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
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended September 30, 1999
[ ] TRANSITION REPORT PURSUANT TO SECTION 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 (I.R.S. Employer
incorporation or organization) Identification No.)
55 Beattie Place, PO 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 Partnership 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)
September 30, 1999
Assets
Cash and cash equivalents $ 383
Receivables and deposits 87
Other assets 23
Investment property:
Land $ 366
Buildings and related personal property 5,533
5,899
Less accumulated depreciation (4,379) 1,520
$ 2,013
Liabilities and Partners' Capital (Deficit)
Liabilities
Accounts payable $ 25
Tenant security deposit liabilities 34
Accrued property taxes 33
Other liabilities 46
Mortgage note payable 2,114
Partners' Capital (Deficit):
General partner $ 292
Limited partners (8,669 units issued and
outstanding) (531) (239)
$ 2,013
See Accompanying Notes to Financial Statements
b)
ANGELES PARTNERS VII
STATEMENTS OF OPERATIONS
(Unaudited)
(in thousands, except unit data)
Three Months Ended Nine Months Ended
September 30, September 30,
1999 1998 1999 1998
Revenues:
Rental income $ 310 $ 303 $ 943 $ 902
Other income 13 19 45 56
Total revenues 323 322 988 958
Expenses:
Operating 125 146 354 408
General and administrative 42 19 104 81
Depreciation 66 68 206 205
Interest 48 52 148 157
Property taxes 11 10 33 32
Total expenses 292 295 845 883
Net income $ 31 $ 27 $ 143 $ 75
Net income allocated
to general partner (1%) $ -- $ -- $ 1 $ 1
Net income allocated
to limited partners (99%) 31 27 142 74
Net income $ 31 $ 27 $ 143 $ 75
Net income per limited
partnership unit $ 3.58 $ 3.11 $ 16.38 $ 8.54
Distributions per limited
partnership unit $ 26.88 $ -- $ 26.88 $ 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, 1998 8,669 $ 293 $ (440) $ (147)
Distribution to partners -- (2) (233) (235)
Net income for the nine months
ended September 30, 1999 -- 1 142 143
Partners' capital (deficit)
at September 30, 1999 8,669 $ 292 $ (531) $ (239)
See Accompanying Notes to Financial Statements
d)
ANGELES PARTNERS VII
STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
Nine Months Ended
September 30,
1999 1998
Cash flows from operating activities:
Net income $ 143 $ 75
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 206 205
Change in accounts:
Receivables and deposits 10 4
Other assets (18) 5
Accounts payable 7 2
Tenant security deposit liabilities 1 1
Accrued property taxes (12) (8)
Other liabilities 10 8
Net cash provided by operating activities 347 292
Cash flows used in investing activities:
Property improvements and replacements (127) (61)
Cash flows used in financing activities:
Distributions to partners (235) (132)
Payments on mortgage note payable (101) (92)
Net cash used in financing activities (336) (224)
Net (decrease) increase in cash and cash equivalents (116) 7
Cash and cash equivalents at beginning of period 499 416
Cash and cash equivalents at end of period $ 383 $ 423
Supplemental disclosure of cash flow information:
Cash paid for interest $ 148 $ 157
See Accompanying Notes to Financial Statements
e)
ANGELES PARTNERS VII
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
NOTE A - BASIS OF PRESENTATION
The accompanying unaudited financial statements of Angeles Partners VII (the
"Partnership" or "Registrant") 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 nine month
periods ended September 30, 1999, are not necessarily indicative of the results
that may be expected for the year ending December 31, 1999. For further
information, refer to the financial statements and footnotes thereto included in
the Partnership's Annual Report on Form 10-KSB for the year ended December 31,
1998.
NOTE B - TRANSFER OF CONTROL
Pursuant to a series of transactions which closed on October 1, 1998 and
February 26, 1999, Insignia Financial Group, Inc. and Insignia Properties Trust
merged into Apartment Investment and Management Company ("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
will have a material effect on the affairs and operations of the Partnership.
