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, 1998
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period.........to.........
Commission file number 0-9704
ANGELES PARTNERS IX
(Exact name of small business issuer as specified in its charter)
California 95-3417137
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
One Insignia Financial Plaza, P.O. Box 1089
Greenville, South Carolina 29602
(Address of principal executive offices)
(864) 239-1000
(Issuer's telephone number)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes X No
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
a)
ANGELES PARTNERS IX
CONSOLIDATED BALANCE SHEET
(Unaudited)
June 30, 1998
(in thousands, except unit data)
Assets
Cash and cash equivalents $ 738
Receivables and deposits 428
Restricted escrows 513
Other assets 493
Investment properties:
Land $ 3,083
Buildings and related personal property 34,157
37,240
Less accumulated depreciation (23,633) 13,607
$ 15,779
Liabilities and Partners' Deficit
Liabilities
Accounts payable $ 190
Tenant security deposit liabilities 113
Accrued property taxes 261
Other liabilities 180
Mortgage notes payable 19,658
Partners' Deficit
General partner's $ (222)
Limited partners' (19,975 units issued
and outstanding) (4,401) (4,623)
$ 15,779
See Accompanying Notes to Consolidated Financial Statements
b)
ANGELES PARTNERS IX
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(in thousands, except unit data)
Three Months Ended Six Months Ended
June 30 June 30,
1998 1997 1998 1997
Revenues:
Rental income $ 1,815 $ 1,752 $ 3,610 $ 3,521
Other income 87 87 172 185
Total revenues 1,902 1,839 3,782 3,706
Expenses:
Operating 1,095 1,004 2,050 1,925
General and administrative 81 59 150 125
Depreciation 455 452 914 895
Interest 432 438 866 875
Property taxes 109 107 217 217
Bad debt expense 23 (11) 57 --
Total expenses 2,195 2,049 4,254 4,037
Net loss $ (293) $ (210) $ (472) $ (331)
Net loss allocated to
general partner (1%) $ (3) $ (2) $ (5) $ (3)
Net loss allocated to
limited partners (99%) (290) (208) (467) (328)
$ (293) $ (210) $ (472) $ (331)
Net loss per limited
partnership unit $(14.52) $(10.41) $(23.38) $(16.42)
See Accompanying Notes to Consolidated Financial Statements
c)
ANGELES PARTNERS IX
CONSOLIDATED STATEMENT OF CHANGES IN PARTNERS' DEFICIT
(Unaudited)
(in thousands, except unit data)
Limited
Partnership General Limited
Units Partner's Partners' Total
Original capital contributions 20,000 $ 1 $20,000 $20,001
Partners' deficit at
December 31, 1997 19,975 $ (217) $(3,934) $(4,151)
Net loss for the six months
ended June 30, 1998 -- (5) (467) (472)
Partners' deficit at
June 30, 1998 19,975 $ (222) $(4,401) $(4,623)
See Accompanying Notes to Consolidated Financial Statements
d)
ANGELES PARTNERS IX
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
Six Months Ended
June 30,
1998 1997
Cash flows from operating activities:
Net loss $ (472) $ (331)
Adjustments to reconcile net loss to net cash
provided by operating activities:
Depreciation 914 895
Amortization of loan costs and discounts 56 57
Bad debt expense 57 --
Change in accounts:
Receivables and deposits (96) 63
Other assets 29 (61)
Accounts payable (108) (114)
Tenant security deposit liabilities (2) (6)
Accrued property taxes 37 (67)
Other liabilities (53) (1)
Net cash provided by operating activities 362 435
Cash flows from investing activities:
Property improvements and replacements (380) (321)
Net withdrawals from (deposits to) restricted escrows 193 (65)
Net cash used in investing activities (187) (386)
Cash flows from financing activities:
Payments on mortgage notes payable (120) (110)
Loan costs paid -- (8)
Net cash used in financing activities (120) (118)
Net increase (decrease) in cash and cash equivalents 55 (69)
Cash and cash equivalents at beginning of period 683 877
Cash and cash equivalents at end of period $ 738 $ 808
Supplemental disclosure of cash flow information:
Cash paid for interest $ 810 $ 820
See Accompanying Notes to Consolidated Financial Statements
e)
ANGELES PARTNERS IX
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE A - BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements of Angeles Partners
IX (the "Partnership") have been prepared in accordance with generally accepted
accounting principles for interim financial information and with the
instructions to Form 10-QSB and Item 310(b) of Regulation S-B. Accordingly, they
do not include all of the information and footnotes required by generally
accepted accounting principles for complete financial statements. In the
opinion of Angeles Realty Corporation (the "General Partner"), all adjustments
(consisting of normal recurring accruals) considered necessary for a fair
presentation have been included. Operating results for the three and six month
periods ended June 30, 1998, are not necessarily indicative of the results that
may be expected for the fiscal year ending December 31, 1998. For further
information, refer to the consolidated financial statements and footnotes
thereto included in the Partnership's annual report on Form 10-KSB for the
fiscal year ended December 31, 1997.
