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 June 30, 2000
[ ] 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)
June 30, 2000
Assets
Cash and cash equivalents $ 309
Receivables and deposits 38
Other assets 20
Investment property:
Land $ 366
Buildings and related personal property 5,673
6,039
Less accumulated depreciation (4,600) 1,439
$ 1,806
Liabilities and Partners' Capital (Deficit)
Liabilities
Accounts payable $ 24
Tenant security deposit liabilities 33
Accrued property taxes 23
Other liabilities 69
Mortgage note payable 2,006
Partners' Capital (Deficit)
General partner $ 292
Limited partners (8,669 units issued and
outstanding) (641) (349)
$ 1,806
See Accompanying Notes to Financial Statements
<PAGE>
b)
ANGELES PARTNERS VII
STATEMENTS OF OPERATIONS
(Unaudited)
(in thousands, except unit data)
Three Months Ended Six Months Ended
June 30, June 30,
2000 1999 2000 1999
Revenues:
Rental income $ 351 $ 316 $ 681 $ 633
Other income 26 14 41 32
Total revenues 377 330 722 665
Expenses:
Operating 131 105 256 229
General and administrative 25 40 44 62
Depreciation 72 63 143 140
Interest 46 50 93 100
Property taxes 12 11 23 22
Total expenses 286 269 559 553
Net income $ 91 $ 61 $ 163 $ 112
Net income allocated to
general partner (1%) $ 1 $ 1 $ 2 $ 1
Net income allocated to
limited partners (99%) 90 60 161 111
Net income $ 91 $ 61 $ 163 $ 112
Net income per limited
partnership unit $ 10.38 $ 6.92 $ 18.57 $ 12.80
Distributions per limited
partnership unit $ 34.26 $ -- $ 34.26 $ --
See Accompanying Notes to Financial Statements
<PAGE>
c)
ANGELES PARTNERS VII
STATEMENT OF CHANGES IN PARTNERS' CAPITAL (DEFICIT)
(Unaudited)
(in thousands, except unit data)
<TABLE>
<CAPTION>
Limited
Partnership General Limited
Units Partner Partners Total
<S> <C> <C> <C> <C>
Original capital contributions 8,674 $ 88 $ 8,674 $ 8,762
Partners' capital (deficit) at
December 31, 1999 8,669 $ 293 $ (505) $ (212)
Distribution to partners -- (3) (297) (300)
Net income for the six months
ended June 30, 2000 -- 2 161 163
Partners' capital (deficit)
at June 30, 2000 8,669 $ 292 $ (641) $ (349)
See Accompanying Notes to Financial Statements
</TABLE>
<PAGE>
d)
ANGELES PARTNERS VII
STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
Six Months Ended
June 30,
2000 1999
Cash flows from operating activities:
Net income $ 163 $ 112
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 143 140
Change in accounts:
Receivables and deposits 56 13
Other assets (2) (18)
Accounts payable 6 1
Tenant security deposit liabilities (2) 1
Accrued property taxes 23 (23)
Other liabilities (23) (3)
Net cash provided by operating activities 364 223
Cash flows used in investing activities:
Property improvements and replacements (38) (22)
Cash flows from financing activities:
Distribution to partners (300) --
Payments on mortgage note payable (73) (66)
Net cash used in financing activities (373) (66)
Net (decrease) increase in cash and cash equivalents (47) 135
Cash and cash equivalents at beginning of period 356 499
Cash and cash equivalents at end of period $ 309 $ 634
Supplemental disclosure of cash flow information:
Cash paid for interest $ 93 $ 100
See Accompanying Notes to Financial Statements
<PAGE>
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 six month
periods ended June 30, 2000, are not necessarily indicative of the results that
may be expected for the year ending December 31, 2000. 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, 1999.
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
has had or 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 (i) certain payments to affiliates for
services and (ii) reimbursement of certain expenses incurred by affiliates on
behalf of the Partnership. The following payments were made to the General
Partner and affiliates during the six months ended June 30, 2000 and 1999:
2000 1999
(in thousands)
Property management fees (included in
operating expenses) $ 35 $ 33
Reimbursement for services of affiliates
(included in general and administrative expenses) 19 16
During the six months ended June 30, 2000 and 1999, 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 $35,000 and $33,000 for the six months ended June 30,
2000 and 1999, respectively.
An affiliate of the General Partner received reimbursement of accountable
administrative expenses amounting to approximately $19,000 and $16,000 for the
six months ended June 30, 2000 and 1999, respectively.
AIMCO and its affiliates currently own 4,696 limited partnership units in the
Partnership representing 54.17% of the outstanding units. A number of these
units were acquired pursuant to tender offers made by AIMCO or its affiliates.
It is possible that AIMCO or its affiliates 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. Under
the Partnership Agreement, unitholders holding a majority of the Units are
entitled to take action with respect to a variety of matters. As a result of its
ownership of 54.17% of the outstanding units, AIMCO is in a position to
influence all voting decisions with respect to the Registrant. When voting on
matters, AIMCO would in all likelihood vote the Units it acquired in a manner
favorable to the interest of the General Partner because of their affiliation
with the General Partner.
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 segment profit (loss) before
depreciation. 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, 1999.
Segment information for the three and six months ended June 30, 2000 and 1999 is
shown in the tables below. The "Other" column includes Partnership
administration related items and income and expense not allocated to the
reportable segment.