NOTE C - TRANSACTIONS WITH AFFILIATED PARTIES
The Partnership has no employees and is dependent on the General Partner and its
affiliates for the management and administration of all Partnership activities.
The Partnership Agreement provides for certain payments to affiliates for
services and as reimbursement of certain expenses incurred by affiliates on
behalf of the Partnership. The following transactions were paid or accrued to
the General Partner and affiliates during the nine months ended September 30,
1999 and 1998:
1999 1998
(in thousands)
Property management fees (included in
operating expenses) $ 49 $ 47
Reimbursement for services of affiliates
(included in general and administrative expenses and
investment properties) 41 37
Partnership management fee (included in
general and administrative expense) (1) -- 22
(1) The Partnership Agreement provides for a fee equal to 7.5% of "net cash
available for distribution" to the limited partners (as defined in the
Partnership Agreement) to be paid to the General Partner for executive and
administrative management services.
During the nine months ended September 30, 1999 and 1998, affiliates of the
General Partner were entitled to receive 5% of gross receipts from the
Registrant's property for providing property management services. The
Registrant paid to such affiliates approximately $49,000 and $47,000 for the
nine months ended September 30, 1999 and 1998, respectively.
An affiliate of the General Partner received reimbursement of accountable
administrative expenses amounting to approximately $41,000 and $37,000 for the
nine months ended September 30, 1999 and 1998, respectively. Included in these
expenses for the nine months ended September 30, 1999 is approximately $16,000
in reimbursements for construction oversight costs. There were no such costs
incurred for the nine months ended September 30, 1998.
On May 19, 1999, AIMCO Properties, L.P., an affiliate of the General Partner,
commenced a tender offer to purchase up to 3,891.26 (44.89% of the total
outstanding units) units of limited partnership interest in the Partnership for
a purchase price of $254 per unit. The offer expired on July 30, 1999.
Pursuant to the offer, AIMCO Properties, L.P. acquired 2,065 units. As a
result, AIMCO and its affiliates currently own 2,119 units of limited
partnership interest in the Partnership representing 24.44% of the total
outstanding units. It is possible that AIMCO or its affiliate will make one or
more additional offers to acquire additional limited partnership interests in
the Partnership for cash or in exchange for units in the operating partnership
of AIMCO. (See "Note E - Legal Proceedings").
NOTE D - SEGMENT REPORTING
Description of the types of products and services from which the reportable
segment derives its revenues:
The Partnership has one reportable segment: residential property. The
Partnership's residential property segment consists of one apartment complex in
Gretna, Louisiana. The Partnership rents apartment units to tenants for terms
that are typically twelve months or less.
Measurement of segment profit or loss:
The Partnership evaluates performance based on net income. The accounting
policies of the reportable segment are the same as those of the Partnership as
described in the Partnership's Annual Report on Form 10-KSB for the year ended
December 31, 1998.
Segment information for the nine months ended September 30, 1999 and 1998 is
shown in the tables below. The "Other" column includes partnership
administration related items and income and expense not allocated to the
reportable segment.
