FORM 10-QSB.--QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
Quarterly or Transitional Report
(As last amended by 34-32231, eff. 6/3/93.)
U.S. Securities and Exchange Commission
Washington, D.C. 20549
Form 10-QSB
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1996
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT
For the transition period.........to.........
Commission file number 0-10199
ANGELES PARK COMMUNITIES, LTD.
(Exact name of small business issuer as specified in its charter)
California 95-3558497
(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) (Zip Code)
Issuer's telephone number (864) 239-1000
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 PARK COMMUNITIES, LTD.
CONSOLIDATED BALANCE SHEET
(Unaudited)
(in thousands, except unit data)
June 30, 1996
Assets
Cash and cash equivalents:
Unrestricted $ 238
Restricted--tenant security deposits 14
Accounts receivable, less allowance of $5 10
Escrow for taxes 120
Other assets 261
Investment properties:
Land $ 1,043
Buildings and related personal property 4,808
5,851
Less accumulated depreciation (4,383) 1,468
$ 2,111
Liabilities and Partners' Deficit
Liabilities
Accounts payable $ 53
Tenant security deposits 14
Other liabilities 266
Mortgage note payable 4,933
Partners' Deficit
General partners' $ (163)
Limited partners' (15,093 units issued
and outstanding) (2,992) (3,155)
$ 2,111
See Accompanying Notes to Consolidated Financial Statements
b) ANGELES PARK COMMUNITIES, LTD.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(in thousands, except unit data)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
1996 1995 1996 1995
<S> <C> <C> <C> <C>
Revenues:
Rental income $ 474 $ 444 $ 978 $ 959
Other income 5 91 22 97
Total revenues 479 535 1,000 1,056
Expenses:
Operating 190 195 367 351
General and administrative 49 41 90 83
Maintenance 43 41 66 63
Depreciation 80 79 161 157
Interest 125 150 250 307
Property taxes 53 42 107 83
Bad debt recovery (5) (750) (5) (750)
Total expenses 535 (202) 1,036 294
Net (loss) income $ (56) $ 737 $ (36) $ 762
Net (loss) income allocated
to general partners (1%) $ (1) $ 7 $ -- $ 8
Net (loss) income allocated
to limited partners (99%) (55) 730 (36) 754
Net (loss) income $ (56) $ 737 $ (36) $ 762
Net (loss) income per
limited partnership unit $ (3.64) $ 48.37 $ (2.39) $ 49.96
<FN>
See Accompanying Notes to Consolidated Financial Statements
</TABLE>
c) ANGELES PARK COMMUNITIES, LTD.
CONSOLIDATED STATEMENT OF CHANGES IN PARTNERS' DEFICIT
(Unaudited)
(in thousands, except unit data)
<TABLE>
<CAPTION>
Limited
Partnership General Limited
Units Partners Partners Total
<S> <C> <C> <C> <C>
Original capital contributions 15,112 $ 1 $15,112 $15,113
Partners' deficit at
December 31, 1995 15,093 $ (163) $(2,956) $(3,119)
Net loss for the six
months ended June 30, 1996 -- -- (36) (36)
Partners' deficit at
June 30, 1996 15,093 $ (163) $(2,992) $(3,155)
<FN>
See Accompanying Notes to Consolidated Financial Statements
</TABLE>
d) ANGELES PARK COMMUNITIES, LTD.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
<TABLE>
<CAPTION>
Six Months Ended
June 30,
1996 1995
<S> <C> <C>
Cash flows from operating activities:
Net (loss) income $ (36) $ 762
Adjustments to reconcile net (loss) income to
net cash provided by operating activities:
Depreciation 161 157
Amortization of loan costs 25 33
Bad debt recovery, net (5) (750)
Change in accounts:
Restricted cash (12) (13)
Accounts receivable 3 171
Escrows for taxes (89) (94)
Other assets -- 2
Accounts payable 17 9
Tenant security deposit liabilities 12 12
Other liabilities 53 (143)
Net cash provided by
operating activities 129 146
Cash flows from investing activities:
Property improvements and replacements (53) (16)
Proceeds from AMIT investment -- 750
Net cash (used in) provided by
investing activities (53) 734
Cash flows used in financing activities:
Payments on mortgage notes payable (19) (892)
Net increase (decrease) in cash 57 (12)
Cash and cash equivalents at beginning of period 181 149
Cash and cash equivalents at end of period $ 238 $ 137
Supplemental disclosure of cash flow information:
Cash paid for interest $ 225 $ 278
<FN>
See Accompanying Notes to Consolidated Financial Statements
</TABLE>
e) ANGELES PARK COMMUNITIES, LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note A - Basis of Presentation
The accompanying unaudited financial statements 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 the Managing General Partner, all adjustments (consisting of
normal recurring accruals) considered necessary for a fair presentation have
been included. Operating results for the six month period ended June 30, 1996,
are not necessarily indicative of the results that may be expected for the
fiscal year ending December 31, 1996. For further information, refer to the
financial statements and footnotes thereto included in Angeles Park Communities,
Ltd.'s (the "Partnership") annual report on Form 10-KSB for the fiscal year
ended December 31, 1995.