Three Months Ended June 30, 2000 Residential Other Totals
(in thousands)
Rental income $ 351 $ -- $ 351
Other income 25 1 26
Interest expense 46 -- 46
Depreciation 72 -- 72
General and administrative expense -- 25 25
Segment profit (loss) 115 (24) 91
Six Months Ended June 30, 2000 Residential Other Totals
(in thousands)
Rental income $ 681 $ -- $ 681
Other income 39 2 41
Interest expense 93 -- 93
Depreciation 143 -- 143
General and administrative expense -- 44 44
Segment profit (loss) 205 (42) 163
Total assets 1,764 42 1,806
Capital expenditures for
investment property 38 -- 38
Three Months Ended June 30, 1999 Residential Other Totals
(in thousands)
Rental income $ 316 $ -- $ 316
Other income 10 4 14
Interest expense 50 -- 50
Depreciation 63 -- 63
General and administrative expense -- 40 40
Segment profit (loss) 97 (36) 61
Six Months Ended June 30, 1999 Residential Other Totals
(in thousands)
Rental income $ 633 $ -- $ 633
Other income 25 7 32
Interest expense 100 -- 100
Depreciation 140 -- 140
General and administrative expense -- 62 62
Segment profit (loss) 167 (55) 112
Total assets 1,889 333 2,222
Capital expenditures for
investment property 22 -- 22
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, its 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 of interests in certain general partner
entities by Insignia Financial Group, Inc. and entities which were, at one time,
affiliates of Insignia; past tender offers by the Insignia affiliates to acquire
limited partnership units; the management of partnerships by the Insignia
affiliates; and the Insignia Merger. 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 owned units as of November 3, 1999. Preliminary
approval of the settlement was obtained on November 3, 1999 from the Court, 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 prior lead counsel to enter the settlement. On
December 14, 1999, the General Partner and its affiliates terminated the
proposed settlement. In February 2000, counsel for some of the named plaintiffs
filed a motion to disqualify plaintiff's lead and liaison counsel who negotiated
the settlement. On June 27, 2000, the Court entered an order disqualifying them
from the case. The Court will entertain applications for lead counsel which must
be filed by August 4, 2000. The Court has scheduled a hearing on August 21, 2000
to address the issue of appointing lead counsel. 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
discussion 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 six
months ended June 30, 2000 and 1999:
Average Occupancy
Property 2000 1999
Cedarwood Apartments 98% 98%
Gretna, Louisiana
Results of Operations
The Partnership realized net income of approximately $91,000 and $163,000 for
the three and six months ended June 30, 2000 as compared to net income of
approximately $61,000 and $112,000 for the three and six months ended June 30,
1999. The increase in net income for the three and six months ended June 30,
2000 was due primarily to an increase in total revenues slightly offset by an
increase in total expenses. Total revenues increased due to an increase in both
rental and other income. The increase in rental income is primarily due to an
increase in average rental rates at the Partnership's investment property. Other
income increased due to an increase in both telephone charges and late charges.
Total expenses increased primarily due to an increase in operating expenses
partially offset by a decrease in general and administrative expenses. Operating
expenses increased due to an increase in management salaries and commissions.
General and administrative expenses decreased due to an decrease in legal costs
which were incurred in 1999 related to a case disclosed in the Partnership's
1998 Form 10-KSB.
Included in general and administrative expense at both June 30, 2000 and 1999
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 Registrant, 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 needed 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 June 30, 2000, the Partnership had cash and cash equivalents of approximately
$309,000 as compared to approximately $634,000 at June 30, 1999. The decrease in
cash and cash equivalents of approximately $47,000 for the six months ended June
30, 2000, from the Partnership's calendar year end, is primarily due to
approximately $373,000 of cash used in financing activities and approximately
$38,000 of cash used in investing activities partially offset by approximately
$364,000 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 distributions to partners 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
money market accounts.
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 investment property to adequately maintain the
physical assets and other operating needs of the Registrant and to comply with
Federal, state, local, legal and regulatory requirements. Capital improvements
planned for the Partnership's property are detailed below.
Cedarwood Apartments: For 2000 the Partnership has budgeted approximately
$154,000 for capital improvements, consisting primarily of cabinet replacements,
major landscaping, parking lot upgrades and floor covering and appliance
replacements. The Partnership completed approximately $38,000 in capital
expenditures at Cedarwood Apartments as of June 30, 2000, consisting primarily
of office equipment, water heaters and appliance and floor covering
replacements. These improvements were funded from operations.
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 Registrant's current assets are thought to be sufficient for any near-term
needs (exclusive of capital improvements) of the Registrant. The mortgage
indebtedness of approximately $2,006,000 is amortized over 28 years with a
maturity date of May 2007. The General Partner may 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 Registrant
will risk losing such property through foreclosure.
A cash distribution of $300,000 ($297,000 of which was paid to the limited
partners, or $34.26 per limited partnership unit) was paid from operations
during the six months ended June 30, 2000. No distributions were made during the
six months ended June 30, 1999. 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 2000 or subsequent periods.
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, its 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 of interests in certain general partner
entities by Insignia Financial Group, Inc. and entities which were, at one time,
affiliates of Insignia; past tender offers by the Insignia affiliates to acquire
limited partnership units; the management of partnerships by the Insignia
affiliates; and the Insignia Merger. 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 owned units as of November 3, 1999. Preliminary
approval of the settlement was obtained on November 3, 1999 from the Court, 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 prior lead counsel to enter the settlement. On
December 14, 1999, the General Partner and its affiliates terminated the
proposed settlement. In February 2000, counsel for some of the named plaintiffs
filed a motion to disqualify plaintiff's lead and liaison counsel who negotiated
the settlement. On June 27, 2000, the Court entered an order disqualifying them
from the case. The Court will entertain applications for lead counsel which must
be filed by August 4, 2000. The Court has scheduled a hearing on August 21, 2000
to address the issue of appointing lead counsel. 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 June 30, 2000.
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:
