March 8, 2000
United States
Securities and Exchange Commission
Washington, D.C. 20549
RE: Angeles Partners XI
Form 10-KSB
File No. 0-1176
To Whom it May Concern:
The accompanying Form 10-KSB for the year ended December 31, 1999 describes a
change in the method of accounting to capitalize exterior painting and major
landscaping, which would have been expensed under the old policy. The
Partnership believes that this accounting principle change is preferable because
it provides a better matching of expenses with the related benefit of the
expenditures and it is consistent with industry practice and the policies of the
Managing General Partner.
Please do not hesitate to contact the undersigned with any questions or comments
that you might have.
Very truly yours,
Stephen Waters
Real Estate Controller
<PAGE>
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FORM 10-KSB--ANNUAL OR TRANSITIONAL REPORT UNDER
SECTION 13 OR 15(d)
Form 10-KSB
(Mark One)
[X] ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
[No Fee Required]
For the fiscal year ended December 31, 1999
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
[No Fee Required]
For the transition period from _________to _________
Commission file number 0-11766
ANGELES PARTNERS XI
(Name of small business issuer in its charter)
California 95-3788040
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
55 Beattie Place, PO Box 1089
Greenville, South Carolina 29602
(Address of principal executive offices)
Issuer's telephone number (864) 239-1000
Securities registered under Section 12(b) of the Exchange Act:
None
Securities registered under Section 12(g) of the Exchange Act:
Limited Partnership Units
(Title of class)
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___
Check if there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B contained in this form, and no disclosure will be contained, to
the best of the registrant's knowledge in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-KSB or any
amendment to this Form 10-KSB.
State issuer's revenues for its most recent fiscal year. $8,157,000
State the aggregate market value of the voting partnership interests held by
non-affiliates computed by reference to the price at which the partnership
interests were sold, or the average bid and asked prices of such partnership
interests as of December 31, 1999. No market exists for the limited partnership
interests of the Registrant, and, therefore, no aggregate market value can be
determined.
DOCUMENTS INCORPORATED BY REFERENCE
None
- --------------------------------------------------------------------------------
<PAGE>
PART I
Item 1. Description of Business
Angeles Partners XI (the "Partnership" or "Registrant") is a publicly held
limited partnership organized under the California Uniform Limited Partnership
Act on February 14, 1983. The Partnership's managing general partner is Angeles
Realty Corporation II ("ARC II" or the "Managing General Partner"), a California
corporation and wholly-owned subsidiary of MAE GP Corporation ("MAE GP").
Effective February 25, 1998, MAE GP merged into Insignia Properties Trust
("IPT"), which was an affiliate of Insignia Financial Group, Inc. ("Insignia").
Effective February 26, 1999, IPT was merged into Apartment Investment and
Management Company ("AIMCO"). Thus the Managing General Partner is now a
wholly-owned subsidiary of AIMCO. The Elliott Family Partnership, Ltd. and ARC
II/AREMCO Partners, Ltd. are the non-managing general partners. The Managing
General Partner and the non-managing general partners are herein collectively
referred to as the "General Partners". The Partnership Agreement provides that
the Partnership is to terminate on December 31, 2035, unless terminated prior to
such date.
The Registrant is engaged in the business of operating and holding real estate
properties for investment. In 1983 and 1984, during its acquisition phase, the
Registrant acquired eight existing apartment properties, a retail/apartment
complex, a retail/office complex and an office/warehouse complex. In 1991, the
Registrant invested in a joint venture along with two other related
partnerships. The Registrant's ownership in this joint venture was 41.1%. On
February 26, 1999, the joint venture sold its only investment property,
Princeton Meadows Golf Course, to an unaffiliated third party (see "Item 7.
Financial Statements, Note C - Investment in Joint Venture"). The Registrant
continues to own and operate one apartment complex. See "Item 2. Description of
Property".
Commencing February 14, 1983, the Registrant offered, pursuant to a Registration
Statement filed with the Securities and Exchange Commission, up to 40,000 units
of Limited Partnership Interest (the "Units"), at a purchase price of $1,000 per
Unit with a minimum purchase of 5 Units ($5,000). Upon termination of the
offering, the Registrant sold 40,000 units aggregating $40,000,000. The General
Partners contributed capital in the amount of $30,000 for a 1% interest in the
Partnership. Since its initial offering, the Registrant has not received, nor
are limited partners required to make, additional capital contributions.
The Registrant has no employees. Management and administrative services are
provided by the Managing General Partner and by agents retained by the Managing
General Partner. An affiliate of the Managing General Partner, has been
providing management services for the Registrant.
The real estate business in which the Partnership is engaged is highly
competitive. There are other residential properties within the market area of
the Registrant's property. The number and quality of competitive properties,
including those which may be managed by an affiliate of the Managing General
Partner in such market area, could have a material effect on the rental market
for the apartments at the Registrant's property and the rents that may be
charged for such apartments. While the Managing General Partner and its
affiliates own and/or control a significant number of apartment units in the
United States such units represent an insignificant percentage of total
apartment units in the United States and, competition for apartments is local.
Both the income and expenses of operating the property owned by the Partnership
are subject to factors outside of the Partnership's control, such as changes in
the supply and demand for similar properties resulting from various market
conditions, increases/decreases in unemployment or population shifts, changes in
the availability of permanent mortgage financing, changes in zoning laws, or
changes in patterns or needs of users. In addition, there are risks inherent in
owning and operating residential properties because such properties are
susceptible to the impact of economic and other conditions outside of the
control of the Partnership.
There have been, and it is possible there may be other, Federal, state and local
legislation and regulations enacted relating to the protection of the
environment. The Partnership is unable to predict the extent, if any, to which
such new legislation or regulations might occur and the degree to which such
existing or new legislation or regulations might adversely affect the property
owned by the Partnership.
The Partnership monitors its property for evidence of pollutants, toxins and
other dangerous substances, including the presence of asbestos. In certain cases
environmental testing has been performed, which resulted in no material adverse
conditions or liabilities. In no case has the Partnership received notice that
it is a potentially responsible party with respect to an environmental clean up
site. However, the joint venture, in which the Partnership had an equity
interest, was responsible for an environmental clean-up. Upon the sale of the
Princeton Meadows Golf Course, the joint venture received documents from the
purchaser releasing the joint venture from any further responsibility or
liability with respect to the clean-up (see "Item 7. Financial Statements, Note
C - Investment in Joint Venture").
A further description of the Partnership's business is included in "Management's
Discussion and Analysis or Plan of Operation" included in "Item 6" of this Form
10-KSB.
Transfer of Control
Pursuant to a series of transactions which closed on October 1, 1998 and
February 26, 1999, Insignia and IPT merged into 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
Managing General Partner. The Managing General Partner does not believe that
this transaction has had or will have a material effect on the affairs and
operations of the Partnership.
Item 2. Description of Property:
The following table sets forth the Partnership's investment in property:
<TABLE>
<CAPTION>
Date of
Property Purchase Type of Ownership Use
<S> <C> <C> <C>
Fox Run Apartments 5/27/83 Fee ownership subject to Apartments
Plainsboro, New Jersey first and second mortgages(1) 776 units
</TABLE>
(1) Property is held by a Limited Partnership in which the Registrant owns a
99% limited partnership interest. The general partner of this entity is a
limited liability company of which the Registrant is the sole member.
The Partnership also has a 41.1% investment in the Princeton Meadows Golf Course
Joint Venture ("Joint Venture"). On February 26, 1999, the Joint Venture sold
its only investment property, Princeton Meadows Golf Course, to an unaffiliated
third party (see "Item 7. Financial Statements, Note C - Investment in Joint
Venture").
Schedule of Property:
Set forth below for the Registrant's property is the gross carrying value,
accumulated depreciation, depreciable life, method of depreciation and Federal
tax basis.
<TABLE>
<CAPTION>
Gross
Carrying Accumulated Useful Federal
Property Value Depreciation Life Method Tax Basis
- -------- ----- ------------ ---- ------ ---------
(in thousands) (in thousands)
<S> <C> <C> <C> <C> <C>
Fox Run Apartments $30,614 $20,142 5-20 yrs S/L $ 9,217
====== ====== ======
</TABLE>
See "Note A" of the consolidated financial statements included in "Item 7.
Financial Statements" for a description of the Partnership's depreciation policy
and "Note L - Change in Accounting Principle".
Schedule of Property Indebtedness
The following table sets forth certain information relating to the loans
encumbering the Registrant's property.