Certain reclassifications have been made to the 1995 information to conform to
the 1996 presentation.
Note B - Transactions with Affiliated Parties
The Partnership has no employees and is dependent on the Managing 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 amounts were paid to the
Managing General Partner and affiliates during the six months ended June 30,
1996 and 1995:
1996 1995
(in thousands)
Property management fees $50 $49
Reimbursement for services of affiliates 60 50
The Partnership insures its properties under a master policy through an agency
and insurer unaffiliated with the Managing General Partner. An affiliate of the
Managing 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 current year's master policy. The current agent assumed
the financial obligations to the affiliate of the Managing General Partner who
receives payments on these obligations from the agent. The amount of the
Partnership's insurance premiums accruing to the benefit of the affiliate of the
Managing General Partner by virtue of the agent's obligations is not
significant.
Note B - Transactions with Affiliated Parties - (continued)
In July 1993, Angeles Mortgage Investment Trust ("AMIT"), a real estate
investment trust, formerly affiliated with Angeles Corporation ("Angeles"),
initiated litigation against the Partnership and other partnerships which loaned
money to AMIT seeking to avoid repayment of such obligations. The Partnership
subsequently filed a counterclaim against AMIT seeking to enforce the
obligation, the principal amount of which was $750,000 plus accrued interest
from March 1993 ("AMIT Obligation"). This amount was fully reserved in 1993.
On November 9, 1994, the Partnership executed a definitive Settlement Agreement
to settle the dispute with respect to the AMIT Obligation. The actual closing
of the Settlement occurred April 14, 1995. The Partnership's claim was
satisfied by a cash payment to the Partnership by AMIT totalling $827,000 (the
"Settlement Amount") at closing, of which $750,000 was payment of the obligation
mentioned above and $77,000 was previously unrecognized interest income.
MAE GP Corporation ("MAE GP"), an affiliate of the Managing General Partner,
owns 1,675,113 Class B Shares of AMIT. MAE GP has the option to convert these
Class B Shares, in whole or in part, into Class A Shares on the basis of 1 Class
A Share for every 49 Class B Shares. These Class B Shares entitle MAE GP to
receive 1.2% of the distributions of net cash distributed by AMIT. These Class
B Shares also entitle MAE GP to vote on the same basis as Class A Shares which
allows MAE GP to vote approximately 37% of the total shares (unless and until
converted to Class A Shares at which time the percentage of the vote controlled
represented by the shares held by MAE GP would approximate 1.2% of the vote).
Between the date of acquisition of these shares (November 24, 1992) and March
31, 1995, MAE GP declined to vote these shares. Since that date, MAE GP voted
its shares at the 1995 annual meeting in connection with the election of
trustees and other matters. MAE GP has not exerted, and continues to decline to
exert, any management control over or participate in the management of AMIT.
MAE GP may choose to vote these shares as it deems appropriate in the future.
In addition, Liquidity Assistance, LLC, ("LAC"), an affiliate of the Managing
General Partner and an affiliate of Insignia Financial Group, Inc., which
provides property management and partnership administration services to the
Partnership, owns 63,200 Class A Shares of AMIT. These Class A Shares entitle
LAC to vote approximately 1.5% of the total shares.
As part of the above described settlement, MAE GP granted to AMIT an option to
acquire the Class B shares owned by it. This option can be exercised at the end
of 10 years or when all loans made by AMIT to partnerships affiliated with MAE
GP as of November 9, 1994 (which is the date of execution of a definitive
Settlement Agreement), have been paid in full, but in no event prior to November
9, 1997. AMIT delivered to MAE GP cash in the sum of $250,000 at closing, which
occurred on April 14, 1995, as payment for the option. Upon exercise of the
option, AMIT would remit to MAE GP an additional $94,000.
