U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
(Mark One)
X ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES AND EXCHANGE ACT OF
1934 [FEE REQUIRED]
For the fiscal year ended December 31, 1995
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 0-11767
ANGELES INCOME PROPERTIES, LTD. II
California 95-3793526
(State or other jurisdiction of
incorporation or organization) (I.R.S. Employer Identification No.)
One Insignia Financial Plaza, P.O. Box 1089
Greenville, South Carolina 29602
(Address of principal executive offices) (Zip Code)
Issuer's telephone number (864) 239-1000
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 is not contained in this form, and no disclosure will be
contained, to the best of 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.X
State issuer's revenues for its most recent fiscal year. $6,928,861
State the aggregate market value of the voting stock held by nonaffiliates of
the registrant. The aggregate market value shall be computed by reference to
the price at which the stock was sold, or the average bid and asked prices of
such stock as of a specified date within the past 60 days. Market value
information for Registrant's Partnership Interests is not available. Should a
trading market develop for these Interests, it is the Managing General Partner's
belief that such trading would not exceed $25 million.
DOCUMENTS INCORPORATED BY REFERENCE
None
PART I
Item 1. Description of Business
Angeles Income Properties, Ltd. II ("the Partnership" or "the Registrant")
is a publicly held limited partnership organized under the California Uniform
Limited Partnership Act pursuant to the amended Certificate and Agreement of
Limited Partnership (hereinafter referred to as "the Agreement") dated March 31,
1983. The Partnership's Managing General Partner is Angeles Realty Corporation
II, a California corporation (hereinafter referred to as the "Managing General
Partner" or "ARCII").
The Partnership, through its public offering of Limited Partnership Units,
sold 100,000 units aggregating $50,000,000. The General Partner contributed
capital in the amount of $1,000 for a 1% interest in the Partnership. The
Partnership was formed for the purpose of acquiring fee and other forms of
equity interests in various types of real property. The Partnership presently
owns four investment properties and owns a general partnership interest in a
fifth property.
The Managing General Partner of the Registrant intends to maximize the
operating results and, ultimately, the net realizable value of each of the
Registrant's properties in order to achieve the best possible return for the
investors. Such results may best be achieved through property sales,
refinancings, debt restructurings or relinquishment of the assets. The
Registrant intends to evaluate each of its holdings periodically to determine
the most appropriate strategy for each of the assets.
The Partnership has no full time employees. The Managing General Partner
is vested with full authority as to the general management and supervision of
the business and affairs of the Partnership. Limited Partners and Non-Managing
General Partners have no right to participate in the management or conduct of
such business and affairs.
The business in which the Partnership is engaged is highly competitive, and
the Partnership is not a significant factor in its industry. Each investment
property is located in or near a major urban area and, accordingly, competes for
rentals not only with similar properties in its immediate area but with hundreds
of similar properties throughout the urban area. Such competition is primarily
on the basis of location, rents, services and amenities. In addition, the
Partnership competes with significant numbers of individuals and organizations
(including similar partnerships, real estate investment trusts and financial
institutions) with respect to the sale of improved real properties, primarily on
the basis of the prices and terms of such transactions.
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.
Item 2. Description of Properties:
The following table sets forth the Registrant's investments in properties:
Date of
Property Purchase Type of Ownership Use
Atlanta Crossing 09/27/83 100% Leasehold Interest Retail Center
Shopping Center 168,668 s.f.
Montgomery, AL
Deer Creek Apartments 09/28/83 Fee ownership subject to Apartments
Plainsboro, NJ a first mortgage 288 units
Georgetown Apartments 11/21/83 Fee ownership subject to Apartments
South Bend, IN a first and second 200 units
mortgage
Landmark Apartments 12/16/83 Fee ownership subject to Apartments
Raleigh, NC a first mortgage 292 units
On March 20, 1995, the Partnership negotiated a Deed in Lieu of Foreclosure
for Executive Plaza Office Park located in Huntsville, Alabama and, as a result,
the property was transferred to the wrap note holder.