<TABLE>
<CAPTION>
Principal Principal
Balance At Balance
December 31, Interest Period Maturity Due At
Property 1999 Rate Amortized Date (2) Maturity
-------- ---- ---- --------- -------- --------
(in thousands) (in thousands)
Fox Run Apartments
<S> <C> <C> <C> <C> <C>
1st mortgage $27,652 8.32% 27 yrs(1) 1/2002 $26,916
2nd mortgage 2,336 15.29% 15 yrs(1) 1/2002 2,192
------ ------
Total $29,988 $29,108
====== ======
</TABLE>
(1) Interest only payments, until February 1999, at which time the monthly
payment was increased to include principal and interest.
(2) See "Item 7. Financial Statements - Note D" for information with respect
to the Registrant's ability to prepay these loans, and other specific
details about the loans.
Rental Rates and Occupancy:
Average annual rental rates and occupancy for 1999 and 1998 for the property:
Average Annual Average Annual
Rental Rates Occupancy
------------ ---------
(per unit)
Property 1999 1998 1999 1998
-------- ---- ---- ---- ----
Fox Run Apartments $10,019 $9,537 97% 97%
As noted under "Item 1. Description of Business", the real estate industry is
highly competitive. The apartment complex of the Partnership is subject to
competition from other residential apartment complexes in the area. The Managing
General Partner believes that this property is adequately insured and in good
physical condition, subject to normal depreciation and deterioration as is
typical for assets of this type and age. See "Capital Improvements" below for
information related to budgeted capital improvements at the property. The
apartment complex leases units for terms of one year or less. No residential
tenant leases 10% or more of the available rental space.
Real Estate Taxes and Rates:
Real estate taxes and rates in 1999 were:
1999 1999
Billing Rate
------- ----
(in thousands)
Fox Run Apartments $793 2.7%
Capital Improvements:
Fox Run Apartments
The Partnership completed approximately $871,000 in capital expenditures at Fox
Run Apartments as of December 31, 1999, consisting primarily of interior
enhancements, parking lot improvements, swimming pool enhancements, landscaping,
water heater and electrical upgrades and property replacements due to the 1997
fire at the property. These improvements were funded from cash flow. The
Partnership is currently evaluating the capital improvement needs of the
property for the upcoming year. The minimum amount to be budgeted is expected to
be $300 per unit or $232,800. Additional improvements may be considered and will
depend on the physical condition of the property as well as anticipated cash
flow generated by the property.
Item 3. 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 Managing General Partner and several of their affiliated
partnerships and corporate entities. The action purports to assert claims on
behalf of a class of limited partners and derivatively on behalf of a number of
limited partnerships (including the Partnership) which are named as nominal
defendants, challenging the acquisition 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 and the Insignia Merger (see
"Item 7. Financial Statements, Note B - Transfer of Control"). The plaintiffs
seek monetary damages and equitable relief, including judicial dissolution of
the Partnership. On June 25, 1998, the Managing 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 Managing General Partner filed
demurrers to the amended complaint which were heard February 1999. Pending the
ruling on such demurrers, settlement negotiations commenced. On November 2,
1999, the parties executed and filed a Stipulation of Settlement settling
claims, subject to final court approval, on behalf of the Partnership and all
limited partners who own units as of November 3, 1999. Preliminary approval of
the settlement was obtained on November 3, 1999 from the Superior Court of the
State of California, County of San Mateo, at which time the Court set a final
approval hearing for December 10, 1999. Prior to the December 10, 1999 hearing
the Court received various objections to the settlement, including a challenge
to the Court's preliminary approval based upon the alleged lack of authority of
class plaintiffs' counsel to enter the settlement. On December 14, 1999, the
Managing General Partner and its affiliates terminated the proposed settlement.
Certain plaintiffs have filed a motion to disqualify some of the plaintiffs'
counsel in the action. The Managing General Partner does not anticipate that
costs associated with this case will be material to the Partnership's overall
operations.
The Partnership is unaware of any other pending or outstanding litigation that
is not of a routine nature arising in the ordinary course of business.
Item 4. Submission of Matters to a Vote of Security Holders
---------------------------------------------------
During the quarter ended December 31, 1999, no matter was submitted to a vote of
units holders through the solicitation of proxies or otherwise.
<PAGE>
PART II
Item 5. Market for the Partnership's Common Equity and Related Security
Holder Matters
The Partnership, a publicly-held limited partnership, offered and sold 40,000
Limited Partnership Units aggregating $40,000,000. The Partnership currently has
39,627 Limited Partnership Units outstanding held by 1,925 Limited Partners of
record. In 1998, the number of Limited Partnership Units decreased by 10 units
due to Limited Partners abandoning their units. In abandoning his or her Limited
Partnership Unit(s), a Limited Partner relinquishes all rights, title and
interest in the Partnership as of the date of abandonment. Affiliates of the
Managing General Partner owned 20,667 units or 52.15% of outstanding partnership
units at December 31, 1999. No public trading market has developed for the
Units, and it is not anticipated that such a market will develop in the future.
The following table sets forth the distributions made by the Partnership for the
years ended December 31, 1998 and 1999:
Distributions
Per Limited
Aggregate Partnership Unit
01/01/98 - 12/31/98 $ -- $ --
01/01/99 - 12/31/99 $ 450,000 (1) $ 11.23
(1) Distribution was made from cash from operations.
Future cash distributions will depend on the levels of net cash generated from
operations, the availability of cash reserves and the timing of the debt
maturities, refinancings and/or sale of the property. The Partnership's
distribution policy is reviewed on a semi-annual basis. There can be no
assurance, however, that the Partnership will generate sufficient funds from
operations, after required capital improvement expenditures, to permit
additional distributions to its partners in 2000 or subsequent periods. See
"Item 2. Description of Properties - Capital Improvements" for information
relating to anticipated capital expenditures at the property.
Several tender offers were made by various parties, including affiliates of the
Managing General Partner, during the years ended December 31, 1999 and 1998. As
a result of these tender offers, AIMCO and its affiliates currently own 20,667
units of limited partnership units in the Partnership representing 52.15% of the
outstanding units. It is possible that AIMCO or its affiliates will make one or
more additional offers to acquire additional limited partnership interests in
the Partnership for cash or in exchange for units in the operating partnership
of AIMCO. Consequently, AIMCO is in a position to influence all voting decisions
with respect to the Registrant. Under the Partnership Agreement, unitholders
holding a majority of the units are entitled to take action with respect to a
variety of matters. When voting on matters, AIMCO would in all likelihood vote
the units it acquired in a manner favorable to the interest of the Managing
General Partner because of their affiliation with the Managing General Partner.
<PAGE>
Item 6. Management's Discussion and Analysis or Plan of Operation
The matters discussed in this Form 10-KSB contain certain forward-looking
statements and involve risks and uncertainties (including changing market
conditions, competitive and regulatory matters, etc.) detailed in the disclosure
contained in this Form 10-KSB and the other filings with the Securities and
Exchange Commission made by the Registrant from time to time. The discussion of
the Registrant's business and results of operations, including forward-looking
statements pertaining to such matters, does not take into account the effects of
any changes to the Registrant's business and results of operations. 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.
This item should be read in conjunction with the consolidated financial
statements and other items contained elsewhere in this report.
Results of Operations
The Partnership's net income for the year ended December 31, 1999 was
approximately $1,704,000 compared to approximately $19,000 for the corresponding
period in 1998. The increase in net income for the year ended December 31, 1999
compared to the corresponding period in 1998 is primarily due to the recognition
of the gain on disposal of the Princeton Meadows Golf Course Joint Venture
("Joint Venture"). Income before equity in income and extraordinary loss on debt
extinguishment of the joint venture for the year ended December 31, 1999
increased as compared to the corresponding period in 1998 due to an increase in
total revenues and a decrease in total expenses. The increase in total revenues
was primarily the result of an increase in rental income at Fox Run Apartments
due to an increase in the average rental rate. The increase in rental income for
the year was partially offset by a decrease in the casualty gain recognized in
1998 as a result of a fire at Fox Run Apartments in October 1997, which
completely destroyed the clubhouse and office. A casualty gain of approximately
$421,000 was recognized during the year ended December 31, 1998 resulting from
the partial receipt of anticipated insurance proceeds. The insurance claim
relating to this fire has been settled with additional proceeds of $120,000
being received during the year ended December 31, 1999. Total insurance proceeds
received approximated the costs incurred to replace the assets.
Total expenses for the year ended December 31, 1999 decreased, as compared with
the comparable period in 1998, primarily due to a decrease in operating expense
and, to a lesser extent, decreases in interest, property tax and depreciation
expense, which was partially offset by an increase in general and administrative
expense. The decrease in operating expense is primarily attributable to
decreases in salaries and related expenses, utilities, and insurance expense.