Note B - Transactions with Affiliated Parties - (continued)
Simultaneously with the execution of the option, MAE GP executed an irrevocable
proxy in favor of AMIT the result of which is MAE GP will be able to vote the
Class B Shares on all matters except those involving transactions between AMIT
and MAE GP affiliated borrowers or the election of any MAE GP affiliate as an
officer or trustee of AMIT. On those matters, MAE GP granted to the AMIT
trustees, in their capacity as trustees of AMIT, proxies with regard to the
Class B Shares instructing such trustees to vote said Class B Shares in
accordance with the vote of the majority of the Class A Shares voting to be
determined without consideration of the votes of "Excess Class A Shares" as
defined in Section 6.13 of the Declaration of Trust of AMIT.
The Partnership filed a Proof of Claim in the bankruptcy proceeding of Angeles
concerning the Partnership's indebtedness to Angeles Acceptance Pool, L.P.
("AAP"). Angeles is the 99% limited partner of AAP and Angeles Acceptance
Directives, an affiliate of the Managing General Partner was, until April 14,
1995, the 1% general partner of AAP. The Proof of Claim alleged that, instead
of causing the Partnership to pay AAP on account of such debt, Angeles, either
itself or through an affiliate, caused the Partnership to make payment to
another Angeles affiliate. To the extent that such action resulted in the
Partnership not receiving credit for the payments so made, the Partnership would
have been damaged in an amount equal to the misappropriated payments. On August
9, 1995, AAP acknowledged constructive receipt of such payment and therefore,
the Managing General Partner withdrew this claim.
Finally, the Managing General Partner of the Partnership has been informed by
representatives of Angeles that, in connection with certain sales of properties
in prior years, the Partnership paid an incentive fee of $840,000 to Angeles
Real Estate Corporation ("ARECO"), a wholly owned subsidiary of Angeles. The
last incentive fee, which was paid to ARECO without the knowledge of the current
management of the Managing General Partner in January 1993, was equal to 4% of
the sales price of the properties sold in 1992, or $167,000. The Managing
General Partner originally believed that the incentive fees previously paid
were not in accordance with the partnership agreement. As a result, the
Partnership filed a claim against Angeles for the total fees, or $1,007,000.
After investigating this matter further, it appears that the incentive fees may
have been paid in accordance with the terms of the partnership agreement or that
the manner in which they were paid may not give rise to a sustainable claim on
behalf of the Partnership. However, it is possible that a claim for repayment
of some or all of these fees could arise at some point in the future if
sufficient distributions are not made to the partners to result in their
receiving their original capital investment plus a cumulative return of 6%. In
light of all of the facts and circumstances known, the Managing General Partner
determined that the likelihood of success and significant recovery resulting
from pursuit of a claim would not be sufficient to warrant the costs which the
Partnership would incur to pursue the claim. Therefore, the Managing General
Partner withdrew this claim on August 9, 1995.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
The Partnership's investment properties consist of one mobile home park and one
recreational vehicle park. The following table sets forth the average occupancy
of the properties for the six months ended June 30, 1996 and 1995:
Average Occupancy
Property 1996 1995
Cloverleaf Farms, Mobile Home Park 99% 99%
Brooksville, Florida
Cloverleaf Forest, Recreational 74% 70%
Vehicle Park
Brooksville, Florida (1)
(1) This is a normal average occupancy for this property for this time of the
year due to many tenants returning to their summer homes which are located
in cooler climates. Occupancy should increase again in the fall and
winter months.
For the three and six months ended June 30, 1996, the Partnership generated a
net loss of $56,000 and $36,000 versus net income of $737,000 and $762,000 for
the three and six months ended June 30, 1995. The Partnership did not
experience significant changes in total revenues or total expenses, exclusive of
the recovery, in 1995, of an amount previously written off as bad debt, during
the three and six months ended June 30, 1996, as compared to the three and six
months ended June 30, 1995.
The Partnership experienced an increase in rental income primarily due to an
increase in rental rates at the mobile home park. In April 1995, the
Partnership received $827,000 from AMIT in satisfaction of a $750,000 note
receivable that the Partnership had from AMIT. Of the $827,000 received,
$77,000 was interest, resulting in increased other income in 1995 as compared to
1996 (see "Note B" for further discussion).
