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, 1999
[ ] TRANSITION REPORT PURSUANT TO 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
For the transition period from.........to.........
Commission file number 0-10304
ANGELES PARTNERS X
(Exact name of small business issuer as specified in its charter)
California 95-3557899
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
55 Beattie Place,
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 X
CONSOLIDATED BALANCE SHEET
(Unaudited)
June 30, 1999
(in thousands, except unit data)
Assets
Cash and cash equivalents $ 2,549
Receivables and deposits 257
Restricted escrows 104
Other assets 249
Investment properties:
Land $ 312
Buildings and related personal property 8,827
9,139
Less accumulated depreciation (6,416) 2,723
$ 5,882
Liabilities and Partners' Deficit
Liabilities
Accounts payable $ 17
Tenant security deposit liabilities 9
Accrued property taxes 41
Other liabilities 144
Notes payable, including $150 in default 8,800
Partners' Deficit
General partner's $ (376)
Limited partners' (18,625 units (2,753)
issued and outstanding) (3,129)
$ 5,882
See Accompanying Notes to Consolidated Financial Statements
b)
ANGELES PARTNERS X
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(in thousands, except unit data)
Three Months Ended Six Months Ended
June 30, June 30,
1999 1998 1999 1998
Revenues:
Rental income $ 502 $ 789 $ 1,288 $ 1,563
Other income 51 59 91 99
Gain on sale of investment
property -- -- 2,673 --
Total revenues 553 848 4,052 1,662
Expenses:
Operating 232 362 572 714
General and administrative 58 53 107 93
Depreciation 130 158 242 316
Interest 182 321 421 643
Property taxes 52 80 115 152
Total expenses 654 974 1,457 1,918
(Loss) income before
extraordinary item (101) (126) 2,595 (256)
Extraordinary loss on early
extinguishment of debt -- -- (66) --
Net (loss) income $ (101) $ (126) $ 2,529 $ (256)
Net (loss) income allocated to
general partner (1%) $ (1) $ (1) $ 25 $ (3)
Net (loss) income allocated to
limited partners (99%) (100) (125) 2,504 (253)
$ (101) $ (126) $ 2,529 $ (256)
Net (loss) income per limited
partnership unit:
(Loss) income before
extraordinary item (5.37) (6.71) 137.95 (13.58)
Extraordinary item -- -- (3.51) --
Net (loss) income (5.37) (6.71) 134.44 (13.58)
See Accompanying Notes to Consolidated Financial Statements
c)
ANGELES PARTNERS X
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 18,714 $ 1 $18,714 $18,715
Partners' deficit at
December 31, 1998 18,625 $ (241) $(5,257) $(5,498)
Distributions to partners (160) -- (160)
Net income for the six months
ended June 30, 1999 -- 25 2,504 2,529
Partners' deficit at
June 30, 1999 18,625 $ (376) $(2,753) $(3,129)
See Accompanying Notes to Consolidated Financial Statements
d)
ANGELES PARTNERS X
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
Six Months Ended
June 30,
1999 1998
Cash flows from operating activities:
Net income (loss) $2,529 $ (256)
Adjustments to reconcile net income (loss) to net
cash (used in) provided by operating activities:
Depreciation 242 316
Amortization of discounts and loan costs 25 28
Extraordinary loss on early extinguishment
of debt 66 --
Gain on sale of investment property (2,673) --
Change in accounts:
Receivables and deposits 51 20
Other assets 8 18
Accounts payable (134) (30)
Tenant security deposit liabilities (22) --
Accrued property taxes (71) (28)
Other liabilities (87) 50
Net cash (used in) provided by
operating activities (66) 118
Cash flows from investing activities:
Property improvements and replacements (95) (143)
Net withdrawals from (deposits to) restricted
escrows 258 (18)
Proceeds from sale of investment property 5,054 --
Net cash provided by (used in)
investing activities 5,217 (161)
Cash flows from financing activities:
Payments on mortgage notes payable (59) (66)
Loan costs paid -- (17)
Distributions to partners (160) (5)
Repayment of notes payable (3,627) --
Prepayment penalty (39) --
Net cash used in financing activities (3,885) (88)
Net increase (decrease) in cash and cash equivalents 1,266 (131)
Cash and cash equivalents at beginning of period 1,283 1,531
Cash and cash equivalents at end of period $2,549 $1,400
Supplemental disclosure of cash flow information:
Cash paid for interest $ 429 $ 527
See Accompanying Notes to Consolidated Financial Statements
e)
ANGELES PARTNERS X
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE A - BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements for Angeles
Partners X (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, 1999, are not necessarily indicative of the results
that may be expected for the fiscal year ending December 31, 1999. 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, 1998.