Insurance expense decreased due to a change in insurance carriers which has
resulted in lower premiums. Also contributing to the decrease in operating
expense is the completion of various projects performed to enhance the
appearance of the property and interior painting completed during the year ended
December 31, 1998. Interest expense decreased primarily due to the repayment of
the note payable to Angeles Mortgage Investment Trust ("AMIT"), which was
collateralized by the Partnership's investment in the Joint Venture. In June
1999, the Partnership paid off the principal balance of the AMIT note plus
accrued interest upon receiving its share of net proceeds from the sale of
Princeton Meadows Golf Course.
The increase in general and administrative expense is primarily due to an
increase in legal costs due to the settlement of a legal dispute which was
previously disclosed. Included in general and administrative expense at both
December 31, 1999 and 1998 are management reimbursements to the Managing 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.
The Partnership has a 41.1% investment in Princeton Meadows Golf Course Joint
Venture. On February 26, 1999, the Joint Venture sold the Princeton Meadows Golf
Course to an unaffiliated third party for gross sale proceeds of $5,100,000. The
Joint Venture received net proceeds of $3,411,000 after payment of closing
costs, and repayment of the mortgage principal and accrued interest. The Joint
Venture recorded a gain on sale of approximately $3,090,000 after the write-off
of undepreciated fixed assets. For the year ended December 31, 1999 the
Partnership realized equity in income of the Joint Venture of approximately
$1,196,000, which included its equity in the gain on disposal of Princeton
Meadows Golf Course of $1,270,000 and the equity in loss on operations of
$74,000, as compared to equity in loss of the Joint Venture of approximately
$5,000 for the year ended December 31, 1998.
Effective January 1, 1999, the Partnership changed its method of accounting to
capitalize the cost of exterior painting and major landscaping on a prospective
basis. The Partnership believes that this accounting principle change is
preferable because it provides a better matching of expenses with the related
benefit of the expenditures and it is consistent with industry practice and the
policies of the Managing General Partner. The effect of the change in 1999 was
to increase net income by $65,000 ($1.62 per limited partnership unit). The
cumulative effect, had this change been applied to prior periods, is not
material. The accounting principle change will not have an effect on cash flow,
funds available for distribution or fees payable to the Managing General Partner
and affiliates.
As part of the ongoing business plan of the Partnership, the Managing General
Partner monitors the rental market environment of its investment property to
assess the feasibility of increasing rents, maintaining or increasing occupancy
levels and protecting the Partnership from increases in expenses. As part of
this plan, the Managing 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
Managing General Partner will be able to sustain such a plan.
Liquidity and Capital Resources
At December 31, 1999, the Partnership had cash and cash equivalents of
approximately $2,118,000 as compared to approximately $1,207,000 at December 31,
1998. Cash and cash equivalents increased approximately $911,000 and is
primarily due to approximately $1,755,000 of cash provided by operating
activities and, to a lesser extent, approximately $886,000 of cash provided by
investing activities, which is partially offset by approximately $1,730,000 of
cash used in financing activities. Cash provided by investing activities
consisted primarily of distributions from the Joint Venture, and to a lesser
extent, the repayment of advances to the Joint Venture and insurance proceeds
received as a result of the casualty at Fox Run Apartments, all of which was
partially offset by property improvements and replacements. Cash used in
financing activities consisted of payments of principal made on the mortgages
encumbering Fox Run Apartments, the repayment of the AMIT note payable and
distributions to partners. The Registrant 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 property 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. The Partnership is currently
evaluating the capital improvement needs of the property for the upcoming year.
The minimum amount to be budgeted is expected to be $300 per unit or $232,800.
Additional improvements may be considered and will depend on the physical
condition of the property as well as anticipated cash flow generated by the
property.
The additional capital expenditures will be incurred only if cash is available
from operations and 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 Registrant's current assets are thought to be sufficient for any near-term
needs (exclusive of capital improvements) of the Registrant. The mortgage
indebtedness of approximately $29,988,000 encumbering Fox Run Apartments is
being amortized over periods ranging from 15 to 27 years with balloon payments
of $29,108,000 due January 2002. The Managing General Partner may attempt to
refinance such indebtedness and/or sell the property prior to such maturity
date. If the property cannot be refinanced or sold for a sufficient amount, the
Partnership will risk losing such property through foreclosure.
During the year ended December 31, 1999, distributions of $450,000 were paid to
partners, of which approximately $445,000 was paid to limited partners
(approximately $11.23 per limited partnership unit). There were no cash
distributions made during the year ended December 31, 1998. Future cash
distributions will depend on the levels of net cash generated from operations,
the availability of cash reserves and the timing of the debt maturities,
refinancings and/or sale of the property. The Partnership's distribution policy
is reviewed on a semi-annual basis. There can be no assurance, however, that the
Partnership will generate sufficient funds from operations, after required
capital improvement expenditures, to permit additional distributions to its
partners in 2000 or subsequent periods.
Tender Offers
Several tender offers were made by various parties, including affiliates of the
Managing General Partner, during the years ended December 31, 1999 and 1998. As
a result of these tender offers, AIMCO and its affiliates currently owns 20,667
units of limited partnership units in the Partnership representing 52.15% of the
outstanding units. It is possible that AIMCO or its affiliates will make one or
more additional offers to acquire additional limited partnership interests in
the Partnership for cash or in exchange for units in the operating partnership
of AIMCO. Consequently, AIMCO is in a position to influence all voting decisions
with respect to the Registrant. Under the Partnership Agreement, unitholders
holding a majority of the units are entitled to take action with respect to a
variety of matters. When voting on matters, AIMCO would in all likelihood vote
the units it acquired in a manner favorable to the interest of the Managing
General Partner because of their affiliation with the Managing General Partner.
Year 2000 Compliance
General Description
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 Managing General Partner and its affiliates for management
and administrative services ("Managing Agent"). Any of the Managing Agent's
computer programs or hardware that had date-sensitive software or embedded chips
might have recognized a date using "00" as the year 1900 rather than the year
2000. This could have resulted 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.
Computer Hardware, Software and Operating Equipment
In 1999, the Managing Agent completed all phases of its Year 2000 program by
completing the replacement and repair of any hardware or software system or
operating equipment that was not yet Year 2000 compliant. The Managing Agent's
hardware and software systems and its operating equipment are now Year 2000
compliant. No material failure or erroneous results have occurred in the
Managing Agent's computer applications related to the failure to reference the
Year 2000 to date.
Third Parties
To date, the Managing Agent is not aware of any significant supplier or
subcontractor (external agent) or financial institution of the Partnership that
has a Year 2000 issue that would have a material impact on the Partnership's
results of operations, liquidity or capital resources. However, the Managing
Agent has no means of ensuring or determining the Year 2000 compliance of
external agents. At this time, the Managing Agent does not believe that a Year
2000 issue of any non-compliant external agent will have a material impact on
the Partnership's financial position or results of operations.
Costs
The total cost of the Managing Agent's Year 2000 project was approximately $3.2
million and was funded from operating cash flows.
Risks Associated with the Year 2000
The Managing Agent completed all necessary phases of its Year 2000 program in
1999, and did not experience system or equipment malfunctions related to a
failure to reference the Year 2000. The Managing Agent or Partnership have not
been materially adversely effected by disruptions in the economy generally
resulting from the Year 2000 issue.
At this time, the Managing Agent does not believe that the Partnership's
businesses, results of operations or financial condition will be materially
adversely effected by the Year 2000 issue.
<PAGE>
Contingency Plans Associated with the Year 2000
The Managing Agent has not had to implement contingency plans such as manual
workarounds or selecting new relationships for its banking or elevator operation
activities in order to avoid the Year 2000 issue.
<PAGE>
Item 7. Financial Statements
ANGELES PARTNERS XI
LIST OF FINANCIAL STATEMENTS
Report of Ernst & Young LLP, Independent Auditors
Consolidated Balance Sheet - December 31, 1999
Consolidated Statements of Operations - Years ended December 31, 1999
and 1998
Consolidated Statements of Changes in Partners' Deficit - Years ended
December 31, 1999 and 1998
Consolidated Statements of Cash Flows - Years ended December 31, 1999
and 1998
Notes to Consolidated Financial Statements
<PAGE>
Report of Ernst & Young LLP, Independent Auditors
The Partners
Angeles Partners XI
We have audited the accompanying consolidated balance sheet of Angeles Partners
XI as of December 31, 1999, and the related consolidated statements of
operations, changes in partners' deficit and cash flows for each of the two
years in the period ended December 31, 1999. These financial statements are the
responsibility of the Partnership's management. Our responsibility is to express
an opinion on these financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by the Partnership's management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Angeles Partners
XI at December 31, 1999, and the consolidated results of its operations and its
cash flows for each of the two years in the period ended December 31, 1999, in
conformity with accounting principles generally accepted in the United States.
