FORM 10-QSB--QUARTERLY OR TRANSITIONAL REPORT UNDER SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
QUARTERLY OR TRANSITIONAL REPORT
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 June 30, 1998
or
[ ] TRANSITION REPORT PURSUANT TO 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
For the transition period from .........to.........
Commission file number 0-8851
ANGELES PARTNERS VII
(Exact name of small business issuer as specified in its charter)
California 95-3215214
(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)
(864) 239-1000
Issuer's telephone number
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes X No
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
a)
ANGELES PARTNERS VII
BALANCE SHEET
(Unaudited)
(in thousands, except unit data)
June 30, 1998
Assets
Cash and cash equivalents $ 395
Receivables and deposits 70
Other assets 8
Investment property:
Land $ 366
Buildings and related personal property 5,360
5,726
Less accumulated depreciation (4,028) 1,698
$ 2,171
Liabilities and Partners' Deficit
Liabilities
Accounts payable $ 25
Tenant security deposit liabilities 32
Accrued property taxes 22
Other liabilities 37
Mortgage note payable 2,278
Partners' Capital (Deficit)
General partner $ 292
Limited partners (8,669 units issued and
outstanding) (515) (223)
$ 2,171
See Accompanying Notes to Financial Statements
b)
ANGELES PARTNERS VII
STATEMENTS OF OPERATIONS
(Unaudited)
(in thousands, except unit data)
Three Months Ended Six Months Ended
June 30, June 30,
1998 1997 1998 1997
Revenues:
Rental income $ 300 $ 291 $ 599 $ 574
Other income 16 14 37 30
Total revenues 316 305 636 604
Expenses:
Operating 135 138 262 262
General and administrative 43 10 62 31
Depreciation 68 68 137 135
Interest 52 55 105 111
Property taxes 11 11 22 21
Total expenses 309 282 588 560
Net income $ 7 $ 23 $ 48 $ 44
Net income allocated to
general partner (1%) $ -- $ -- $ -- $ --
Net income allocated to
limited partners (99%) 7 23 48 44
Net income $ 7 $ 23 $ 48 $ 44
Net income per limited
partnership unit $ .81 $ 2.65 $ 5.54 $ 5.08
Distributions per limited
partnership unit $15.11 $ -- $15.11 $ --
See Accompanying Notes to Financial Statements
c)
ANGELES PARTNERS VII
STATEMENT OF CHANGES IN PARTNERS' CAPITAL (DEFICIT)
(Unaudited)
(in thousands, except unit data)
Limited
Partnership General Limited
Units Partner Partners Total
Original capital contributions 8,674 $ 88 $ 8,674 $ 8,762
Partners' capital (deficit)
at December 31, 1997 8,669 $ 293 $ (432) $ (139)
Distributions to partners -- (1) (131) (132)
Net income for the six months
ended June 30, 1998 -- -- 48 48
Partners' capital (deficit)
at June 30, 1998 8,669 $ 292 $ (515) $ (223)
See Accompanying Notes to Financial Statements
d)
ANGELES PARTNERS VII
STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
Six Months Ended
June 30,
1998 1997
Cash flows from operating activities:
Net income $ 48 $ 44
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation 137 135
Change in accounts:
Receivables and deposits 17 31
Other assets 3 (12)
Accounts payable 6 (6)
Tenant security deposit liabilities 1 --
Accrued property taxes (18) (19)
Other liabilities 4 3
Net cash provided by
operating activities 198 176
Cash flows used in investing activities:
Property improvements and replacements (26) (34)
Cash flows used in financing activities:
Distributions to partners (132) --
Payments on mortgage note payable (61) (56)
Net cash used in financing activities (193) (56)
Net (decrease) increase in cash and cash equivalents (21) 86
Cash and cash equivalents at beginning of period 416 239
Cash and cash equivalents at end of period $ 395 $ 325
Supplemental disclosure of cash flow information:
Cash paid for interest $ 106 $ 111
See Accompanying Notes to Financial Statements
e)
ANGELES PARTNERS VII
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
NOTE 1 - BASIS OF PRESENTATION
The accompanying unaudited financial statements of Angeles Partners VII (the
"Partnership") have been prepared in accordance with generally accepted
accounting principles for interim financial information and with the
instructions to Form 10-QSB and Item 310(b) of Regulation S-B. Accordingly, they
do not include all of the information and footnotes required by generally
accepted accounting principles for complete financial statements. In the
opinion of Angeles Realty Corporation (the "General Partner"), all adjustments
(consisting of normal recurring accruals) considered necessary for a fair
presentation have been included. Operating results for the three and six months
ended June 30, 1998, are not necessarily indicative of the results that may be
expected for the fiscal year ending December 31, 1998. For further information,
refer to the financial statements and footnotes thereto included in the
Partnership's annual report on Form 10-KSB for the fiscal year ended December
31, 1997.
