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 September 30, 1996
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period.........to.........
Commission file number 0-11766
ANGELES PARTNERS XI
(Exact name of small business issuer as specified in its charter)
California 95-3788040
(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 PARTNERS XI
CONSOLIDATED BALANCE SHEET
(Unaudited)
(in thousands, except unit data)
September 30, 1996
<TABLE>
<CAPTION>
<S> <C> <C>
Assets
Cash and cash equivalents:
Unrestricted $ 959
Restricted--tenant security deposits 517
Accounts receivable 190
Escrow for taxes 164
Restricted escrows 75
Other assets 232
Investment in, and advances of $157 to, joint venture 193
Investment properties:
Land $ 3,998
Buildings and related personal property 24,862
28,860
Less accumulated depreciation (15,414) 13,446
$ 15,776
Liabilities and Partners' Deficit
Liabilities
Accounts payable $ 510
Due to affiliates 441
Tenant security deposits 514
Accrued interest 1,393
Other liabilities 270
Notes payable, including $7,019 in default 30,426
Partners' Deficit
General partners $ (494)
Limited partners (39,842 units issued and outstanding) (17,284) (17,778)
$ 15,776
<FN>
See Accompanying Notes to Consolidated Financial Statements
</TABLE>
b) ANGELES PARTNERS XI
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(in thousands, except unit data)
<TABLE>
<CAPTION>
Three Months Ended Nine Month Ended
September 30, September 30,
1996 1995 1996 1995
<S> <C> <C> <C> <C>
Revenues:
Rental income $ 1,644 $ 1,852 $ 4,950 $ 5,608
Other income 84 102 271 269
Total revenues 1,728 1,954 5,221 5,877
Expenses:
Operating 483 561 1,361 1,743
General and administrative 48 49 148 189
Maintenance 224 224 577 573
Depreciation 382 409 1,130 1,216
Interest 1,267 849 2,826 2,541
Property taxes 183 204 538 563
Bad debt expense -- 31 -- 31
Total expenses 2,587 2,327 6,580 6,856
Gain on sale of investment property -- 2,336 -- 2,336
Casualty gain -- -- 170 --
Equity in net income (loss) of joint venture 30 40 (24) (7)
Debt restructure costs -- (330) -- (330)
(Loss) income before extraordinary item (829) 1,673 (1,213) 1,020
Extraordinary gain on forgiveness of debt -- 221 -- 221
Net (loss) income $ (829) $ 1,894 $(1,213) $ 1,241
Net (loss) income allocated
to general partners (1%) $ (8) $ 19 $ (12) $ 12
Net (loss) income allocated
to limited partners (99%) (821) 1,875 (1,201) 1,229
Net (loss) income $ (829) $ 1,894 $(1,213) $ 1,241
Per limited partnership unit:
(Loss) income before
extraordinary item $(20.60) $ 41.57 $(30.14) $ 25.34
Extraordinary gain on forgiveness of debt -- 5.48 -- 5.48
Net (loss) income $(20.60) $ 47.05 $(30.14) $ 30.82
<FN>
See Accompanying Notes to Consolidated Financial Statements
</TABLE>
c) ANGELES PARTNERS XI
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 40,000 $ 30 $ 40,000 $ 40,030
Partners' deficit at
December 31, 1995 39,842 $ (482) $(16,059) $(16,541)
Distributions to partners (24) (24)
Nt loss for the nine months
ended September 30, 1996 (12) (1,201) (1,213)
Partners' deficit at
September 30, 1996 39,842 $ (494) $(17,284) $(17,778)
<FN>
See Accompanying Notes to Consolidated Financial Statements
</TABLE>
d) ANGELES PARTNERS XI
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
1996 1995
<S> <C> <C>
Cash flows from operating activities:
Net (loss) income $ (1,213) $ 1,241
Adjustments to reconcile net (loss) income to cash
provided by operating activities:
Equity in net loss from joint venture 24 7
Depreciation 1,130 1,216
Amortization of loan costs 42 76
Bad debt expense -- 31
Gain on sale of investment property -- (2,336)
Extraordinary gain on forgiveness of debt -- (221)
Casualty gain (170) --
Change in accounts:
Restricted cash (6) (13)
Accounts receivable (6) (14)
Escrows for taxes (51) 89
Other assets 5 (7)
Accounts payable 402 (372)
Tenant security deposit liabilities 14 (9)
Accrued interest 894 701
Due to affiliates 91 45
Other liabilities 54 164
Net cash provided by operating activities 1,210 598
Cash flows from investing activities:
Advances to joint venture (117) --
Proceeds from sale of investment property -- 4,717
Property improvements and replacements (466) (1,096)