Principles of Consolidation
The consolidated financial statements include all of the accounts of the
Partnership and its 99% limited partnership interests in Cardinal Woods
Apartments, Ltd., Carriage AP X, Ltd. and Vista AP X, Ltd. The Partnership may
remove the General Partner of these lower tier partnerships; therefore, the
lower tier partnerships are controlled and consolidated by the Partnership. All
significant interpartnership balances have been eliminated.
NOTE B - TRANSFER OF CONTROL
Pursuant to a series of transactions which closed on October 1, 1998 and
February 26, 1999, Insignia Financial Group, Inc. and Insignia Properties Trust
merged into Apartment Investment and Management Company ("AIMCO"), a publicly
traded real estate investment trust, with AIMCO being the surviving corporation
(the "Insignia Merger"). As a result, AIMCO acquired 100% ownership interest in
the General Partner. The General Partner does not believe that this transaction
will have a material effect on the affairs and operations of the Partnership.
NOTE C - DISPOSITION OF PROPERTY
On March 1, 1999, Vista Hills Apartments, located in El Paso, Texas, was sold to
an unaffiliated third party for $5,150,000. After closing expenses of
approximately $96,000 the net proceeds received by the Partnership were
approximately $5,054,000. The Partnership used most of the proceeds from the
sale of the property to pay off the debt encumbering the property of
approximately $3,627,000. The sale of the property resulted in a gain on sale
of investment property of approximately $2,673,000 and a loss on early
extinguishment of debt of approximately $66,000.
NOTE D - 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 payments to affiliates for services and
as 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, 1999 and 1998:
1999 1998
(in thousands)
Property management fees (included in operating expenses) $ 73 $ 83
Reimbursement for services of affiliates
(included in operating, and general and administrative
expenses) 38 55
During the six months ended June 30, 1999 and 1998, affiliates of the General
Partner were entitled to receive 5% of gross receipts from all of the
Registrant's properties for providing property management services. The
Registrant paid to such affiliates approximately $73,000 and $83,000 for the six
months ended June 30, 1999 and 1998, respectively.
An affiliate of the General Partner received reimbursement of accountable
administrative expenses amounting to approximately $38,000 and $55,000 for the
six months ended June 30, 1999 and 1998, respectively. Included in these
expenses for the six months ended June 30, 1998, is approximately $1,000, in
reimbursements for construction oversight costs. No such costs were incurred for
the six months ended June 30, 1999. The Partnership also paid approximately
$4,000 during the six month period ended June 30, 1998 to an affiliate of the
General Partner for reimbursements of costs related to the loan refinancing at
Carriage Hills in November 1997. These costs were capitalized as loan costs and
are being amortized over the term of the loan. No such costs were incurred for
the six months ended June 30, 1999.
AMIT, a real estate investment trust, provided unsecured loans to the
Partnership. The Partnership had a loan that was previously secured by Vista
Hills Apartments; however, the second mortgage was released in 1992 as part of
the terms and conditions for refinancing the first mortgage. A multifamily rider
was executed between the Partnership and the first mortgage holder for Vista AP
X, stating that any subordinated debt must be non-foreclosable and have a
maturity date not less than 2 years beyond the maturity of the refinanced first
mortgage. The agreement also provided for interest to be paid based on
available cash flow. In June 1996, but effective March 31, 1996, this loan was
modified, adding non-default accrued interest payable to the loan balance and
waiving accrued, but unpaid, default interest and late charges. The modified
note would have matured in September 2002 and provided for interest at 12.5% on
the original $1,300,000 note amount. The debt restructuring was accounted for
as a modification of terms. The total future cash payments under the
restructured loan exceeded the carrying value of the loan as of the date of
restructure. Consequently, interest on the restructured debt was being recorded
at an effective rate of 10.8% which was the rate required to equate the present
value of the total future cash payments under the new terms with the carrying
amount of the loan at the date of restructure. As part of the modification,
AMIT was granted a first priority lien on the Partnership's 99% limited
partnership interest in the Vista AP X lower-tier partnership which owns Vista
Hills Apartments. The lender's recourse was limited to the assets of Vista AP
X; the debt was non-recourse to the other assets of the Partnership. This loan,
with a carrying amount of approximately $1,561,000 plus accrued interest of
approximately $325,000, was assigned to AAP on December 31, 1997 and was
ultimately forgiven by AAP in August 1998. As a result of the assignment
mentioned above, the Partnership has no outstanding obligations to AMIT at June
30, 1999.