Increases in operating and property tax expense were substantially offset by a
decrease in interest expense. The increase in operating expense was due
primarily to a substantial increase in insurance premiums which is typical of
the insurance rate increases occurring in the Florida market. Additionally,
legal fees increased related to efforts to collect certain tenant reimbursements
related to prior years. Property taxes increased due to an increase in the
assessed value of the properties. Interest expense decreased due to the
Partnership paying off the second mortgage debt in late 1995. Also contributing
to this decrease was a decrease in loan cost amortization related to the pay off
of the second mortgage.
As part of the ongoing business plan of the Partnership, the Managing 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
expense. As part of this plan, the Managing General Partner attempts to protect
the Partnership from 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
Managing General Partner will be able to sustain such a plan.
At June 30, 1996, the Partnership had unrestricted cash of $238,000 versus
$137,000 at June 30, 1995. The decrease in cash provided by operating
activities results from reduced cash generated from operations, a settlement of
a receivable from the tenants of an investment property that the Partnership
sold in 1987 which the Partnership received in early 1995 and which did not
recur in 1996, offset, in part, by an increase in other liabilities during the
six months ended June 30, 1996. The increase in cash used in investing
activities is attributable to an increase in spending on paving projects and the
proceeds received in 1995 on the AMIT investment which did not recur in 1996.
Cash used in financing activities decreased due to lower mortgage principal
payments attributable to the pay off of the second mortgage debt in late 1995.
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. The mortgage indebtedness
of $4,933,000 is being amortized over 30 years with a balloon payment of
$4,692,000 due in July 2001, at which time the properties will either be
refinanced or sold. Future cash distributions will depend on the levels of net
cash generated from operations, property sales and the availability of cash
reserves. There were no cash distributions during the six months ended June 30,
1996, or the six months ended June 30, 1995.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
In July 1993, AMIT, a real estate investment trust, formerly affiliated with
Angeles, initiated litigation against the Partnership and other partnerships
which loaned money to AMIT seeking to avoid repayment of such obligations. The
Partnership subsequently filed a counterclaim against AMIT seeking to enforce
the obligation, the principal amount of which was $750,000 plus accrued interest
from March 1993 ("AMIT Obligation"). This amount was fully reserved in 1993.
On November 9, 1994, the Partnership executed a definitive Settlement Agreement
to settle the dispute with respect to the AMIT Obligation. The actual closing
of the Settlement occurred April 14, 1995. The Partnership's claim was
satisfied by a cash payment to the Partnership by AMIT totalling $827,000 (the
"Settlement Amount") at closing, of which $750,000 was payment of the obligation
mentioned above and $77,000 was previously unrecognized interest income.
MAE GP, an affiliate of the Managing General Partner, owns 1,675,113 Class B
Shares of AMIT. MAE GP has the option to convert these Class B Shares, in whole
or in part, into Class A Shares on the basis of 1 Class A Share for every 49
Class B Shares. These Class B Shares entitle MAE GP to receive 1.2% of the
distributions of net cash distributed by AMIT. These Class B Shares also
entitle MAE GP to vote on the same basis as Class A Shares which allows MAE GP
to vote approximately 37% of the total shares (unless and until converted to
Class A Shares at which time the percentage of the vote controlled represented
by the shares held by MAE GP would approximate 1.2% of the vote). Between the
date of acquisition of these shares (November 24, 1992) and March 31, 1995, MAE
GP declined to vote these shares. Since that date, MAE GP voted its shares at
the 1995 annual meeting in connection with the election of trustees and other
matters. MAE GP has not exerted, and continues to decline to exert, any
management control over or participate in the management of AMIT. MAE GP may
choose to vote these shares as it deems appropriate in the future. In addition,
Liquidity Assistance, LLC, ("LAC"), an affiliate of the Managing General Partner
and an affiliate of Insignia Financial Group, Inc., which provides property
management and partnership administration services to the Partnership, owns
63,200 Class A Shares of AMIT. These Class A Shares entitle LAC to vote
approximately 1.5% of the total shares.
As part of the above described settlement, MAE GP granted to AMIT an option to
acquire the Class B shares owned by it. This option can be exercised at the end
of 10 years or when all loans made by AMIT to partnerships affiliated with MAE
GP as of November 9, 1994 (which is the date of execution of a definitive
Settlement Agreement), have been paid in full, but in no event prior to November
9, 1997. AMIT delivered to MAE GP cash in the sum of $250,000 at closing, which
occurred on April 14, 1995, as payment for the option. Upon exercise of the
option, AMIT would remit to MAE GP an additional $94,000.