Deposits to restricted escrows -- (615)
Withdrawals from restricted escrows -- 540
Net cash (used in) provided by investing activities (583) 3,546
Cash flows from financing activities:
Distributions to partners (24) --
Proceeds from mortgage notes payable -- 33
Repayments of mortgage notes payable (231) (3,987)
Payments on mortgage notes payable (283) (570)
Net cash used in financing activities (538) (4,524)
Increase (decrease) in cash 89 (380)
Cash and cash equivalents at beginning of period 870 1,606
Cash and cash equivalents at end of period $ 959 $ 1,226
Supplemental disclosure of cash flow information:
Cash paid during this period for interest $ 1,889 $ 1,657
Property improvements and replacements included
in accounts payable $ -- $ 57
Interest transferred to mortgage notes payable $ 50 $ 1,889
<FN>
See Accompanying Notes to Consolidated Financial Statements
</TABLE>
e) ANGELES PARTNERS XI
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE A - GOING CONCERN
Angeles Partners XI (the "Partnership") continues to incur operating losses and
is in default on approximately $7,019,000 of its unsecured indebtedness, plus
related accrued interest of approximately $1,065,000, due to its inability to
make interest and principal payments when due. The Partnership has extended the
maturity date on its first mortgage debt secured by the Fox Run Apartments
property, in the principal amount of $21,610,000, to December 1996. The
Partnership is current on its first mortgage; however, the Partnership does not
have the resources to pay this debt when it matures.
The second mortgages secured by Fox Run Apartments, in the principal amount of
$6,840,000, are held by Angeles Mortgage Investment Trust ("AMIT"). Angeles
Realty Corporation II (the "Managing General Partner") had negotiated amendments
to these mortgages which required interest only payments based on an 8% pay rate
with interest continuing to accrue at the original rates of 11.5% and 12.5% as
per the note agreements. The principal amount of this debt and accrued interest
was due in September 1996.
The Managing General Partner is conducting negotiations to refinance the first
and second mortgages, however, there is no assurance that these negotiations
will be successful.
As a result of a significant portion of the debt being in default or maturing in
1996, there is substantial doubt about the Partnership's ability to continue as
a going concern. The financial statements do not include any adjustments to
reflect the possible future effects on the recoverability and classification of
assets or amounts or classification of liabilities that may result from the
outcome of these uncertainties.
NOTE B - 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 three and nine month periods ended
September 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 the
Partnership's 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 C - 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 expenses owed to the Managing General Partner and affiliates
during the nine month periods ended September 30, 1996 and 1995 were paid or
accrued:
1996 1995
(in thousands)
Property management fees $259 $284
Reimbursement for services of affiliates,
(Total of $441 and $317 accrued at 119 102
September 30, 1996 and 1995, respectively) (1)
(1) Included in "Reimbursements for services of affiliates" for 1996 is
approximately $26,000 in reimbursements for construction oversight costs.
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.
In November 1992, Angeles Acceptance Pool, L.P. ("AAP"), a Delaware limited
partnership was organized to acquire and hold the obligations evidencing the
working capital loan previously provided to the Partnership by Angeles Capital
Investments, Inc. ("ACII"). Angeles Corporation ("Angeles") is the 99% limited
partner of AAP. Angeles Acceptance Directives, Inc. ("AAD"), an affiliate of the
Managing General Partner, 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 Managing General Partner and Angeles, AAD resigned as general partner of AAP
and simultaneously received a 1/2% limited partner interest in AAP. An
affiliate of Angeles now serves as the general partner of AAP.