In November 1992, AAP, a Delaware limited partnership which controlled the
working capital loan previously provided by Angeles Capital Investment, Inc.
("ACII"), was organized. Angeles Corporation ("Angeles") is the 99% limited
partner of AAP and Angeles Acceptance Directives, Inc.("AAD"), which is wholly-
owned by IPT, was, until April 14, 1995, the 1% general partner of AAP. On
April 14, 1995, as part of a settlement of claims between affiliates of the
General Partner and Angeles, AAD resigned as general partner of AAP and
simultaneously received a .5% limited partner interest in AAP. An affiliate of
Angeles now serves as the general partner of AAP.
This working capital loan funded Vista AP X's operating deficits in prior years.
As a result of the sale of Cardinal Woods Apartments on August 15, 1997,
$501,000 of the then outstanding debt to AAP was repaid. The remaining Vista AP
X note payable of $150,000 became due November 25, 1997. Upon maturity, Vista
AP X did not have the means with which to satisfy the maturing debt obligation.
The loan was unsecured; AAP's
recourse was limited to the assets of Vista AP X. The debt was non-recourse to
the other assets of the Partnership. In August 1998, the General Partner
negotiated a settlement with AAP, whereby the Partnership paid AAP $30,000, and
the remainder of the debt owed AAP, including the $1,561,000 note previously
assigned to AAP by AMIT, was forgiven. As a result of the assignment mentioned
above, the Partnership has no outstanding obligations to AMIT for the six months
ended June 30, 1999.
On June 7, 1999, AIMCO Properties, L.P., an affiliate of the General Partner
commenced a tender offer to purchase up to 6,182.01 (approximately 33.19% of the
total outstanding units) units of limited partnership interest in the
Partnership for a purchase price of $165.00 per unit. The offer expired on July
14, 1999. Pursuant to the offer, AIMCO Properties, L.P. acquired 436 units. As
a result AIMCO and its affiliates currently own 5,284 units of limited
partnership interest in the Partnership representing approximately 28.37% of the
total outstanding units. It is possible that AIMCO or its affiliate will make
one or more additional offers to acquire additional limited partnership
interests in the Partnership for cash or in exchange for units in the operating
partnership of AIMCO.
During August 1998, an affiliate of the General Partner (the "Purchaser")
commenced a tender offer for limited partnership interests in the Partnership.
The Purchaser offered to purchase up to 8,000 of the outstanding units of
limited partnership interest in the Partnership, at $150 per Unit, net to the
seller in cash. In the fourth quarter, the Purchaser closed the tender offer
and acquired 3,784 Units of limited partnership interest or approximately
20.317%.
NOTE E - SEGMENT INFORMATION
Description of the types of products and services from which the reportable
segment derives its revenues:
The Partnership has one reportable segment: residential properties. The
Registrant's residential property segment consists of two apartment complexes
located in Alabama and Michigan. The Partnership rents apartment units to
tenants for terms that are typically twelve months or less.
Measurement of segment profit or loss:
The Partnership evaluates performance based on net income. The accounting
policies of the reportable segment are the same as those of the Partnership as
described in the Partnership's annual report on Form 10-KSB for the fiscal year
ended December 31, 1998.
Factors management used to identify the enterprise's reportable segment:
The Partnership's reportable segment consists of investment properties that
offer similar products and services. Although each of the investment properties
is managed separately, they have been aggregated into one segment as they
provide services with similar types of products and customers.
