DEED IN LIEU OF FORECLOSURE This AGREEMENT FOR DEED IN LIEU OF FORECLOSURE (this "Agreement") is made as of January 30, 1998 by and between ANGELES PARTNERS 16, a California limited partnership ("AP16"), ANGELES REALTY CORPORATION II, a California corporation ("ARC"), and ANGELES MORTGAGE INVESTMENT TRUST, a California business trust ("AMIT"). RECITALS A. ARC is the sole general partner of AP16. B. AP16 is indebted to AMIT pursuant to those certain two Promissory Notes currently held by AMIT which were originally issued in favor of Stephen E. Haight, both dated May 20, 1986, in the original principal amounts of $400,000 and $375,000, respectively, as amended by that certain Note and Mortgage Modification Agreement dated July 14, 1993 (collectively, as amended, the "Notes"). C. AMIT is the holder of a certain Subordinated Mortgage and Assignment of Rents in the original principal amount of $775,000 dated May 20, 1986, filed December 17, 1987, in the office of the Ramsey County Registrar of Titles as Document No. 857307, as amended by that certain Note and Mortgage Modification Agreement filed on August 16, 1993 as Document No. 1023847 in said office (as amended, the "Mortgage"), which Mortgage secures the payment of the Notes. D. The Mortgage constitutes a second lien against certain improved real property located in Ramsey County, Minnesota, legally described as follows: As set forth on Exhibit A attached hereto, (the "Property"), which Property is commonly known and referred to as Silver Ridge Apartments, located at 2330 Stillwater Avenue, Maplewood, Minnesota 55119. E. AP16 has and asserts no offsets, counter claims or defenses to the indebtedness evidenced by the Notes and the Mortgage, each of which are valid obligations of AP16, and which Notes are currently due and payable in full. F. The total amount outstanding on the Notes and Mortgage as of the date hereof is $396,832.19, computed as follows: Principal $375,000.00 Accrued Interest to 1/30/98 3,082.19 Late Charge 18,750.00 Total $396,832.19 G. In accordance with the terms and provisions of the Notes and Mortgage, which are currently in default, AMIT has demanded that AP16 convey to AMIT by limited warranty deed, bill of sale, and other appropriate assignments and instruments, all of the AP16's right, title and interest, in and to the Property, related personal property, the name Silver Ridge Apartments (and derivatives) and all claims, causes of action, contract rights and other general intangibles related to the Property, in exchange for which AMIT will release AP16 from liability on the Notes and Mortgage, and AMIT has agreed to do so on the terms and subject to the conditions hereinafter set forth. AGREEMENTS NOW, THEREFORE, in consideration of the premises and the agreements, covenants, representations and warranties contained herein and in any other documents delivered hereunder, and for one dollar and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: 1. Recitals. The information contained in the recitals set forth above is true and correct in all respects and accurately sets forth the facts and circumstances under which this Agreement has been executed. The recitals are a part of this Agreement and incorporated herein by reference. 2. Delivery of Documents. On or prior to the date hereof, AP16 has delivered or caused to be delivered to AMIT, as the case may be, all of the following documents dated such date and in form and substance satisfactory to AMIT, all duly executed and delivered by all appropriate parties: 2.1 A limited warranty deed (the "Deed") conveying the Property to AMIT subject only to the matters set forth in Exhibit B hereto (the "Permitted Encumbrances") with non-merger language acceptable to AMIT. 2.2 A bill of sale and assignment (the "Bill of Sale") conveying to AMIT all tangible and intangible personal property on or related to the Property and, if any, all warranties and any claims under warranties with respect to the real and personal property together with any and all certificates of title pertaining to such personal property required by law to be registered or certificated. 2.3 An executed assignment of leases (the "Lease Assignment") conveying to AMIT all leases pertaining to the Property and, if any, all guaranties of such leases and all of AP16's rights under the leases and guaranties, and all security deposits related thereto and interest thereon. 2.4 Owner's duplicate certificate of title no. 335310 covering the Property. 2.5 A commitment for an ALTA owner's policy of title insurance issued by Commonwealth Land Title Insurance Company ("Title") in favor of AMIT covering the Property in form and substance acceptable to AMIT whereby Title commits to issue its owner's policy of title insurance in favor of AMIT, which policy will be free from all standard exceptions and all other exceptions except for the Permitted Encumbrances and other exceptions specifically approved by AMIT. AMIT shall be responsible for payment for this title commitment and any premiums for the final title insurance policy. 2.6 An as-built survey of the Property, if in the possession of AP16 or its agents. 