This working capital loan funded the Partnership's operating deficits in prior
years. Total indebtedness, which is included as a note payable, was
approximately $1,797,000 at September 30, 1996, with monthly interest only
payments at prime. A principal payment was made in September 1995 in the amount
of approximately $194,000 from the proceeds of the sale of Harbour Landing
Apartments. The remaining principal balance is to be paid the earlier of i) the
availability of funds, ii) the sale of the remaining property owned by the
Partnership, or iii) November 1997. Total interest expense for this loan was
approximately $112,000 and $132,000 for the nine months ended September 30, 1996
and 1995, respectively. There was approximately $165,000 of interest payable
accrued at September 30, 1996.
NOTE C - TRANSACTIONS WITH AFFILIATED PARTIES (CONTINUED)
AMIT currently provides secondary financing secured by the Partnership's
investment property, the Fox Run Apartments, and the Joint Venture, which is
secured by the Joint Venture's sole investment property known as the Princeton
Meadows Golf Course. In addition, AMIT provides unsecured financing to the
Partnership. Total AMIT indebtedness, included as a note payable, was
approximately $7,019,000 ($6,840,000 in second mortgages secured by Fox Run
Apartments) at September 30, 1996, and was in default due to nonpayment upon
maturities, September 1996 and February 1995. Total interest expense on this
financing was approximately $1,191,000 and $508,000 for the nine months ended
September 30, 1996 and 1995, respectively. Accrued interest payable was
approximately $1,065,000 at September 30, 1996. Interest expense on the debt on
the Joint Venture was approximately $150,000 and $155,000 for the nine months
ended September 30, 1996 and 1995, respectively. Accrued interest on the Joint
Venture was approximately $19,000 at September 30, 1996.
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 to 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 has 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. 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, currently owns 87,700 Class A Shares of AMIT. These Class A Shares
entitle LAC to vote approximately 2% of the total shares. The number of Class A
Shares of AMIT owned by LAC increased from 63,200 shares on September 30, 1996,
to 87,700 shares as of October 22, 1996. The voting percentage also increased
from 1.5% to 2% over the same period.
As part of a settlement of certain disputes with AMIT, MAE GP granted to AMIT an
option to acquire the Class B Shares. 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 April 14, 1995, as payment for the option. Upon exercise of the
option, AMIT would remit to MAE GP an additional $94,000.
NOTE C - 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.
NOTE D - INVESTMENT IN JOINT VENTURE
The Partnership owns a 41.1% interest in Princeton Meadows Golf Course Joint
Venture ("Joint Venture").
The balance sheet of the Joint Venture is summarized as follows:
September 30, 1996
(in thousands)
Assets
Cash $ 232
Deferred charges and other assets 169
Investment properties, net 1,899
Total $ 2,300
Liabilities and Partners' Capital
Notes payable to AMIT $ 1,567
Other liabilities 642
Partners' capital 91
Total $ 2,300
NOTE D - INVESTMENT IN JOINT VENTURE - (CONTINUED)
The statements of operations of the Joint Venture are summarized as follows:
Three Months Ended Nine Months Ended
September 30, September 30,
1996 1995 1996 1995
(in thousands) (in thousands)
Revenue $ 568 $ 501 $ 1,177 $ 985
Costs and expenses (495) (405) (1,235) (1,003)
Net income (loss) $ 73 $ 96 $ (58) $ (18)
The Partnership's equity interest in the net loss of the Joint Venture for the
nine months ended September 30, 1996, and September 30, 1995, was approximately
$24,000 and $7,000, respectively.
The Princeton Meadows Golf Course property had an underground fuel storage tank
that was removed in 1992. This fuel storage tank caused contamination to the
area. Management installed monitoring wells in the area where the tank was
formerly buried. Some samples from these wells indicated lead and phosphorous
readings that were higher than the range prescribed by the New Jersey Department
of Environmental Protection ("DEP"). The Joint Venture notified DEP of the
findings when they were first discovered. However, DEP did not give any
directives as to corrective action until late 1995.
