FORM 10-QSB--QUARTERLY OR TRANSITIONAL REPORT UNDER SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
Quarterly or Transitional Report
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-QSB
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended September 30, 2000
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from _________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 (I.R.S. Employer
incorporation or organization) Identification No.)
55 Beattie Place, PO Box 1089
Greenville, South Carolina 29602
(Address of principal executive offices)
(864) 239-1000
(Issuer's telephone number)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the 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, 2000
<TABLE>
<CAPTION>
Assets
<S> <C> <C>
Cash and cash equivalents $ 772
Receivables and deposits 634
Other assets 211
Investment in joint venture 4
Investment property:
Land $ 3,998
Buildings and related personal property 27,857
31,855
Less accumulated depreciation (21,304) 10,551
$ 12,172
Liabilities and Partners' Deficit
Liabilities
Accounts payable $ 61
Tenant security deposits 620
Due to affiliate 45
Other liabilities 423
Mortgage notes payable 29,674
Partners' Deficit
General partners $ (503)
Limited partners (39,627 units issued and
outstanding) (18,148) (18,651)
$ 12,172
See Accompanying Notes to Consolidated Financial Statements
</TABLE>
<PAGE>
b)
ANGELES PARTNERS XI
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(in thousands, except unit data)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
2000 1999 2000 1999
Revenues:
<S> <C> <C> <C> <C>
Rental income $ 2,052 $ 1,913 $ 5,924 $ 5,707
Other income 131 117 439 298
Casualty gain -- 120 -- 120
Total revenues 2,183 2,150 6,363 6,125
Expenses:
Operating 600 515 1,912 1,625
General and administrative 93 44 191 147
Depreciation 393 384 1,162 1,128
Interest 685 698 2,053 2,141
Property taxes 208 203 626 580
Total expenses 1,979 1,844 5,944 5,621
Income before equity in (loss) income and
extraordinary loss on debt
extinguishment of joint venture 204 306 419 504
Equity in (loss) income of joint
venture (Note D) -- (6) -- 1,214
Income before equity in extraordinary
loss on debt extinguishment of joint
venture 204 300 419 1,718
Equity in extraordinary loss on debt
extinguishment (Note D) -- -- -- (3)
Net income $ 204 $ 300 $ 419 $ 1,715
Net income allocated to general partners (1%) $ 2 $ 3 $ 4 $ 17
Net income allocated to limited partners (99%) 202 297 415 1,698
$ 204 $ 300 $ 419 $ 1,715
Net income per limited partnership unit:
Income before equity in extraordinary
loss on debt extinguishment of joint
venture $ 5.09 $ 7.50 $ 10.47 $ 42.93
Extraordinary loss -- -- -- (0.08)
$ 5.09 $ 7.50 $ 10.47 $ 42.85
Distributions per limited partnership unit $ -- $ 5.00 $ 44.59 $ 5.00
See Accompanying Notes to Consolidated Financial Statements
</TABLE>
<PAGE>
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, 1999 39,627 $ (489) $ (16,796) $(17,285)
Distributions to partners -- (18) (1,767) (1,785)
Net income for the nine months
ended September 30, 2000 -- 4 415 419
Partners' deficit
at September 30, 2000 39,627 $ (503) $ (18,148) $(18,651)
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,
2000 1999
Cash flows from operating activities:
<S> <C> <C>
Net income $ 419 $ 1,715
Adjustments to reconcile net income to net cash
provided by operating activities:
Equity in income of joint venture -- (1,214)
Equity in extraordinary loss on debt extinguishment
of joint venture -- 3
Depreciation 1,162 1,128
Amortization of loan costs 85 84
Casualty gain -- (120)
Change in accounts:
Receivables and deposits 151 (24)
Other assets (38) (46)
Accounts payable 19 26
Tenant security deposit liabilities 51 34
Due to affiliates 45 (33)
Other liabilities 100 (16)
Net cash provided by operating activities 1,994 1,537
Cash flows from investing activities:
Property improvements and replacements (1,241) (674)
Insurance proceeds received related to casualty -- 372
Distributions from joint venture -- 1,086
Repayment of advance to joint venture -- 164
Net cash (used in) provided by investing activities (1,241) 948
Cash flows from financing activities:
Distributions to partners (1,785) (200)
Payment on notes payable -- (868)
Payment of mortgage notes payable (314) (270)
Net cash used in financing activities (2,099) (1,338)
Net (decrease) increase in cash and cash equivalents (1,346) 1,147
Cash and cash equivalents at beginning of period 2,118 1,207
Cash and cash equivalents at end of period $ 772 $ 2,354
Supplemental disclosure of cash flow information:
Cash paid for interest $ 1,747 $ 2,065
See Accompanying Notes to Consolidated Financial Statements
</TABLE>
<PAGE>
e)
ANGELES PARTNERS XI
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note A - Basis of Presentation
The accompanying unaudited consolidated financial statements of Angeles Partners
XI (the "Partnership" or "Registrant") have been prepared in accordance with
generally accepted accounting principles for interim financial information and
with the instructions to Form 10-QSB and Item 310(b) of Regulation S-B.
Accordingly, they do not include all of the information and footnotes required
by generally accepted accounting principles for complete financial statements.
In the opinion of Angeles Realty Corporation II (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, 2000, are not necessarily
indicative of the results that may be expected for the fiscal year ending
December 31, 2000. For further information, refer to the consolidated financial
statements and footnotes thereto included in the Partnership's Annual Report on
Form 10-KSB for the fiscal year ended December 31, 1999.
Principles of Consolidation
The Partnership's consolidated financial statements include all of 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 entities are deemed controlled and, therefore,
consolidated by the Partnership. All inter-entity balances have been eliminated.
Note B - Transfer of Control
Pursuant to a series of transactions which closed on October 1, 1998 and
February 26, 1999, Insignia Financial Group, Inc. and Insignia Properties Trust
("IPT") merged into Apartment Investment and Management Company ("AIMCO"), a
publicly traded real estate investment trust, with AIMCO being the surviving
corporation (the "Insignia Merger"). As a result, AIMCO acquired 100% ownership
interest in the 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 - 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 nine months ended September 30, 2000 and 1999 were paid or accrued:
2000 1999
(in thousands)
Property management fees (included in
operating expense) $316 $297
Reimbursement for services of affiliates (included
in general and administrative and operating
expenses and investment property) 243 90
Due to affiliates 45 --
During the nine months ended September 30, 2000 and 1999, 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 $316,000 and $297,000 for the nine months
ended September 30, 2000 and 1999, respectively.
An affiliate of the Managing General Partner received reimbursement of
accountable administrative expenses amounting to approximately $243,000 and
$90,000 for the nine months ended September 30, 2000 and 1999, respectively.
Included in these expenses at September 30, 2000 and 1999 is approximately
$104,000 and $6,000, respectively, in reimbursements for construction oversight
costs. Also, approximately $45,000 of these reimbursements were accrued and
included in "Due to affiliate" at September 30, 2000.
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 "Note D"). 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.
In addition to its indirect ownership of the general partner interest in the
Partnership, AIMCO and its affiliates currently own 23,273 limited partnership
units in the Partnership representing 58.73% of the outstanding units. A number
of these units were acquired pursuant to tender offers made by AIMCO or its
affiliates. 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. In this regard, on July 24, 2000, an affiliate of AIMCO commenced a
tender offer to purchase any and all of the remaining partnership interests for
a purchase price of $334 per limited partnership unit. This offer expired on
September 28, 2000 with a total of 1,830 units acquired by an affiliate of
AIMCO. Under the Partnership Agreement, unitholders holding a majority of the
Units are entitled to take action with respect to a variety of matters, which
would include without limitation, voting on certain amendments to the
Partnership Agreement and voting to remove the Managing General Partner. As a
result of its ownership of 58.73% of the outstanding units, AIMCO is in a
position to influence all voting decisions with respect to the Registrant. 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.
