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, 1999
[ ] 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 0-9136
ANGELES PARTNERS VIII
(Name of small business issuer in its charter)
California 95-3264317
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
55 Beattie Place, PO Box 1089
Greenville, South Carolina 29602
(Address of principal executive offices)
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:
Units of Limited Partnership Interest
(Title of class)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes X No___
Check if there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B contained in this form, and no disclosure will be contained, to
the best of the 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.
State issuer's revenues for its most recent fiscal year. $2,981,000
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 December 31, 1999. No market exists for the limited partnership
interests of the Registrant, and, therefore, no aggregate market value can be
determined.
DOCUMENTS INCORPORATED BY REFERENCE
None
PART I
Item 1. Description of Business
Angeles Partners VIII (the "Partnership" or "Registrant") is a publicly held
limited partnership organized under the California Uniform Limited Partnership
Act on August 7, 1978. The general partner of the Partnership is Angeles Realty
Corporation (the "General Partner" or "ARC"), a California corporation, which
was a wholly-owned subsidiary of MAE GP Corporation ("MAE GP"). Effective
February 25, 1998, MAE GP was merged into Insignia Properties Trust ("IPT"),
which was an affiliate of Insignia Financial Group, Inc. ("Insignia"). Effective
February 26, 1999, IPT was merged with and into Apartment Investment and
Management Company ("AIMCO"). Thus the General Partner became a wholly-owned
subsidiary of AIMCO. (See "Transfer of Control" below.) The Partnership
Agreement provides that the Partnership is to terminate on December 31, 2035,
unless terminated prior to such date.
The offering of the Registrant's limited partnership units ("Units") commenced
on December 4, 1978, and terminated on September 13, 1979. The Registrant,
through its public offering of Units, sold 12,000 units aggregating $12,000,000.
Since its initial offering, the Registrant has not received, nor are limited
partners required to make, additional capital contributions. Funds obtained by
the Registrant during the public offering period, together with long-term
borrowings, were used to acquire two residential apartment properties prior to
October 31, 1979. By October 31, 1980, the Registrant had purchased three
additional residential apartment properties. The Registrant currently owns and
operates one residential apartment complex. (See "Item 2. Description of
Property" for a description of the Registrant's property).
The Registrant has no employees. Management and administrative services are
performed by the General Partner and by agents retained by the General Partner.
An affiliate of the General Partner has been providing such property management
services.
The real estate business in which the Partnership is engaged is highly
competitive. There are other residential properties within the market area of
the Registrant's property. The number and quality of competitive properties,
including those which may be managed by an affiliate of the General Partner, in
such market area could have a material effect on the rental market for the
apartments at the Registrant's property and the rents that may be charged for
such apartments. While the General Partner and its affiliates own and/or control
a significant number of apartment units in the United States, such units
represent an insignificant percentage of total apartment units in the United
States and competition for apartments is local.
Both the income and expenses of operating the property owned by the Partnership
are subject to factors outside of the Partnership's control, such as changes in
the supply and demand for similar properties resulting from various market
conditions, increases/decreases in unemployment or population shifts, changes in
the availability of permanent mortgage financing, changes in zoning laws, or
changes in patterns or needs of users. In addition, there are risks inherent in
owning and operating residential properties because such properties are
susceptible to the impact of economic and other conditions outside of the
control of the Partnership.
There have been, and it is possible there may be other, Federal, state and local
legislation and regulations enacted relating to the protection of the
environment. The Partnership is unable to predict the extent, if any, to which
such new legislation or regulations might occur and the degree to which such
existing or new legislation or regulations might adversely affect the property
owned by the Partnership.
The Partnership monitors its property for evidence of pollutants, toxins and
other dangerous substances, including the presence of asbestos. In certain cases
environmental testing has been performed, which resulted in no material adverse
conditions or liabilities. In no case has the Partnership received notice that
it is a potentially responsible party with respect to an environmental clean up
site.
A further description of the Partnership's business is included in "Management's
Discussion and Analysis or Plan of Operations" included in "Item 6." of this
Form 10-KSB.
Transfer of Control
Pursuant to a series of transactions which closed on October 1, 1998 and
February 26, 1999, Insignia and IPT merged into AIMCO, a publicly traded real
estate investment trust with AIMCO being the surviving corporation (the
"Insignia Merger"). As a result, AIMCO acquired 100% ownership interest in the
General Partner. The General Partner does not believe that this transaction has
had or will have a material effect on the affairs and operations of the
Partnership.
Item 2. Description of Property:
The following table sets forth the Partnership's investment in property:
Date of
Property Purchase Type of Ownership Use
Bercado Shores 05/31/79 Fee ownership, subject to Apartment
Mishawaka, Indiana a first and second mortgage 234 units
Schedule of Property:
Set forth below for the Partnership's property is the gross carrying value,
accumulated depreciation, depreciable life, method of depreciation and Federal
tax basis.
Gross
Carrying Accumulated Useful Federal
Property Value Depreciation Life Method Tax Basis
(in thousands) (in thousands)
Bercado Shores $ 4,750 (1) (1) (1) $ 1,697
(1) As a result of adopting the liquidation basis of accounting, the gross
carrying value of the property was adjusted to its net realizable value
and will not be depreciated further.
Schedule of Property Indebtedness
The following table sets forth certain information relating to the loans
encumbering the Partnership and its property.
<TABLE>
<CAPTION>
Principal Principal
Balance At Stated Balance
December 31, Interest Period Maturity Due At
Property 1999 Rate Amortized Date Maturity
(in thousands) (in thousands)
<S> <C> <C> <C> <C> <C>
Bercado Shores
1st mortgage $ 3,897 (1) 30 yrs 06/2000 $ 3,859
2nd mortgage, 1,350 12.50% (2) 06/1995(3) 1,350
(in default)
Partnership Debt
(in default) 371 (4) 11/1997(5) 371
Total $ 5,618 $ 5,580
</TABLE>
(1) Based on the one-year Treasury Constant Maturities rate plus 3%; 7.94%,
average rate for the year ended December 31, 1999.
(2) Interest only payments
(3) In March 1993, the Partnership defaulted on payments on the second trust
deed from Angeles Mortgage Investment Trust ("AMIT") on Bercado Shores.
(4) Based on the prime rate plus 0.75%; 8.69% average rate for the year ended
December 31, 1999.
(5) In November 1997, the Partnership defaulted on payments on its note
payable to Angeles Acceptance Pool, L.P. ("AAP"). On December 14, 1999,
the Partnership was notified that Angeles Acceptance Pool (the
"Plaintiff") had filed suit against the Partnership in the Circuit Court
of Madison County, Alabama. The Plaintiff has obtained a default judgment
of approximately $552,000. The General Partner believes that the court
lacked jurisdiction over the Partnership and that the judgment is void.
The General Partner intends to contest any effort by the Plaintiff to
enforce the judgment against the Partnership.
See "Item 7. Financial Statements - Note D" for information with respect to the
Partnership's ability to repay these loans and other specific details about the
loans.
Schedule of Average Rental Rate and Occupancy:
Average annual rental rate and occupancy for 1999 and 1998 for the property:
Average Annual Average Annual
Rental Rate Occupancy
(per unit)
Property 1999 1998 1999 1998
Bercado Shores $6,580 $6,434 90% 93%
The decrease in occupancy at Bercado Shores is primarily due to the cash flow
problems at the property which has affected the property's ability to fund all
the required capital expenditures (see "Item 1. Financial Statements, Note A -
Basis of Presentation"). As a result, this has affected the property's lease
renewals and its ability to attract new tenants.