The Partnership also has a 14.4% interest in the Princeton Meadows Joint
Venture. The Partnership entered into a General Partnership Agreement with
Angeles Partners XI and Angeles Partners XII, both California partnerships and
affiliates of the Managing General Partner, to form the Princeton Meadows Joint
Venture ("Joint Venture"). The property owned by the Joint Venture, as of
December 31, 1995, is summarized as follows:
Princeton Meadows 07/26/91 Fee ownership subject Golf Course
Golf Course to a first mortgage
Princeton, NJ
The Joint Venture is carried on Angeles Income Properties, Ltd. II balance sheet
on the equity method and is included in "Investment in Joint Venture".
Schedule of Properties:
<TABLE>
<CAPTION>
Gross
Carrying Accumulated Federal
Property Value Depreciation Rate Method Tax Basis
<S> <C> <C> <C> <C> <C>
Atlanta Crossing
Shopping Center $ 5,192,109 $ 3,941,425 5-20 yrs (1) $ 2,251,851
Deer Creek Apts. 10,692,977 6,122,400 5-20 yrs (1) 2,969,281
Georgetown Apts. 7,029,418 4,164,032 5-20 yrs (1) 1,513,039
Landmark Apts. 11,626,949 7,057,131 5-20 yrs (1) 3,113,322
$34,541,453 $21,284,988 $ 9,847,493
<FN>
(1) Straight line and accelerated
</TABLE>
See Note A of the financial statements included in Item 7 for a description
of the Partnership's depreciation policy.
Schedule of Mortgages:
<TABLE>
<CAPTION>
Principal Principal
Balance At Balance
December 31, Interest Period Maturity Due At
Property 1995 Rate Amortized Date Maturity
<S> <C> <C> <C> <C> <C>
Deer Creek Apts.
1st mortgage $ 7,581,542 9.13% 30 yrs 07/1996 $7,517,390
Georgetown Apts.
1st mortgage 5,466,508 7.83% 28.67 yrs 10/2003 4,806,300
2nd mortgage 172,890 7.83% (1) 10/2003 172,890
Landmark Apts.
1st mortgage 3,596,420 9.75% 20 yrs 07/1997 3,455,599
16,817,360
Less unamortized
discounts (94,271)
$16,723,089 $15,952,179
<FN>
(1) Interest only payments
</TABLE>
Schedule of Rental Rates and Occupancy:
Average Annual Average Annual
Rental Rates Occupancy
Property 1995 1994 1995 1994
Atlanta Crossing $ 3.68/sf $ 4.03/sf 89% 86%
Shopping Center
Deer Creek Apartments 8,325/unit 8,133/unit 95% 92%
Georgetown Apartments 6,890/unit 6,661/unit 98% 98%
Landmark Apartments 7,097/unit 6,581/unit 97% 96%
As noted under Item 1. "Description of Business", the real estate industry is
highly competitive. All of the properties of the Partnership are subject to
competition from other residential apartment complexes and commercial buildings
in the area. The Managing General Partner believes that all of the properties
are adequately insured. The multi-family residential properties' lease terms
are for one year or less. No residential tenant leases 10% or more of the
available rental space.
The following is a schedule of the lease expirations for the years 1996-2005:
Number of Annual % of Gross
Atlanta Crossing Expirations Square Feet Rent Annual Rent
1996 1 1,800 $ 17,136 2.8%
1997 2 5,570 37,215 6.0%
1998 4 13,672 111,641 18.1%
1999 -- -- -- --
2000 2 10,658 70,431 11.4%
2001 -- -- -- --
2002 -- -- -- --
2003 1 (1) 40,829 6.6%
2004 2 11,971(1) 75,649 12.3%
2005 1 (1) 28,200 4.6%
(1) Includes a tenant that holds a ground lease and is not included in the
total square footage for the property (See "Note I" for further
information).
The following schedule reflects information on tenants occupying 10% or more
of the leasable square feet for each property:
<TABLE>
<CAPTION>
Nature of Square Footage Annual Rent Lease
Business Leased Per Square Foot Expiration
<S> <C> <C> <C>
Atlanta Crossing Shopping Center
Grocery Store 53,820 $1.25 01/01/06
Discount Store 50,000 3.30 02/28/06
</TABLE>
Real estate taxes and rates in 1995 for each property were:
1995 1995
Billing Rate
Atlanta Crossing $ 51,658 3.45
Shopping Center
Deer Creek Apartments 233,260 2.18
Georgetown Apartments 108,763* 7.98
Landmark Apartments 118,838 1.22
*Amount per 1994 billings; tax bills for 1995 not yet received.