Note D - Investment in Joint Venture
The Partnership has a 41.1% investment in Princeton Meadows Golf Course 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. As of
September 30, 1999, the Joint Venture recorded a gain on sale of approximately
$3,088,000 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 at September 30, 1999 was
approximately $1,269,000 and its equity in loss on operations of the Joint
Venture at September 30, 1999 amounted to approximately $55,000. 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 September 30, 2000,
is as follows (in thousands):
Assets
Cash $ 16
Total $ 16
Liabilities and Partners' Capital
Other liabilities $ 6
Partners' capital 10
Total $ 16
The condensed statement of operations of the Joint Venture for the nine months
ended September 30, 2000 and 1999 are summarized as follows (in thousands):
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
2000 1999 2000 1999
<S> <C> <C> <C> <C>
Revenues $ -- $ 4 $ -- $ 94
Costs and expenses -- -- -- (230)
Income (loss) before gain on sale of
investment property and extraordinary
loss on extinguishment of debt -- 4 -- (136)
Gain (loss) on sale of investment
property -- (20) -- 3,088
Extraordinary loss on extinguishment
of debt -- -- -- (7)
Net income (loss) $ -- $ (16) $ -- $2,945
</TABLE>
The Partnership recognized its 41.1% equity income of approximately $1,214,000
in the Joint Venture for the nine months ended September 30, 1999. The
Partnership also realized an extraordinary loss on extinguishment of debt of
$3,000 for the nine months ended September 30, 1999. Due to the sale of
Princeton Meadows Golf Course in February 1999, the Joint Venture had no
operations during the nine months ended September 30, 2000. Therefore the
Partnership did not recognize any equity in income of the Joint Venture for the
nine months ended September 30, 2000. In addition, the Partnership anticipates
that during the fourth quarter of 2000, all remaining assets and liabilities of
the Joint Venture will be liquidated.
Note E - Distributions
A distribution of approximately $1,785,000 (approximately $1,767,000 to the
limited partners, $44.59 per limited partnership unit) was paid from operations
during the nine months ended September 30, 2000. During the nine months ended
September 30, 1999, a distribution of approximately $200,000 was paid from
operations to the partners, of which $198,000 was paid to the limited partners
(approximately $5.00 per limited partnership unit). Subsequent to September 30,
2000, the Partnership declared and paid a distribution of approximately $294,000
(approximately $291,000 to limited partners or $7.34 per limited partnership
unit) from operations.
Note F - Segment Reporting
Description of the types of products and services from which the reportable
segment derives its revenues:
The Partnership has one reportable segment: residential property. 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 of the Partnership as described in the Partnership's Annual Report on Form
10-KSB for the year ended December 31, 1999.
Segment information for the three and nine months ended September 30, 2000 and
1999, 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.
Three Months Ended September 30, 2000 Residential Other Totals
Rental income $ 2,052 $ -- $ 2,052
Other income 130 1 131
Interest expense 685 -- 685
Depreciation 393 -- 393
General and administrative expense -- 93 93
Segment profit (loss) 296 (92) 204
Nine months Ended September 30, 2000 Residential Other Totals
Rental income $ 5,924 $ -- $ 5,924
Other income 414 25 439
Interest expense 2,053 -- 2,053
Depreciation 1,162 -- 1,162
General and administrative expense -- 191 191
Segment profit (loss) 585 (166) 419
Total assets 12,020 152 12,172
Capital expenditures for
investment property 1,241 -- 1,241
Three Months Ended September 30, 1999 Residential Other Totals
Rental income $ 1,913 $ -- $ 1,913
Other income 107 10 117
Casualty gain 120 -- 120
Interest expense 698 -- 698
Depreciation 384 -- 384
General and administrative expense -- 44 44
Equity in (loss) of joint venture -- (6) (6)
Segment profit 340 (40) 300
Nine Months Ended September 30, 1999 Residential Other Totals
Rental income $ 5,707 $ -- $ 5,707
Other income 270 28 298
Casualty gain 120 -- 120
Interest expense 2,141 -- 2,141
Depreciation 1,128 -- 1,128
General and administrative expense -- 147 147
Equity in income of joint venture -- 1,214 1,214
Equity in extraordinary loss on debt
extinguishment of joint venture -- (3) (3)
Segment profit 623 1,092 1,715
Total assets 12,948 1,479 14,427
Capital expenditures for
investment property 674 -- 674
<PAGE>
Note G - 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, its 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 of interests in certain general partner
entities by Insignia Financial Group, Inc. ("Insignia") and entities which were,