As noted under "Item 1. Description of Business", the real estate industry is
highly competitive. The apartment complex of the Partnership is subject to
competition from other residential apartment complexes in the area. The General
Partner believes that this property is adequately insured. This property is an
apartment complex that leases units for terms of one year or less. No tenant
leases 10% or more of the available rental space. This property is subject to
normal depreciation and deterioration as is typical for assets of this type and
age.
Schedule of Real Estate Taxes and Rates:
Real estate taxes and rates in 1999 for the property were:
1999 1999
Billing Rate
(in thousands)
Bercado Shores $ 255 14.39%
Capital Improvements:
Bercado Shores
The Partnership completed approximately $138,000 in capital expenditures at
Bercado Shores as of December 31, 1999, consisting of structural improvements
and appliance and flooring replacements. These improvements were funded
primarily from operating cash flow. The Partnership is currently evaluating the
capital improvement needs of the property for the upcoming year. The minimum
amount to be budgeted is expected to be $300 per unit or $70,200. Additional
improvements may be considered and will depend on the physical condition of the
property as well as replacement reserves and anticipated cash flow generated by
the property.
Item 3. Legal Proceedings
In March 1998, several putative unit holders of limited partnership units of the
Partnership commenced an action entitled Rosalie Nuanes, et al. v. Insignia
Financial Group, Inc., et al. in the Superior Court of the State of California
for the County of San Mateo. The plaintiffs named as defendants, among others,
the Partnership, the General Partner and several of their affiliated
partnerships and corporate entities. The action purports to assert claims on
behalf of a class of limited partners and derivatively on behalf of a number of
limited partnerships (including the Partnership) which are named as nominal
defendants, challenging the acquisition by Insignia Financial Group, Inc.
("Insignia") and entities which were, at one time, affiliates of Insignia
("Insignia Affiliates") of interests in certain general partner entities, past
tender offers by Insignia Affiliates to acquire limited partnership units, the
management of partnerships by Insignia Affiliates and the Insignia Merger (see
"Item 7. Financial Statements, Note C - Transfer of Control"). The plaintiffs
seek monetary damages and equitable relief, including judicial dissolution of
the Partnership. On June 25, 1998, the General Partner filed a motion seeking
dismissal of the action. In lieu of responding to the motion, the plaintiffs
have filed an amended complaint. The General Partner filed demurrers to the
amended complaint which were heard February 1999. Pending the ruling on such
demurrers, settlement negotiations commenced. On November 2, 1999, the parties
executed and filed a Stipulation of Settlement, settling claims, subject to
final court approval, on behalf of the Partnership and all limited partners who
own units as of November 3, 1999. Preliminary approval of the settlement was
obtained on November 3, 1999 from the Superior Court of the State of California,
County of San Mateo, at which time the Court set a final approval hearing for
December 10, 1999. Prior to the December 10, 1999 hearing the Court received
various objections to the settlement, including a challenge to the Court's
preliminary approval based upon the alleged lack of authority of class
plaintiffs' counsel to enter the settlement. On December 14, 1999, the General
Partner and its affiliates terminated the proposed settlement. Certain
plaintiffs have filed a motion to disqualify some of the plaintiffs' counsel in
the action. The General Partner does not anticipate that costs associated with
this case will be material to the Partnership's overall operations.
The Partnership is unaware of any other pending or outstanding litigation that
is not of a routine nature arising in the ordinary course of business.
Item 4. Submission of Matters to a Vote of Security Holders
During the quarter ended December 31, 1999, no matter was submitted to a vote of
unit holders through the solicitation of proxies or otherwise.
PART II
Item 5. Market for the Partnership Equity and Related Security Holder Matters
The Partnership, a publicly-held limited partnership, currently has 1,264
limited Partners of record holding 11,759 Units. Affiliates of the General
Partner owned 24 Units or .204% at December 31, 1999. During 1998, 96 Limited
Partnership Units were abandoned by investors. In abandoning his or her
partnership units, a limited partner relinquishes all right, title and interest
in the Partnership as of the date of abandonment. 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 from operations until
and unless the financial condition of the Partnership and other relevant factors
warrant resumption of distributions. Consequently, there were no distributions
made by the Partnership during either of the years ended December 31, 1999 and
1998.
Item 6. Management's Discussion and Analysis or Plan of Operation
The matters discussed in this Form 10-KSB contain certain forward-looking
statements and involve risks and uncertainties (including changing market
conditions, competitive and regulatory matters, etc.) detailed in the disclosure
contained in this Form 10-KSB and the other filings with the Securities and
Exchange Commission made by the Registrant from time to time. The discussions of
the Registrant's business and results of operations, including forward-looking
statements pertaining to such matters, does not take into account the effects of
any changes to the Registrant's business and results of operations. Accordingly,
actual results could differ materially from those projected in the
forward-looking statements as a result of a number of factors, including those
identified herein.
This item should be read in conjunction with the consolidated financial
statements and other items contained elsewhere in this report.
Liquidity and Capital Resources
As of September 30, 1999, the Partnership adopted the liquidation basis of
accounting due to the imminent loss of its remaining investment property. The
Partnership has experienced significant recurring operating losses, is in
default on a portion of its mortgage notes payable and does not generate
sufficient cash flow to meet current debt service requirements on its
subordinated debt. 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.
The Partnership had an outstanding obligation due to an affiliate of the General
Partner (the "Affiliate"), for cumulative unpaid accountable administrative
services. This liability was secured by the Partnership's 99% limited
partnership interest in Brittany Point AP VIII L.P. ("Brittany LP"), the entity
that owned Brittany Point Apartments. During the third quarter of 1999, the
Affiliate exercised remedies with respect to this liability. In such exercise,
effective September 20, 1999, the Affiliate acquired the Partnership's 99%
limited partnership interest in Brittany LP at a public sale in compliance with
the South Carolina Uniform Commercial Code. The Partnership recognized a gain on
conversion of minority interest in Brittany LP of approximately $8,486,000 which
was the excess of the entity's liabilities over its assets.
The Affiliate has the power to remove the general partner of Brittany LP, an
entity in which the Partnership owns an interest. While the Affiliate informed
the Partnership that it did not intend to effect such a removal during 1999,
there can be no assurance that such general partner will not be removed at some
point in the future, thereby causing the loss of the Partnership's entire
interest in Brittany LP.
In addition, the Partnership's second mortgage to AMIT in the amount of
approximately $1,350,000, plus accrued interest of approximately $2,449,000,
which is secured by the Partnership's remaining investment property, Bercado
Shores Apartments, has been in default since 1993 due to nonpayment of interest
and the maturity of the note in 1995. This indebtedness is recourse to the
Partnership and the estimated fair value of this property is less than the total
of its first and second mortgages. This property remains subject to foreclosure
under the terms of the second mortgage agreement. Such holder has informed the
General Partner of its intention to exercise remedies with respect to all or a
portion of such indebtedness at an indeterminate point in the future. While such
holder did not exercise remedies during 1999, there can be no assurance as to
when the exercise of such remedies will occur. The General Partner currently
believes that the use by the Partnership of its limited resources to contest the
exercise of such remedies would most likely be futile. Accordingly, when such
holder commences the exercise of such remedies, the General Partner may execute
settlement documents to effect the exercise of such remedies in a manner that is
cost effective to the Partnership.
Pursuant to a series of transactions, affiliates of the General Partner acquired
ownership interests in AMIT. On September 17, 1998, AMIT was merged with and
into IPT, which was the sole shareholder of the General Partner. On February 26,
1999, IPT was merged into AIMCO. As a result AIMCO is the current holder of the
AMIT debt.
