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, 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)
September 30, 2000
<TABLE>
<CAPTION>
Assets
<S> <C> <C>
Cash and cash equivalents $ 445
Receivables and deposits 37
Other assets 24
Investment property:
Land $ 366
Buildings and related personal property 5,699
6,065
Less accumulated depreciation (4,665) 1,400
$ 1,906
Liabilities and Partners' Capital (Deficit)
Liabilities
Accounts payable $ 32
Tenant security deposit liabilities 31
Accrued property taxes 35
Other liabilities 72
Due to affiliates 12
Mortgage note payable 1,969
Partners' Capital (Deficit)
General partner $ 293
Limited partners (8,669 units issued and
outstanding) (538) (245)
$ 1,906
See Accompanying Notes to Financial Statements
</TABLE>
b)
ANGELES PARTNERS VII
STATEMENTS OF OPERATIONS
(Unaudited)
(in thousands, except unit data)
Three Months Ended Nine Months Ended
September 30, September 30,
2000 1999 2000 1999
Revenues:
Rental income $ 360 $ 310 $ 1,041 $ 943
Other income 22 13 63 45
Total revenues 382 323 1,104 988
Expenses:
Operating 122 125 378 354
General and administrative 34 42 78 104
Depreciation 65 66 208 206
Interest 46 48 139 148
Property taxes 11 11 34 33
Total expenses 278 292 837 845
Net income $ 104 $ 31 $ 267 $ 143
Net income allocated to
general partner (1%) $ 1 $ 0 $ 3 $ 1
Net income allocated to
limited partners (99%) 103 31 264 142
$ 104 $ 31 $ 267 $ 143
Net income per limited
partnership unit $11.88 $ 3.58 $30.45 $16.38
Distributions per limited
partnership unit $ -- $26.88 $34.26 $26.88
See Accompanying Notes to Financial Statements
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 nine months
ended September 30, 2000 -- 3 264 267
Partners' capital (deficit)
at September 30, 2000 8,669 $ 293 $ (538) $ (245)
See Accompanying Notes to Financial Statements
</TABLE>
d)
ANGELES PARTNERS VII
STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
2000 1999
Cash flows from operating activities:
<S> <C> <C>
Net income $ 267 $ 143
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 208 206
Change in accounts:
Receivables and deposits 57 10
Other assets (6) (18)
Accounts payable 14 7
Tenant security deposit liabilities (4) 1
Accrued property taxes 35 (12)
Due to affiliates 12 --
Other liabilities (20) 10
Net cash provided by operating activities 563 347
Cash flows used in investing activities:
Property improvements and replacements (64) (127)
Cash flows from financing activities:
Distribution to partners (300) (235)
Payments on mortgage note payable (110) (101)
Net cash used in financing activities (410) (336)
Net increase (decrease) in cash and cash equivalents 89 (116)
Cash and cash equivalents at beginning of period 356 499
Cash and cash equivalents at end of period $ 445 $ 383
Supplemental disclosure of cash flow information:
Cash paid for interest $ 139 $ 148
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 and nine month
periods ended September 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 nine months ended September 30, 2000 and 1999:
2000 1999
(in thousands)
Property management fees (included in
operating expenses) $ 54 $ 49
Reimbursement for services of affiliates
(included in general and administrative expenses) 40 41
Due to affiliates 12 --
During the nine months ended September 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 $54,000 and $49,000 for the nine months
ended September 30, 2000 and 1999, respectively.
An affiliate of the General Partner received reimbursement of accountable
administrative expenses amounting to approximately $40,000 and $41,000 for the
nine months ended September 30, 2000 and 1999, respectively. Approximately
$12,000 of these expenses were accrued at September 30, 2000.
In addition to its indirect ownership of the general partner interest in the
Partnership, AIMCO and its affiliates currently own 5,453 limited partnership
units in the Partnership representing 62.902% 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, which
would include without limitation, voting on certain amendments to the
Partnership Agreement and voting to remove the General Partner. As a result of
its ownership of 62.902% 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 - Distributions
A cash distribution of approximately $300,000 (approximately $297,000 of which
was paid to the limited partners, or $34.26 per limited partnership unit) was
paid from operations during the nine months ended September 30, 2000. A cash
distribution of approximately $235,000 (approximately $233,000 of which was paid
to the limited partners or $26.88 per limited partnership unit) was paid from
operations during the nine months ended September 30, 1999. Subsequent to
September 30, 2000, the Partnership declared and paid a distribution of
approximately $263,000 (approximately $260,000 of which was paid to the limited
partners or $29.99 per limited partnership unit) from operations.