2.7 A complete set of as-built plans and specifications for the improvements on the Property (the "Existing Plans"), together with all proposed plans and specifications (including detailed proposed site plans) for proposed changes to the Property (the "Proposed Plans"), if in the possession of AP16 or its agents. The Existing Plans and Proposed Plans all being assigned to AMIT pursuant to the Bill of Sale. 2.8 Copies of all certificates of occupancy, permits and licenses pertaining to the Property and available in the records of AP16 or its agents. 2.9 Copies of all appraisals related to the Property available in the records of AP16 or its agents. 2.10 Copies of any and all soil tests, engineering studies, environmental assessments and other information pertaining to the Property available in the records of AP16 or its agents. 2.11 Originals of all leases and related guaranties pertaining to tenants currently occupying or having rights to occupy any portion of the Property together with all amendments thereto and all rental payment and security deposit records and all correspondence pertaining to lease matters related thereto (the "Lease Files") and, to the extent available in the records of AP16 or its agents, copies of all other leases pertaining to the Property together with all amendments thereto and all correspondence pertaining to lease matters related thereto. Such items may be left with AMIT's property manager at the Property. 2.12 Copies of any and all management agreements, service contracts, leases of personal property, unrecorded easements, covenants and restrictions and other agreements related to the Property (the "Contracts"). 2.13 All keys and other entry devices. 2.14 Copies of any and all other documents pertaining to the title, condition, operation and maintenance of the Property, if any, in the possession of AP16 or its agents. 2.15 An incumbency certificate and partnership documents of AP16 including a certified partnership agreement, together with all amendments thereto, and resolutions of the partnership authorizing this Agreement and the transactions contemplated hereby executed by the general and limited partners of AP16 as required under the partnership agreement. 2.16 An incumbency certificate and corporate documents of ARC including certified Articles of Incorporation and Bylaws, a Certificate of Good Standing issued by the Minnesota Secretary of State, and resolutions of the corporation authorizing this Agreement and the transactions contemplated hereby. 2.17 Seller's affidavit of no judgments, mechanic's liens or other unrecorded interests. 2.18 Certificate of real estate value. 2.19 Internal Revenue Service '1445 certification of nonforeign status. 2.20 Internal Revenue Service '1099 certification of taxpayer identification. 2.21 UCC and state and federal tax and judgment lien searches on AP16 and ARC. 2.22 Current financial statement of AP16 certified as being true and correct as of the date delivered. 2.23 Written instructions to AP16's current property manager to deliver and pay to AMIT all security deposits and interest thereon and all other amounts held by or under the control of said manager relating to the use, ownership, occupancy, maintenance and operation of the Property. As of January 30, 1998, the amounts held by said property manager are $394,355.73. 2.24 Notice letters to every tenant regarding change in ownership of the Property, transfer of security deposits and instructions for future payment of rents. 2.25 Termination of existing management agreement. 2.26 Termination of all Contracts, unless specifically assumed by AMIT, at AMIT's election. 2.27 Current rent roll of the Property, certified as being true and correct by AP16. 2.28 Such other documents and certificates as may be reasonably required by Title or AMIT. Hereinafter, the documents referred to in this Section 2 shall be referred to collectively as the "Conveyance Documents." 3. Representations and Warranties. In addition to the other representations and warranties made by them elsewhere in this Agreement or in any schedules, documents or affidavits delivered hereunder, AP16 and ARC each hereby represent and warrants to AMIT as of the date hereof: 3.1 They are in full compliance with the terms and conditions of this Agreement. 3.2 None of their representations herein or in any schedule delivered hereunder is false or misleading in any material respect. 3.3 To the knowledge of AP16 and ARC, the valuation of the Property conveyed to AMIT pursuant to the Conveyance Documents, as established by the Ramsey County Assessor, is $5,115,000. AMIT has also obtained a recent appraisal of the Property which states that the present fair market value of the Property is $5,400,000. By entering into this Agreement, AMIT has paid full and fair consideration for the property conveyed pursuant to the Conveyance Documents. 3.4 AP16 has no equity in the property conveyed to AMIT by the Conveyance Documents. 3.5 Each of them has been represented by independent legal counsel and such other financial and tax advisors as they have deemed necessary and have relied on such counsel and advisors with respect to all legal and tax consequences of the transactions contemplated herein. 3.6 EACH OF THEM HAS BEEN ADVISED AS FOLLOWS WITH RESPECT TO THE PROPERTY AND THE MORTGAGE: THEY HAVE THE RIGHT TO REQUIRE A FORECLOSURE SALE OF THE PROPERTY UNDER THE MORTGAGE AND TO REQUIRE A MINIMUM OF SIX WEEKS PUBLISHED NOTICE OF SUCH SALE; THEY HAVE THE RIGHT TO REQUEST THAT THE COURT ORDER A DELAY OF THE SALE; THEY MAY BRING A COURT ACTION TO CONTEST THE FORECLOSURE AND SALE OF THE PROPERTY; FOLLOWING FORECLOSURE SALE, THEY HAVE THE RIGHT TO REMAIN IN POSSESSION OF THE PROPERTY DURING A 12-MONTH PERIOD OF REDEMPTION; AND THEY (AND EACH OF THEM) HAS VOLUNTARILY WAIVED EACH RIGHT REFERRED TO ABOVE. 