FORM 10-QSB.--QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
Quarterly or Transitional Report
(As last amended by 34-32231, eff. 6/3/93.)
U.S. Securities and Exchange Commission
Washington, D.C. 20549
Form 10-QSB
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1995
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period.........to.........
Commission file number 0-9136
ANGELES PARTNERS VIII
(Exact name of small business issuer as specified in its charter)
California 95-3264317
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
One Insignia Financial Plaza, P.O. Box 1089
Greenville, South Carolina 29602
(Address of principal executive offices) (Zip Code)
Issuer's telephone number (803) 239-1000
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes X No
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
a) ANGELES PARTNERS VIII
BALANCE SHEET
(Unaudited)
<TABLE>
<CAPTION>
September 30, 1995
<S> <C> <C>
Assets
Cash:
Unrestricted $ 243,544
Restricted--tenant security deposits 56,146
Accounts receivable 11,507
Tax refund receivable 224,231
Escrows for taxes 141,126
Restricted escrows 196,000
Other assets 94,697
Investment properties:
Land $ 543,070
Buildings and related personal property 13,506,828
14,049,898
Less accumulated depreciation (9,022,325) 5,027,573
$ 5,994,824
Liabilities and Partners' Deficit
Liabilities
Accounts payable $ 36,904
Tenant security deposits 55,632
Accrued taxes 531,966
Accrued interest 1,062,862
Other liabilities 150,731
Note payable to an affiliate 370,719
Mortgage notes payable, $11,989,982 in default 16,135,077
Partners' Deficit
General partner $ (158,032)
Limited partners (11,985 units
issued and outstanding) (12,191,035) (12,349,067)
$ 5,994,824
</TABLE>
[FN]
See Accompanying Notes to Financial Statements
b) ANGELES PARTNERS VIII
STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<captiom>
Three Months Ended Nine Months Ended
September 30, September 30,
1995 1994 1995 1994
<S> <C> <C> <C> <C>
Revenues:
Rental income $ 892,396 $ 859,944 $2,660,866 $2,557,374
Other income 56,136 57,613 164,533 179,585
Tax recovery (Note D) 801,989 -- 801,989 --
Total revenues 1,750,521 917,557 3,627,388 2,736,959
Expenses:
Operating 249,983 242,238 735,351 699,832
General and administrative 31,609 24,939 86,732 71,046
Property management fees 47,267 45,207 140,196 136,112
Maintenance 89,343 106,882 266,095 338,672
Depreciation 149,658 149,794 443,246 445,807
Interest 458,499 444,406 1,393,797 1,282,489
Property taxes 116,730 146,038 348,537 428,922
Total expenses 1,143,089 1,159,504 3,413,954 3,402,880
Loss on disposal of
property -- (361) -- (361)
Net income (loss) $ 607,432 $ (242,308) $ 213,434 $ (666,282)
Net income (loss) allocated
to general partner (1%) $ 6,074 $ (2,423) $ 2,134 $ (6,663)
Net income (loss) allocated
to limited partners (99%) 601,358 (239,885) 211,300 (659,619)
$ 607,432 $ (242,308) $ 213,434 $ (666,282)
Net income (loss) per limited
partnership unit $ 50.18 $ (19.99) $ 17.63 $ (54.97)
</TABLE>
[FN]
See Accompanying Notes to Financial Statements
c) ANGELES PARTNERS VIII
STATEMENT OF CHANGES IN PARTNERS' DEFICIT
(Unaudited)
<TABLE>
<CAPTION> Limited
Partnership General Limited
Units Partner Partners Total
<S> <C> <C> <C> <C>
Original capital contributions 12,000 $ 121,000 $12,000,000 $12,121,000
Partners' deficit
at December 31, 1994 11,985 $(160,166) $(12,402,335) $(12,562,501)
Net income for the nine months
ended September 30, 1995 -- 2,134 211,300 213,434
Partners' deficit
at September 30, 1995 11,985 $(158,032) $(12,191,035) $(12,349,067)
</TABLE>
[FN]
See Accompanying Notes to Financial Statements
d) ANGELES PARTNERS VIII
STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
1995 1994
<S>
Cash flows from operating activities: <C> <C>
Net income (loss) $ 213,434 $(666,282)
Adjustments to reconcile net income (loss) to
cash provided by operating activities:
Depreciation 443,246 445,807
Amortization of loan costs 45,770 86,744
Loss on disposal of property -- 361
Change in accounts:
Restricted cash 45 (1,156)
Accounts receivable (1,655) 3,734
Tax refund receivable (224,231) --
Escrows for taxes (115,315) 14,493
Other assets -- 668
Accounts payable (81,176) (46,188)
Tenant security deposit liabilities (1,881) (2,317)
Accrued property taxes (373,938) 231,694
Accrued interest 390,051 220,761
Other liabilities (51,330) 35,176
Net cash provided by operating activities 243,020 323,495
Cash flows from investing activities:
Property improvements and replacements (116,496) (113,648)
Deposits to restricted escrows (196,000) --
Net cash used in investing activities (312,496) (113,648)
Cash flows from financing activities:
Payments on mortgage notes payable (103,502) (101,573)
Loan costs (5,000) --
Net cash used in financing activities (108,502) (101,573)
Net (decrease) increase in cash (177,978) 108,274
Cash at beginning of period 421,522 252,641
Cash at end of period $ 243,544 $ 360,915