1999 Residential Other Totals
(in thousands)
Rental income $ 943 $ -- $ 943
Other income 36 9 45
Interest expense 148 -- 148
Depreciation 206 -- 206
General and administrative expense -- 104 104
Segment profit (loss) 238 (95) 143
Total assets 1,840 173 2,013
Capital expenditures for
investment properties 127 -- 127
1998 Residential Other Totals
(in thousands)
Rental income $ 902 $ -- $ 902
Other income 40 16 56
Interest expense 157 -- 157
Depreciation 205 -- 205
General and administrative expense -- 81 81
Segment profit (loss) 140 (65) 75
Total assets 1,815 362 2,177
Capital expenditures 61 -- 61
NOTE E - 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 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 B - Transfer of Control"). The complaint seeks 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 ("Stipulation"), settling claims, subject to final
court approval, on behalf of the Partnership and all limited partners who own
units as of November 3, 1999. The Court has preliminarily approved the
Settlement and scheduled a final approval hearing for December 10, 1999. In
exchange for a release of all claims, the Stipulation provides that, among other
things, an affiliate of the General Partner will make tender offers for all
outstanding limited partnership interests in 49 partnerships, including the
Registrant, subject to the terms and conditions set forth in the Stipulation,
and has agreed to establish a reserve to pay an additional amount in settlement
to qualifying class members (the "Settlement Fund"). At the final approval
hearing, Plaintiffs' counsel will make an application for attorneys' fees and
reimbursement of expenses, to be paid in part by the partnerships and in part
from the Settlement Fund. 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 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
The matters discussed in this Form 10-QSB contain certain forward-looking
statements and involve risks and uncertainties (including changing market
conditions, competitive and regulatory matters, etc.) detailed in the
disclosures contained in this Form 10-QSB 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 operation. 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.
The Partnership's investment property consists of one apartment complex. The
following table sets forth the average occupancy of the property for the nine
months ended September 30, 1999 and 1998:
Average Occupancy
Property 1999 1998
Cedarwood Apartments 97% 96%
Gretna, Louisiana
Results of Operations
The Partnership realized net income of approximately $31,000 and $143,000 for
the three and nine months ended September 30, 1999 as compared to net income of
approximately $27,000 and $75,000 for the three and nine months ended September
30, 1998. The increase in net income for the three and nine months ended
September 30, 1999 was due primarily to an increase in total revenues and a
decrease in total expenses. Total revenues increased primarily due to an
increase in rental income. The increase in rental income is primarily due to an
increase in average occupancy and an increase in the average annual rental rates
at the Partnership's investment property. The increase in rental income was
partially offset by a decrease in other income. Other income decreased
primarily due to lower interest income as a result of a decrease in interest
bearing cash balances as a result of distributions paid during 1999.
Total expenses decreased primarily due to a decrease in operating expenses.
Operating expenses decreased primarily due to a decrease in maintenance expense
and, to a lesser extent, a decrease in insurance expense. Maintenance expense
decreased due to lower repair costs to the pool and buildings for the nine
months ended September 30, 1999 as compared to the comparable period of 1998.
The decrease in insurance expense is due to a change in the Partnership's
insurance carrier late in 1998 which resulted in lower premiums.
The decrease in total expenses was partially offset by an increase in general
and administrative expense. General and administrative expenses increased
primarily as a result of an increase in legal costs, which include the
Partnership's portion of settlement costs paid in 1999 as disclosed in the
Partnership's annual report on Form 10-KSB for the year ended December 31, 1998.
These fees have not yet been incurred for 1999 but will be incurred during the
fourth quarter of 1999. Included in general and administrative expense for the
nine months ended September 30, 1999 and 1998 are management reimbursements to
the General Partner allowed under the Partnership Agreement. 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 Registrant from increases in expense. As part of this plan, the
General Partner attempts to protect the Registrant 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.
Liquidity and Capital Resources
At September 30, 1999, the Partnership had cash and cash equivalents of
approximately $383,000 as compared to approximately $423,000 at September 30,
1998. Cash and cash equivalents decreased approximately $116,000 for the nine
months ended September 30, 1999 from the Partnership's fiscal year end,
primarily due to approximately $336,000 of cash used in financing activities and
approximately $127,000 of cash used in investing activities, which was partially
offset by approximately $347,000 of cash provided by operating activities. Cash
used in investing activities consisted of property improvements and
replacements. Cash used in financing activities consisted primarily of partner
distributions and, to a lesser extent, payments of principal made on the
mortgage encumbering the Registrant's property. The Partnership invests its
working capital reserves in a money market account.
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 and to comply with Federal, state,
and local legal and regulatory requirements. Capital improvements planned for
the Partnership's property are detailed below.