As discussed in Note L to the consolidated financial statements, the Partnership
changed its method of accounting to capitalize the cost of exterior painting and
major landscaping effective January 1, 1999.
/s/ ERNST & YOUNG LLP
Greenville, South Carolina
February 21, 2000
<PAGE>
ANGELES PARTNERS XI
CONSOLIDATED BALANCE SHEET
(in thousands, except unit data)
December 31, 1999
<TABLE>
<CAPTION>
Assets
<S> <C> <C>
Cash and cash equivalents $ 2,118
Receivables and deposits 785
Other assets 239
Investment in joint venture (Note C) 4
Investment property (Notes D and G):
Land $ 3,998
Buildings and related personal property 26,616
-------
30,614
Less accumulated depreciation (20,142) 10,472
------- -------
$ 13,618
Liabilities and Partners' Deficit
Liabilities
Accounts payable $ 42
Tenant security deposits 569
Other liabilities 304
Mortgage notes payable (Notes D and G) 29,988
Partners' Deficit
General partners $ (489)
Limited partners (39,627 units issued and
outstanding) (16,796) (17,285)
------- -------
$ 13,618
</TABLE>
See Accompanying Notes to Consolidated Financial Statements
<PAGE>
ANGELES PARTNERS XI
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except unit data)
Years Ended
December 31,
1999 1998
Revenues:
Rental income $ 7,638 $7,204
Other income 399 403
Casualty gain 120 421
------ ------
Total revenues 8,157 8,028
------ ------
Expenses:
Operating 2,307 2,558
General and administrative 258 216
Depreciation 1,480 1,514
Interest 2,836 2,907
Property taxes 765 809
------ ------
Total expenses 7,646 8,004
------ ------
Income before equity in income(loss) and extraordinary
loss on debt extinguishment of joint venture 511 24
Equity in income (loss) of joint
venture (Note C) 1,196 (5)
------ ------
Income before equity in extraordinary loss
on debt extinguishment of joint venture 1,707 19
Equity in extraordinary loss on
debt extinguishment (Note C) (3) --
------ ------
Net income $ 1,704 $ 19
====== ======
Net income allocated to general partners (1%) $ 17 $ --
Net income allocated to limited partners (99%) 1,687 19
------ ------
$ 1,704 $ 19
====== ======
Net income per limited partnership unit:
Income before equity in extraordinary loss on debt
extinguishment of joint venture $ 42.65 $ .48
Extraordinary loss (.08) --
-- ---- ------
$ 42.57 $ .48
====== ======
Distributions per limited partnership unit $ 11.23 $ --
====== ======
See Accompanying Notes to Consolidated Financial Statements
<PAGE>
ANGELES PARTNERS XI
CONSOLIDATED STATEMENT OF CHANGES IN PARTNERS' DEFICIT
(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, 1997 39,637 $ (501) $(18,057) $(18,558)
Net income for the year ended
December 31, 1998 -- -- 19 19
Abandonment of Limited
Partnership units (Note H) (10) -- -- --
------ ------ ------- -------
Partners' deficit at
December 31, 1998 39,627 (501) (18,038) (18,539)
Net income for the year
ended December 31, 1999 -- 17 1,687 1,704
Distributions to partners -- (5) (445) (450)
------ ------ ------- -------
Partners' deficit
at December 31, 1999 39,627 $ (489) $(16,796) $(17,285)
====== ====== ======= =======
</TABLE>
See Accompanying Notes to Consolidated Financial Statements
<PAGE>
ANGELES PARTNERS XI
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
<TABLE>
<CAPTION>
Year Ended December 31,
1999 1998
Cash flows from operating activities:
<S> <C> <C>
Net income $ 1,704 $ 19
Adjustments to reconcile net income to net
cash provided by operating activities:
Equity in (income) loss of joint venture (1,196) 5
Equity in extraordinary loss on debt extinguishment
Of joint venture 3 --
Depreciation 1,480 1,514
Amortization of loan costs 113 113
Casualty gain (120) (421)
Change in accounts:
Receivables and deposits 172 (202)
Other assets (6) 14
Accounts payable (16) (14)
Tenant security deposit liabilities 7 21
Due to affiliate 2 (437)
Other liabilities (388) 224
------ ------
Net cash provided by operating activities 1,755 836
------ ------
Cash flows from investing activities:
Property improvements and replacements (871) (601)
Distributions from joint venture 1,221 --
Repayment of advance to joint venture 164 --
Insurance proceeds received related to casualty 372 230
------ ------
Net cash provided by (used in) investing activities 886 (371)
------ ------
Cash flows from financing activities:
Payments on mortgage notes payable (412) (4)
Repayments of notes payable (868) --
Distributions to partners (450) --
------ ------
Net cash used in financing activities (1,730) (4)
------ ------
Increase in cash and cash equivalents 911 461
Cash and cash equivalents at beginning of year 1,207 746
------ ------
Cash and cash equivalents at end year $ 2,118 $ 1,207
====== ======
Supplemental disclosure of cash flow information:
Cash paid for interest $ 2,954 $ 2,794
====== ======
</TABLE>
See Accompanying Notes to Consolidated Financial Statements
<PAGE>
ANGELES PARTNERS XI
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1999
Note A - Organization and Significant Accounting Policies
Organization: Angeles Partners XI (the "Registrant" or "Partnership") is a
California limited partnership organized on February 14, 1983 to acquire and
operate residential and commercial real estate properties. The Partnership's
managing general partner is Angeles Realty Corporation II ("ARC II" or the
"Managing General Partner"), an affiliate of Insignia Financial Group, Inc.
("Insignia") and a wholly-owned subsidiary of MAE GP Corporation ("MAE GP").
Effective February 25, 1998, MAE GP was merged into Insignia Properties Trust
("IPT"), which was an affiliate of Insignia Financial Group, Inc. ("Insignia").
Effective February 26, 1999, IPT was merged into Apartment Management and
Investment Company ("AIMCO") (See "Note B - Transfer of Control"). Thus, the
Managing General Partner is now a wholly-owned subsidiary of AIMCO. The Elliott
Family Partnership, Ltd. and ARC II/AREMCO Partners, Ltd. are the non-managing
general partners. The Managing General Partner and the non-managing general
partners are herein collectively referred to as the "General Partners". The
Partnership Agreement provides that the Partnership is to terminate on December
31, 2035, unless terminated prior to such date. As of December 31, 1999, the
Partnership operates one residential property located in Plainsboro, New Jersey.
Principles of Consolidation: The Partnership's consolidated financial statements
included all the accounts of Fox Run AP XI, L.P., of which the Partnership owns
a 99% limited partnership interest. The general partner of Fox Run AP XI, L.P.
is AP XI Fox Run GP, LLC, a single member limited liability corporation which is
wholly-owned by the Registrant. Thus, these partnerships are deemed controlled
and, therefore, consolidated by the Partnership. All interentity balances have
been eliminated.
Allocations and Distributions to Partners: In accordance with the Agreement, any
gain from the sale or other disposition of Partnership assets will be allocated
first to the Managing General Partner to the extent of the amount of any
brokerage compensation and incentive interest to which the Managing General
Partner is entitled. Any gain remaining after said allocation will be allocated
to the General Partners and Limited Partners in proportion to their interests in
the Partnership.
The Partnership will allocate other profits and losses 1% to the General
Partners and 99% to the Limited Partners.
Except as discussed below, the Partnership will allocate distributions 1% to the
General Partners and 99% to the Limited Partners.
Upon the sale or other disposition, or refinancing, of any asset of the
Partnership the Distributable Net Proceeds shall be distributed as follows: (i)
first, to the Partners in proportion to their Original Capital Investment
applicable to the property; (ii) second, to the Partners until the Limited
Partners have received distributions from all sources equal to their 6%
Cumulative Distribution; (iii) third, to the Managing General Partner until it
has received an amount equal to the difference between (a) 3% of the Aggregate
Disposition Prices (as defined in the Partnership Agreement) of all properties
and investments sold or otherwise disposed of, or refinanced by the Partnership,
on a cumulative basis and (b) all distributions previously received by the
Managing General Partner pursuant to this clause; (iv) fourth, to the Partners
until the Limited Partners have received distributions from all sources equal to
an additional cumulative return of 4% per annum on their Adjusted Capital
Investment; and (v) thereafter, 85% to the Limited Partners and Non-Managing
General Partners in proportion to their interests and 15% ("Incentive Interest")
to the Managing General Partner.