Simultaneously with the execution of the option, MAE GP executed an irrevocable
proxy in favor of AMIT the result of which is MAE GP will be able to vote the
Class B Shares on all matters except those involving transactions between AMIT
and MAE GP affiliated borrowers or the election of any MAE GP affiliate as an
officer or trustee of AMIT. On those matters, MAE GP granted to the AMIT
trustees, in their capacity as trustees of AMIT, proxies with regard to the
Class B Shares instructing such trustees to vote said Class B Shares in
accordance with the vote of the majority of the Class A Shares voting to be
determined without consideration of the votes of "Excess Class A Shares" as
defined in Section 6.13 of the Declaration of Trust of AMIT.
The Partnership filed a Proof of Claim in the bankruptcy proceeding of Angeles
concerning the Partnership's indebtedness to AAP. The Proof of Claim alleged
that instead of causing the Partnership to pay AAP on account of such debt,
Angeles either itself or through an affiliate, caused the Partnership to make
payment to another Angeles affiliate. To the extent that such action resulted
in the Partnership not receiving credit for the payments so made, the
Partnership would have been damaged in an amount equal to the misappropriated
payments. On August 9, 1995, AAP acknowledged constructive receipt of such
payment and therefore, the Managing General Partner withdrew this claim.
Finally, the Managing General Partner of the Partnership has been informed by
representatives of Angeles that, in connection with certain sales of properties
in prior years, the Partnership paid an incentive fee of $840,000 to ARECO, a
wholly owned subsidiary of Angeles. The last incentive fee, which was paid to
ARECO without the knowledge of the current management of the Managing General
Partner in January 1993, was equal to 4% of the sales price of the properties
sold in 1992, or $167,000. The Managing General Partner originally believed
that the incentive fees previously paid were not in accordance with the
partnership agreement. As a result, the Partnership filed a claim against
Angeles for the total fees, or $1,007,000. After investigating this matter
further, it appears that the incentive fees may have been paid in accordance
with the terms of the partnership agreement or that the manner in which they
were paid may not give rise to a sustainable claim on behalf of the Partnership.
However, it is possible that a claim for repayment of some or all of these fees
could arise at some point in the future if sufficient distributions are not made
to the partners to result in their receiving their original capital investment
plus a cumulative return of 6%. In light of all of the facts and circumstances
known, the Managing General Partner determined that the likelihood of success
and significant recovery resulting from pursuit of a claim would not be
sufficient to warrant the costs which the Partnership would incur to pursue the
claim. Therefore, the Managing General Partner withdrew this claim on August 9,
1995.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a) Exhibits: Exhibit 27. Financial Data Schedule
b) Reports on From 8-K: None filed during the quarter ended
June 30, 1996.
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 PARK COMMUNITIES, LTD.
By: Angeles Realty Corporation
Managing General Partner
By: /s/Carroll D. Vinson
Carroll D. Vinson
President, Director
By: /s/Robert D. Long, Jr.
Robert D. Long, Jr.
Vice President/CAO
Date: August 2, 1996
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from Angeles
Park Communities, Ltd. 1996 Second Quarter 10-QSB and is qualified in its
entirety by reference to such 10-QSB filing.
</LEGEND>
<CIK> 0000317969
<NAME> ANGELES PARK COMMUNITIES, LTD.
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> JUN-30-1996
<CASH> 238
<SECURITIES> 0
<RECEIVABLES> 10
<ALLOWANCES> 5
<INVENTORY> 0
<CURRENT-ASSETS> 0<F1>
<PP&E> 5,851
<DEPRECIATION> 4,383
<TOTAL-ASSETS> 2,111
<CURRENT-LIABILITIES> 0<F1>
<BONDS> 4,933
0
0
<COMMON> 0
<OTHER-SE> (3,155)
<TOTAL-LIABILITY-AND-EQUITY> 2,111
<SALES> 0
<TOTAL-REVENUES> 1,000
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 1,036
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 250
<INCOME-PRETAX> (36)
<INCOME-TAX> 0
<INCOME-CONTINUING> (36)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (36)
<EPS-PRIMARY> (2.39)
<EPS-DILUTED> 0
<FN>
<F1>The Registrant has an unclassified balance sheet.
</FN>
</TABLE>