Cedarwood Apartments
Based on a report received from an independent third party consultant analyzing
necessary exterior improvements and estimates made by the General Partner on
interior improvements, it is estimated that the property requires approximately
$152,000 of capital improvements over the next few years. The Partnership has
budgeted, but is not limited to, capital improvements of approximately $152,000
for 1999 at this property which include certain of the required improvements and
consist of gutters and downspout improvements, parking lot improvements, floor
covering and appliance replacements and major landscaping and irrigation. As of
September 30, 1999 approximately $127,000 has been incurred consisting primarily
of parking lot and structural improvements. These improvements were funded from
operations. The parking lot improvements are substantially complete as of
September 30, 1999.
The additional capital expenditures will be incurred only if cash is available
from operations or from the Partnership reserves. To the extent that such
budgeted capital improvements are completed, the Partnership's distributable
cash flow, if any, may be adversely affected at least in the short term.
The Partnership's current assets are thought to be sufficient for any near-term
needs (exclusive of capital improvements) of the Partnership. The mortgage
indebtedness of approximately $2,114,000 is amortized over 28 years with a
maturity date of May 2007. The General Partner will attempt to refinance such
indebtedness and/or sell the property prior to such maturity date. If the
property cannot be refinanced or sold for a sufficient amount, the Partnership
will risk losing such property through foreclosure.
A cash distribution of approximately $235,000 (approximately $233,000 of which
was paid to the limited partners, or approximately $26.88 per limited
partnership unit) was paid from operations during the nine months ended
September 30, 1999. A cash distribution of approximately $132,000
(approximately $131,000 of which was paid to the limited partners, or
approximately $15.11 per limited partnership unit) was paid from operations
during the nine months ended September 30, 1998. The Partnership's distribution
policy is reviewed on an annual basis. Future cash distributions will depend on
the levels of net cash generated from operations, the availability of cash
reserves, and the timing of the debt maturity, refinancing, and/or the sale of
the property. There can be no assurance, however, that the Partnership will
generate sufficient funds from operations, after planned capital improvement
expenditures, to permit any additional distributions to its partners during the
remainder of 1999 or subsequent periods.
Tender Offer
On May 19, 1999, AIMCO Properties, L.P., an affiliate of the General Partner
commenced a tender offer to purchase up to 3,891.26 (44.89% of the total
outstanding units) units of limited partnership interest in the Partnership for
a purchase price of $254 per unit. The offer expired on July 30, 1999.
Pursuant to the offer, AIMCO Properties, L.P. acquired 2,065 units. As a
result, AIMCO and its affiliates currently own 2,119 units of limited
partnership interest in the Partnership representing 24.44% of the total
outstanding units. It is possible that AIMCO or its affiliate will make one or
more additional offers to acquire additional limited partnership interests in
the Partnership for cash or in exchange for units in the operating partnership
of AIMCO. (See "Item 1. Financial Statements, Note E - Legal Proceedings").
Year 2000 Compliance
General Description of the Year 2000 Issue and the Nature and Effects of the
Year 2000 on Information Technology (IT) and Non-IT Systems
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 computer programs or
hardware that have date-sensitive software or embedded chips may recognize a
date using "00" as the year 1900 rather than the year 2000. This could result
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.
Over the past two years, the Managing Agent has determined that it will be
required to modify or replace significant portions of its software and certain
hardware so that those systems will properly utilize dates beyond December 31,
1999. The Managing Agent presently believes that with modifications or
replacements of existing software and certain hardware, the Year 2000 issue can
be mitigated. However, if such modifications and replacements are not made, or
not completed in time, the Year 2000 issue could have a material impact on the
operations of the Partnership.
The Managing Agent's plan to resolve Year 2000 issues involves four phases:
assessment, remediation, testing, and implementation. To date, the Managing
Agent has fully completed its assessment of all the information systems that
could be significantly affected by the Year 2000, and has begun the remediation,
testing and implementation phases on both hardware and software systems.