Supplemental disclosure of cash flow information:
Cash paid for interest $ 957,976 $ 977,678
</TABLE>
[FN]
See Accompanying Notes to Financial Statements
e) ANGELES PARTNERS VIII
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
Note A - Going Concern
The accompanying financial statements have been prepared assuming the
Partnership will continue as a going concern. The Partnership has incurred
recurring operating losses and is in default on a portion of its mortgage notes
payable. The Partnership's first mortgage in the amount of $4,145,095 secured
by Bercado Shores Apartments was previously in default due to nonpayment of 1993
property taxes. However, these taxes have been paid and the first mortgage of
Bercado Shores is no longer in default. (See discussion in Note D). The second
mortgage to Angeles Mortgage Investment Trust ("AMIT"), a lending trust
sponsored by an affiliate of the General Partner, in the amount of $1,350,000
secured by Bercado Shores Apartments, is in default due to nonpayment of
interest. The Partnership's second mortgage to AMIT in the amount of $1,250,000
secured by Brittany Point Apartments is also in default due to nonpayment of
interest. This default also creates a default in the first mortgage in the
amount of $9,389,982 due to certain cross-default provisions in the first
mortgage. In addition, the Brittany Point Apartments first mortgage matured in
June 1995. A five year extension is currently being discussed with the existing
lender which would lower the interest rate from 10.125% to 7.875%. At September
30, 1995, the negotiations were ongoing. To facilitate the refinancing, the
property has been transferred to a lower tier partnership known as Brittany
Point AP VIII, L.P. in which Angeles Partners VIII is the 99% limited partner.
Although legal ownership of this asset was transferred to a new entity, Angeles
Partners VIII retained control and substantially all economic benefits of the
property.
The Partnership is negotiating an amendment of the terms of the debt
agreement with AMIT for the second mortgage on Bercado Shores that is in
default, but the agreement is not yet memorialized. A workout proposal with
AMIT on Brittany Point is currently being negotiated, as the property is unable
to meet current debt service payments due to cash flow difficulties.
Unless the above debt workouts are successfully negotiated, the Partnership
expects to be unable to maintain or enhance the properties' operations and
values. The financial statements do not include any adjustments to reflect the
possible future effects on the recoverability and classification of assets or
amounts and classification of liabilities that may result from these
uncertainties.
Note B - Basis of Presentation
The accompanying unaudited financial statements have been prepared in
accordance with generally accepted accounting principles for interim financial
information and with the instructions to Form 10-QSB and Item 310(b) of
Regulation S-B. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of the General Partner, all adjustments
(consisting of normal recurring accruals) considered necessary for a fair
presentation have been included. Operating results for the nine months ended
September 30, 1995, are not necessarily indicative of the results that may be
expected for the year ending December 31, 1995. For further information, refer
to the financial statements and footnotes thereto included in the Partnership's
annual report on Form 10-KSB for the year ended December 31, 1994.
Certain reclassifications have been made to the 1994 information to conform
to the 1995 presentation.
Note C - Transactions with Affiliated Parties
The Partnership has no employees and is dependent on the General Partner and
its affiliates for the management and administration of all partnership
activities. The Partnership Agreement provides for payments to affiliates for
services and as reimbursement of certain expenses incurred by affiliates on
behalf of the Partnership. The following payments were made to the General
Partner and affiliates for the nine months ended September 30, 1995 and 1994:
1995 1994
Property management fees $140,196 $136,112
Reimbursement for services of affiliates 47,469 31,115
The Partnership insures its properties under a master policy through an
agency and insurer unaffiliated with the General Partner. An affiliate of the
General Partner acquired, in the acquisition of a business, certain financial
obligations from an insurance agency which was later acquired by the agent who
placed the current year's master policy. The current agent assumed the
financial obligations to the affiliate of the General Partner, who receives
payments on these obligations from the agent. The amount of the Partnership's
insurance premiums accruing to the benefit of the affiliate of the General
Partner by virtue of the agent's obligation is not significant.