At September 30, 1999, the Partnership had cash and cash equivalents of
approximately $226,000 as compared to approximately $317,000 at December 31,
1998. Cash and cash equivalents decreased approximately $91,000 for the nine
months ended September 30, 1999, from the Registrant's fiscal year end. The
decrease in net cash was primarily due to approximately $360,000 of cash used in
investing activities and approximately $234,000 of cash used in financing
activities, which is partially offset by approximately $503,000 of cash provided
by operating activities. Cash used in investing activities consisted of property
improvements and replacements and the conversion of the Partnership's investment
in Brittany LP to a minority interest. Cash used in financing activities
consisted of payments of principal made on the mortgages encumbering the
Registrant's properties. The Registrant invests its working capital reserves in
money market accounts.
The Partnership's note payable of approximately $371,000, plus accrued interest
of approximately $226,000, due to AAP is in default due to non-payment upon
maturity in November 1997. AAP has filed suit against the Partnership as a
result of this default. A judgement has been awarded to AAP however the
Partnership intends to contest the validity of the judgment if AAP attempts to
enforce it.
Due to the loss of Brittany LP and the imminent loss of Bercado Shores
Apartments the General Partner decided in September 1999 to terminate the
Partnership upon the loss of Bercado Shores Apartments. As a result of the
decision to liquidate the Partnership, the Partnership changed its basis of
accounting for its consolidated financial statements at September 30, 1999, to
the liquidation basis of accounting. Consequently, assets have been valued at
estimated net realizable value 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 consolidated financial
statements.
For the three months ended December 31, 1999, the Partnership recorded a net
increase in net liabilities in liquidation of approximately $440,000. The
statement of net liabilities in liquidation as of December 31, 1999 includes
approximately $470,000 of costs that the General Partner estimates will be
incurred during the period of liquidation based on the assumption that the
liquidation process will be complete by December 31, 2000. These costs include
the estimated net loss for the year ended December 31, 2000 for the remaining
property, Bercado Shores. In addition, the costs also include anticipated legal
fees and administrative expenses for the year ended December 31, 2000. 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.
The following is a general description of the tax consequences that may result
to a limited partner of the transfer of the Partnership's property and the
removal of the general partner of Brittany Point AP VIII, L.P. Each limited
partner should consult with his or her own tax advisor to determine his or her
particular tax consequences. The transfer of the limited partnership interests
in Brittany Point AP VIII, L.P. in satisfaction of Partnership debt resulted in
the taxable sale or exchange of the limited partnership interests. The removal
of the general partner of Brittany Point AP VIII, L.P. will result in a deemed
cash distribution to the general partner. The taxable gain and income resulting
from the transfer of the Partnership property and the removal of the general
partner will pass through to the limited partners, and will likely result in
income tax liability to the limited partners without any distribution of cash
from the Partnership.
There were no distributions paid for the years ended December 31, 1999 or 1998.
Future cash distributions will depend on the estimated levels of net cash
generated from the liquidation of the Partnership. However, based on the
Partnership's liabilities upon liquidation, it is unlikely that any such
distributions will be made.
Results from Operations
Prior to adopting the liquidation basis of accounting, the Partnership realized
net income of approximately $7,883,000 for the nine months ended September 30,
1999 compared with a net loss of approximately $558,000 for the corresponding
period in 1998. The increase in net income is primarily due to the loss of the
Partnership's 99% limited partnership interest in Brittany LP as discussed
above, resulting in the recognition of an extraordinary gain on conversion to
minority interest of approximately $8,486,000 during the nine months ended
September 30, 1999.
The Partnership's net loss before extraordinary gain on conversion to minority
interest for the nine months ended September 30, 1999 was approximately $603,000
compared to approximately $602,000 for the year ending December 31, 1998. The
increase in net loss for the nine months ended September 30, 1999 compared to
the corresponding period in 1998 is primarily attributable to an increase in
total expenses partially offset by a slight increase in total revenues.
Total expenses increased primarily due to an increase in property tax expense
which is partially offset by a decrease in operating expense. During the second
quarter of 1998, Bercado Shores successfully appealed an increase in its
property tax assessment value. The property received a credit on its 1998
property tax bill, a portion of which related to the 1997 tax year. The full
amount of the credit was applied against property tax expense for the nine
months ended September 30, 1998 resulting in a lower than normal expense for
that period. The decrease in operating expense is partially attributable to a
decrease in tax service fees, which were paid in 1998 to defend the tax appeal
at Bercado Shores. Operating expense also decreased for the nine months ended
September 30, 1999 due to a decrease in salaries and related expenses at
Brittany Point and a decrease in insurance expense at both investment properties
due to a change in insurance carriers late in 1998. The increase in total
revenues for the nine months ended September 30, 1999 is due to an increase in
rental income. Rental income increased due to an increase in average annual
rental rates at both properties and an increase in occupancy at Brittany Point,
which more than offset the decline in occupancy at Bercado Shores.
Included in general and administrative expenses for the nine month period ended
September 30, 1999 and the year ended December 31, 1998 are reimbursements to
the General Partner allowed under the Partnership Agreement associated with its
management of the Partnership. In addition, costs associated with the quarterly
and annual communications with investors and regulatory agencies and the annual
audit required by the Partnership Agreement are also included.
As part of the ongoing business plan of the Partnership, the General Partner
monitors the rental market environment of its investment property to assess the
feasibility of increasing rents, maintaining or increasing occupancy levels and
protecting the Partnership from increases in expenses. As part of this plan, the
General Partner attempts to protect the Partnership from the burden of
inflation-related increases in expenses by increasing rents and maintaining a
high overall occupancy level. However, 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.
Year 2000 Compliance
General Description
The Year 2000 issue is the result of computer programs being written using two
digits rather than four digits to define the applicable year. The Partnership is
dependent upon the General Partner and its affiliates for management and
administrative services ("Managing Agent"). Any of the Managing Agent's computer
programs or hardware that had date-sensitive software or embedded chips might
have recognized a date using "00" as the year 1900 rather than the year 2000.
This could have resulted in a system failure or miscalculations causing
disruptions of operations, including, among other things, a temporary inability
to process transactions, send invoices, or engage in similar normal business
activities.
Computer Hardware, Software and Operating Equipment
In 1999, the Managing Agent completed all phases of its Year 2000 program by
completing the replacement and repair of any hardware or software system or
operating equipment that was not yet Year 2000 compliant. The Managing Agent's
hardware and software systems and its operating equipment are now Year 2000
compliant. To date, no material failure or erroneous results have occurred in
the Managing Agent's computer applications related to the failure to reference
the Year 2000.
Third Parties
To date, the Managing Agent is not aware of any significant supplier or
subcontractor (external agent) or financial institution of the Partnership that
has a Year 2000 issue that would have a material impact on the Partnership's
results of operations, liquidity or capital resources. However, the Managing
Agent has no means of ensuring or determining the Year 2000 compliance of
external agents. At this time, the Managing Agent does not believe that a Year
2000 issue of any non-compliant external agent will have a material impact on
the Partnership's financial position or results of operations.
Costs
The total cost of the Managing Agent's Year 2000 project was approximately $3.2
million and was funded from operating cash flows.
Risks Associated with the Year 2000
The Managing Agent completed all necessary phases of its Year 2000 program in
1999, and did not experience system or equipment malfunctions related to a
failure to reference the Year 2000. The Managing Agent or Partnership have not
been materially adversely affected by disruptions in the economy generally
resulting from the Year 2000 issue.
At this time, the Managing Agent does not believe that the Partnership's
businesses, results of operations or financial condition will be materially
adversely affected by the Year 2000 issue.