Certain reclassifications have been made to the 1997 information to conform to
the 1998 presentation.
Principles of Consolidation
The consolidated financial statements of the Partnership include its 99% limited
partnership interest in Houston Pines, Ltd. The Partnership may remove the
general partner of Houston Pines; therefore, the Partnership is controlled and
consolidated by the Partnership. All significant interpartnership balances have
been eliminated. Minority interest is immaterial and not shown separately in the
financial statements.
NOTE B - TRANSACTION WITH AFFILIATES
The Partnership has no employees and is dependent on the General Partner and its
affiliates for the management and administration of all Partnership activities.
Effective February 25, 1998, the General Partner became wholly-owned by Insignia
Properties Trust ("IPT"), an affiliate of Insignia Financial Group, Inc.
("Insignia"). On February 25, 1998, the former owner of the Managing General
Partner, MAE GP Corporation ("MAE GP"), an affiliate of Insignia, was merged
into IPT. The partnership agreement provides for payments to affiliates for
services and as reimbursement of certain expenses incurred by affiliates on
behalf of the Partnership.
The following amounts were paid to the General Partner and its affiliates for
the six months ended June 30, 1998 and 1997 (in thousands):
1998 1997
Property management fees (included in operating expenses) $189 $186
Reimbursement of services of affiliates, (included in
in general and administrative expenses) 107 84
In addition, construction services reimbursements of approximately $35,000 and
$5,000 were paid to an affiliate of the General Partner during the six months
ended June 30, 1998 and 1997, respectively.
For the period from January 1, 1997 to August 31, 1997, the Partnership insured
its properties under a master policy through an agency affiliated with the
General Partner, but with an insurer unaffiliated with the General Partner. An
affiliate of the General Partner acquired, in the acquisition of a business,
certain financial obligations from an insurance agency which was later acquired
by the agent who placed the master policy. The agent assumed the financial
obligations to the affiliate of the General Partner which received payment on
these obligations from the agent. The amount of the Partnership's insurance
premiums that accrued to the benefit of the affiliate of the General Partner by
virtue of the agent's obligations is not significant.
On March 17, 1998, Insignia entered into an agreement to merge its national
residential property management operations, and its controlling interest in IPT,
with Apartment Investment and Management Company ("AIMCO"), a publicly traded
real estate investment trust. The closing, which is anticipated to happen in
September or October of 1998, is subject to customary conditions, including
government approvals and the approval of Insignia's shareholders. If the
closing occurs, AIMCO will then control the General Partner of the Partnership.
On April 13, 1998, an affiliate of Insignia commenced a tender offer for limited
partnership interests in the Partnership. The Purchaser offered to purchase up
to 8,300 of the outstanding units of limited partnership interest ("Units") in
the Partnership at a purchase price of $325 per Unit, net to the seller in cash,
upon the terms and subject to the conditions set forth in the Offer to Purchase
dated April 13, 1998 (the "Offer to Purchase") and in the related Assignment of
Partnership Interest (which, together with any supplemental or amendments,
collectively constitute the "Offer") per Schedule 14D-9 originally filed with
the Securities and Exchange Commission on April 13, 1998. Because of the
existing and potential future conflicts of interest (described in the
Partnership's Statements on Schedule 14D-9 filed with the Securities and
Exchange Commission), neither the Partnership nor the General Partner expressed
any opinion as to the Offer to Purchase and made no recommendation as to whether
unit holders should tender their units in response to the Offer to Purchase. On
May 11, 1998, the tender offer was closed, and the Purchaser acquired 2,572
Units of limited partnership interest.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS
The Partnership's investment properties consist of five apartment complexes. The
following table sets forth the average occupancy of the properties for the six
months ended June 30, 1998 and 1997:
Average Occupancy
Property 1998 1997
Pines of Northwest Crossing Apartments (1) 95% 91%
Houston, Texas
Panorama Terrace Apartments 89% 91%
Birmingham, Alabama
Forest River Apartments 93% 91%
Gadsden, Alabama
Village Green Apartments 93% 91%
Montgomery, Alabama
Rosemont Crossing Apartments (2) 88% 94%
San Antonio, Texas
(1) Occupancy at Pines of Northwest Crossing Apartments has increased due to
exterior building improvements made to the property.