Note C - Transactions with Affiliated Parties - continued
AMIT currently provides secondary financing on the Partnership's investment
properties. Total indebtedness to AMIT of $2,600,000 was in default at
September 30, 1995. Total interest expense on this financing was $363,329 and
$239,035 at September 30, 1995, and September 30, 1994, respectively. Accrued
interest was $954,579 and $382,470 at September 30, 1995, and September 30,
1994, respectively.
MAE GP Corporation ("MAE GP"), an affiliate of the General Partner, owns
1,675,113 Class B Shares of AMIT. MAE GP has the option to convert these Class
B Shares, in whole or in part, into Class A Shares on the basis of 1 Class A
Share for every 49 Class B Shares. These Class B Shares entitle MAE GP to
receive 1% of the distributions of net cash distributed by AMIT. These Class B
Shares also entitle MAE GP to vote on the same basis as Class A Shares which
allows MAE GP to vote approximately 37% of the total shares (unless and until
converted to Class A Shares at which time the percentage of the vote controlled
represented by the shares held by MAE GP would approximate 1% of the vote).
Between the date of acquisition of these shares (November 24, 1992) and March
31, 1995, MAE GP declined to vote these shares. Since that date, MAE GP voted
its shares at the 1995 annual meeting in connection with the election of
trustees and other matters. MAE GP has not exerted, and continues to decline to
exert, any management control over or participate in the management of AMIT.
However, MAE GP may choose to vote these shares as it deems appropriate in the
future.
In November 1992, Angeles Acceptance Pool, L.P. ("AAP"), a Delaware limited
partnership which now controls the working capital loan previously provided by
Angeles Capital Investment, Inc. ("ACII"), was organized. 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 .5% 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 to AAP, which is included as a note payable,
was $370,719 at September 30, 1995, and September 30, 1994, respectively, with
monthly interest-only payments at prime plus 0.75% (8.75% at September 30,
1995). Principal is to be paid upon the earlier of i) the availability of
funds, ii) the sale of one or more properties covered by the Partnership, or
iii) November 25, 1997. Total interest expense for this loan was $26,723 and
$21,239 at September 30, 1995, and September 30, 1994, respectively. Accrued
interest was $81,253 and $43,563 at September 30, 1995, and September 30, 1994,
respectively.
Note C - Transactions with Affiliated Parties - continued
As part of a settlement of certain disputes with AMIT, MAE GP granted to AMIT
an option to acquire the Class B shares. This option can be exercised at the
end of 10 years or when all loans made by AMIT to partnerships affiliated with
MAE GP as of November 9, 1994, (which is the date of execution of a definitive
Settlement Agreement) have been paid in full, but in no event prior to November
9, 1997. AMIT delivered to MAE GP cash in the sum of $250,000 at closing, which
occurred April 14, 1995, as payment for the option. Upon exercise of the
option, AMIT would remit to MAE GP an additional $94,000.
Simultaneously with the execution of the option, MAE GP executed an
irrevocable proxy in favor of AMIT, the result of which is MAE GP will be able
to vote the Class B shares on all matters except those involving transactions
between AMIT and MAE GP affiliated borrowers or the election of any MAE GP
affiliate as an officer or trustee of AMIT. On those matters, MAE GP granted to
the AMIT trustees, in their capacity as trustees of AMIT, proxies with regard to
the Class B shares instructing such trustees to vote said Class B shares in
accordance with the vote of the majority of the Class A shares voting to be
determined without consideration of the votes of "Excess Class A Shares" as
defined in Section 6.13 of the Declaration of Trust of AMIT.
Note D - Tax Recovery - Bercado Shores Apartments
The Partnership has successfully appealed the property taxes for Bercado
Shores. The current year property taxes have been reduced based on the newly
assessed property value. The tax authority is reimbursing the property for
prior overpayments of the 1990, 1991, and 1992 taxes totalling $545,394. The
tax authority has applied $321,163 of the refund to pay the 1993 taxes. The net
reimbursement to the property of $224,231 has been recorded as a tax refund
receivable at September 30, 1995. This receivable was collected by the
Partnership on October 5, 1995. The first mortgage in the amount of $4,145,095
was previously in default due to the nonpayment of the 1993 taxes. Since the
property's property taxes are now current, the first mortgage is no longer in
default.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
The Partnership's investment properties consist of two apartment complexes.