Item 3. Legal Proceedings
Angeles Mortgage Investment Trust ("AMIT"), a real estate investment trust,
made a loan to the Joint Venture on a non-recourse basis in September 1991, in
the amount of $1,280,000 secured by the Joint Venture's real property known as
Princeton Meadows Golf Course. AMIT asserts that the loan is recourse by virtue
of a certain amendment purportedly entered into as of November 1, 1992, but
which the Partnership and the Joint Venture have been informed and believe were
actually executed in December of 1992 ("Note Modification"). The Partnership
and the Joint Venture have been further informed and believe that the amendment
was executed at the direction of Angeles Corporation ("Angeles") by an
individual in his purported capacity as an officer of the Managing General
Partner of the Partnership and the Joint Venture at a time when such person was
not in fact an officer of such entities. Accordingly, the Partnership and the
Joint Venture filed Proofs of Claim in the Angeles bankruptcy proceeding with
respect to such purported amendment. Additionally, the Partnership and the
Joint Venture filed a Proof of Claim in the Angeles Funding Corporation and
Angeles Real Estate Corporation bankruptcy proceedings on similar grounds. Both
Angeles Funding Corporation and Angeles Real Estate Corporation are affiliates
of Angeles. Angeles has agreed to cooperate with the Partnership and the Joint
Venture in any action commenced by or against them by AMIT asserting that the
original $1,280,000 obligation owed to AMIT is recourse to the Partnership.
Angeles further agreed to waive the attorney-client privilege with respect to
any information relating to the Note Modification. Accordingly, the Partnership
and the Joint Venture withdrew their Proofs of Claim on August 9, 1995. The
Partnership has been in and continues to have discussions with AMIT regarding
resolution of this issue. No agreement has been reached with AMIT at this time.
MAE GP Corporation ("MAE GP"), an affiliate of the Managing General Partner,
owns 1,675,113 Class B Shares of AMIT. MAE GP has the option to convert these
Class B Shares, in whole or in part, into Class A Shares on the basis of 1 Class
A Share for every 49 Class B Shares. These Class B Shares entitle MAE GP to
receive 1.2% of the distributions of net cash distributed by AMIT. The Class B
Shares also entitle MAE GP to vote on the same basis as Class A Shares which
allows MAE GP to vote approximately 37% of the total shares (unless and until
converted to Class A Shares at which time the percentage of the vote controlled
represented by the shares held by MAE GP would approximate 1.2% of the vote).
Between the date of acquisition of these shares (November 24, 1992) and March
31, 1995, MAE GP declined to vote these shares. Since that date, MAE GP voted
its shares at the 1995 annual meeting in connection with the election of
trustees and other matters. MAE GP has not exerted, and continues to decline to
exert, any management control over or participate in the management of AMIT.
MAE GP may choose to vote these shares as it deems appropriate in the future.
In addition, Liquidity Assistance, LLC, ("LAC"), an affiliate of the Managing
General Partner and an affiliate of Insignia Financial Group, Inc., which
provides property management and partnership administration services to the
Partnership, owns 63,200 Class A Shares of AMIT. These Class A Shares entitle
LAC to vote approximately 1.5% of the total shares.
As part of a settlement of certain disputes with AMIT, MAE GP granted to AMIT
an option to acquire the Class B Shares. This option can be exercised at the
end of 10 years or when all loans made by AMIT to partnerships affiliated with
MAE GP as of November 9, 1994, (which is the date of execution of a definitive
Settlement Agreement) have been paid in full, but in no event prior to November
9, 1997. AMIT delivered to MAE GP cash in the sum of $250,000 at closing, which
occurred April 14, 1995, as payment for the option. Upon exercise of the
option, AMIT would remit to MAE GP an additional $94,000.
Simultaneously with the execution of the option, MAE GP executed an
irrevocable proxy in favor of AMIT the result of which is MAE GP will be able to
vote the Class B Shares on all matters except those involving transactions
between AMIT and MAE GP affiliated borrowers or the election of any MAE GP
affiliate as an officer or trustee of AMIT. On those matters, MAE GP granted to
the AMIT trustees, in their capacity as trustees of AMIT, proxies with regard to
the Class B Shares instructing such trustees to vote said Class B Shares in
accordance with the vote of the majority of the Class A Shares voting to be
determined without consideration of the votes of "Excess Class A Shares" as
defined in Section 6.13 of the Declaration of Trust of AMIT.