Certain reclassifications have been made to the 1997 information to conform to
the 1998 presentation.
NOTE 2 - TRANSACTIONS WITH AFFILIATES
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 General Partner is wholly-owned by Insignia Properties Trust ("IPT"), an
affiliate of Insignia Financial Group, Inc. ("Insignia"). The Partnership
Agreement ("Agreement") provides for payments to affiliates for services and as
reimbursement of certain expenses incurred by affiliates on behalf of the
Partnership. The following amounts were paid to the General Partner and
affiliates during the six months ended June 30, 1998 and 1997:
1998 1997
(in thousands)
Property management fees (included in $ 31 $ 30
operating expense)
Reimbursement for services of affiliates 24 20
(included in general and administrative
expense)
Partnership management fee (included in
general and administrative expense) (1) 22 --
(1) The Agreement provides for a fee equal to 7.5% of "net cash available for
distribution" to the limited partners (as defined in the Agreement) to be
paid to the General Partner for executive and administrative management
services.
For the period from January 1, 1997, to August 31, 1997, the Partnership insured
its properties under a master policy through an agency affiliated with the
General Partner with an 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 master policy. The agent assumed the financial
obligations to the affiliate of the General Partner which receives payment on
these obligations from the agent. The amount of the Partnership's insurance
premiums that accrued to the benefit of the affiliate of the General Partner by
virtue of the agent's obligations was not significant.
On March 17, 1998, Insignia entered into an agreement to merge its national
residential property management operations, and its controlling interest in IPT,
with Apartment Investment and Management Company ("AIMCO"), a publicly traded
real estate investment trust. The closing, which is anticipated to happen in
September or October of 1998, is subject to customary conditions, including
government approvals and the approval of Insignia's shareholders. If the
closing occurs, AIMCO will then control the General Partner of the Partnership.
NOTE 3 - DISTRIBUTION
An operating cash distribution of $132,000 ($15.11 per limited partnership unit
was made during the six months ended June 30, 1998. No cash distributions were
made during the six months ended June 30, 1997.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
The Partnership's investment property consists of one apartment complex. The
following table sets forth the average occupancy of the property for the six
months ended June 30, 1998 and 1997:
Average
Occupancy
Property 1998 1997
Cedarwood Apartments
Gretna, Louisiana 96% 97%
Results of Operations
The Partnership reported net income of approximately $7,000 and $48,000 for the
three and six months ended June 30, 1998, respectively, as compared to
approximately $23,000 and $44,000 for the three and six months ended June 30,
1997, respectively. The increase in net income is primarily attributable to an
increase in rental income. Rental income increased due to an increase in the
average rental rate at Cedarwood Apartments. An increase in other income also
contributed to the increase in net income for the year due to an increase in
interest income. Interest income increased due to higher average cash balances
for the six months ended June 30, 1998 as compared to June 30, 1997.
Offsetting these increases in net income was an increase in general and
administrative expenses. General and administrative expenses increased
primarily due to the payment of a partnership management fee of $22,000 in May
1998. The fee was paid for executive and administrative management services and
was equal to 7.5% of "net cash available for distributions" pursuant to the
Partnership Agreement.
Included in operating expense for the six months ended June 30, 1998, is $6,000
of major repairs and maintenance comprised mainly of parking lot improvements,
major landscaping, and swimming pool repairs. Included in operating expense for
the six months ended June 30, 1997, is $5,000 of major repairs and maintenance
comprised mainly of major landscaping, exterior building improvements and window
coverings.
The General Partner continues to monitor the rental market environment at its
apartment property to assess the feasibility of increasing rents, to maintain or
increase the occupancy level and to protect the Partnership from increases in
expense. The General Partner expects to be able, at a minimum, to continue
protecting the Partnership from the burden of inflation-related increases in
expenses by increasing rents and maintaining a high overall occupancy level.
However, rental concessions and rental rate reductions needed to offset
softening market conditions could affect the ability to sustain this plan.
Liquidity and Capital Resources
At June 30, 1998, the Partnership had cash and cash equivalents of approximately
$395,000 compared to approximately $325,000 for the corresponding period of
1997. The net (decrease) increase in cash and cash equivalents for the six
months ended June 30, 1998 and 1997 was $(21,000) and $86,000, respectively.