Segment information for the six months ended June 30, 1999 and 1998 is shown in
the tables below (in thousands). The "Other" Column includes partnership
administration related items and income and expense not allocated to the
reportable segment.
1999
Residential Other Totals
Rental income $1,288 $ -- $1,288
Other income 62 29 91
Interest expense 421 -- 421
Depreciation 242 -- 242
General and administrative expense -- 107 107
Gain on sale of investment property 2,673 -- 2,673
Extraordinary loss on early
extinguishment of debt 66 -- 66
Segment profit (loss) 2,607 (78) 2,529
Total assets 3,905 1,977 5,882
Capital expenditures for investment
properties 95 -- 95
1998
Residential Other Totals
Rental income $1,563 $ -- $1,563
Other income 66 33 99
Interest expense 635 8 643
Depreciation 316 -- 316
General and administrative expense -- 93 93
Segment loss (188) (68) (256)
Total assets 6,261 1,398 7,659
Capital expenditures for investment
properties 143 -- 143
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, the General Partner and several of their affiliated
partnerships and corporate entities. The complaint purports to assert claims on
behalf of a class of limited partners and derivatively on behalf of a number of
limited partnerships (including the Partnership) which are named as nominal
defendants, challenging the acquisition by Insignia Financial Group, Inc.
("Insignia") and entities which were, at one time, affiliates of Insignia
("Insignia Affiliates") of interests in certain general partner entities, past
tender offers by Insignia Affiliates to acquire limited partnership units, the
management of partnerships by Insignia Affiliates as well as a recently
announced agreement between Insignia and Apartment Investment and Management
Company. The complaint seeks monetary damages and equitable relief, including
judicial dissolution of the Partnership. On June 25, 1998, the General Partner
filed a motion seeking dismissal of the action. In lieu of responding to the
motion, the plaintiffs have filed an amended complaint. The General Partner has
filed demurrers to the amended complaint which were heard during February 1999.
No ruling on such demurrers has been received. The General Partner does not
anticipate that costs associated with this case, if any, will be material to the
Partnership's net 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 Partnership from time to time.
The discussion of the Partnership'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 Partnership'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 remaining investment properties consist of two apartment
complexes. The following table sets forth the average occupancy of the
Partnership's remaining properties for the six months ended June 30, 1999 and
1998:
Average Occupancy
Property 1999 1998
Greentree Apartments
Mobile, Alabama 99% 96%
Carriage Hills Apartments
East Lansing, Michigan 93% 94%
The General Partner attributes the increase in occupancy at Greentree Apartments
to an aggressive and effective marketing campaign during the last part of 1998
and into the first and second quarter of 1999.
Results of Operations
The Partnership realized a net loss of approximately $101,000 and net income of
approximately $2,529,000 for the three and six months ended June 30, 1999,
respectively, compared to net losses of approximately $126,000 and $256,000 for
the three and six months ended June 30, 1998, respectively. The increase in net
income for the six months ended June 30, 1999 is primarily attributable to an
increase in total revenue and to a lesser extent a decrease in total expenses.
Total revenue increased primarily as a result of the gain recognized during 1999
on the sale of Vista Hills Apartments. The gain recognized in 1999 was slightly
offset by the loss on early extinguishment of debt recognized upon the sale of
the property. The decrease in net loss for the three months ended June 30, 1999
is primarily due to the decrease in total revenue and total expenses resulting
from the sale of Vista Hills which was offset by a decrease in total revenues as
a result of sale. On March 1, 1999, Vista Hills Apartments, located in El Paso,
Texas, was sold to an unaffiliated third party for $5,150,000. After closing
expenses of approximately $96,000 the net proceeds received by the Partnership
were approximately $5,054,000. The Partnership used most of the proceeds from
the sale of the property to pay off the debt encumbering the property of
approximately $3,627,000.