Fair Value of Financial Instruments: Statement of Financial Accounting Standards
("SFAS") No. 107, "Disclosures about Fair Value of Financial Instruments", as
amended by SFAS No. 119, "Disclosures about Derivative Financial Instruments and
Fair Value of Financial Instruments", requires disclosure of fair value
information about financial instruments, whether or not recognized in the
balance sheet, for which it is practicable to estimate fair value. Fair value is
defined in the SFAS as the amount at which the instruments could be exchanged in
a current transaction between willing parties, other than in a forced or
liquidation sale. The Partnership believes that the carrying amount of its
financial instruments (except for long term debt) approximates their fair value
due to the short term maturity of these instruments. The fair value of the
Partnership's long term debt, after discounting the scheduled loan payments at
an estimated borrowing rate currently available to the Partnership, approximates
its carrying value.
Cash and Cash Equivalents: Includes cash on hand and in banks and money market
accounts. At certain times, the amount of cash deposited at a bank may exceed
the limit on insured deposits.
Tenant Security Deposits: The Partnership requires security deposits from all
apartment lessees for the duration of the lease and such deposits are included
in receivables and deposits. Deposits are refunded when the tenant vacates the
apartment if there has been no damage to the unit and the tenant is current on
its rental payments.
Loan Costs: Loan costs of approximately $564,000 at December 31, 1999, are
included in other assets on the balance sheet and are being amortized on a
straight-line basis over the life of the loan. Accumulated amortization of
approximately $348,000 at December 31, 1999, is also included in other assets.
Investment in Joint Venture: The Partnership accounts for its 41.1% investment
in Princeton Meadows Golf Course Joint Venture (the "Joint Venture") using the
equity method of accounting (see "Note C"). Under the equity method of
accounting, the Partnership records its equity interest in earnings or losses of
the Joint Venture; however, the investment in the Joint Venture will be recorded
at an amount less than zero (a liability) to the extent of the Partnership's
share of net liabilities of the Joint Venture.
Investment Properties: The Partnership owns and operates one investment property
consisting of an apartment complex, which is stated at cost. Acquisition fees
are capitalized as a cost of real estate. In accordance with Financial
Accounting Standards Board Statement No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed Of", the Partnership
records impairment losses on long-lived assets used in operations when events
and circumstances indicate that the assets might be impaired and the
undiscounted cash flows estimated to be generated by those assets are less than
the carrying amounts of those assets. No adjustments for impairment of value
were necessary for the years ended December 31, 1999 or 1998.
Depreciation: Depreciation is calculated by the straight-line and accelerated
methods over the estimated lives of the rental property and personal property.
For Federal income tax purposes, the accelerated cost recovery method is used
(1) for real property over 18 years for additions after March 15, 1984, and
before May 9, 1985, and 19 years for additions after May 8, 1985, and before
January 1, 1987, and (2) for personal property over 5 years for additions prior
to January 1, 1987. As a result of the Tax Reform Act of 1986, for additions
after December 31, 1986, the alternative depreciation system is used for
depreciation of (1) real property additions over 40 years, and (2) personal
property additions over 5-20 years.
Effective January 1, 1999 the Partnership changed its method of accounting to
capitalize the costs of exterior painting and major landscaping (Note L).
Leases: The Partnership generally leases apartment units for twelve month terms
or less. The Partnership recognizes income as earned on its leases. In addition,
the Managing General Partner's policy is to offer rental concessions during
particularly slow months or in response to heavy competition from other similar
complexes in the area. Concessions are charged against rental income as
incurred.
Segment Reporting: Statement of Financial Accounting Standards ("SFAS") 131,
"Disclosure about Segments of an Enterprise and Related Information" established
standards for the way that public business enterprises report information about
operating segments in annual financial statements and requires that those
enterprises report selected information about operating segments in interim
financial reports. It also establishes standards for related disclosures about
products and services, geographic areas, and major customers. (See "Note J" for
detailed disclosure of the Partnership's segments.)
Use of Estimates: The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
Advertising: The Partnership expenses the costs of advertising as incurred.
Advertising costs of approximately $45,000 and $54,000 for the years ended
December 31, 1999 and 1998, respectively, were charged to operating expense as
incurred.
Note B - Transfer of Control
Pursuant to a series of transactions which closed on October 1, 1998 and
February 26, 1999, Insignia and IPT merged into 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
Managing General Partner. The Managing General Partner does not believe that
this transaction has had or will have a material effect on the affairs and
operations of the Partnership.
Note C - Investment in Joint Venture
The Partnership has a 41.1% investment in Princeton Meadows Golf Course Joint
Venture ("Joint Venture"). On February 26, 1999, the Joint Venture sold its only
investment property, Princeton Meadows Golf Course, to an unaffiliated third
party. The sale resulted in net proceeds of approximately $3,411,000 after
payment of closing costs, and repayment of mortgage principal and accrued
interest. The Joint Venture recorded a gain on sale of approximately $3,090,000
after the write-off of undepreciated fixed assets. In connection with the sale,
a commission of approximately $153,000 was paid to the Joint Venture's managing
general partner in accordance with the Joint Venture Agreement. The
Partnership's 1999 pro-rata share of this gain is approximately $1,270,000 and
its equity in loss on operations of the Joint Venture amounted to approximately
$74,000. The Joint Venture also recognized an extraordinary loss on early
extinguishment of debt of approximately $7,000 as a result of unamortized loan
costs being written off.
Condensed balance sheet information of the Joint Venture at December 31, 1999,
is as follows (in thousands):
Assets
Cash $ 17
-------
Total $ 17
=======
Liabilities and Partners' Capital
Other liabilities $ 7
Partners' capital 10
-------
Total $ 17
=======
The condensed statement of operations of the Joint Venture for the years ended
December 31, 1999 and 1998, are summarized as follows (in thousands):
Years Ended
December 31,
1999 1998
Revenues $ 104 $ 1,667
Costs and expenses (283) (1,681)
----- ------
Loss before gain on sale of
investment property and extraordinary
loss on extinguishment of debt (179) (14)
Gain on sale of investment property 3,090 --
Extraordinary loss on extinguishment
of debt (7) --
----- -----
Net income (loss) $ 2,904 $ (14)
====== ====
The Partnership recognized its 41.1% equity income of approximately $1,196,000
and equity loss of approximately $5,000 in the Joint Venture for the years ended
December 31, 1999 and 1998, respectively. The Partnership also recognized an
extraordinary loss on extinguishment of debt of $3,000 for the year ended
December 31, 1999.
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 the DEP of the
findings when they were first discovered. However, the 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 engaged an engineering firm to
conduct consulting and compliance work and a second firm to perform the field
work necessary for the clean-up. Field work commenced with skimmers installed at
three test wells on the site. These skimmers were in place to detect any
residual fuel that may still be in the ground. Upon the sale of the Golf Course,
as noted above, the Joint Venture was released from any further responsibility
or liability with respect to the clean-up.
<PAGE>
Note D - Mortgage Notes Payable
The principle terms of mortgage notes payable are as follows:
<TABLE>
<CAPTION>
Monthly Principal Principal
Payment Stated Balance Balance At
Including Interest Maturity Due At December 31,
Property Interest Rate Date Maturity 1999
- -------- -------- ---- ---- -------- ----
(in thousands) (in thousands)
<S> <C> <C> <C> <C> <C>
Fox Run Apartments
1st mortgage $222(1) 8.32% 1/2002 $26,916 $27,652
2nd mortgage 36(1) 15.29% 1/2002 2,192 2,336
--- ------ ------
Total $258 $29,108 $29,988
=== ====== ======
</TABLE>
(1) Interest only payments, until February 1999, at which time the monthly
payment was increased to include principal and interest.
The mortgage notes payable are nonrecourse and are secured by pledge of the
Partnership's investment property and by pledge of revenues from the rental
property. The notes impose prepayment penalties if repaid prior to maturity.
Further, the properties may not be sold subject to existing note indebtedness.
Scheduled principal payments of mortgage notes payable subsequent to December
31, 1999, are as follows (in thousands):
2000 $ 413
2001 493
2002 29,082
------
$29,988
Note E - Income Taxes
The Partnership has received a ruling from the Internal Revenue Service that it
will be classified as a partnership for Federal income tax purposes.
Accordingly, taxable income or loss of the Partnership is reported in the income
tax returns of its partners. No provision for income taxes is made in the
consolidated financial statements of the Partnership.