at one time, affiliates of Insignia; past tender offers by the Insignia
affiliates to acquire limited partnership units; the management of partnerships
by the Insignia affiliates; and the Insignia Merger. 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 owned units as of November 3, 1999. Preliminary
approval of the settlement was obtained on November 3, 1999 from the Court, 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 prior lead counsel to enter the settlement. On
December 14, 1999, the Managing General Partner and its affiliates terminated
the proposed settlement. In February 2000, counsel for some of the named
plaintiffs filed a motion to disqualify plaintiff's lead and liaison counsel who
negotiated the settlement. On June 27, 2000, the Court entered an order
disqualifying them from the case. The Court is considering applications for lead
counsel and has currently scheduled a hearing on the matter for November 20,
2000. 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 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
The matters discussed in this Form 10-QSB contain certain forward-looking
statements and involve risks and uncertainties (including changing market
conditions, competitive and regulatory matters, etc.) detailed in the disclosure
contained in this Form 10-QSB 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.
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, 2000 and 1999:
Average Occupancy
Property 2000 1999
Fox Run Apartments 96% 98%
Plainsboro, New Jersey
Results from Operations
The Partnership's net income for the nine months ended September 30, 2000 was
approximately $419,000 compared to approximately $1,715,000 for the
corresponding period in 1999. The net income for the three months ended
September 30, 2000 was approximately $204,000 compared to approximately $300,000
for the corresponding period in 1999. The decrease in net income for the nine
months ended September 30, 2000 is primarily due to the recognition of the
equity in income from the gain on disposal of the Princeton Meadows Golf Course
Joint Venture ("Joint Venture") during the nine months ended September 30, 1999,
as discussed below. Income before equity in (loss) income and extraordinary loss
on debt extinguishment of the joint venture for both the three and nine months
ended September 30, 2000 decreased as compared to the corresponding periods in
1999 due to an increase in total expenses which was partially offset by an
increase to total revenues. The increase in total revenues was the result of
increases in rental income and other income. The increase in rental revenue is
due to an increase in average rental rates which more than offset a decrease in
average occupancy at the property. Other income increased due to increases in
corporate unit revenue, clubhouse rental income, cable rebates, and interest
income.
Total expenses for the three and nine months ended September 30, 2000 increased
due to increases in operating expenses, property tax expense, depreciation
expense and general and administrative expenses, partially offset by a decreases
in interest expense. The increase in operating expenses was due to increases in
utilities, interior painting, floor covering repair, snow removal, and payroll
costs. Property tax expense increased due to the timing of the receipt of tax
bills in 1999, which affected the accruals at September 30, 1999. Depreciation
expense increased due to capital asset expenditures during the past twelve
months. Interest expense decreased primarily due to the repayment of the note
payable to Angeles Mortgage Investment Trust ("AMIT") in 1999, 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.
General and administrative expenses increased during the nine months ended
September 30, 2000 due to an increase in the cost of services included in the
management reimbursements to the General Partner as allowed under the
Partnership Agreement. This increase in general and administrative expenses was
partially offset by a decrease in legal costs due to the settlement of a legal
dispute, which was previously disclosed during 1999. In addition, cost
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. As of
September 30, 1999 the Joint Venture recorded a gain on sale of approximately
$3,088,000 after the write-off of undepreciated fixed assets. For the nine
months ended September 30, 1999 the Partnership realized equity in income of the
Joint Venture of approximately $1,214,000, which included its equity in the gain
on disposal of Princeton Meadows Golf Course of $1,269,000 and the equity in
loss on operations of $55,000. For the nine months ended September 30, 2000,
Princeton Meadows Golf Course did not have any operations, therefore, the
Partnership did not recognize any equity earnings from the Joint Venture.