Net cash provided by operating activities increased due to the decrease in other
assets and an increase in accounts payable. Net cash used in investing
activities decreased due to a decrease in property improvements and replacements
in 1998 as compared to 1997. Net cash used in financing activities increased due
to an operating distribution made in 1998.
The sufficiency of existing liquid assets to meet future liquidity and capital
expenditure requirements is directly related to the level of capital
expenditures required at the property to adequately maintain the physical assets
and other operating needs of the Partnership. Such assets are currently thought
to be sufficient for any short-term needs of the Partnership. The mortgage
indebtedness of $2,278,000 is being amortized over 28 years with a maturity date
of May 2007. An operating cash distribution of $132,000 was made during the six
months ended June 30, 1998. No cash distributions were made during the six
months ended June 30, 1997. Future cash distributions will depend on the levels
of net cash generated from operations, refinancings, property sale and the
availability of cash reserves.
Year 2000
The Partnership is dependent upon the General Partner and Insignia for
management and administrative services. Insignia has completed an assessment
and will have to modify or replace portions of its software so that its computer
systems will function properly with respect to dates in the year 2000 and
thereafter (the "Year 2000 Issue"). The project is estimated to be completed
not later than December 31, 1998, which is prior to any anticipated impact on
its operating systems. The General Partner believes that with modifications to
existing software and conversions to new software, the Year 2000 Issue will not
pose significant operational problems for its computer systems. However, if such
modifications and conversions are not made, or are not completed timely, the
Year 2000 Issue could have a material impact on the operations of the
Partnership.
Other
Certain items discussed in this quarterly report may constitute forward-looking
statements within the meaning of the Private Securities Litigation Reform Act of
1995 (the "Reform Act") and as such may involve known and unknown risks,
uncertainties and other factors which may cause the actual results, performance
or achievements of the Partnership to be materially different from any future
results, performance or achievements expressed or implied by such forward-
looking statements. Such forward-looking statements speak only as of the date
of this quarterly report. The Partnership expressly disclaims any obligation or
undertaking to release publicly any updates of revisions to any forward-looking
statements contained herein to reflect any change in the Partnership's
expectations with regard thereto or any change in events, conditions or
circumstances on which any such statement is based.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
In March 1998, several putative unit holders of limited partnership units of the
Partnership commenced an action entitled ROSALIE NUANES, ET AL. V. INSIGNIA
FINANCIAL GROUP, INC., ET AL. 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 complaint 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 and its 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 as well as a recently announced agreement between
Insignia and Apartment Investment and Management Company. The complaint seeks
monetary damages and equitable relief, including judicial dissolution of the
Partnership. In lieu of responding to the motion, the plaintiffs have filed an
amended complaint. The General Partner believes the action to be without merit,
and intends to vigorously defend it. On June 25, 1998, the General Partner filed
a motion seeking dismissal of the action.
The Partnership is unaware of any other pending or outstanding litigation that
is not of a routine nature. The General Partner believes that all such pending
or outstanding litigation will be resolved without a material adverse effect
upon the business, financial condition, or operations of the Partnership.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a) Exhibits
Exhibit 27, Financial Data Schedule, is filed as an exhibit to this
report.
b) Reports on Form 8-K:
None filed during the quarter ended June 30, 1998.
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 VII
By: Angeles Realty Corporation
General Partner
By: /s/ Carroll D. Vinson
Carroll D. Vinson
President and Director
By: /s/ Robert D. Long
Robert D. Long
Vice President and Principal Accounting Officer
Date: August 11, 1998
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from
Angeles Partners VII 1998 Second Quarter 10-QSB and is qualified in its
entirety by reference to such 10-QSB filing.
</LEGEND>
<CIK> 0000310303
<NAME> ANGELES PARTNERS VII
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> JUN-30-1998
<CASH> 395
<SECURITIES> 0
<RECEIVABLES> 70
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0<F1>
<PP&E> 5,726
<DEPRECIATION> 4,028
<TOTAL-ASSETS> 2,171
<CURRENT-LIABILITIES> 0<F1>
<BONDS> 2,278
0
0
<COMMON> 0
<OTHER-SE> (223)
<TOTAL-LIABILITY-AND-EQUITY> 2,171
<SALES> 0
<TOTAL-REVENUES> 636
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 588
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 105
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 48
<EPS-PRIMARY> 5.54<F2>
<EPS-DILUTED> 0
<FN>
<F1>Registrant has an unclassified balance sheet.
<F2>Multiplier is 1.
</FN>
</TABLE>