The following is a reconciliation of reported net income and Federal taxable
income:
1999 1998
---- ----
(in thousands, except unit data)
Net income as reported $ 1,704 $ 19
Add (deduct):
Depreciation differences 1,619 1,144
Equity in income of Joint Venture (565) --
Unearned income (19) (14)
Miscellaneous (14) 17
------ ------
Federal taxable income 2,725 1,166
====== ======
Federal taxable income
per limited partnership unit $ 64.70 $ 29.14
====== ======
The following is a reconciliation between the Partnership's reported amounts and
Federal tax basis of net assets and liabilities (in thousands):
Net liabilities as reported $(17,285)
Land and buildings 2,896
Accumulated depreciation (4,151)
Syndication and distribution costs 5,261
Other 593
-------
Net deficiency - Federal tax basis $(12,686)
=======
Note F - 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 (i) certain
payments to affiliates for services and (ii) reimbursement of certain expenses
incurred by affiliates on behalf of the Partnership.
The following payments owed to the Managing General Partner and affiliates
during the years ended December 31, 1999 and 1998 were paid or accrued:
1999 1998
---- ----
(in thousands)
Property management fees (included in operating expense) $ 398 $ 376
Partnership management fee (included in general and 35 23
administrative expense (*))
Reimbursement for services of affiliates (included in
operating and general and administrative expenses
and investment property) 128 142
Due to affiliates 35 33
(*) The Partnership Agreement provides for a fee equal to 5% of "net cash flow
from operations", as defined in the Partnership Agreement to be paid to
the Managing General Partner for executive and administrative management
services.
During the years ended December 31, 1999 and 1998, affiliates of the Managing
General Partner were entitled to receive 5% of gross receipts from the
Registrant's property for providing property management services. The Registrant
paid to such affiliates approximately $398,000 and $376,000 for the years ended
December 31, 1999 and 1998, respectively.
An affiliate of the Managing General Partner received reimbursement of
accountable administrative expenses amounting to approximately $128,000 and
$142,000 for the years ended December 31, 1999 and 1998, respectively.
Angeles Mortgage Investment Trust ("AMIT"), a real estate investment trust,
provided financing (the "AMIT Loan") to the Joint Venture (see "Note C").
Pursuant to a series of transactions, affiliates of the Managing General Partner
acquired ownership interests in AMIT. On September 17, 1998, AMIT was merged
with and into IPT, the entity which controlled the Managing General Partner.
Effective February 26, 1999, IPT was merged into AIMCO. As a result, AIMCO
became the holder of the AMIT loan.
On February 26, 1999, Princeton Meadows Golf Course was sold to an unaffiliated
third party. Upon closing, the AMIT principal balance of $1,567,000 plus accrued
interest of approximately $17,000 was paid off.
Also, the Partnership had an AMIT note payable, which was collateralized by the
Partnership's investment in the Joint Venture with a principal balance of
approximately $868,000 and accrued interest of $8,500. In June 1999, the Joint
Venture distributed a total of approximately $2,641,000 to the joint venturers
from the proceeds of the sale of the property. The Partnership's share of this
distribution was approximately $1,086,000. Upon receipt of the distribution
funds, the Partnership repaid its AMIT note payable of approximately $868,000
plus accrued interest of $8,500.
In addition, the Partnership made advances to the Joint Venture as deemed
appropriate by the Managing General Partner. These advances did not bear
interest nor have stated terms of repayment. In June 1999, the advance
receivable from the Joint Venture of approximately $164,000 was collected from
the proceeds of the sale of the golf course.
Several tender offers were made by various parties, including affiliates of the
Managing General Partner, during the years ended December 31, 1999 and 1998. As
a result of these tender offers, AIMCO and its affiliates currently owns 20,667
units of limited partnership units in the Partnership representing 52.15% of the
outstanding units. It is possible that AIMCO or its affiliates will make one or
more additional offers to acquire additional limited partnership interests in
the Partnership for cash or in exchange for units in the operating partnership
of AIMCO. Consequently, AIMCO is in a position to influence all voting decisions
with respect to the Registrant. Under the Partnership Agreement, unitholders
holding a majority of the units are entitled to take action with respect to a
variety of matters. When voting on matters, AIMCO would in all likelihood vote
the units it acquired in a manner favorable to the interest of the Managing
General Partner because of their affiliation with the Managing General Partner.
<PAGE>
Note G - Real Estate and Accumulated Depreciation
<TABLE>
<CAPTION>
Initial Cost
To Partnership
--------------
(in thousands)
Buildings Cost
and Related Capitalized
Personal Subsequent to
Description Encumbrances Land Property Acquisition
----------- ------------ ---- -------- -----------
(in thousands)
<S> <C> <C> <C> <C>
Fox Run Apartments $29,988 $ 3,998 $20,990 $ 5,626
====== ====== ====== ======
</TABLE>
<TABLE>
<CAPTION>
Gross Amount At Which Carried
At December 31, 1999
(in thousands)
Buildings
And Related
Personal Accumulated Date Depreciable
Description Land Property Total Depreciation Acquired Life-Years
----------- ---- -------- ----- ------------ -------- ----------
(in thousands)
<S> <C> <C> <C> <C> <C> <C>
Fox Run Apartments $3,998 $26,616 $30,614 $20,142 5/27/83 5-20
===== ====== ====== ======
</TABLE>
The depreciable lives included above are for the building and components. The
depreciable lives for related personal property are for 5 to 7 years.
Reconciliation of "Real Estate and Accumulated Depreciation":
Years Ended December 31,
1999 1998
---- ----
(in thousands)
Investment Property
Balance at beginning of year $29,743 $29,142
Property improvements 871 601
------ ------
Balance at end of year $30,614 $29,743
====== ======
Accumulated Depreciation
Balance at beginning of year $18,662 $17,148
Additions charged to expense 1,480 1,514
------ ------
Balance at end of year $20,142 $18,662
====== ======
<PAGE>
Note H - Abandonment of Limited Partnership Units
The aggregate cost of the investment properties for Federal income tax purposes
at December 31, 1999 and 1998, is approximately $33,510,000 and $32,639,000,
respectively. The accumulated depreciation taken for Federal income tax purposes
at December 31, 1999 and 1998, is approximately $24,293,000 and $23,938,000,
respectively.
In 1998, the number of Limited Partnership Units decreased by 10 units due to
limited partners abandoning their units. In abandoning his or her Limited
Partnership Unit(s), a limited partner relinquishes all right, title, and
interest in the Partnership as of the date of abandonment. However, the limited
partner is allocated his or her share of the net income or loss for that year.
The income or loss per Limited Partnership Unit in the accompanying consolidated
statements of operations is calculated based on the number of units outstanding
at the beginning of the year. There were no such abandonments during 1999.
Note I - Casualty
In October, 1997, there was a fire at Fox Run Apartments that completely
destroyed the clubhouse and office. A casualty gain of approximately $421,000
was recognized during the year ended December 31, 1998 resulting from the
partial receipt of anticipated insurance proceeds. The insurance claim relating
to this fire has been settled with additional proceeds of $120,000 being
received during the year ended December 31, 1999. Total insurance proceeds
received approximated the costs incurred to replace the assets.
Note J - Segment Reporting
Description of the types of products from which the reportable segment derives
its revenues:
The Partnership has one reportable segment: residential properties. The
Partnership's residential property segment consists of one apartment complex
located in Plainsboro, New Jersey. The Partnership rents apartment units to
tenants for terms that are typically twelve months or less.
Measurement of segment profit or loss:
The Partnership evaluates performance based on segment profit (loss) before
depreciation. The accounting policies of the reportable segment are the same as
those described in the summary of significant accounting policies.