The following table sets forth the average occupancy of the properties for the
nine months ended September 30, 1995 and 1994:
Average
Occupancy
1995 1994
Bercado Shores Apartments
Mishawka, Indiana 95% 93%
Brittany Point Apartments
Huntsville, Alabama 90% 87%
The increase in occupancy at Brittany Point is attributed to increases in
advertising efforts and leasing incentives offered since 1994.
The Partnership realized net income of $213,434 for the nine months ended
September 30, 1995, compared to a net loss of $666,282 for the nine months ended
September 30, 1994. The Partnership realized net income of $607,432 for the
three months ended September 30, 1995, compared to a net loss of $242,308 for
the three months ended September 30, 1994. The tax recovery recognized in the
three months ended September 30, 1995, is a result of the settlement of the tax
appeal for the 1990, 1991, and 1992 property taxes for Bercado Shores (See
further discussion in Note D of the Notes to Financial Statements).
Total expenses were comparable for the three and nine months ended September
30, 1995 and 1994, due to increases in interest, operating and general and
administrative expenses being offset by decreases in maintenance expense and
property taxes. The increase in general and administrative expense for the
nine months ended September 30, 1995, was due to increased legal expense
resulting from the refinancing of the Brittany Point first mortgage, which
should be finalized during the fourth quarter of 1995. The decrease in
maintenance expense for the three and nine months ended September 30, 1995, was
due primarily to decreased carpet cleaning expense and exterior lighting repairs
of approximately $42,000 at Bercado Shores and decreased contract trash removal
and other miscellaneous repairs of approximately $30,000 at Brittany Point.
Property tax expense decreased for the three and nine months ended September 30,
1995, as a result of the successful tax appeal at Bercado Shores which reduced
the property's assessed value. The loss on disposal in 1994 relates to the
replacement of roofs at the properties.
As part of the ongoing business plan of the Partnership, the General Partner
monitors the rental market environment of each of its investment properties to
assess the feasibility of increasing rents, maintaining or increasing occupancy
levels and protecting the Partnership from increases in expenses. As part of
this plan, the General Partner attempts to protect the Partnership from the
burden of inflation-related increases in expenses by increasing rents and
maintaining a high overall occupancy level. However, due to changing market
conditions, which can result in the use of rental concessions and rental
reductions to offset softening market conditions, there is no guarantee that the
General Partner will be able to sustain such a plan.
The Partnership held unrestricted cash of $243,544 at September 30, 1995,
compared to unrestricted cash of $360,915 at September 30, 1994. Net cash
provided by operating activities decreased for the nine months ended September
30, 1995, compared to the corresponding period of 1994 due to increased deposits
to escrows for taxes and increased payments of accounts payable, accrued
property taxes, and other liabilities partially by an increase in accrued
interest. Net cash used in investing activities increased due to deposits to
restricted escrows resulting from the pending refinancing of the Brittany Point
mortgage. Net cash used in financing activities increased due to loan costs
associated with the Brittany Point refinancing.
No distributions were made by the Partnership during 1994 or during the nine
months ended September 30, 1995.
Since 1992, the nominal cash generated by the properties has been
insufficient to pay the capital expenditures and scheduled debt service. The
Partnership has incurred recurring operating losses and is in default on a
portion of its mortgage notes payable. The Partnership's first mortgage in the
amount of $4,145,095 secured by Bercado Shores was previously in default due to
nonpayment of 1993 taxes. The property is now current on payment of property
taxes and the first mortgage is no longer in default (See discussion in Note D
in the Notes to the Financial Statements). The second mortgage to Angeles
Mortgage Investment Trust ("AMIT"), a lending trust sponsored by an affiliate of
the General Partner, in the amount of $1,350,000, secured by the Bercado Shores
Apartments, is in default due to nonpayment of interest. The Partnership's
second mortgage to AMIT in the amount of $1,250,000 secured by Brittany Point
Apartments is also in default due to nonpayment of interest. This default also
creates a default in the first mortgage of $9,389,982 due to certain cross-
default provisions in the first mortgage.
Bercado Shores' cash flows from operations have historically been
insufficient to pay necessary operating expenses and debt service. The
Partnership is negotiating terms with AMIT for the second mortgage that is in
default, but the agreement is not yet memorialized. A workout proposal with
AMIT on the Brittany Point mortgage is currently being negotiated since the
property is unable to meet the current debt service payments due to cash flow
difficulties.