3.7 AP16 covenants, represents and warrants that it is the sole owner of and has good right and lawful authority to sell, transfer, assign and convey the Property pursuant to the terms hereof free and clear of all mortgages, liens, pledges, claims, charges, easements, rights of way, covenants, conditions, restrictions, encumbrances and any other matters affecting title thereto except for the Permitted Encumbrances and will defend the title to the Property against all claims and demands whatsoever not specifically excepted as Permitted Encumbrances. 3.8 AP16 is a limited partnership duly organized, validly existing and in good standing under the laws of the State of California and has the power, authority, permits, consents, authorizations and licenses necessary to execute, deliver and perform this Agreement and the Conveyance Documents. ARC is the sole general partner of AP16. All consents of the general and limited partners of AP16 necessary to authorize the execution, delivery and performance of this Agreement and the Conveyance Documents have been duly obtained and are in full force and effect. This Agreement and the Conveyance Documents have been duly authorized, executed and delivered by and on behalf of AP16 so as to constitute the valid and binding obligations of AP16 enforceable in accordance with their terms. 3.9 ARC is a corporation duly organized, validly existing and in good standing under the laws of the State of California and has all power, authority, permits, consents, authorizations and licenses necessary to execute, deliver and perform this Agreement and the Conveyance Documents. All resolutions of the directors and shareholders of ARC necessary to authorize the execution, delivery and performance of this Agreement and the Conveyance Documents have been duly adopted and are in full force and effect. This Agreement and the Conveyance Documents have been duly authorized, executed and delivered by and on behalf of ARC so as to constitute the valid and binding obligations of ARC enforceable in accordance with their terms. 3.10 There is no provision in any indenture, contract or agreement to which any one or more of them is a party or by which they or any one of them is bound and, to the best of their knowledge, no law, statute, ordinance, rule, regulation or restriction, or order of any court or administrative agency to which they or any one of them is subject or by which they or any one of them is bound, which prohibits the execution and delivery of this Agreement, the Conveyance Documents, or the performance and observance of terms, covenants or conditions of this Agreement or any of the Conveyance Documents. 3.11 Any and all financial statements heretofore delivered to AMIT by or on behalf of any one or more of them are true and correct in all material respects, and fairly represent the financial condition of the subjects thereof as of the respective dates thereof. No material change has occurred in the financial condition reflected in the most recent financial statement of any one or more of them since the respective dates of the most recent financial statement delivered by each. None of the aforesaid financial statements or any certificate or statement furnished to AMIT by or on behalf of any one or more of them in connection with this Agreement or any of the Conveyance Documents contains any untrue statement of a material fact or omits a material fact necessary in order to make the statements contained therein taken as a whole, not misleading. 3.12 Neither of them has received notice of any actions, suits, proceedings or investigations commenced or, to the best of their knowledge, threatened against them or any one of them or the Property in any court or before any federal, state, municipal or other governmental agency and they (and each of them) are not in default with respect to any order of any court or governmental agency. 3.13 They (and each of them) will reasonably cooperate with AMIT in collecting the rents and accounts assigned to AMIT pursuant to the terms of the Conveyance Documents including, without limitation, by providing witnesses, documentation and/or any additional information necessary to effectuate the collection of the rents and accounts by AMIT. 3.14 To the best of their knowledge, the Property does not violate any federal, state, local or other governmental law, ordinance or regulation including, without limitation, any environmental, building, zoning, health, safety, planning or subdivision law, ordinance or regulation, or any applicable private restriction. No notice of the violation of any said laws, ordinances, regulations or restrictions has been received by either of them. Neither of them has notice, information or knowledge of any change contemplated in any applicable law, ordinance, regulation or restriction, any notice of pending or threatened condemnation, zoning change or any judicial, administrative, governmental or quasi-governmental action or any action by adjacent landowners which could have a materially adverse affect on the Property. 