Segment information for the years 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 $ 7,638 $ -- $ 7,638
Other income 353 46 399
Interest expense 2,836 -- 2,836
Depreciation 1,480 -- 1,480
General and administrative expense -- 258 258
Casualty gain 120 -- 120
Equity in income of joint venture -- 1,196 1,196
Equity in extraordinary loss on
debt extinguishment of joint
venture -- (3) (3)
Segment profit 723 981 1,704
Total assets 12,706 912 13,618
Capital expenditures for investment
property 871 -- 871
1998 Residential Other Totals
---- ----------- ----- ------
Rental income $ 7,204 $ -- $ 7,204
Other income 374 29 403
Interest expense 2,907 -- 2,907
Depreciation 1,514 -- 1,514
General and administrative expense -- 216 216
Casualty gain 421 -- 421
Equity in loss of joint venture -- (5) (5)
Segment profit (loss) 211 (192) 19
Total assets 13,087 952 14,039
Capital expenditures for investment
property 601 -- 601
Note K - 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 Managing General Partner and several of their affiliated
partnerships and corporate entities. The action purports to assert claims on
behalf of a class of limited partners and derivatively on behalf of a number of
limited partnerships (including the Partnership) which are named as nominal
defendants, challenging the acquisition 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 and the Insignia Merger (see
"Note B - Transfer of Control"). The plaintiffs seek monetary damages and
equitable relief, including judicial dissolution of the Partnership. On June 25,
1998, the Managing 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 Managing General Partner filed demurrers to the amended
complaint which were heard February 1999. Pending the ruling on such demurrers,
settlement negotiations commenced. On November 2, 1999, the parties executed and
filed a Stipulation of Settlement settling claims, subject to final court
approval, on behalf of the Partnership and all limited partners who own units as
of November 3, 1999. Preliminary approval of the settlement was obtained on
November 3, 1999 from the Superior Court of the State of California, County of
San Mateo, at which time the Court set a final approval hearing for December 10,
1999. Prior to the December 10, 1999 hearing the Court received various
objections to the settlement, including a challenge to the Court's preliminary
approval based upon the alleged lack of authority of class plaintiffs' counsel
to enter the settlement. On December 14, 1999, the Managing General Partner and
its affiliates terminated the proposed settlement. Certain plaintiffs have filed
a motion to disqualify some of the plaintiffs' counsel in the action. The
Managing General Partner does not anticipate that costs associated with this
case will be material to the Partnership's overall operations.
The Partnership is unaware of any other pending or outstanding litigation that
is not of a routine nature arising in the ordinary course of business.
Note L - Change in Accounting Principle
Effective January 1, 1999, the Partnership changed its method of accounting to
capitalize the cost of exterior painting and major landscaping on a prospective
basis. The Partnership believes that this accounting principle change is
preferable because it provides a better matching of expenses with the related
benefit of the expenditures and it is consistent with industry practice and the
policies of the Managing General Partner. The effect of the change in 1999 was
to increase net income by $65,000 ($1.62 per limited partnership unit). The
cumulative effect, had this change been applied to prior periods, is not
material. The accounting principle change will not have an affect on cash flow,
funds available for distribution or fees payable to the Managing General Partner
and affiliates.
<PAGE>
Item 8. Changes in and Disagreements with Accountant on Accounting and
Financial Disclosures
None.
<PAGE>
PART III
Item 9. Directors, Executive Officers, Promoters and Control Persons;
Compliance with Section 16(a) of the Exchange Act
Angeles Realty Corporation II ("ARC II" or the "Managing General Partner"), was
a wholly-owned subsidiary of MAE GP Corporation ("MAE GP"). Effective February
25, 1998, MAE GP was merged into Insignia Properties Trust ("IPT"), which was an
affiliate of Insignia Financial Group, Inc. ("Insignia"). Effective, October 1,
1998 and February 26, 1999, Insignia and IPT were respectively merged into
Apartment Investment and Management Company ("AIMCO"). Thus, the Managing
General Partner is now a wholly-owned subsidiary of AIMCO.
The names and ages of, as well as the positions and offices held by, the
executive officers and director of the Managing General Partner, are set forth
below. There are no family relationships between or among any officers and
directors.
Name Age Position
Patrick J. Foye 42 Executive Vice President and Director
Martha L. Long 40 Senior Vice President and Controller
Patrick J. Foye has been Executive Vice President and Director of the
Managing General Partner since October 1, 1998. Mr. Foye has served as
Executive Vice President of AIMCO since May 1998. Prior to joining AIMCO,
Mr. Foye was a partner in the law firm of Skadden, Arps, Slate, Meagher &
Flom LLP from 1989 to 1998 and was Managing Partner of the firm's Brussels,
Budapest and Moscow offices from 1992 through 1994. Mr. Foye is also Deputy
Chairman of the Long Island Power Authority and serves as a member of the New
York State Privatization Council. He received a B.A. from Fordham College
and a J.D. from Fordham University Law School.
Martha L. Long has been Senior Vice President and Controller of the Managing
General Partner and AIMCO since October 1998, as a result of the acquisition of
Insignia Financial Group, Inc. From June 1994 until January 1997, she was the
Controller for Insignia, and was promoted to Senior Vice President - Finance and
Controller in January 1997, retaining that title until October 1998. From 1988
to June 1994, Ms. Long was Senior Vice President and Controller for The First
Savings Bank, FSB in Greenville, South Carolina.
Based solely upon a review of Forms 3 and 4 and amendments thereto furnished to
the Registrant under Rule 16a-3(e) during the Registrant's most recent fiscal
year and Forms 5 and amendments thereto furnished to the Registrant with respect
to its most recent fiscal year, the Registrant is not aware of any director,
officer, beneficial owner of more than ten percent of the units of limited
partnership interest in the Registrant that failed to file on a timely basis, as
disclosed in the above Forms, reports required by section 16(a) of the Exchange
Act during the most recent fiscal year or prior fiscal years except as follows:
AIMCO and its joint filers failed to timely file a Form 4 with respect to its
acquisition of Units.
Item 10. Executive Compensation
No compensation or remuneration was paid by Angeles Partners XI (the
"Partnership" or "Registrant") to any officer or director of ARC II. However,
certain fees and other payments have been made to the Partnership's Managing
General Partner and its affiliates, as described in "Item 12." below.
Item 11. Security Ownership of Certain Beneficial Owners and Management
Except as noted below, no person or entity was known by the Registrant to be the
beneficial owner of more than 5% of the Limited Partner Units of the Registrant
as of December 31, 1999.
Entity Number of Units Percentage
Insignia Properties LP 80 0.202%
(an affiliate of AIMCO)
Cooper River Properties, LLC 8,782 22.162%
(an affiliate of AIMCO)
AIMCO Properties, LP 11,805 29.790%
(an affiliate of AIMCO)
Cooper River Properties, LLC, and Insignia Properties LP are indirectly
ultimately owned by AIMCO. The business address of Insignia Properties LP and
Cooper River Properties, LLC is 55 Beattie Place, Greenville, SC 29602. AIMCO
Properties, L.P. is indirectly ultimately controlled by AIMCO. Its business
address is 2000 South Colorado Blvd., Denver, Colorado 80222.
The Partnership knows of no contractual arrangements, the operation of the terms
of which may at a subsequent date result in a change in control of the
Partnership, except for: Article 12.1 of the Agreement, which provides that upon
a vote of the Limited Partners holding more than 50% of the then outstanding
Limited Partnership Units, the General Partners may be expelled from the
Partnership upon 90 days written notice. In the event that a successor general
partner has been elected by Limited Partners holding more than 50% of the then
outstanding Limited Partnership Units and if said Limited Partners elect to
continue the business of the Partnership, the Partnership is required to pay in
cash to the expelled General Partners an amount equal to the accrued and unpaid
management fee described in Article 10 of the Agreement and to purchase the
General Partners' interest in the Partnership on the effective date of the
expulsion, which shall be an amount equal to the difference between (i) the
balance of the General Partner's capital account and (ii) the fair market value
of the share of Distributable Net Proceeds to which the General Partner would be
entitled. Such determination of the fair market value of the share of
Distributable Net Proceeds is defined in Article 12.2(b) of the Agreement.
Item 12. Certain Relationships and Related Transactions
No transactions have occurred between the Partnership and any officer or
director of ARC II.
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 (i) certain
payments to affiliates for services and (ii) reimbursement of certain expenses
incurred by affiliates on behalf of the Partnership.
<PAGE>
The following payments owed to the Managing General Partner and affiliates
during the years ended December 31, 1999 and 1998 were paid or accrued:
1999 1998
---- ----
(in thousands)
Property management fees $ 398 $ 376
Partnership management fee (*) 35 23
Reimbursement for services of affiliates 128 142
Due to affiliates 35 33
(*) The Partnership Agreement provides for a fee equal to 5% of "net cash flow
from operations", as defined in the Partnership Agreement to be paid to
the Managing General Partner for executive and administrative management
services.
During the years ended December 31, 1999 and 1998, affiliates of the Managing
General Partner were entitled to receive 5% of gross receipts from the
Registrant's property for providing property management services. The Registrant
paid to such affiliates approximately $398,000 and $376,000 for the years ended
December 31, 1999 and 1998, respectively.
An affiliate of the Managing General Partner received reimbursement of
accountable administrative expenses amounting to approximately $128,000 and
$142,000 for the years ended December 31, 1999 and 1998, respectively.