In November 1995, representatives of the Joint Venture and the New Jersey DEP
met and developed a plan of action to clean-up the contamination site at
Princeton Meadows Golf Course. The Joint Venture has engaged an engineering
firm to conduct consulting and compliance work and a second firm to perform the
field work necessary for the clean-up. The Joint Venture has recorded a
liability of $199,000 for the costs of the clean-up. The contracts have been
executed and work has commenced with the expected completion date to be sometime
in late 1996. The Managing General Partner believes the liability recorded is
sufficient to cover all costs associated with this incident.
NOTE E - OTHER ITEMS
On September 6, 1995, the Managing General Partner sold the Harbour Landing
property to an unaffiliated third party. Net proceeds were $4,716,872 and the
total gain on the sale was $2,336,262. Also, as a result of the sale $220,594
of debt was forgiven. The second mortgage, which was secured by Harbour Landing
Apartments, is held by AMIT and is still in default at September 30, 1996. Due
to the sale of the property, this debt became unsecured debt of the Partnership.
Prior to the third quarter of 1995, the Partnership was in default on the
mortgages held by AMIT, which is secured by the Fox Run property, due to its
inability to make interest and principal payments when due. However, during the
third quarter of 1995, the Partnership was successful in negotiating amendments
to these mortgages effective September 1, 1995. As a result of the
modifications, $330,277 of debt restructuring costs were incurred and the past
due interest of $1,610,382 at August 31, 1995 was capitalized to the principal
balance of the mortgage pursuant to the agreement.
During the second quarter of 1996, there were two separate fires at Fox Run
Apartments. Sixteen units received extensive damage, while four were completely
destroyed. The insurance proceeds to be received are estimated at $170,000.
The destroyed units were fully depreciated, resulting in a casualty gain of
$170,000.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
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, 1996 and 1995:
Average
Occupancy
Property 1996 1995
Fox Run Apartments
Plainsboro, New Jersey 95% 96%
The Partnership generated net losses for the three and nine months ended
September 30, 1996, of approximately $829,000 and $1,213,000, respectively,
versus net income for the three and nine months ended September 30, 1995, of
approximately $1,894,000 and $1,241,000, respectively. The net loss for the nine
months ended September 30, 1996, versus the net income for the nine months ended
September 30, 1995, is primarily attributable to the sale of Harbour Landing
Apartments in September 1995.
On September 6, 1995, the Managing General Partner sold the Harbour Landing
property to an unaffiliated third party. Net proceeds were $4,716,872 and the
total gain on the sale was $2,336,262. Also, as a result of the sale $220,594
of debt was forgiven. The second mortgage, which was secured by Harbour Landing
Apartments, is held by AMIT and is still in default at September 30, 1996. Due
to the sale of the property, this debt became unsecured debt of the Partnership.
As a result of the sale of Harbour Landing Apartments, there was an overall
decrease in rental income for the three and nine months ended September 30,
1996, versus the three and nine months ended September 30, 1995. This was
partially offset by a slight increase in rental income at Fox Run Apartments.
While average occupancy decreased at Fox Run Apartments, average rent per unit
increased. Other income increased due to an increase in lease cancellation fees
and utility collections at Fox Run Apartments. The sale of Harbour Landing
Apartments resulted in a decrease in operating, maintenance, depreciation,
interest and property tax expense for the nine months ended September 30, 1996,
as compared to the nine months ended September 30, 1995. The decreases in
expenses as a result of the sale were partially offset by increases in
maintenance, depreciation and interest expense at Fox Run Apartments.
Maintenance expense increased at Fox Run Apartments due primarily to snow
removal costs associated with the severe winter of 1996. There were also
extensive swimming pool repairs and exterior building improvements. Depreciation
expense increased at Fox Run Apartments due to the completion of certain
property improvements in 1995 and in the first half of 1996. The default
interest assessed on the AMIT debt that matured September 1, 1996, lead to an
increase in interest expense at Fox Run Apartments.
The Partnership has a 41.1% investment in the Princeton Meadows Golf Course
Joint Venture. For the three and nine months ended September 30, 1996, the
Partnership realized equity in net income and equity in net loss of the Joint
Venture of approximately $30,000 and $24,000, respectively, as compared to an
equity in net income and equity in net loss of the Joint Venture of
approximately $40,000 and $7,000 for the three and nine months ended September
30, 1995, respectively. The loss for the nine months ended September 30, 1996,
can be attributed to an increase in advertising, salaries, insurance and
maintenance expense. Advertising expense increased as a result of an aggressive
advertising campaign and salary expense increased due to the hiring of
additional qualified personnel, including a full time golf pro for the course.