3.15 There are no outstanding or unpaid claims, actions or causes of actions related to any transaction or obligation entered into or incurred by any one or more of them with respect to the Property. Except for the specific unpaid claims listed on Schedule 1 that AMIT has agreed to assume, they and each of them agree that they will satisfy or make arrangements to satisfy all other unpaid claims listed on Schedule 1 and any other outstanding claims related to the Property, whether or not listed on Schedule 1, before they become a lien on the Property. 3.16 AP16 has turned over to AMIT any and all funds on deposit in any account or otherwise held by AP16 or its agents and all instruments, judgments, agreements and other property constituting rents, revenues and other income (including, without limitation, tenant security deposits, insurance proceeds, tax refunds or other rebates or reimbursements and judgment or settlement awards) generated by the Property for any and all occupancy of the Property. If, at any time in the future, AP16 receives any cash, instruments or other property constituting rents, revenues or other income related to or generated by the Property, regardless of the period from which said amounts relate, AP16 will hold the same in trust for AMIT and will forthwith pay and deliver all such cash, instruments, and other property to AMIT in the form received duly endorsed or assigned to AMIT. AP16 and ARC each agree that as of the date hereof they have no interest in or claim to any such funds, instruments, judgments, agreements or other property constituting past, present or future rents, revenues or other income generated by the Property. 3.17 On or prior to the date hereof, AP16 and ARC have turned over to AMIT the originals of all current leases and related guaranties, if any, pertaining to the Property together with all amendments thereto and all correspondence related thereto. AP16 and ARC each represent and warrant that there are no other current leases and no amendments to current leases and no correspondence or other documentation related to the leases (including, without limitation, non-disturbance agreements, notices with respect to exercise of options, existence of defaults or other notices or letters of intent) that have not been turned over to AMIT. 3.18 On or prior to the date hereof, AP16 and ARC delivered to AMIT the originals (or, if originals were not available, copies) of all management agreements, service contracts, leases of personal property, unrecorded easements, covenants and restrictions and all other agreements related to the Property. AP16 and ARC each represent and warrant that there are no other management agreements, service contracts, leases of personal property, unrecorded easements, covenants or restrictions or other agreements related to the Property that have not been turned over to AMIT. 3.19 As of the date hereof AP16 is not in default under any leases, service contracts, easements, or restrictive covenants pertaining to the Property and there were no outstanding obligations under any such documents to be performed by AP16. 3.20 There are no actions, suits, proceedings or investigations pending or, to the knowledge of any of them threatened against AP16 or the Property in any court or before any federal, state, municipal or other governmental agency. 3.21 The rent roll provided to AMIT pursuant to Section 2.27 hereof is complete, true and correct. 3.22 To the best of their knowledge, there are no Hazardous Substances in or upon the Property originating from any source and no violation of any Environment Law relating to the Property. "Hazardous Substance" means any material, waste, substance, pollutant or contaminant which may or could pose a risk of injury or a threat to health or the environment including, without limitation, polychlorinated biphenyls, petroleum or petroleum products, asbestos in any form or asbestos containing materials, flammable explosives, radioactive materials, radon gas, urea formaldehyde, foam insulation or products and those substances included within the definitions of "hazardous substance," "hazardous waste," "hazardous material," "toxic substance," "solid waste," "pollutant" or "contaminate" in or otherwise regulated by any federal, state or local laws, ordinances or regulations. "Environmental Law" means any federal, state or local law, ordinance or regulation pertaining to health, industrial hygiene, or the regulation or protection of the environment, including ambient air, soil, groundwater, surface water and/or land use. 3.23 AP16 and ARC will reasonably cooperate with AMIT and the holder of the first mortgage on the Property ("Holder") in order to obtain the consent of Holder to the conveyance by AP16 to AMIT herein described. In connection therewith, AP16 and ARC shall execute and deliver such instruments, certifications, instructions, affidavits, consents, approvals, assignments and such other agreements and documents as Holder and/or AMIT shall reasonably request. All of the representations and warranties made hereunder are true and correct and all information provided to AMIT by the other parties in connection with this Agreement has not and does not contain any statement which, at the time and in light of the circumstances under which it was made, would be false or misleading with