Note E - 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 nine months ended September 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 September 30, 2000 Residential Other Totals
(in thousands)
Rental income $ 360 $ -- $ 360
Other income 21 1 22
Interest expense 46 -- 46
Depreciation 65 -- 65
General and administrative expense -- 34 34
Segment profit (loss) 137 (33) 104
Nine Months Ended September 30, 2000 Residential Other Totals
(in thousands)
Rental income $ 1,041 $ -- $ 1,041
Other income 60 3 63
Interest expense 139 -- 139
Depreciation 208 -- 208
General and administrative expense -- 78 78
Segment profit (loss) 342 (75) 267
Total assets 1,814 92 1,906
Capital expenditures for investment
property 64 -- 64
Three Months Ended September 30, 1999 Residential Other Totals
(in thousands)
Rental income $ 310 $ -- $ 310
Other income 11 2 13
Interest expense 48 -- 48
Depreciation 66 -- 66
General and administrative expense -- 42 42
Segment profit (loss) 71 (40) 31
Nine months Ended September 30, 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 127 -- 127
property
Note F - 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. ("Insignia") 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 is considering applications for lead counsel and has
currently scheduled a hearing on the matter for November 20, 2000. 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 nine
months ended September 30, 2000 and 1999:
Average Occupancy
Property 2000 1999
Cedarwood Apartments 97% 97%
Gretna, Louisiana
Results of Operations
The Partnership realized net income of approximately $104,000 and $267,000 for
the three and nine months ended September 30, 2000 as compared to net income of
approximately $31,000 and $143,000 for the three and nine months ended September
30, 1999. The increase in net income for the three and nine months ended
September 30, 2000 was due primarily to an increase in total revenues and a
slight decrease 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 decreased for the nine months ended September 30, 2000 due to a
decrease in general and administrative and interest expenses partially offset by
an increase in operating expenses. Operating expenses increased due to an
increase in management salaries and commissions partially offset by a decrease
in maintenance expense. Maintenance expenses decreased due to decreases in yard
and grounds maintenance and interior building improvements at the Partnership's
investment property. 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. The decrease in interest expense is due
to scheduled principal payments on the property's mortgage. Total expenses
decreased for the three months ended September 30, 2000 due primarily to a
decrease in general and administrative expenses as noted above.
Included in general and administrative expense at both September 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 September 30, 2000, the Partnership had cash and cash equivalents of
approximately $445,000 as compared to approximately $383,000 at September 30,
1999. The increase in cash and cash equivalents of approximately $89,000 for the
nine months ended September 30, 2000, from the Partnership's calendar year end,
is primarily due to approximately $563,000 of cash provided by operating
activities partially offset by approximately $410,000 of cash used in financing
activities and approximately $64,000 of cash used in investing 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 and 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
$164,000 for capital improvements, consisting primarily of cabinet replacements,
major landscaping, parking lot upgrades and floor covering and appliance
replacements. The Partnership completed approximately $64,000 in capital
expenditures at Cedarwood Apartments as of September 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 $1,969,000 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 approximately $300,000 (approximately $297,000 of which
was paid to the limited partners, or $34.26 per limited partnership unit) was
paid from operations during the nine months ended September 30, 2000. A cash
distribution of approximately $235,000 (approximately $233,000 of which was paid
to the limited partners or $26.88 per limited partnership unit) was paid from
operations during the nine months ended September 30, 1999. Subsequent to
September 30, 2000, the Partnership declared and paid a distribution of
approximately $263,000 (approximately $260,000 of which was paid to the limited
partners or $29.99 per limited partnership unit) from operations. 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. ("Insignia") 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 is considering applications for lead counsel and has
currently scheduled a hearing on the matter for November 20, 2000. 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, 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: November 8, 2000