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 September 30, 2000, the Partnership had cash and cash equivalents of
approximately $772,000 as compared to approximately $2,354,000 at September 30,
1999. Cash and cash equivalents decreased approximately $1,346,000 for the
period ended September 30, 2000, from the Registrant's fiscal year-end and is
primarily due to approximately $2,099,000 of cash used in financing activities
and approximately $1,241,000 of cash used in investing activities which is
partially offset by approximately $1,994,000 of cash provided by operations.
Cash used in investing activities consisted of property improvements and
replacements. Cash used in financing activities consisted primarily of
distributions to partners and, to a lesser extent, payments of principal made on
the mortgages encumbering Fox Run Apartments. 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 has budgeted
approximately $465,000 for capital improvements for the property during 2000
consisting primarily of heating improvements, appliances and floor coverings. In
addition approximately $1,200,000 has been added to the 2000 budget to complete
work begun in 1999 but not yet completed. This amount consists of costs for air
conditioning and parking lot upgrades. As of September 30, 2000, the Partnership
spent approximately $1,241,000 on capital improvements at Fox Run Apartments of
which approximately $930,000 relates to 1999 budgeted items completed in 2000.
These improvements consisted primarily of cabinet replacements, carpet and vinyl
replacements, resurfacing, appliances, air conditioning units, and electrical
upgrades. These improvements were funded from cash flow. The additional
improvements planned for 2000 at the Partnership's property 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 $29,674,000 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.
A distribution of approximately $1,785,000 (approximately $1,767,000 to the
limited partners, $44.59 per limited partnership unit) was paid from operations
during the nine months ended September 30, 2000. During the nine months ended
September 30, 1999, a distribution of approximately $200,000 was paid from
operations to the partners, of which $198,000 was paid to the limited partners
(approximately $5.00 per limited partnership unit). Subsequent to September 30,
2000, the Partnership declared and paid a distribution of approximately $294,000
(approximately $291,000 to limited partners or $7.34 per limited partnership
unit) 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 during the remainder of 2000 or
subsequent periods.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
In March 1998, several putative unit holders of limited partnership units of the
Partnership commenced an action entitled Rosalie Nuanes, et al. v. Insignia
Financial Group, Inc., et al. in the Superior Court of the State of California
for the County of San Mateo. The plaintiffs named as defendants, among others,
the Partnership, its 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 of interests in certain general partner
entities by Insignia Financial Group, Inc. ("Insignia") and entities which were,
at one time, affiliates of Insignia; past tender offers by the Insignia
affiliates to acquire limited partnership units; the management of partnerships
by the Insignia affiliates; and the Insignia Merger. 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 owned units as of November 3, 1999. Preliminary
approval of the settlement was obtained on November 3, 1999 from the Court, 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 prior lead counsel to enter the settlement. On
December 14, 1999, the Managing General Partner and its affiliates terminated
the proposed settlement. In February 2000, counsel for some of the named
plaintiffs filed a motion to disqualify plaintiff's lead and liaison counsel who
negotiated the settlement. On June 27, 2000, the Court entered an order
disqualifying them from the case. The Court is considering applications for lead
counsel and has currently scheduled a hearing on the matter for November 20,
2000. The Managing General Partner does not anticipate that costs associated
with this case will be material to the Partnership's overall operations.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a) Exhibits:
Exhibit 27 is filed as an exhibit to this report.
b) Reports on Form 8-K:
None filed during the quarter ended September 30, 2000.
<PAGE>
SIGNATURES
In accordance with Section 13 or 15(d) 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/Patrick J. Foye
Patrick J. Foye
Executive Vice President
By: /s/Martha L. Long
Martha L. Long
Senior Vice President and
Controller
Date: November 13, 2000