(2) Occupancy at Rosemont Crossing has decreased due to new construction in the
area and low interest rates attracting first time home buyers.
The Partnership's net losses for the three and six month periods ended June 30,
1998, were approximately $293,000 and $472,000, respectively, versus net losses
of approximately $210,000 and $331,000 for the corresponding periods of 1997.
The increase in net loss is primarily attributable to increases in operating
expense, general and administrative expense, and bad debt expense. The increase
in operating expense is primarily due the continuation of the exterior
renovation project which began second quarter of 1997 at The Pines of Northwest
Crossing Apartments, and an increase in landscaping at Panorama Terrace
Apartments. The improvements at both of these properties are necessary in order
to improve the appearance of the apartment complexes in order to remain
competitive in their market areas. Included in operating expense for the six
months ended June 30, 1998, is approximately $243,000 of major repairs and
maintenance comprised primarily of exterior building repairs and landscaping.
Included in operating expenses for the six months ended June 30, 1997, is
approximately $104,000 of major repairs and maintenance comprised primarily of
exterior building repairs, exterior painting, and landscaping. The increase in
general and administrative expense is primarily the result of increased legal
fees in connection with the personal injury claim at The Pines of Northwest
Crossing Apartments (see Part II, Item 1 - Legal Proceedings). Bad debt expense
increased primarily due to write-offs recorded at Rosemont Crossing Apartments
and The Pines of Northwest Crossing Apartments. Partially offsetting the
increase in operating expense, general and administrative expense, and bad debt
expense was an increase in rental revenue. Rental revenue increased due to an
increase in average occupancy and average rental rates at The Pines of Northwest
Crossing Apartments, Forest River Apartments, and the Village Green Apartments.
As part of the ongoing business plan of the Partnership, the General Partner
monitors the rental market environment of each of its investment properties to
assess the feasibility of increasing rents, maintaining or increasing occupancy
levels and protecting the Partnership from increases in expenses. As part of
this plan, the General Partner attempts to protect the Partnership 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.
At June 30, 1998, the Partnership held cash and cash equivalents of
approximately $738,000, compared to approximately $808,000 at June 30, 1997.
For the six months ended June 30, 1998, net cash increased approximately
$55,000, compared to a net decrease of approximately $69,000 for the
corresponding period in 1997. Net cash provided by operating activities
decreased primarily due to an increase in operating and general administrative
expenses as discussed above, and a decrease in net cash provided by receivables
and deposits due to the timing of cash receipts. Net cash used in investing
activities decreased as a result of net withdrawals being received from
restricted escrows during the six months ended June 30, 1998, compared to the
six months ended June 30, 1997, when net deposits were made to restricted
escrows. This change was partially offset by an increase in property
improvements and replacements. Net cash used in financing activities increased
slightly as a result of an increase in principal payments paid, partially offset
by a decrease in loan costs paid.
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 various properties to adequately maintain the
physical assets and other operating needs of the Partnership. Such assets are
currently thought to be sufficient for any near-term needs of the Partnership.
The mortgage indebtedness of approximately $19,658,000, net of discount, is
amortized over varying periods with required balloon payments of $18,258,000
from August 2002 to November 2003, at which time the properties will either be
refinanced or sold. Future cash distributions will depend on the levels of cash
generated from operations, refinancings, property sales and the availability of
cash reserves. No cash distributions were paid during the six months ended June
30, 1998, or during the six months ended June 30, 1997.