The environmental issue at the property (See "Note B - Investment in Joint
Venture") necessitated a purchase of new insurance. The Partnership also
implemented a preventive maintenance program and repairs were made to the cart
paths and course. These increases in expenses were only partially offset by an
increase in revenues. These revenue increases can be attributed to maintenance
upgrades at the golf course that have improved the appearance of the property.
During the second quarter of 1996, there were two separate fires at Fox Run
Apartments. Sixteen units received extensive damage, while four were completely
destroyed. The insurance proceeds to be received are estimated at $170,000.
The destroyed units were fully depreciated, resulting in a casualty gain of
$170,000.
Prior to the third quarter of 1995, the Partnership was in default on the
mortgages held by AMIT, which is secured by the Fox Run property, due to its
inability to make interest and principal payments when due. However, during the
third quarter of 1995, the Partnership was successful in negotiating amendments
to these mortgages effective September 1, 1995. As a result of the
modifications, $330,277 of debt restructuring costs were incurred and the past
due interest of $1,610,382 at August 31, 1995 was capitalized to the principal
balance of the mortgage pursuant to the agreement.
The Managing General Partner continues to monitor the rental market environment
at its investment property to assess the feasibility of increasing rents, to
maintain or increase the occupancy level and to protect the Partnership from
increases in expense. The Managing General Partner expects to be able, at a
minimum, to continue protecting the Partnership from inflation-related increases
in expenses by increasing rents and maintaining a high overall occupancy level.
However, rental concessions and rental reductions needed to offset softening
market conditions could affect the ability to sustain this plan.
At September 30, 1996, the Partnership had unrestricted cash of approximately
$959,000 as compared to approximately $1,226,000 at September 30, 1995. Net
cash provided by operating activities for the nine months ended September 30,
1996 increased as compared to the nine months ended September 30, 1995 due to an
increase in accounts payable, partially offset by a decrease in other
liabilities. The proceeds received from the sale of Harbour Landing provided
cash from investing activities in 1995, while advances made to the joint venture
and property improvements and replacements resulted in cash used in investing
activities in 1996. Net cash used in financing activities decreased for the
nine months ended September 30, 1996, as compared to the corresponding period
ended September 30, 1995, due to repayments on mortgage notes payable, resulting
from the pay-off of the debt secured by Harbour Landing Apartments in September
1995, as a result of the sale of this investment property. Offsetting this
decrease was a distribution paid for the withholding tax imposed by the state of
South Carolina on the taxable income of non-resident limited partners. This tax
amounted to approximately $24,000 during 1996.
The Partnership continues to incur operating losses and is in default on
approximately $7,019,000 of principal debt, of which approximately $6,840,000 is
secured by second mortgages on Fox Run Apartments, plus related accrued interest
of approximately $1,065,000, due to its inability to make interest and principal
payments when due. The Partnership is current on its first mortgage secured by
the Fox Run Apartments property; however, the Partnership does not have the
resources to pay this debt when it becomes due. The Partnership has been
granted a six month extension and the debt now matures in December 1996.
The second mortgages secured by the Fox Run Apartments property are held by
AMIT. The Managing General Partner had negotiated amendments to these mortgages
which required interest only payments based on an 8% pay rate with interest
continuing to accrue at the original rates of 11.5% and 12.5% as per the note
agreements. The principal amount of this debt and accrued interest matured in
September 1996.
The Managing General Partner is conducting negotiations to refinance the first
and second mortgages, however, there is no assurance that these negotiations
will be successful.
As a result of a significant portion of the debt being in default or maturing in
1996, there is substantial doubt about the Partnership's ability to continue as
a going concern. The financial statements do not include any adjustments to
reflect the possible future effects on the recoverability and classification of
assets or amounts or classification of liabilities that may result from the
outcome of these uncertainties.