Angeles Mortgage Investment Trust ("AMIT"), a real estate investment trust,
provided financing (the "AMIT Loan") to the Princeton Meadows Golf Course Joint
Venture ("Joint Venture") (see "Part II. Item 7. Financial Statements, Note C -
Investment in Joint Venture"). Pursuant to a series of transactions, affiliates
of the Managing General Partner acquired ownership interests in AMIT. On
September 17, 1998, AMIT was merged with and into IPT, the entity which
controlled the Managing General Partner. Effective February 26, 1999, IPT was
merged into AIMCO. As a result, AIMCO became the holder of the AMIT loan.
On February 26, 1999, Princeton Meadows Golf Course was sold to an unaffiliated
third party. Upon closing, the AMIT principal balance of $1,567,000 plus accrued
interest of approximately $17,000 was paid off.
Also, the Partnership had an AMIT note payable, which was collateralized by the
Partnership's investment in the Joint Venture with a principal balance of
approximately $868,000 and accrued interest of $8,500. In June 1999, the Joint
Venture distributed a total of approximately $2,641,000 to the joint venturers
from the proceeds of the sale of the property. The Partnership's share of this
distribution represented approximately $1,086,000. Upon receipt of the
distribution funds, the Partnership repaid its AMIT note payable of
approximately $868,000 plus accrued interest of $8,500.
In addition, the Partnership made advances to the Joint Venture as deemed
appropriate by the Managing General Partner. These advances did not bear
interest nor have stated terms of repayment. In June 1999, the advance
receivable from the Joint Venture of approximately $164,000 was collected from
the proceeds of the sale of the golf course.
Several tender offers were made by various parties, including affiliates of the
Managing General Partner, during the years ended December 31, 1999 and 1998. As
a result of these tender offers, AIMCO and its affiliates currently owns 20,667
units of limited partnership units in the Partnership representing 52.15% of the
outstanding units. It is possible that AIMCO or its affiliates will make one or
more additional offers to acquire additional limited partnership interests in
the Partnership for cash or in exchange for units in the operating partnership
of AIMCO. Consequently, AIMCO is in a position to influence all voting decisions
with respect to the Registrant. Under the Partnership Agreement, unitholders
holding a majority of the units are entitled to take action with respect to a
variety of matters. When voting on matters, AIMCO would in all likelihood vote
the units it acquired in a manner favorable to the interest of the Managing
General Partner because of their affiliation with the Managing General Partner.
<PAGE>
PART IV
Item 13. Exhibits and Reports on Form 8-K
(a) Exhibits:
Exhibit 18, Independent Accountants' Preferability Letter for
Change in Accounting Principle, is filed as an exhibit to this
report.
Exhibit 27, Financial Data Schedule, is filed as an exhibit to
this report.
(b) Reports on Form 8-K filed in the fourth quarter of the calendar year
1999:
None.
<PAGE>
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the Registrant has
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
ANGELES PARTNERS XI
-------------------
(A California Limited Partnership)
(Registrant)
By: Angeles Realty Corporation II
Its Managing General Partner
By: /s/Patrick J. Foye
Patrick J. Foye
Executive Vice President
By: /s/Martha L. Long
Martha L. Long
Senior Vice President and
Controller
Date:
In accordance with the Exchange Act, this report has been signed below by the
following persons on behalf of the Registrant and in the capacities on the date
indicated.
/s/Patrick J. Foye Date:
- ------------------
Patrick J. Foye
Executive Vice President
and Director
/s/Martha L. Long Date:
- -----------------
Martha L. Long
Senior Vice President
and Controller
<PAGE>
ANGELES PARTNERS XI
EXHIBIT INDEX
Exhibit Number Description of Exhibit
3.1 Amended Agreement of Limited Partnership dated February 26,
1982, filed in Form 10-K dated November 30, 1983, incorporated
herein by reference
10.1 Agreement of Purchase and Sale of Real Property with Exhibits
- Fox Run I and II Apartments filed in Form 8-K dated June 30,
1983, incorporated herein by reference
10.2 Agreement of Purchase and Sale of Real Property with Exhibits
- Harbour Landing Apartments filed in Form 8-K dated December
21, 1983, incorporated herein by reference
10.3 Agreement of Purchase and Sale of Real Property with Exhibits
- Westmont Village Apartments filed in Form 8-K dated March
30, 1984, incorporated herein by reference.
10.4 Multi Family Note, dated June 11, 1986 - Fox Run Apartments I
and II filed in Form 8-K dated November 30, 1986, incorporated
herein by reference
10.5 Second Trust deed dated September 22, 1987 - Fox Run
Apartments filed in Form 10-K, dated November 30, 1987, and is
incorporated herein by reference
10.6 Agreement to Accept Deed in Lieu of Foreclosure - Boca Plaza
Shopping Center filed in Form 8-K dated January 15, 1991,
incorporated herein by reference
10.7 Order appointing receiver - Springside Apartments dated April
24, 1991 filed in Form 10Q dated May 14, 1991, incorporated
herein by reference
10.8 Purchase and Sale Agreement with Exhibits - dated July 26,
1991 between Princeton Golf Course Joint Venture and Lincoln
Property Company No. 199 filed in Form 10-K dated March 27,
1992, incorporated herein by reference.
10.9 Princeton Meadows Golf Course Joint Venture Agreement with
Exhibits - dated August 21, 1991 between the Partnership,
Angeles Income Properties II and Angeles Partners XII, filed
in Form 10-K dated March 27, 1992, incorporated herein by
reference.
10.10 Stock Purchase Agreement dated November 24, 1992 showing the
purchase of 100% of the outstanding stock of Angeles Realty
Corporation by IAP GP Corporation, a subsidiary of MAE GP
Corporation, filed in Form 8-K dated December 31, 1992, which
is incorporated herein by reference.
10.11 Secured Promissory Note between Angeles Mortgage Investment
Trust, A California Business Trust, Fox Run AP XI, L.P., a
South Carolina limited partnership and Angeles Partners XI, a
California limited partnership dated December 19, 1996.
10.12 Loan agreement between General Electric Capital Corporation, a
New York corporation, and Fox Run AP XI, L.P., a South
Carolina limited partnership dated December 23, 1996.
16.1 Letter from the Registrant's former independent accountant
regarding its concurrence with the statements made by the
Registrant, is incorporated by reference to the exhibit filed
with Form 8-K dated September 1, 1993.
18 Independent Accountants' Preferability Letter for Change in
Accounting Principle.
27 Financial Data Schedule.
<PAGE>
Exhibit 18
February 7, 2000
Mr. Patrick J. Foye
Executive Vice President
Angeles Realty Corporation II
Managing General Partner of Angeles Partners XI
55 Beattie Place
P.O. Box 1089
Greenville, South Carolina 29602
Dear Mr. Foye:
Note L of Notes to the Consolidated Financial Statements of Angeles Partners XI
included in its Form 10-KSB for the year ended December 31, 1999 describes a
change in the method of accounting to capitalize exterior painting and major
landscaping, which would have been expensed under the old policy. You have
advised us that you believe that the change is to a preferable method in your
circumstances because it provides a better matching of expenses with the related
benefit of the expenditures and is consistent with policies currently being used
by your industry and conforms to the policies of the Managing General Partner.
There are no authoritative criteria for determining a preferable method based on
the particular circumstances; however, we conclude that the change in the method
of accounting for exterior painting and major landscaping is to an acceptable
alternative method which, based on your business judgment to make this change
for the reasons cited above, is preferable in your circumstances.
Very truly yours,
/s/ Ernst & Young LLP
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from Angeles
Partners XI 1999 Fourth Quarter 10-KSB and is qualified in its entirety by
reference to such 10-KSB filing.
</LEGEND>
<CIK> 0000702986
<NAME> ANGELES PARTNERS XI
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
<CASH> 2,118
<SECURITIES> 0
<RECEIVABLES> 785
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0 <F1>
<PP&E> 30,614
<DEPRECIATION> (20,142)
<TOTAL-ASSETS> 13,618
<CURRENT-LIABILITIES> 0 <F1>
<BONDS> 29,988
0
0
<COMMON> 0
<OTHER-SE> (17,285)
<TOTAL-LIABILITY-AND-EQUITY> 13,618
<SALES> 0
<TOTAL-REVENUES> 8,157
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 7,646
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,836
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> (3)
<CHANGES> 0
<NET-INCOME> 1,704
<EPS-BASIC> 42.57 <F2>
<EPS-DILUTED> 0
<FN>
<F1> Registrant has an unclassified balance sheet. <F2> Multiplier is 1.
</FN>
</TABLE>