MAE GP Corporation ("MAE GP"), an affiliate of the General Partner, owns
1,675,113 Class B Shares of AMIT. MAE GP has the option to convert these Class
B Shares, in whole or in part, into Class A Shares on the basis of 1 Class A
Share for every 49 Class B Shares. These Class B Shares entitle MAE GP to
receive 1% of the distributions of net cash distributed by AMIT. These Class B
Shares also entitle MAE GP to vote on the same basis as Class A Shares which
allows MAE GP to vote approximately 37% of the total shares (unless and until
converted to Class A Shares at which time the percentage of the vote controlled
represented by the shares held by MAE GP would approximate 1% of the vote).
Between the date of acquisition of these shares (November 24, 1992) and March
31, 1995, MAE GP declined to vote these shares. Since that date, MAE GP voted
its shares at the 1995 annual meeting in connection with the election of
trustees and other matters. MAE GP has not exerted, and continues to decline to
exert, any management control over or participate in the management of AMIT.
However, MAE GP may choose to vote these shares as it deems appropriate in the
future.
As part of a settlement of certain disputes with AMIT, MAE GP granted to AMIT
an option to acquire the Class B shares. This option can be exercised at the
end of 10 years or when all loans made by AMIT to partnerships affiliated with
MAE GP as of November 9, 1994, (which is the date of execution of a definitive
Settlement Agreement) have been paid in full, but in no event prior to November
9, 1997. AMIT delivered to MAE GP cash in the sum of $250,000 at closing, which
occurred April 14, 1995, as payment for the option. Upon exercise of the
option, AMIT would remit to MAE GP an additional $94,000.
Simultaneously with the execution of the option, MAE GP executed an
irrevocable proxy in favor of AMIT, the result of which is MAE GP will be able
to vote the Class B shares on all matters except those involving transactions
between AMIT and MAE GP affiliated borrowers or the election of any MAE GP
affiliate as an officer or trustee of AMIT. On those matters, MAE GP granted to
the AMIT trustees, in their capacity as trustees of AMIT, irrevocable proxies
with regard to the Class B shares instructing such trustees to vote said Class B
shares in accordance with the vote of the majority of the Class A shares voting
to be determined without consideration of the votes of "Excess Class A Shares"
as defined in Section 6.13 of the Declaration of Trust of AMIT.
As previously stated, the Partnership is in default on the second mortgages
for both investment properties and the first mortgage for Brittany Point. The
first mortgage indebtedness of $9,389,982 for Brittany Point matured in June
1995. A five year extension is currently being discussed with the existing
lender which would lower the interest rate from 10.125% to 7.875%. At September
30, 1995, the negotiations were ongoing. To facilitate the refinancing, the
property has been transferred to a lower tier partnership known as Brittany
Point AP VIII, L.P. Angeles Partners VIII is the 99% limited partner in this
lower tier partnership. Although legal ownership of this asset was transferred
to a new entity, Angeles Partners VIII retained control and substantially all
economic benefits of the property.
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a) Exhibits
Exhibit 27, Financial Data Schedule, is filed as an exhibit to this
report.
b) Reports on Form 8-K
None filed during the quarter ended September 30, 1995.
SIGNATURES
In accordance with the requirements of the Exchange Act, the Registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
ANGELES PARTNERS VIII
By: Angeles Realty Corporation
General Partner
By: /s/Carroll D. Vinson
Carroll D. Vinson
President
By: /s/Robert D. Long, Jr.
Robert D. Long, Jr.
Controller and Principal
Accounting Officer
Date: November 13, 1995
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from Angeles
Partners VIII Limited Partnership's 1995 Third Quarter 10-QSB and is qualified
in its entirety by reference to such 10-QSB filing.
</LEGEND>
<CIK> 0000276779
<NAME> ANGELES PARTNERS VIII LIMITED PARTNERSHIP
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> SEP-30-1995
<CASH> 243,544
<SECURITIES> 0
<RECEIVABLES> 235,738
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 967,251
<PP&E> 14,049,898
<DEPRECIATION> (9,022,325)
<TOTAL-ASSETS> 5,994,824
<CURRENT-LIABILITIES> 1,838,094
<BONDS> 16,505,796
<COMMON> 0
0
0
<OTHER-SE> (12,349,067)
<TOTAL-LIABILITY-AND-EQUITY> 5,994,824
<SALES> 0
<TOTAL-REVENUES> 3,627,388
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 3,413,954
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,393,797
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (213,434)
<EPS-PRIMARY> (17.63)
<EPS-DILUTED> 0
</TABLE>