Contingency Plans Associated with the Year 2000
The Managing Agent has not had to implement contingency plans such as manual
workarounds or selecting new relationships for its banking or elevator operation
activities in order to avoid the Year 2000 issue.
Item 7. Financial Statements
ANGELES PARTNERS VIII
LIST OF FINANCIAL STATEMENTS
Report of Ernst & Young LLP, Independent Auditors
Consolidated Statement of Net Liabilities in Liquidation - December 31,
1999
Consolidated Statement of Changes in Net Liabilities in Liquidation -
Three Months ended December 31, 1999
Consolidated Statements of Operations - Nine Months ended September 30,
1999 and year ended December 31, 1998
Consolidated Statements of Changes in Partners' Deficit/Net Liabilities in
Liquidation - Nine Months ended September 30, 1999 and year ended December
31, 1998 and December 31, 1999
Consolidated Statements of Cash Flows - Nine Months ended September 30,
1999 and year ended December 31, 1998
Notes to Consolidated Financial Statements
Report of Ernst & Young LLP, Independent Auditors
The Partners
Angeles Partners VIII
We have audited the accompanying consolidated statement of net liabilities in
liquidation of Angeles Partners VIII as of December 31, 1999, and the related
consolidated statement of changes in net liabilities in liquidation for the
three months then ended. In addition, we have audited the consolidated
statements of operations, changes in partners' deficit/net liabilities in
liquidation and cash flows for the nine months ended September 30, 1999 and for
the year ended December 31, 1998. 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 auditing standards generally accepted
in the United States. 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 foreclosure of its
remaining investment property, the General Partner has decided effective
September 30, 1999 to liquidate the Partnership. As a result, the Partnership
has changed its basis of accounting as of September 30, 1999 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 consolidated net liabilities in liquidation of
Angeles Partners VIII at December 31, 1999, the consolidated changes in net
liabilities in liquidation for the three months ended December 31, 1999 and the
consolidated results of its operations and its cash flows for the nine months
ended September 30, 1999 and for the year ended December 31, 1998, in conformity
with accounting principles generally accepted in the United States applied on
the bases described in the preceding paragraph.
/s/ ERNST & YOUNG LLP
Greenville, South Carolina
February 25, 2000
ANGELES PARTNERS VIII
CONSOLIDATED STATEMENT OF NET LIABILITIES IN LIQUIDATION
(in thousands)
December 31, 1999
Assets
Cash and cash equivalents $ 226
Receivables and deposits 135
Investment property 4,750
5,111
Liabilities
Accounts payable 28
Tenant security deposits 25
Accrued property taxes 284
Other liabilities 81
Due to affiliates 21
Accrued interest ($2,675 in default) 2,700
Mortgage and notes payable ($1,721 in
default) 5,618
Estimated costs during the period of
liquidation 470
9,227
Net liabilities in liquidation $(4,116)
See Accompanying Notes to Consolidated Financial Statements
ANGELES PARTNER VIII
CONSOLIDATED STATEMENT OF CHANGES IN NET LIABILITIES IN LIQUIDATION
(in thousands)
Three Months Ended December 31, 1999
Net liabilities in liquidation at September 30, 1999 $ (3,621)
Changes in net liabilities in liquidation attributed to:
Decrease in cash and cash equivalents --
Decrease in receivables and deposits (71)
Increase in due to affiliate (21)
Increase in accounts payable (12)
Decrease in tenant security deposit liabilities 5
Increase in accrued interest (153)
Decrease in accrued taxes 60
Increase in other liabilities (62)
Decrease in mortgage notes payable 19
Increase in estimated costs during the period of liquidation (260)
Net liabilities in liquidation at December 31, 1999 $ (4,116)
See Accompanying Notes to Consolidated Financial Statements
ANGELES PARTNERS VIII
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except unit data)
Nine Months Ended Year Ended
September 30, December 31,
1999 1998
Revenues:
Rental income $ 2,818 $ 3,730
Other income 163 215
Total revenues 2,981 3,945
Expenses:
Operating 1,176 1,518
General and administrative 108 149
Depreciation 535 697
Interest 1,439 1,894
Property taxes 326 289
Total expenses 3,584 4,547
Loss before extraordinary item (603) (602)
Extraordinary gain on conversion to
minority interest (Note A) 8,486 --
Net income (loss) $ 7,883 $ (602)
Net income (loss) allocated
to general partner (1%) $ 79 $ (6)
Net income (loss) allocated
to limited partners (99%) 7,804 (596)
$ 7,883 $ (602)
Net income (loss) per limited partnership unit:
Loss before extraordinary item $(50.77) $(50.27)
Extraordinary gain on conversion
to minority interest 714.43 --
$663.66 $(50.27)
See Accompanying Notes to Consolidated Financial Statements
<PAGE>
ANGELES PARTNERS VIII
CONSOLIDATED STATEMENT OF CHANGES IN PARTNERS' DEFICIT/
Net Liabilities in Liquidation
(in thousands, except unit data)
<TABLE>
<CAPTION>
Limited
Partnership General Limited
Units Partner Partners Total
<S> <C> <C> <C> <C>
Original capital contributions 12,000 $ 121 $ 12,000 $ 12,121
Partners' deficit at
December 31, 1997 11,855 $ (176) $(14,026) $(14,202)
Abandonment of limited
partnership units (96) -- -- --
Net loss for the years ended
December 31, 1998 -- (6) (596) (602)
Partners' deficit at
December 31, 1998 11,759 (182) (14,622) (14,804)
Net income for the nine months
ended September 30, 1999 -- 79 7,804 7,883
Partners' deficit
at September 30, 1999 11,759 $ (103) $ (6,818) (6,921)
Adjustment to liquidation basis
(Note A) 3,300
Net liabilities in liquidation
at September 30, 1999 $(3,621)
See Accompanying Notes to Consolidated Financial Statements
</TABLE>
<PAGE>
ANGELES PARTNERS VIII
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
<TABLE>
<CAPTION>
Nine Months Ended Year Ended
September 30, December 31,
1999 1998
Cash flows from operating activities:
<S> <C> <C>
Net income (loss) $ 7,883 $ (602)
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Depreciation 535 697
Amortization of loan costs 41 55
Extraordinary gain on conversion to minority interest (8,486) --
Change in accounts:
Receivables and deposits 29 (272)
Other assets (27) 12
Accounts payable 5 33
Tenant security deposit liabilities 4 3
Accrued property taxes 50 70
Accrued interest 432 507
Other liabilities (24) 111
Due to affiliates 61 --
Net cash provided by operating activities 503 614
Cash flows from investing activities:
Conversion to minority interest (115) --
Property improvements and replacements (245) (339)
Net cash used in investing activities (360) (339)
Cash flows used in financing activities:
Payments on mortgage notes payable (234) (286)
Net decrease in cash and cash equivalents (91) (11)
Cash and cash equivalents at beginning of period 317 328
Cash and cash equivalents at end of period $ 226 $ 317
Supplemental disclosure of cash flow information:
Cash paid for interest $ 966 $ 1,331
See Accompanying Notes to Consolidated Financial Statements
</TABLE>
ANGELES PARTNERS VIII
CONSOLIDATED STATEMENTS OF CASH FLOWS - CONTINUED
In connection with the Partnership's loss of its 99% limited partnership
interest in Brittany Point AP VIII L.P., the following accounts were adjusted
for non-cash activity:
Receivables and deposits $ (168,000)
Other assets (71,000)
Investment properties, net of accumulated
depreciation (2,976,000)
Accounts payable 51,000
Tenant security deposits 49,000
Other liabilities 6,000
Accrued interest 402,000
Accrued property taxes 141,000
Due to affiliates 375,000
Mortgage note payable 10,792,000
See Accompanying Notes to Consolidated Financial Statements
ANGELES PARTNERS VIII
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1999
Note A - Basis of Presentation
As of September 30, 1999, Angeles Partners VIII (the "Partnership" or
"Registrant") adopted the liquidation basis of accounting due to the imminent
loss of its remaining investment property. The Partnership has incurred
recurring operating losses and continues to suffer from inadequate liquidity. In
addition, the Partnership is in default on a portion of its mortgage notes
payable and does not generate sufficient cash flows to meet current debt-service
requirements on its subordinated debt. No other sources of additional financing
are available to the Partnership and Angeles Realty Corporation ("ARC" or the
"General Partner") does not have any other plans to remedy the liquidity
problems the Partnership is currently experiencing.