Assessments are continuing in regards to embedded systems. The status of each
is detailed below.
Status of Progress in Becoming Year 2000 Compliant, Including Timetable for
Completion of Each Remaining Phase
Computer Hardware:
During 1997 and 1998, the Managing Agent identified all of the computer systems
at risk and formulated a plan to repair or replace each of the affected systems.
In August 1998, the main computer system used by the Managing Agent became fully
functional. In addition to the main computer system, PC-based network servers,
routers and desktop PCs were analyzed for compliance. The Managing Agent has
begun to replace each of the non-compliant network connections and desktop PCs
and, as of September 30, 1999, had virtually completed this effort.
The total cost to the Managing Agent to replace the PC-based network servers,
routers and desktop PCs is expected to be approximately $1.5 million of which
$1.3 million has been incurred to date.
Computer Software:
The Managing Agent utilizes a combination of off-the-shelf, commercially
available software programs as well as custom-written programs that are designed
to fit specific needs. Both of these types of programs were studied, and
implementation plans written and executed with the intent of repairing or
replacing any non-compliant software programs.
In April 1999 the Managing Agent embarked on a data center consolidation project
that unifies its core financial systems under its Year 2000 compliant system.
The estimated completion date for this project is October 1999.
During 1998, the Managing agent began converting the existing property
management and rent collection systems to its management properties Year 2000
compliant systems. The estimated additional costs to convert such systems at
all properties, is $200,000, and the implementation and testing process was
completed in June 1999.
The final software area is the office software and server operating systems.
The Managing Agent has upgraded all non-compliant office software systems on
each PC and has upgraded virtually all of the server operating systems.
Operating Equipment:
The Managing Agent has operating equipment, primarily at the property sites,
which needed to be evaluated for Year 2000 compliance. In September 1997, the
Managing Agent began taking a census and inventory of embedded systems
(including those devices that use time to control systems and machines at
specific properties, for example elevators, heating, ventilating, and air
conditioning systems, security and alarm systems, etc.).
The Managing Agent has chosen to focus its attention mainly upon security
systems, elevators, heating, ventilating and air conditioning systems, telephone
systems and switches, and sprinkler systems. While this area is the most
difficult to fully research adequately, management has not yet found any major
non-compliance issues that put the Managing Agent at risk financially or
operationally.
A pre-assessment of the properties by the Managing Agent has indicated virtually
no Year 2000 issues. A complete, formal assessment of all the properties by the
Managing Agent was virtually completed by September 30, 1999. Any operating
equipment that is found non-compliant will be repaired or replaced.
The total cost incurred for all properties managed by the Managing Agent as of
September 30, 1999 to replace or repair the operating equipment was
approximately $75,000. The Managing Agent estimates the cost to replace or
repair any remaining operating equipment is approximately $125,000.
The Managing Agent continues to have "awareness campaigns" throughout the
organization designed to raise awareness and report any possible compliance
issues regarding operating equipment within its enterprise.
Nature and Level of Importance of Third Parties and Their Exposure to the Year
2000
The Managing Agent has banking relationships with three major financial
institutions, all of which have designated their compliance. The Managing Agent
has updated data transmission standards with all of the financial institutions.
All financial institutions have communicated that they are Year 2000 compliant
and accordingly no accounts were required to be moved from the existing
financial institutions.
The Partnership does not rely heavily on any single vendor for goods and
services, and does not have significant suppliers and subcontractors who share
information systems (external agent). To date, the Partnership is not aware of
any external agent with a Year 2000 compliance issue that would materially
impact the Partnership's results of operations, liquidity, or capital resources.
However, the Partnership has no means of ensuring that external agents will be
Year 2000 compliant.
The Managing Agent does not believe that the inability of external agents to
complete their Year 2000 remediation process in a timely manner will have a
material impact on the financial position or results of operations of the
Partnership. However, the effect of non-compliance by external agents is not
readily determinable.