Excluding the impact of the sale of Vista Hills Apartments and the properties'
operating results for 1998, the net loss for the three months ended June 30,
1999 decreased approximately $10,000 and income increased approximately $98,000
for the six months ended June 30, 1999 as compared to the three and six months
ended June 30, 1998. The increase in net income for the six months ended June
30, 1999 is primarily due to an increase in total revenues and a decrease in
total expenses. Total revenues increased as a result of an increase in rental
revenue at the remaining properties due to increased occupancy at Greentree
Apartments as discussed above. Total expenses decreased primarily due to a
decrease in operating expenses, which was partially offset by an increase in
general and administrative expenses. Operating expenses decreased due to
decreases in insurance and maintenance expense. Insurance expense decreased due
to a change in insurance carriers at both of the investment properties
during the fourth quarter of 1998 which resulted in lower insurance premiums.
Maintenance expense decreased as a result of expenses incurred in the first six
months of 1998 for major landscaping and interior and exterior building
improvements which did not recur in the first six months of 1999.
General and administrative expenses increased as a result of an increase in
legal costs. Legal costs increased as a result of the settlement of outstanding
litigation cases during the first quarter of 1999. Included in general and
administrative expenses at both June 30, 1999 and 1998 are management
reimbursements to the General Partner allowed under the Partnership Agreement.
In addition, costs associated with the quarterly and annual communications with
investors and regulatory agencies and the annual audit required by the
Partnership Agreement are also included.
As part of the ongoing business plan of the Partnership, the General Partner
monitors the rental market environment of 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.
Liquidity and Capital Resources
At June 30, 1999, the Partnership had cash and cash equivalents of approximately
$2,549,000 compared to approximately $1,400,000 at June 30, 1998. The increase
in cash and cash equivalents of approximately $1,266,000 for the six months
ended June 30, 1999 from the Registrant's year end was primarily due to
approximately $5,217,000 of cash provided by investing activities offset by
approximately $66,000 of cash used in operating activities and approximately
$3,885,000 of cash used in financing activities. Net cash provided by investing
activities consisted primarily of proceeds from the sale of investment property
and to a lesser extent net withdrawals from restricted escrows which was
slightly offset by property improvements and replacements. Net cash used in
financing activities consisted primarily of repayment of mortgage notes payable,
and to a lesser extent debt extinguishment costs, a disposition fee to which the
General Partner was entitled upon the sale of the property, and payments on
mortgage notes payable. The Partnership invests its working capital reserves in
a money market account.
The sufficiency of existing liquid assets to meet future liquidity and capital
expenditure requirements is directly related to the level of capital
expenditures required at the properties to adequately maintain the physical
assets and other operating needs of the Partnership and to comply with Federal,
state, and local legal and regulatory requirements. Capital improvements
planned for each of the Partnership's properties are detailed below.
Greentree Apartments
Based on a report received from an independent third party consultant analyzing
necessary exterior improvements and estimates made by the General Partner on
interior improvements, it is estimated that the property requires approximately
$160,000 of capital improvements over the next few years. The Partnership has
budgeted, but is not limited to, capital improvements of approximately $74,000
for 1999 which include certain of the required improvements and consist of air
conditioning and floor covering replacements, electrical repairs, major
landscaping and plumbing upgrades. For the six months ended June 30, 1999, the
Partnership has expended approximately $35,000 consisting primarily of floor
covering replacements.
Carriage Hills Apartments
Based on a report received from an independent third party consultant analyzing
necessary exterior improvements and estimates made by the General Partner on
interior improvements, it is estimated that the property requires approximately
$569,000 of capital improvements over the next few years. The Partnership has
budgeted, but is not limited to capital improvements of approximately $569,000
for 1999 which include certain of the required improvements and consist of
siding/trim/facial/ soffits, balconies, parking lot repairs, floor covering,
appliances, and cabinet replacements. For the six months ended June 30, 1999,
the Partnership has expended approximately $54,000 consisting primarily of floor
covering, appliance and cabinet replacements.
Vista Hills Apartments
During January and February of 1999, the Partnership expended approximately
$6,000 consisting primarily of roof repairs and floor covering replacements.
This property was sold March 1, 1999.
The additional capital expenditures will be incurred only if cash is available
from operations or from partnership reserves. To the extent that such budgeted
capital improvements are completed, the Registrant's distributable cash flow, if
any, may be adversely affected at least in the short term.