The Partnership had an outstanding obligation due to an affiliate of the General
Partner (the "Affiliate"), for cumulative unpaid accountable administrative
services. This liability was secured by the Partnership's 99% limited
partnership interest in Brittany Point AP VIII L.P. ("Brittany LP"), the entity
that owned Brittany Point Apartments. During the third quarter of 1999, the
Affiliate exercised remedies with respect to this liability. In such exercise,
effective September 20, 1999, the Affiliate acquired the Partnership's 99%
limited partnership interest in Brittany LP at a public sale in compliance with
the South Carolina Uniform Commercial Code. The Partnership recognized a gain on
conversion of minority interest in Brittany LP of approximately $8,486,000,
which was the excess of the entity's liabilities over its assets.
The Affiliate has the power to remove the general partner of Brittany LP, an
entity in which the Partnership owns an interest. While the Affiliate informed
the Partnership that it did not intend to effect such a removal during 1999,
there can be no assurance that such general partner will not be removed at some
point in the future, thereby causing the loss of the Partnership's entire
interest in Brittany LP.
In addition, the Partnership's second mortgage to Angeles Mortgage Investment
Trust ("AMIT") in the amount of approximately $1,350,000, plus accrued interest
of approximately $2,449,000, which is secured by the Partnership's remaining
investment property, Bercado Shores Apartments, has been in default since 1993
due to nonpayment of interest and the maturity of the note in 1995. Pursuant to
a series of transactions, affiliates of the General Partner acquired ownership
interests in AMIT. On September 17, 1998, AMIT was merged with and into Insignia
Properties Trust ("IPT"), which was the sole shareholder of the General Partner.
On February 26, 1999, IPT was merged into Apartment Investment and Management
Company ("AIMCO") a publicly traded real estate investment trust. As a result,
AIMCO is the current holder of the AMIT debt. This indebtedness is recourse to
the Partnership and the estimated fair value of this property is less than the
total of its first and second mortgages. This property remains subject to
foreclosure under the terms of the second mortgage agreement. AMIT has informed
the General Partner of its intention to exercise remedies with respect to all or
a portion of such indebtedness at an indeterminate point in the future. While
such holder did not exercise remedies during 1999, there can be no assurance as
to when the exercise of such remedies will occur. The General Partner currently
believes that the use by the Partnership of its limited resources to contest the
exercise of such remedies would most likely be futile. Accordingly, when AMIT
commences the exercise of such remedies, the General Partner will execute
settlement documents to effect the exercise of such remedies in a manner that is
cost effective to the Partnership.
Due to the loss of Brittany LP and the imminent loss of Bercado Shores
Apartments the General Partner decided in September 1999 to terminate the
Partnership upon the loss of Bercado Shores Apartments. As a result of the
decision to liquidate the Partnership, the Partnership changed its basis of
accounting for its consolidated financial statements at September 30, 1999, to
the liquidation basis of accounting. Consequently, assets have been valued at
estimated net realizable value 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 consolidated financial
statements.
Included in liabilities in the statement of net liabilities in liquidation, as
of December 31, 1999, are approximately $470,000 of costs 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 December 31,
2000. These costs principally include the estimated net loss for Bercado Shores
and interest and administrative expenses for the Partnership. 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 September 30, 1999, 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 $3,300,000 which is included in the Statement of Changes in
Partners' Deficit/Net Liabilities in Liquidation. The adjustments are summarized
as follows:
Decrease (Increase)
in Net Liabilities
(in thousands)
Adjustment from book value of property and improvements
to estimated net realizable value $ 3,544
Adjustment to record estimated costs associated with
the liquidation (Note A) (210)
Adjustment of other assets and liabilities (34)
Net decrease in net liabilities $ 3,300
Note B - Organization and Summary of Significant Accounting Policies
Organization: Angeles Partners VIII is a California limited partnership
organized on August 7, 1978, to operate residential and commercial real estate
properties. The Partnership's general partner is Angeles Realty Corporation
("ARC" or the "General Partner"), which was a wholly-owned subsidiary of MAE GP
Corporation ("MAE GP"). Effective February 25, 1998, MAE GP was merged into
Insignia Properties Trust ("IPT"), which was an affiliate of Insignia Financial
Group, Inc. ("Insignia"). Effective February 26, 1999, IPT was merged with and
into Apartment Investment and Management Company ("AIMCO"). Thus the General
Partner became a wholly-owned subsidiary of AIMCO. The directors and officers of
the General Partner also serve as executive officers of AIMCO (See "Note C -
Transfer of Control" below). The Partnership Agreement provides that the
Partnership is to terminate on December 31, 2035, unless terminated prior to
that date. As of December 31, 1999, the Partnership operates one residential
property in Mishawaka, Indiana.
Allocations and Distributions to Partners: Net income and losses (excluding
those arising from the occurrence of sales or dispositions) of the Partnership
will be allocated 1% to the General Partner and 99% to the Limited Partners on
an annual basis.
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 of the Ten Percent Distribution (as defined
in the Partnership Agreement) to which the General Partner is entitled. Any gain
remaining after said allocation will be allocated to the Partners in proportion
to their interests in the Partnership.
Distributions of available cash, except as discussed below, are allocated among
the Limited Partners and General Partner in accordance with the Agreement of
Limited Partnership.
Upon the sale, other disposition or refinancing, of any asset of the Partnership
other than in connection with the dissolution of the Partnership, the net
proceeds thereof which the General Partner determines can reasonably be
distributed to the Partners and are not required for support of the operations
of the Partnership or for investment in additional real properties, if any, must
be distributed 1% to the General Partner and 99% to the Limited Partners until
such time as the Partners have received cumulative distributions from the
Partnership equal to the amount of their original capital contributions to the
Partnership plus a cumulative return of 12% per annum (simple interest) on the
Limited Partners' Adjusted Capital Investment, as defined in the Agreement.
Thereafter, 10% of such proceeds will be distributed to the General Partner and
the remaining 90% of such proceeds will be distributed 1% to the General Partner
and 99% to the Limited Partners.
Principles of Consolidation: Prior to September 30, 1999, the consolidated
financial statements of the Partnership included its 99% limited partnership
interests in Brittany L.P. and Brittany Point GP, L.P. Because the Partnership
could remove the general partner of Brittany L.P. and Brittany Point GP, L.P.;
these partnerships were controlled and consolidated by the Partnership. All
significant interpartnership balances have been eliminated.
As of September 30, 1999, the Partnership lost its entire 99% limited
partnership interest in Brittany LP (see Note A).
Depreciation: Depreciation was computed on an accelerated method over the
estimated useful lives of 10 to 25 years for buildings and improvements and 3 to
5 years for furnishings and equipment until such time as the expense is exceeded
by depreciation as computed on the straight line method. Assets placed in
service after 1987 are depreciated over estimated useful lives of 10 to 15 years
for buildings and improvements and 5 to 7 years for furnishings and equipment
using the straight-line method. No depreciation was recorded subsequent to
September 30, 1999 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 from 5-20 years.