Costs to Address Year 2000
The total cost of the Year 2000 project to the Managing Agent is estimated at
$3.5 million and is being funded from operating cash flows. To date, the
Managing Agent has incurred approximately $2.9 million ($0.7 million expenses
and $2.2 million capitalized for new systems and equipment) related to all
phases of the Year 2000 project. Of the total remaining project costs,
approximately $0.5 million is attributable to the purchase of new software and
operating equipment, which will be capitalized. The remaining $0.2 million
relates to repair of hardware and software and will be expensed as incurred.
The Partnership's portion of these costs are not material.
Risks Associated with the Year 2000
The Managing Agent believes it has an effective program in place to resolve the
Year 2000 issue in a timely manner. As noted above, the Managing Agent has not
yet completed all necessary phases of the Year 2000 program. In the event that
the Managing Agent does not complete any additional phases, certain worst case
scenarios could occur. The worst case scenarios could include elevators,
security and heating, ventilating and air conditioning systems that read
incorrect dates and operate with incorrect schedules (e.g., elevators will
operate on Monday as if it were Sunday). Although such a change would be
annoying to residents, it is not business critical.
In addition, disruptions in the economy generally resulting from Year 2000
issues could also adversely affect the Partnership. The Partnership could be
subject to litigation for, among other things, computer system failures,
equipment shutdowns or failure to properly date business records. The amount of
potential liability and lost revenue cannot be reasonably estimated at this
time.
Contingency Plans Associated with the Year 2000
The Managing Agent has contingency plans for certain critical applications and
is working on such plans for others. These contingency plans involve, among
other actions, manual workarounds and selecting new relationships for such
activities as banking relationships and elevator operating systems.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEDINGS
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 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
"Part I - Financial Information, Item 1. Financial Statements, Note B - Transfer
of Control"). The complaint seeks 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 ("Stipulation"), settling claims, subject to final court approval, on
behalf of the Partnership and all limited partners who own units as of November
3, 1999. The Court has preliminarily approved the Settlement and scheduled a
final approval hearing for December 10, 1999. In exchange for a release of all
claims, the Stipulation provides that, among other things, an affiliate of the
General Partner will make tender offers for all outstanding limited partnership
interests in 49 partnerships, including the Registrant, subject to the terms and
conditions set forth in the Stipulation, and has agreed to establish a reserve
to pay an additional amount in settlement to qualifying class members (the
"Settlement Fund"). At the final approval hearing, Plaintiffs' counsel will
make an application for attorneys' fees and reimbursement of expenses, to be
paid in part by the partnerships and in part from the Settlement Fund.
The General Partner does not anticipate that costs associated with this case
will be material to the Partnership's overall operations.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a) Exhibits:
Exhibit 27, Financial Data Schedule, is filed as an exhibit
to this report.
b) Reports on Form 8-K:
None filed during the quarter ended September 30, 1999.
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/Patrick J. Foye
Patrick J. Foye
Executive Vice President
By: /s/Martha L. Long
Martha L. Long
Senior Vice President and
Controller
Date: November 10, 1999
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from Angeles
Partners VII 1999 Third 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> 9-MOS
<FISCAL-YEAR-END> DEC-30-1999
<PERIOD-END> SEP-30-1999
<CASH> 383
<SECURITIES> 0
<RECEIVABLES> 87
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0<F1>
<PP&E> 5,899
<DEPRECIATION> 4,379
<TOTAL-ASSETS> 2,013
<CURRENT-LIABILITIES> 0<F1>
<BONDS> 2,114
0
0
<COMMON> 0
<OTHER-SE> (239)
<TOTAL-LIABILITY-AND-EQUITY> 2,013
<SALES> 0
<TOTAL-REVENUES> 988
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 845
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 148
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 143
<EPS-BASIC> 16.38<F2>
<EPS-DILUTED> 0
<FN>
<F1>Registrant has an unclassified balance sheet.
<F2>Multiplier is 1.
</FN>
</TABLE>