The Partnership's current assets are thought to be sufficient for any near-term
needs (exclusive of capital improvements) of the Partnership. The mortgage
indebtedness of approximately $8,800,000, net of discount, mature October 2003
and December 2004 with balloon payments due at maturity. The General Partner
will attempt to refinance such indebtedness and/or sell the properties prior to
such maturity dates. If the properties cannot be refinanced or sold for a
sufficient amount, the Partnership will risk losing such properties through
foreclosure.
There were no cash distributions to the limited partners during the six months
ended June 30, 1999 or 1998. Subsequent to June 30, 1999 a distribution of
$1,450,000 (approximately $1,436,000 to the limited partners which was
approximately $77.10 per limited partnership unit) was approved from a
combination of sales proceeds from the sale of Vista Hills and operations of the
Partnership. The General Partner received a disposition fee for which it was
entitled upon the sale of the Vista Hills Apartments during the six months ended
June 30, 1999. The Partnership's distribution policy is reviewed on a quarterly
basis. Future cash distributions will depend on the levels of net cash
generated from operations, the availability of cash reserves, and the timing of
debt maturities, refinancings and/or property sales. 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 in 1999 or subsequent periods.
Tender Offer
On June 7, 1999, AIMCO Properties, L.P., an affiliate of the General Partner
commenced a tender offer to purchase up to 6,182.01 (approximately 33.19% of the
total outstanding units) units of limited partnership interest in the
Partnership for a purchase price of $165.00 per unit. The offer expired on July
14, 1999. Pursuant to the offer, AIMCO Properties, L.P. acquired 436 units. As
a result AIMCO and its affiliates currently own 5,284 units of limited
partnership interest in the Partnership representing approximately 28.37% of the
total outstanding units. It is possible that AIMCO or its affiliate will make
one or more additional offers to acquire additional limited partnership
interests in the Partnership for cash or in exchange for units in the operating
partnership of AIMCO.
During August 1998, an affiliate of the General Partner (the "Purchaser")
commenced a tender offer for limited partnership interests in the Partnership.
The Purchaser offered to purchase up to 8,000 of the outstanding units of
limited partnership interest in the Partnership, at $150 per Unit, net to the
seller in cash. In the fourth quarter, the Purchaser closed the tender offer
and acquired 3,784 Units of limited partnership interest or 20.317%.
Year 2000 Compliance
General Description of the Year 2000 Issue and the Nature and Effects of the
Year 2000 on Information Technology (IT) and Non-IT Systems
The Year 2000 issue is the result of computer programs being written using two
digits rather than four digits to define the applicable year. The Partnership
is dependent upon the General Partner and its affiliates for management and
administrative services ("Managing Agent"). Any of the computer programs or
hardware that have date-sensitive software or embedded chips may recognize a
date using "00" as the year 1900 rather than the year 2000. This could result
in a system failure or miscalculations causing disruptions of operations,
including, among other things, a temporary inability to process transactions,
send invoices, or engage in similar normal business activities.
Over the past two years, the Managing Agent has determined that it will be
required to modify or replace significant portions of its software and certain
hardware so that those systems will properly utilize dates beyond December 31,
1999. The Managing Agent presently believes that with modifications or
replacements of existing software and certain hardware, the Year 2000 issue can
be mitigated. However, if such modifications and replacements are not made, or
not completed in time, the Year 2000 issue could have a material impact on the
operations of the Partnership.
The Managing Agent's plan to resolve Year 2000 issues involves four phases:
assessment, remediation, testing, and implementation. To date, the Managing
Agent has fully completed its assessment of all the information systems that
could be significantly affected by the Year 2000, and has begun the remediation,
testing and implementation phases on both hardware and software systems.
Assessments are continuing in regards to embedded systems. The status of each
is detailed below.
Status of Progress in Becoming Year 2000 Compliant, Including Timetable for
Completion of Each Remaining Phase
Computer Hardware:
During 1997 and 1998, the Managing Agent identified all of the computer systems
at risk and formulated a plan to repair or replace each of the affected systems.
In August 1998, the main computer system used by the Managing Agent became fully
functional. In addition to the main computer system, PC-based network servers,
routers and desktop PCs were analyzed for compliance. The Managing Agent has
begun to replace each of the non-compliant network connections and desktop PCs
and, as of June 30, 1999, had completed approximately 90% of this effort.