Cash and Cash Equivalents: Includes cash on hand and in banks and money market
accounts. At certain times, the amount of cash deposited at a bank may exceed
the limit on insured deposits.
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.
Fair Value of Financial Instruments: The Partnership believes that the carrying
amount of its financial instruments (except for long term debt) approximates
their fair value due to the short term maturity of these instruments. The fair
value of the Partnership's first mortgage, after discounting the scheduled loan
payments to maturity, approximates its carrying balance. The General Partner
believes that it is not appropriate to use the Partnership's incremental
borrowing rate for the second mortgage and the note payable to AAP as there is
currently no market in which the Partnership could obtain similar financing.
Therefore, the General Partner considers estimation of fair value to be
impracticable for this indebtedness.
Investment Property: Investment property, which consists of one apartment
complex, was stated at cost. Acquisition fees were 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. No adjustments for
impairment of value were recorded in the nine months ended September 30, 1999 or
the year ended December 31, 1999. As a result of the Partnership adopting the
liquidation basis of accounting, the investment property was adjusted to its
estimated net realizable value at September 30, 1999. The effect of adoption was
to increase the carrying value of the investment property by approximately
$3,544,000.
Loan Costs: Loan costs were being amortized on a straight-line basis over the
lives of the respective loans. At September 30, 1999, these loan costs were
written off in the adjustment to liquidation basis because the Partnership
determined that these intangible assets no longer have value.
Advertising Costs: The Partnership expensed the costs of advertising as
incurred.
Leases: The Partnership generally leases apartment units for lease terms of
twelve months or less. The Partnership recognized income as earned on its
leases. The General Partner's policy is to offer rental concessions during
particularly slow months or in response to heavy competition from other similar
complexes in the area. Concessions were charged against rental income as
incurred.
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.
Segment Reporting: Statement of Financial Accounting Standards ("SFAS") No. 131,
"Disclosure about Segments of an Enterprise and Related Information" established
standards for the way that public business enterprises report information about
operating segments in annual financial statements and requires that those
enterprises report selected information about operating segments in interim
financial reports. It also establishes standards for related disclosures about
products and services, geographic areas, and major customers. As defined in SFAS
No. 131, the Partnership has only one reportable segment. Moreover, due to the
very nature of the Partnership's operations, the Managing General Partner
believes that segment-based disclosures will not result in a more meaningful
presentation than the financial statement as currently presented.
Reclassification: Certain reclassifications have been made to the 1998
information to conform to the 1999 presentation.
Note C - Transfer of Control
Pursuant to a series of transactions which closed on October 1, 1998 and
February 26, 1999, Insignia and IPT merged into AIMCO with AIMCO being the
surviving corporation (the "Insignia Merger"). As a result, AIMCO ultimately
acquired 100% ownership interest in the General Partner. The General Partner
does not believe that this transaction has had or will have a material effect on
the affairs and operations of the Partnership.
Note D - Mortgage and Notes Payable
The principle terms of mortgage and notes payable are as follows:
<TABLE>
<CAPTION>
Principal Monthly Principal
Balance At Payment Stated Balance
December 31, Including Interest Maturity Due At
Property 1999 Interest Rate Date Maturity
(in thousands) (in thousands)
<S> <C> <C> <C> <C> <C>
Bercado Shores
1st mortgage $ 3,897 $ 34 (a) 6/2000 $ 3,859
2nd mortgage 1,350 (b) 12.50% 6/1995(c) 1,350
(in default)
Partnership Debt
(in default) 371 -- (d) 11/1997(e) 371
Totals $ 5,618 $ 34 $ 5,580
</TABLE>
(a) Based on the one-year Treasury Constant Maturities rate plus 3%; 7.94%,
average rate for the year ended December 31, 1999.
(b) Interest only payments.
(c) In March 1993, the Partnership defaulted on payments on the second trust
deed from AMIT on Bercado Shores (see "Note A")
(d) Based on the prime rate plus 0.75%; 8.69%, average rate for the year ended
December 31, 1999.
(e) In November 1997, the Partnership defaulted on payments on its note payable
to Angeles Acceptance Pool, L.P. (see "Note F")
The mortgage notes payable are secured by the Partnership's investment property
and by pledge of revenues from the investment property.
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 Partnership adopted the liquidation basis of accounting effective September
30, 1999 and accordingly, it did not have a statement of operations for the year
ended December 31, 1999. The Federal taxable income for the year ended December
31, 1999 was $6,495,000 ($566.60 per limited partnership unit).
The following is a reconciliation of reported net loss and Federal taxable loss
(in thousands, except unit data) for the year ended December 31, 1998:
1998
Net loss as reported $ (602)
Add (deduct):
Depreciation differences 87
Unearned income 16
Other --
Accruals and prepaids 16
Federal taxable loss $ (483)
Federal taxable loss per limited
partnership unit $(36.82)
The following is a reconciliation between the Partnership's reported amounts and
Federal tax basis of net deficiency at December 31, 1999 (in thousands):
Net liabilities in liquidation as reported $ (4,116)
Investment property (3,053)
Syndication and distribution costs 1,318
Other 460
Net deficiency - Federal tax basis $ (5,391)
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 (i) certain payments to affiliates of the
General Partner for services and (ii) reimbursement of certain expenses incurred
by affiliates on behalf of the Partnership. The following payments were paid or
accrued to the General Partner and/or its affiliates during the years ended
December 31, 1999 and in 1998, respectively:
1999 1998
(in thousands)
Property management fees, included in
operating expenses $ 173 $ 199
Reimbursement for services of affiliates
included in operating and general
administrative expenses and investment properties 108 113
During the years ended December 31, 1999 and 1998, affiliates of the General
Partner were entitled to receive 5% of gross receipts from both of the
Partnership's properties for providing property management services. The
Partnership paid to such affiliates approximately $173,000 and $199,000 for the
years ended December 31, 1999 and 1998, respectively.
Affiliates of the General Partner received reimbursement of accountable
administrative expenses amounting to approximately $108,000 and $113,000 for the
years ended December 31, 1999 and 1998, respectively.
In June 1990, AMIT provided secondary financing on the Partnership's investment
property, Bercado Shores Apartments. Total indebtedness was approximately
$1,350,000 at December 31, 1999, and is in default at December 31, 1999. Total
interest expense related to this debt was approximately $557,000 and $709,000
for the year ended December 31, 1999 and 1998, respectively. Accrued interest
related to this debt was approximately $2,449,000 at December 31, 1999. As
discussed in "Note A - Basis of Presentation", AIMCO is now the holder of the
AMIT debt. The AMIT mortgage secured by Bercado Shores Apartments has been in
default since 1993 due to nonpayment of interest and the maturity of the note in
1995. The Partnership had an outstanding obligation due to an affiliate of the
General Partner (the "Affiliate"), for cumulative unpaid accountable
administrative services. This liability was secured by the Partnership's 99%
limited partnership interest in Brittany Point AP VIII L.P. ("Brittany LP"), the
entity that owned Brittany Point Apartments. During the third quarter of 1999,
the Affiliate exercised remedies with respect to this liability. In such
exercise, effective September 20, 1999, the Affiliate acquired the Partnership's
99% limited partnership interest in Brittany LP at a public sale in compliance
with the South Carolina Uniform Commercial Code.