Year 2000
The Partnership is dependent upon the General Partner and Insignia for
management and administrative services. Insignia has completed an assessment
and will have to modify or replace portions of its software so that its computer
systems will function properly with respect to dates in the year 2000 and
thereafter (the "Year 2000 Issue"). The project is estimated to be completed
not later than December 31, 1998, which is prior to any anticipated impact on
its operating systems. The General Partner believes that with modifications to
existing software and conversions to new software, the Year 2000 Issue will not
pose significant operational problems for its computer systems. However, if such
modifications and conversions are not made, or are not completed timely, the
Year 2000 Issue could have a material impact on the operations of the
Partnership.
Other
Certain items discussed in this quarterly report may constitute forward-looking
statements within the meaning of the Private Securities Litigation Reform Act of
1995 (the "Reform Act") and as such may involve known and unknown risks,
uncertainties and other factors which may cause the actual results, performance
or achievements of the Partnership to be materially different from any future
results, performance or achievements expressed or implied by such forward-
looking statements. Such forward-looking statements speak only as of the date
of this quarterly report. The Partnership expressly disclaims any obligation or
undertaking to release publicly any updates of revisions to any forward-looking
statements contained herein to reflect any change in the Partnership's
expectations with regard thereto or any change in events, conditions or
circumstances on which any such statement is based.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
On March 4, 1994, an employee of an affiliate of the General Partner who worked
at The Pines of Northwest Crossing Apartments ("Plaintiff") allegedly sustained
personal injuries during the ordinary course of business. The Plaintiff
remained out of work until March 24, 1994. The Plaintiff alleges that upon his
return back to work, he was terminated in retaliation for having filed a
worker's compensation claim. The Plaintiff seeks actual damages, exemplary
damages, attorney's fees and court costs. A settlement was reached with the
plaintiff and the liability was paid during the second quarter of 1998.
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 which are named as nominal defendants, challenging the
acquisition by Insignia and its affiliates of interests in certain general
partner entities, past tender offers by Insignia affiliates to acquire limited
partnership units, the management of partnerships by Insignia affiliates as well
as a recently announced agreement between Insignia and AIMCO. The complaint
seeks monetary damages and equitable relief, including judicial dissolution of
the Partnership. The General Partner believes the action to be without merit,
and intends to vigorously defend it. On June 24, 1998, the General Partner
filed a motion seeking dismissal of the action.
In July 1998, a limited partner of the Partnership commenced an action in the
Circuit Court for Jackson County, Missouri entitled BOND PURCHASE LLC V. ANGELES
PARTNERS IX, ET AL. The complaint claims that the Partnership and an affiliate
of the General Partner breached certain contractual and fiduciary duties
allegedly owed to the claimant and seeks damages and injunctive relief. The
General Partner believes the claims to be without merit and intends to
vigorously defend the claims.
The Partnership is unaware of any other pending or outstanding litigation that
is not of a routine nature. The General Partner of the Partnership believes
that all such pending or outstanding litigation will be resolved without a
material adverse effect upon the business, financial condition or operations of
the Partnership.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
Exhibit 27, Financial Data Schedule, is filed as and exhibit to this
report.
(b) Reports on Form 8-K:
No reports on Form 8-K were filed during the quarter ended June 30,
1998.
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
ANGELES PARTNERS IX
By: Angeles Realty Corporation
Its General Partner
By: /s/ Carroll D. Vinson
Carroll D. Vinson
President
By: /s/ Robert D. Long, Jr.
Robert D. Long, Jr.
Vice President/CAO
Date: August 6, 1998
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from
Angeles Partners IX 1998 Second Quarter 10-QSB and is qualified in its
entirety by reference to such 10-QSB filing.
</LEGEND>
<CIK> 0000313499
<NAME> ANGELES PARTNERS IX
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> JUN-30-1998
<CASH> 738
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0<F1>
<PP&E> 37,240
<DEPRECIATION> 23,633
<TOTAL-ASSETS> 15,779
<CURRENT-LIABILITIES> 0<F1>
<BONDS> 19,658
0
0
<COMMON> 0
<OTHER-SE> (4,623)
<TOTAL-LIABILITY-AND-EQUITY> 15,779
<SALES> 0
<TOTAL-REVENUES> 3,782
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 4,254
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 866
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (472)
<EPS-PRIMARY> (23.38)<F2>
<EPS-DILUTED> 0
<FN>
<F1>Registrant has an unclassified balance sheet.
<F2>Multiplier is 1.
</FN>
</TABLE>
