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 March 31, 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)
March 31, 2000
<TABLE>
<CAPTION>
Assets
<S> <C> <C>
Cash and cash equivalents $ 477
Receivables and deposits 39
Other assets 30
Investment property:
Land $ 366
Buildings and related personal property 5,648
6,014
Less accumulated depreciation (4,528) 1,486
$ 2,032
Liabilities and Partners' Capital (Deficit)
Liabilities
Accounts payable $ 16
Tenant security deposit liabilities 32
Accrued property taxes 11
Other liabilities 70
Mortgage note payable 2,043
Partners' Capital (Deficit)
General partner $ 294
Limited partners (8,669 units issued and
outstanding) (434) (140)
$ 2,032
See Accompanying Notes to Financial Statements
</TABLE>
b)
ANGELES PARTNERS VII
STATEMENTS OF OPERATIONS
(Unaudited)
(in thousands, except unit data)
Three Months Ended
March 31,
2000 1999
Revenues:
Rental income $ 330 $ 317
Other income 15 18
Total revenues 345 335
Expenses:
Operating 125 124
General and administrative 19 22
Depreciation 71 77
Interest 47 50
Property taxes 11 11
Total expenses 273 284
Net income $ 72 $ 51
Net income allocated to general partner (1%) $ 1 $ 1
Net income allocated to limited partners (99%) 71 50
Net income $ 72 $ 51
Net income per limited partnership unit $ 8.19 $ 5.77
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)
Net income for the three months
ended March 31, 2000 -- 1 71 72
Partners' capital (deficit)
at March 31, 2000 8,669 $ 294 $ (434) $ (140)
See Accompanying Notes to Financial Statements
</TABLE>
d)
ANGELES PARTNERS VII
STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
2000 1999
Cash flows from operating activities:
<S> <C> <C>
Net income $ 72 $ 51
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 71 77
Change in accounts:
Receivables and deposits 55 27
Other assets (12) (16)
Accounts payable (2) --
Tenant security deposit liabilities (3) --
Accrued property taxes 11 (34)
Other liabilities (22) (3)
Net cash provided by operating activities 170 102
Cash flows used in investing activities:
Property improvements and replacements (13) (11)
Cash flows used in financing activities:
Payments on mortgage note payable (36) (33)
Net increase in cash and cash equivalents 121 58
Cash and cash equivalents at beginning of period 356 499
Cash and cash equivalents at end of period $ 477 $ 557
Supplemental disclosure of cash flow information:
Cash paid for interest $ 47 $ 50
See Accompanying Notes to Financial Statements
</TABLE>
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 month period
ended March 31, 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 three months ended March 31, 2000 and 1999:
2000 1999
(in thousands)
Property management fees (included in
operating expenses) $ 17 $ 16
Reimbursement for services of affiliates
(included in general and administrative expenses) 8 12
During the three months ended March 31, 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 $17,000 and $16,000 for the three months ended March
31, 2000 and 1999, respectively.
An affiliate of the General Partner received reimbursement of accountable
administrative expenses amounting to approximately $8,000 and $12,000 for the
three months ended March 31, 2000 and 1999, respectively.
AIMCO and its affiliates currently own 4,681 limited partnership units in the
Partnership representing 54.00% 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 54.00% 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 months ended March 31, 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.
2000 Residential Other Totals
(in thousands)
Rental income $ 330 $ -- $ 330
Other income 14 1 15
Interest expense 47 -- 47
Depreciation 71 -- 71
General and administrative expense -- 19 19
Segment profit (loss) 90 (18) 72
Total assets 1,916 116 2,032
Capital expenditures for
investment property 13 -- 13
1999 Residential Other Totals
(in thousands)
Rental income $ 317 $ -- $ 317
Other income 15 3 18
Interest expense 50 -- 50
Depreciation 77 -- 77
General and administrative expense -- 22 22
Segment profit (loss) 70 (19) 51
Total assets 1,813 368 2,181
Capital expenditures for
investment property 11 -- 11
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 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 B - 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 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 three
months ended March 31, 2000 and 1999:
Average Occupancy
Property 2000 1999
Cedarwood Apartments 97% 98%
Gretna, Louisiana
Results of Operations
The Partnership's net income for the three months ended March 31, 2000 and 1999
was approximately $72,000 and $51,000, respectively. The increase in net income
is due to a decrease in total expenses and an increase in total revenues. Total
expenses decreased primarily due to a decrease in depreciation expense. The
decrease in depreciation expense is due primarily to fixed assets placed into
service in previous years becoming fully depreciated in 2000.
Operating, interest, property tax, and general and administrative expenses
remained relatively constant for the comparable periods. Included in general and
administrative expense at both March 31, 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.
Total revenues increased primarily due to an increase in rental income. The
increase in rental income is due to an increase in the average rental rate at
the Partnership's investment property.
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 March 31, 2000, the Partnership had cash and cash equivalents of
approximately $477,000 as compared to approximately $557,000 at March 31, 1999.
The increase in cash and cash equivalents of approximately $121,000 for the
three months ended March 31, 2000, from the Partnership's calendar year end, is
primarily due to approximately $170,000 of cash provided by operating
activities, which was partially offset by approximately $36,000 of cash used in
financing activities and approximately $13,000 of cash used in investing
activities. Cash used in investing activities consisted of property improvements
and replacements. Cash used in financing activities consisted of 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 $13,000 in capital
expenditures at Cedarwood Apartments as of March 31, 2000, consisting primarily
of office equipment and water heaters, 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 $2,043,000 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.
No distributions were made during the three months ended March 31, 2000 or 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 required 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, 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
"Part 1 - Financial Information, Item 1. Financial Statements, Note B - 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.
<PAGE>
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 March 31, 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: May 11, 2000
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from Angeles
Partners VII 2000 First 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> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<CASH> 477
<SECURITIES> 0
<RECEIVABLES> 39
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0 <F1>
<PP&E> 6,014
<DEPRECIATION> 4,528
<TOTAL-ASSETS> 2,032
<CURRENT-LIABILITIES> 0 <F1>
<BONDS> 2,043
0
0
<COMMON> 0
<OTHER-SE> (140)
<TOTAL-LIABILITY-AND-EQUITY> 2,032
<SALES> 0
<TOTAL-REVENUES> 345
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 273
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 47
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 72
<EPS-BASIC> 8.19 <F2>
<EPS-DILUTED> 0
<FN>
<F1> Registrant has an unclassified balance sheet. <F2> Multiplier is 1.
</FN>
</TABLE>