In November 1992, 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"), which was
wholly- owned by IPT, 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 Partnership's note payable
of approximately $371,000, plus accrued interest of approximately $226,000, due
to Angeles Acceptance Pool, L.P. ("AAP") is in default due to non-payment upon
maturity in November 1997. AAP has filed suit against the Partnership as a
result of this default. A judgment has been awarded to AAP; however, the
Partnership intends to contest the validity of the judgment if AAP attempts to
enforce it. This indebtedness, which is included in notes payable, was
approximately $371,000 at December 31, 1999 and is in default due to non-payment
upon maturity in November 1997 (see "Note A - Basis of Presentation"). Interest
is accruing monthly at prime plus 0.75% (8.69%, average rate at December 31,
1999). Total interest expense for this loan was approximately $32,000 and
$35,000 for the year ended December 31, 1999 and 1998, respectively. Total
accrued interest for this loan was approximately $226,000 at December 31, 1999.
Note G - Real Estate and Accumulated Depreciation
Initial Cost
To Partnership
(in thousands)
<TABLE>
<CAPTION>
Buildings Cost
and Related Capitalized Adjustment to
Personal Subsequent to Liquidation Basis
Description Encumbrances Land Property Acquisition
(in thousands) (in thousands)
<S> <C> <C> <C> <C> <C>
Bercado Shores $5,247 $212 $4,048 $876 $(386)
</TABLE>
Gross Amount At Which Carried
At December 31, 1999
(in thousands)
<TABLE>
<CAPTION>
Buildings
And Related
Personal Accumulated Date Depreciable
Description Land Property Total Depreciation Acquired Life-Years
<S> <C> <C> <C> <C> <C> <C>
Bercado Shores $212 $4,538 $4,750 (1) 5/31/79 (1)
</TABLE>
(1) As a result of adopting the liquidation basis of accounting the gross
carrying value of the property was adjusted to its net realizable value
and will not be depreciated further.
Reconciliation of "Real Estate and Accumulated Depreciation":
Years Ended December 31,
1999 1998
(in thousands)
Real Estate
Balance at beginning of year $15,605 $15,266
Property improvements 245 339
Disposal of assets (10,768) --
Adjustment to liquidation basis (332) --
Balance at end of year $ 4,750 $15,605
Accumulated Depreciation
Balance at beginning of year $11,132 $10,435
Current year expense 535 697
Disposal of assets (7,792) --
Adjustment to liquidation basis (3,875) --
Balance at end of year $ -- $11,132
The aggregate cost of the investment properties for Federal income tax purposes
at December 31, 1999 and 1998, was approximately $5,774,000 and $17,459,000,
respectively. The accumulated depreciation for Federal income tax purposes at
December 31, 1999 and 1998, is $4,077,000 and $11,528,000, respectively.
Note H - Abandoned Limited Partnership Units
In 1998, the number of Limited Partnership Units decreased by 96 units due to
limited partners abandoning their units. In abandoning his or her Limited
Partnership Unit, 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 the year. The loss per limited partnership unit in the
accompanying consolidated statements of operations for the year ended December
31, 1998 is calculated based on the number of units outstanding at the beginning
of the year.
Note I - Legal Proceedings
In March 1998, several putative unit holders of limited partnership units of the
Partnership commenced an action entitled Rosalie Nuanes, et al. v. Insignia
Financial Group, Inc., et al. in the Superior Court of the State of California
for the County of San Mateo. The plaintiffs named as defendants, among others,
the Partnership, the General Partner and several of their affiliated
partnerships and corporate entities. The action purports to assert claims on
behalf of a class of limited partners and derivatively on behalf of a number of
limited partnerships (including the Partnership) which are named as nominal
defendants, challenging the acquisition by Insignia Financial Group, Inc.
("Insignia") and entities which were, at one time, affiliates of Insignia
("Insignia Affiliates") of interests in certain general partner entities, past
tender offers by Insignia Affiliates to acquire limited partnership units, the
management of partnerships by Insignia Affiliates and the Insignia Merger (see
"Note C - Transfer of Control"). The plaintiffs seek monetary damages and
equitable relief, including judicial dissolution of the Partnership. On June 25,
1998, the General Partner filed a motion seeking dismissal of the action. In
lieu of responding to the motion, the plaintiffs have filed an amended
complaint. The General Partner filed demurrers to the amended complaint which
were heard February 1999. Pending the ruling on such demurrers, settlement
negotiations commenced. On November 2, 1999, the parties executed and filed a
Stipulation of Settlement, settling claims, subject to final court approval, on
behalf of the Partnership and all limited partners who own units as of November
3, 1999. Preliminary approval of the settlement was obtained on November 3, 1999
from the Superior Court of the State of California, County of San Mateo, at
which time the Court set a final approval hearing for December 10, 1999. Prior
to the December 10, 1999 hearing the Court received various objections to the
settlement, including a challenge to the Court's preliminary approval based upon
the alleged lack of authority of class plaintiffs' counsel to enter the
settlement. On December 14, 1999, the General Partner and its affiliates
terminated the proposed settlement. Certain plaintiffs have filed a motion to
disqualify some of the plaintiffs' counsel in the action. The General Partner
does not anticipate that costs associated with this case will be material to the
Partnership's overall operations.
The Partnership is unaware of any other pending or outstanding litigation that
is not of a routine nature arising in the ordinary course of business.
Item 8. Changes in and Disagreements with Accountant on Accounting and Financial
Disclosures
None.
PART III
Item 9. Directors, Executive Officers, Promoters and Control Persons; Compliance
with Section 16(a) of the Exchange Act
Angeles Partners VIII (the "Registrant" or "Partnership") has no officers or
directors. Angeles Realty Corporation, Inc. (the "General Partner") manages and
controls the Partnership and has general responsibility and authority in all
matters affecting its business. The General Partner is a subsidiary of Apartment
Investment and Management Company ("AIMCO").
The names of the directors and officers of the General Partner, their ages, and
the nature of all positions presently held by them are set forth below:
Name Age Position
Patrick J. Foye 42 Executive Vice President and Director
Martha L. Long 40 Senior Vice President and Controller
Patrick J. Foye has been Executive Vice President and Director of the General
Partner since October 1, 1998. Mr. Foye has served as Executive Vice President
of AIMCO since May 1998. Prior to joining AIMCO, Mr. Foye was a partner in the
law firm of Skadden, Arps, Slate, Meagher & Flom LLP from 1989 to 1998 and was
Managing Partner of the firm's Brussels, Budapest and Moscow offices from 1992
through 1994. Mr. Foye is also Deputy Chairman of the Long Island Power
Authority and serves as a member of the New York State Privatization Council. He
received a B.A. from Fordham College and a J.D. from Fordham University Law
School.
Martha L. Long has been Senior Vice President and Controller of the General
Partner and AIMCO since October 1998, as a result of the acquisition of Insignia
Financial Group, Inc. From June 1994 until January 1997, she was the Controller
for Insignia, and was promoted to Senior Vice President - Finance and Controller
in January 1997, retaining that title until October 1998. From 1988 to June
1994, Ms. Long was Senior Vice President and Controller for The First Savings
Bank, FSB in Greenville, South Carolina.
Based solely upon a review of Forms 3 and 4 and amendments thereto furnished to
the Registrant under Rule 16a-3(e) during the Registrant's most recent fiscal
year and Forms 5 and amendments thereto furnished to the Registrant with respect
to its most recent fiscal year, the Registrant is not aware of any director,
officer, beneficial owner of more than ten percent of the units of limited
partnership interest in the Registrant that failed to file on a timely basis, as
disclosed in the above Forms, reports required by section 16(a) of the Exchange
Act during the most recent fiscal year or prior fiscal years.
Item 10. Executive Compensation
The Registrant was not required to and did not pay any remuneration to officers
or directors of the General Partner during 1999 or 1998. However, reimbursements
and other payments have been made to the Partnership's General Partner and its
affiliates, as described in "Item 12" below.