respect to any material fact or would omit any material fact necessary in order to make any such statement contained therein not false or misleading in any material respect. If any of said parties subsequently obtains knowledge that any such representation or warranty was or is untrue, such party shall immediately notify AMIT as to the untrue nature of said representation and agree to take such action as may be necessary to cause such representation to become true. 4. Release from Obligations. In consideration of the delivery of the documents set forth in Section 2 and in reliance on the representations and warranties of AP16 and ARC set forth herein and the due performance by such persons and entities of the obligations set forth herein, AMIT, for itself and its successors and assigns, releases AP16 and ARC and their respective officers, directors, shareholders, partners, agents and employees, and the personal representatives, heirs, successors and assigns of any and all of the foregoing from liability on the Notes and Mortgage and any related loan documents. In addition, AP16 and ARC have obligations to AMIT separate and apart from the Notes and Mortgage. The parties hereby acknowledge and agree that the release set forth in this Section 4 does not release or affect in any way the liability of such persons or entities to AMIT other than under the Notes and Mortgage. The release as set forth above is expressly conditioned on the following: 4.1 Full compliance by AP16 and ARC with the terms of this Agreement. 4.2 No representation of AP16 and ARC made in this Agreement or any of the documents required to be delivered under this Agreement shall prove to be false in any material respect. 4.3 The financial statements delivered in connection with this Agreement accurately and completely reflect the assets and liabilities of each respective person or entity. 4.4 AMIT shall not be required to restore to any person or entity for any reason all or any part of the property it has received pursuant to the Conveyance Documents. In the event the above conditions are not met, the indebtedness and liability of each person and entity shall automatically be revived, reinstated and restored. 5. Release. As an inducement to AMIT to enter into this Agreement and in consideration of AMIT's release of liability on indebtedness under Section 4 hereof and effective upon execution of this Agreement: 5.1 AP16 (for itself and each of its limited partners, agents and employees), ARC (for itself and its officers, directors, shareholders, agents and employees), and the personal representatives, heirs, successors and assigns of any and all of the foregoing (collectively, the "Releasing Parties") each hereby releases, acquits and forever discharges AMIT, its parent, affiliates, officers, employees, directors, agents, representatives, attorneys, insurers, predecessors and their respective personal representatives, successors and assigns (collectively, the "Released Parties") of and from, any and all manner of action or causes of action, suits, claims, damages, judgments and liabilities, whether known or unknown, liquidated or unliquidated, fixed, contingent, direct or indirect, which the Releasing Parties (or any of them) may in the past have asserted, may now assert or may in the future assert against the Released Parties (or any of them) under or with respect to the Notes or the Mortgage or any document related thereto or referred to therein or with respect to any actions or inactions regarding the Property or any leases or proposed sales of any of the Property. 5.2 Each of the Releasing Parties acknowledge that (i) it has agreed to enter into the foregoing release freely and voluntarily upon its own information and investigation; (ii) it is aware that its attorneys may discover facts different from or in addition to the facts that they now know or believe to be true with respect to the subject matter of the foregoing release; and (iii) it is its intention to (and upon execution of this Agreement, its release shall) fully, finally, absolutely and forever settle any and all claims, disputes and differences which now exist, may exist or have ever existed in favor of the Releasing Parties (or any of them) against the Released Parties (or any of them). The foregoing release shall operate as a full and complete release between the parties notwithstanding the discovery of any different or additional facts. 6. Miscellaneous. 6.1 Choice of Law. This Agreement shall be governed by and construed in accordance with the laws of the State of Minnesota. AP16 and ARC each hereby consents to the personal jurisdiction of the state and federal courts located in the State of Minnesota in connection with any controversy related to this Agreement. 6.2 Integration. This Agreement from and after the date hereof supersedes, and has merged into it, all prior oral and written offers, negotiations, understandings or agreements on the same subjects by or between the parties hereto with the effect that this Agreement shall control. Prior drafts of this Agreement may not be introduced as evidence in any subsequent proceeding involving the parties or any of them. 6.3 Counterparts. This Agreement may be executed in any number of counterparts, each of which when so executed and delivered shall be deemed to be an original and all of which taken together shall constitute but one and the same instrument. 