The total cost to the Managing Agent to replace the PC-based network servers,
routers and desktop PCs is expected to be approximately $1.5 million of which
$1.3 million has been incurred to date. The remaining network connections and
desktop PCs are expected to be upgraded to Year 2000 compliant systems by
September 30, 1999. The completion of this process is scheduled to coincide
with the release of a compliant version of the Managing Agent's operating
system.
Computer Software:
The Managing Agent utilizes a combination of off-the-shelf, commercially
available software programs as well as custom-written programs that are designed
to fit specific needs. Both of these types of programs were studied, and
implementation plans written and executed with the intent of repairing or
replacing any non-compliant software programs.
In April, 1999 the Managing Agent embarked on a data center consolidation
project that unifies its core financial systems under its Year 2000 compliant
system. The estimated completion date for this project is October, 1999.
During 1998, the Managing Agent began converting the existing property
management and rent collection systems to its management properties Year 2000
compliant systems. The estimated additional costs to convert such systems at all
properties, is $200,000, and the implementation and testing process was
completed in June, 1999.
The final software area is the office software and server operating systems.
The Managing Agent has upgraded all non-compliant office software systems on
each PC and has upgraded 90% of the server operating systems. The remaining
server operating systems are planned to be upgraded to be Year 2000 compliant by
September, 1999. The completion of this process is scheduled to coincide with
the release of a compliant version of the Managing Agent's operating system.
Operating Equipment:
The Managing Agent has operating equipment, primarily at the property sites,
which needed to be evaluated for Year 2000 compliance. In September 1997, the
Managing Agent began taking a census and inventory of embedded systems
(including those devices that use time to control systems and machines at
specific properties, for example elevators, heating, ventilating, and air
conditioning systems, security and alarm systems, etc.).
The Managing Agent has chosen to focus its attention mainly upon security
systems, elevators, heating, ventilating and air conditioning systems, telephone
systems and switches, and sprinkler systems. While this area is the most
difficult to fully research adequately, management has not yet found any major
non-compliance issues that put the Managing Agent at risk financially or
operationally.
A pre-assessment of the properties by the Managing Agent has indicated no Year
2000 issues. A complete, formal assessment of all the properties by the
Managing Agent is in process and will be completed in September, 1999. Any
operating equipment that is found non-compliant will be repaired or replaced.
The total cost incurred for all properties managed by the Managing Agent as of
June 30, 1999 to replace or repair the operating equipment was approximately
$75,000. The Managing Agent estimates the cost to replace or repair any
remaining operating equipment is approximately $125,000.
The Managing Agent continues to have "awareness campaigns" throughout the
organization designed to raise awareness and report any possible compliance
issues regarding operating equipment within its enterprise.
Nature and Level of Importance of Third Parties and Their Exposure to the Year
2000
The Managing Agent continues to conduct surveys of its banking and other vendor
relationships to assess risks regarding their Year 2000 readiness. The Managing
Agent has banking relationships with three major financial institutions, all of
which have indicated their compliance efforts will be complete before July,
1999. The Managing Agent has updated data transmission standards with all of the
financial institutions. The Managing Agent's contingency plan in this regard is
to move accounts from any institution that cannot be certified Year 2000
compliant by September 1, 1999.
The Partnership does not rely heavily on any single vendor for goods and
services, and does not have significant suppliers and subcontractors who share
information systems (external agent). To date the Partnership is not aware of
any external agent with a Year 2000 compliance issue that would materially
impact the Partnership's results of operations, liquidity, or capital resources.
However, the Partnership has no means of ensuring that external agents will be
Year 2000 compliant.
The Managing Agent does not believe that the inability of external agents to
complete their Year 2000 remediation process in a timely manner will have a
material impact on the financial position or results of operations of the
Partnership. However, the effect of non-compliance by external agents is not
readily determinable.
Costs to Address Year 2000
The total cost of the Year 2000 project to the Managing Agent is estimated at
$3.5 million and is being funded from operating cash flows. To date, the
Managing Agent has incurred approximately $2.9 million ($0.7 million expensed
and $2.2 million capitalized for new systems and equipment) related to all
phases of the Year 2000 project. Of the total remaining project costs,
approximately $0.5 million is attributable to the purchase of new software and
operating equipment, which will be capitalized. The remaining $0.2 million
relates to repair of hardware and software and will be expensed as incurred.