Item 11. Security Ownership of Certain Beneficial Owners and Management
Except as noted below, no person or entity was known by the Registrant to be the
beneficial owner of more than 5% of the Limited Partnership Units of the
Registrant as of December 31, 1999.
Entity Number of Units Percentage
Insignia Properties LP ("IPLP") 24 .204%
IPLP is indirectly ultimately owned by AIMCO. Its business address is 55 Beattie
Place, Greenville, South Carolina 29602.
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 for: 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 Partners an amount equal to the accrued and unpaid
management fee described in Article 10 of the Agreement and to purchase the
General Partners' interest in the Partnership on the effective date of the
expulsion, which shall be an amount equal to the difference between (i) the
balance of the General Partner's capital account and (ii) the fair market value
of the share of Distributable Net Proceeds to which the General Partner would be
entitled. Such determination of the fair market value of the share of
Distributable Net Proceeds is defined in Article 12.2(b) of the Agreement.
Item 12. Certain Relationships and Related Transactions
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 (i) certain payments to affiliates of the
General Partner for services and (ii) reimbursement of certain expenses incurred
by affiliates on behalf of the Partnership. The following payments were paid or
accrued to the General Partner and/or its affiliates during the years ended
December 31, 1999 and 1998, respectively:
1999 1998
(in thousands)
Property management fees $ 173 $ 199
Reimbursement for services of affiliates 108 113
During the years ended December 31, 1999 and 1998, affiliates of the General
Partner were entitled to receive 5% of gross receipts from both of the
Partnership's properties for providing property management services. The
Partnership paid to such affiliates approximately $173,000 and $199,000 for the
years ended December 31, 1999 and 1998, respectively.
Affiliates of the General Partner received reimbursement of accountable
administrative expenses amounting to approximately $108,000 and $113,000 for the
years ended December 31, 1999 and 1998, respectively.
In June 1990, AMIT provided secondary financing on the Partnership's investment
property, Bercado Shores Apartments. Total indebtedness was approximately
$1,350,000 at December 31, 1999, and is in default at December 31, 1999. Total
interest expense related to this debt was approximately $557,000 and $709,000
for the year ended December 31, 1999 and 1998, respectively. Accrued interest
related to this debt was approximately $2,449,000 at December 31, 1999. As
discussed in "Note A - Basis of Presentation", AIMCO is now the holder of the
AMIT debt. The AMIT mortgage secured by Bercado Shores Apartments has been in
default since 1993 due to nonpayment of interest and the maturity of the note in
1995. The Partnership had an outstanding obligation due to an affiliate of the
General Partner (the "Affiliate"), for cumulative unpaid accountable
administrative services. This liability was secured by the Partnership's 99%
limited partnership interest in Brittany Point AP VIII L.P. ("Brittany LP"), the
entity that owned Brittany Point Apartments. During the third quarter of 1999,
the Affiliate exercised remedies with respect to this liability. In such
exercise, effective September 20, 1999, the Affiliate acquired the Partnership's
99% limited partnership interest in Brittany LP at a public sale in compliance
with the South Carolina Uniform Commercial Code.
In November 1992, 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"), which was
wholly- owned by IPT, 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. This indebtedness, which is
included in notes payable, was approximately $371,000 at December 31, 1999 and
is in default due to non-payment upon maturity in November 1997 (see "Note A -
Basis of Presentation"). Interest is accruing monthly at prime plus 0.75%
(8.69%, average rate at December 31, 1999). Total interest expense for this loan
was approximately $32,000 and $35,000 for the year ended December 31, 1999 and
1998, respectively. Total accrued interest for this loan was approximately
$226,000 at December 31, 1999. AAP has filed suit against the Partnership as a
result of this default. A judgment has been awarded to AAP however the
Partnership intends to contest the validity of the judgment if AAP attempts to
enforce it.
PART IV
Item 13. Exhibits and Reports on Form 8-K
(a) Exhibits:
Exhibit 27, Financial Data Schedule, is filed as an exhibit to
this report.
(b) Reports on Form 8-K filed during the fourth quarter of 1999:
None.
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 VIII
By: Angeles Realty Corporation
General Partner
By: /s/Patrick J. Foye
Patrick J. Foye
Executive Vice President
By: /s/Martha L. Long
Senior Vice President and
Controller
Date:
In accordance with the Exchange Act, this report has been signed below by the
following persons on behalf of the Registrant and in the capacities on the date
indicated.
/s/Patrick J. Foye Executive Vice President Date:
Patrick J. Foye and Director
/s/Martha L. Long Senior Vice President and Date:
Martha L. Long Controller
ANGELES PARTNERS VIII
EXHIBIT INDEX
Exhibit Number Description of Exhibit
2.1 Agreement and Plan of Merger, dated as of October 1, 1998 by
and between AIMCO and IPT, incorporated by reference to
Registrant's Current Report on Form 8-K dated October 1, 1998.
3.1 Amendment Certificate and Agreement of the Limited Partnership
filed as exhibit 3.1 in Form 10-K dated October 31, 1979 and
is incorporated herein by reference
10.1 Property Management Agreements between the Partnership and
Angeles Real Estate Management Company, filed as an exhibit
10.1 in Form 10-K dated October 31, 1980 and is incorporated
herein by reference
10.2 First Trust Deed Mortgage - Bercado Shores, filed as an
exhibit 10.8 in Form 10-K dated March 28, 1991 and is
incorporated herein by reference
10.3 First Trust Deed Mortgage - Devonshire Apartments, filed as an
exhibit 10.9 in Form 10-K dated March 28, 1991 and is
incorporated herein by reference
10.4 Promissory Note Secured by Mortgage and Other Security -
Breckenridge, filed as an exhibit 10.10 in Form 10-K dated
March 28, 1991 and is incorporated herein by reference
10.5 Promissory Note Secured by Mortgage and Other Security -
Devonshire, filed as an exhibit 10.11 in Form 10-K dated March
28, 1991 and is incorporated herein by reference
10.6 Promissory Note Secured by Mortgage and Other Security -
Brittany Point, filed as an exhibit 10.12 in Form 10-K dated
March 28, 1991 and is incorporated herein by reference
10.7 Agreement to Purchase and Sale of Real Property between
Angeles Partners VIII and New Plan Realty Trust, dated January
29, 1992 which was filed as exhibit I to the Trust's Form 8-K
filed February 29, 1992 and 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 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 Promissory Note Secured by Mortgage and Other Security dated
January 18, 1996 - Brittany Point AP VIII, L.P.
10.10 Mortgage Assignment of Rents and Security Agreement dated
January 18, 1996 - Brittany Point AP VIII, L.P.
16 Letter from the Registrant's former accountant regarding
its concurrence with the statements made by the Registrant is
incorporated by reference to the exhibit filed with Form
8-K dated August 30, 1993
27 Financial Data Schedule
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from Angeles
Partners VIII 1999 Fourth Quarter 10-KSB and is qualified in its entirety by
reference to such 10-KSB filing.
</LEGEND>
<CIK> 0000276779
<NAME> Angeles Partners VIII
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
<CASH> 226
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0 <F1>
<PP&E> 4,750
<DEPRECIATION> 0
<TOTAL-ASSETS> 5,111
<CURRENT-LIABILITIES> 0 <F1>
<BONDS> 5,618
0
0
<COMMON> 0
<OTHER-SE> (4,116)
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<EPS-BASIC> 663.66 <F2>
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<FN>
<F1> Registrant has an unclassified balance sheet. <F2> Multiplier is 1.
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