6.4 Binding Agreement. This Agreement shall be binding upon and inure to the benefit of the parties and their respective personal representatives, heirs, successors, and assigns, except that AP16 and ARC shall not have the right to assign its or their rights hereunder or any interest herein without the prior written consent of AMIT. 6.5 Amendments. No amendment or modification of this Agreement shall be effective unless in writing signed by all parties hereto and no waiver or consent to any departure of any provision hereof by AP16 and ARC of any of the provisions of this Agreement shall be effective unless the same shall be in writing and signed by AMIT and then shall be effective only in the specific instance and for the specific purpose for which given. 6.6 Exclusive Benefit. This Agreement represents a personal concession to AP16 and ARC only for the sole and exclusive benefit of the parties hereto and nothing contained herein shall be deemed to confer any right or benefit on any other person not a party hereto. 6.7 Construction. The captions and headings of the various sections of this Agreement are for convenience only and shall not be deemed a part of this Agreement and shall not be construed as defining or as limiting in any way the scope or intent of the provisions hereof. Wherever the context requires or permits, the singular shall include the plural and the plural shall include the singular and the masculine, feminine and neuter shall be freely interchangeable. 6.8 Certain Expenses. AMIT agrees to pay the closing costs of this transaction, including but not limited to any updated survey, appraisal report, title insurance premium, transfer taxes, current real estate taxes and AMIT's legal fees; provided, however, that no expenses incurred by AP16 or ARC shall be paid by AMIT unless previously approved in writing by AMIT. IN WITNESS WHEREOF, this Agreement has been executed as of the date and year first above written. AP16: ANGELES PROPERTIES 16, a California limited partnership By ANGELES REALTY CORPORATION II, a California corporation, general partner By /s/ Robert D. Long, Jr. Its Vice President ARC: ANGELES REALTY CORPORATION II, a California corporation By /s/ Robert D. Long, Jr. Its Vice President AMIT: ANGELES MORTGAGE INVESTMENT TRUST, a California business trust By/s/Anna Merguerian_________ Anna Merguerian, Vice President EXHIBIT A (Legal Description) That certain real property located in Ramsey County, Minesota, described as follows: Parcel 1. Commencing on the East line of the Northwest quarter of the Southwest quarter of Section 25, Township 29, Range 22 at a point in the center of the Stillwater Road, which is 227 feet South of the Northeast corner of said Northwest quarter of the Southwest quarter; thence South along the Easterly line of the Northwest quarter of the Southwest quarter to the Southeast corner of said Northwest quarter of the Southwest quarter; thence Westerly along the Southerly line of the Northwest quarter of the Southwest quarter to the Southwest corner of the Northwest quarter of the Southwest quarter; thence Northerly along the Westerly line of the Northwest quarter of the Southwest quarter to the center line of Stillwater Road; thence Easterly along the center line of Stillwater Road to the point of beginning, except therefrom the following; That part of the North 3/4 of the Northwest quarter of the Southwest quarter of Section 25, Township 29 North, Range 22 West, lying South of the center line of the Stillwater Connection (formerly Stillwater Road) and lying east of a line running parallel with and distant 642 feet East of the West line of said Northwest quarter of Southwest quarter lying Westerly of a line running Northwest at an angle of 63 degrees 37 minutes to the South line of said North 3/4 of Northwest quarter of Southwest quarter from a point thereon distant 1038 feet East of the Southwest corner of said last described fraction of said Section 25, also except part taken for Registered Land Survey No. 21 and also except part taken for Registered Land Survey No. 137, and also except that part lying Southeasterly of State Trunk Highway No. 212. Parcel 2. That part of the North 3/4 of NW 1/4 of SW 1/4 of Section 25, Township 29 North, Range 22 West, lying South of the center line of the Stillwater Connection (formerly Stillwater Road) and lying East of a line running parallel with and distant 642 feet East of the West line of said NW 1/4 of SW 1/4 and lying Westerly of a line running Northwest at an angle of 63 degrees 37 minutes to the South line of said N 3/4 of NW 1/4 of SW 1/4 from a point thereon distant 1038 feet East of the Southwest corner last described fraction of said Section 25. EXHIBIT B (Permitted Encumbrances) 1. The lien of real estate taxes and special assessments due and payable in the year 1998 and thereafter. 2. The rights of tenants, as tenants only, in possession under unrecorded leases. 3. Mortgage filed as Document No. 1023845 and Assignment filed as Document No. 1023846. 4. Rights of judgment creditor under those instruments filed as Documents No. 1150960, 1157128 and 1169334. 5. Judgment filed as Document No. 1172662. 6. Easements, covenants, restrictions and declarations of record, if any. -----END PRIVACY-ENHANCED MESSAGE-----