The Partnership's portion of these costs are not material.
Risks Associated with the Year 2000
The Managing Agent believes it has an effective program in place to resolve the
Year 2000 issue in a timely manner. As noted above, the Managing Agent has not
yet completed all necessary phases of the Year 2000 program. In the event that
the Managing Agent does not complete any additional phases, certain worst case
scenarios could occur. The worst case scenarios could include elevators,
security and heating, ventilating and air conditioning systems that read
incorrect dates and operate with incorrect schedules (e.g., elevators will
operate on Monday as if it were Sunday). Although such a change would be
annoying to residents, it is not business critical.
In addition, disruptions in the economy generally resulting from Year 2000
issues could also adversely affect the Partnership. The Partnership could be
subject to litigation for, among other things, computer system failures,
equipment shutdowns or failure to properly date business records. The amount of
potential liability and lost revenue cannot be reasonably estimated at this
time.
Contingency Plans Associated with the Year 2000
The Managing Agent has contingency plans for certain critical applications and
is working on such plans for others. These contingency plans involve, among
other actions, manual workarounds and selecting new relationships for such
activities as banking relationships and elevator operating systems.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
In March 1998, several putative unit holders of limited partnership units of the
Partnership commenced an action entitled ROSALIE NUANES, ET AL. V. INSIGNIA
FINANCIAL GROUP, INC., ET AL. in the Superior Court of the State of California
for the County of San Mateo. The plaintiffs named as defendants, among others,
the Partnership, the General Partner and several of their affiliated
partnerships and corporate entities. The complaint purports to assert claims on
behalf of a class of limited partners and derivatively on behalf of a number of
limited partnerships (including the Partnership) which are named as nominal
defendants, challenging the acquisition by Insignia Financial Group, Inc.
("Insignia") and entities which were, at one time, affiliates of Insignia
("Insignia Affiliates") of interests in certain general partner entities, past
tender offers by Insignia Affiliates to acquire limited partnership units, the
management of partnerships by Insignia Affiliates as well as a recently
announced agreement between Insignia and Apartment Investment and Management
Company. The complaint seeks monetary damages and equitable relief, including
judicial dissolution of the Partnership. On June 25, 1998, the General Partner
filed a motion seeking dismissal of the action. In lieu of responding to the
motion, the plaintiffs have filed an amended complaint. The General Partner has
filed demurrers to the amended complaint which were heard during February 1999.
No ruling on such demurrers has been received. The General Partner does not
anticipate that costs associated with this case, if any, will be material to the
Partnership's net operations.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a) Exhibits:
Exhibit 27, Financial Data Schedule, is attached as an exhibit to this
report.
b) Reports on Form 8-K:
None filed during the quarter ended June 30, 1999
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
ANGELES PARTNERS X
By: Angeles Realty Corporation
Its General Partner
By: /s/ Patrick J. Foye
Patrick J. Foye
Executive Vice President
By: /s/ Carla R. Stoner
Carla R. Stoner
Senior Vice President
Finance and Administration
Date: August 12, 1999
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from Angeles
Partners X 1999 Second Quarter 10-QSB and is qualified in its entirety by
reference to such 10-QSB filing.
</LEGEND>
<CIK> 0000317900
<NAME> ANGELES PARTNERS X
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> JUN-30-1999
<CASH> 2,549
<SECURITIES> 0
<RECEIVABLES> 257
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0<F1>
<PP&E> 9,139
<DEPRECIATION> 6,416
<TOTAL-ASSETS> 5,882
<CURRENT-LIABILITIES> 0<F1>
<BONDS> 8,800
0
0
<COMMON> 0
<OTHER-SE> (3,129)
<TOTAL-LIABILITY-AND-EQUITY> 5,882
<SALES> 0
<TOTAL-REVENUES> 4,052
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 1,457
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 421
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,529
<EPS-BASIC> 134.44<F2>
<EPS-DILUTED> 0
<FN>
<F1>Registrant has an unclassified balance sheet.
<F2>Multiplier is 1.
</FN>
</TABLE>