The Partnership has no material capital programs scheduled to be performed in
1996, although certain routine capital expenditures and maintenance expenses
have been budgeted. These capital expenditures and maintenance expenses will be
incurred only if cash is available from operations or is received from the
capital reserve 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 property to adequately maintain the physical assets
and other operating needs of the Partnership. As mentioned previously,
approximately $7,019,000 in debt of the Partnership is in default due to non-
payment upon maturity. The remaining indebtedness of approximately $23,407,000
ranges from interest only to an amortization period of 30 years with maturity
dates ranging from December 1996 to November 1997, during which time $23,308,000
of balloon payments are due. The Managing General Partner is currently
negotiating the refinancing of this indebtedness, however, there are no
certainties that the refinancing will be successful. Future cash distributions
will depend on the levels of net cash generated from operations, refinancings,
property sale and the availability of cash reserves.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
AMIT, a real estate investment trust, made a loan to the Joint Venture in
September 1991 in the amount of $1,280,000, secured by the Joint Venture's real
property known as Princeton Meadows Golf Course. The Partnership believed that
the loan was a non-recourse obligation. AMIT asserted that this loan was
recourse by virtue of an amendment purportedly entered into as of November 1,
1992, but which the Partnership has been informed and believes was actually
executed in December 1992 ("Note Modification"). The Partnership has been
further informed and believes that the amendment was executed at the direction
of Angeles Corporation ("Angeles") by an individual in his purported capacity as
an officer of the Managing General Partner of the Partnership and the Joint
Venture at a time when such person was not in fact an officer of such entities.
Accordingly, the Partnership and the Joint Venture filed Proofs of Claim in the
Angeles bankruptcy proceeding with respect to the purported amendment.
Additionally, the Partnership and the Joint Venture filed a Proof of Claim in
the Angeles Funding Corporation and Angeles Real Estate Corporation bankruptcy
proceedings on similar grounds. Both Angeles Funding Corporation and Angeles
Real Estate Corporation are affiliates of Angeles. In addition, Angeles has
agreed to cooperate with the Partnership and the Joint Venture in any action
commenced by or against them by AMIT asserting that the $1,280,000 obligation
owed to AMIT is recourse to the Partnership. Angeles further agreed to waive
the attorney-client privilege with respect to any information relating to the
Note Modification. Accordingly, the Partnership and the Joint Venture withdrew
their Proofs of Claim on August 9, 1995.
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 to 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 in the future. In addition, 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, currently owns 87,700 Class A Shares of AMIT. These Class A
Shares entitle LAC to vote approximately 2% of the total shares. The number of
Class A Shares of AMIT owned by LAC increased from 63,200 shares on September
30, 1996, to 87,700 shares as of October 22, 1996. The voting percentage also
increased from 1.5% to 2% over the same period.
As part of a settlement of certain disputes with AMIT, MAE GP granted to AMIT an
option to acquire the Class B Shares. 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 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 Registrant is unaware of any other pending or outstanding litigation that is
not of a routine nature. The Managing General Partner of the Registrant
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 an exhibit to this
report.
b) Reports on Form 8-K:
None filed during the quarter ended September 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 PARTNERS XI
By: Angeles Realty Corporation II
Managing 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: November 12, 1996
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from Angeles
Partners XI 1996 Third Quarter 10-QSB and is qualified in its entirety by
reference to such 10-QSB filing.
</LEGEND>
<CIK> 0000702986
<NAME> ANGELES PARTNERS XI
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> SEP-30-1996
<CASH> 959
<SECURITIES> 0
<RECEIVABLES> 190
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0<F1>
<PP&E> 28,860
<DEPRECIATION> 15,414
<TOTAL-ASSETS> 15,776
<CURRENT-LIABILITIES> 0<F1>
<BONDS> 30,426
0
0
<COMMON> 0
<OTHER-SE> (17,778)
<TOTAL-LIABILITY-AND-EQUITY> 15,776
<SALES> 0
<TOTAL-REVENUES> 5,221
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 6,580
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,826
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,213)
<EPS-PRIMARY> (30.14)<F2>
<EPS-DILUTED> 0
<FN>
<F1>Registrant has an unclassified balance sheet.
<F2>Multiplier is 1.
</FN>
</TABLE>