Also, Angeles, either directly or through an affiliate, maintained a central
disbursement account (the "Account") for the properties and partnerships managed
by Angeles and its affiliates, including the Registrant. Angeles caused the
Partnership to make deposits to the Account ostensibly to fund the payment of
certain obligations of the Partnership. Angeles further caused checks on such
Account to be written to or on behalf of certain other partnerships. At least
$63,412 deposited by or on behalf of the Partnership was used for purposes other
than satisfying the liabilities of the Partnership. Accordingly, the
Partnership filed a Proof of Claim in the Angeles bankruptcy proceedings for
such amount. However, subsequently the Managing General Partner of the
Partnership has determined that the cost involved to pursue such claim would
likely exceed any amount received, if in fact such claim were to be resolved in
favor of the Partnership. Therefore, the Partnership withdrew this claim on
August 9, 1995.
Except as mentioned above, the Partnership is not involved in any legal
proceedings other than those arising in the normal course of business. The
Managing General Partner believes that any losses experienced as a result of
such proceedings will not have a material adverse effect upon the Partnership's
operations.
Item 4. Submission of Matters to a Vote of Security Holders
The unit holders of the Partnership did not vote on any matter during the
fiscal year covered by this report.
PART II
Item 5. Market for the Partnership's Common Equity and Related Security Holder
Matters
The Partnership, a publicly-held limited partnership, sold 100,000 Limited
Partnership Units during its offering period through February 29, 1984. The
Partnership currently has 99,851 Limited Partnership Units outstanding and 4,410
Limited Partners of record. During the year, the number of Limited Partnership
Units decreased by 1 Unit due to limited partners abandoning their Units. In
abandoning his or her Limited Partnership Unit, a limited partner relinquishes
all right, title and interest in the Partnership as of the date of abandonment.
There is no intention to sell additional Limited Partnership Units nor is there
an established market for these units.
The Partnership has discontinued making cash distributions from operations
until and unless the financial condition of the Partnership and other relevant
factors warrant resumption of distributions.
Item 6. Management's Discussion and Analysis or Plan of Operation
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, 1995, was
$1,417,735 versus a net loss of $1,713,927 for the year ended December 31, 1994.
The increase in net income is primarily due to a decrease in expenses and to the
gain on foreclosure of Executive Plaza Office Park on March 20, 1995 (see
discussion below).
The Partnership generated revenues of $6,928,861 for the year ended December
31, 1995, versus $7,783,436 for the year ended December 31, 1994. This decrease
in revenue is primarily due to rental revenue lost as a result of the
foreclosure of Executive Plaza Office Park. This decrease in revenue was
partially offset by increased revenue due to increased occupancy at Landmark
Apartments, Deer Creek Apartments, and Atlanta Crossing Shopping Center and due
to the increase in rental rates at Deer Creek Apartments, Georgetown Apartments
and Landmark Apartments. In addition, other income decreased due to a decrease
in corporate units and deposit forfeitures at Deer Creek Apartments. This was
partially offset by an increase in clubhouse rentals and lease cancellation fees
at Deer Creek Apartments.
The Partnership incurred expenses from operations of $7,375,591 for the year
ended December 31, 1995 versus $9,432,320 for the year ended December 31, 1994.
The overall decrease in expenses is primarily due to the foreclosure of
Executive Plaza Office Park. As a result of the foreclosure, the Partnership
realized a decrease in the following expenses: operating, property management
fees, maintenance, depreciation, amortization, and interest. In addition,
operating expense decreased due to a decrease in electricity expense in vacant
units at Deer Creek Apartments. This is primarily due to the increase in
occupancy at Deer Creek Apartments. Administrative expenses decreased due to
decreased cost reimbursements for partnership administration services.
Maintenance expense also decreased due to decreases in snow removal, maintenance
supplies, and interior painting expenses. Bad debt recovery relates to past due
amounts received that had been previously reserved. Tenant reimbursements
increased for the year ended December 31, 1995, versus the year ended December
31, 1994 despite the loss of Executive Plaza Office Park. Tenant reimbursements
are billed annually with estimates recorded quarterly. Due to the change in
management companies in 1993, the detailed information was not available to
accurately estimate the receivable in 1993. The receivable was overestimated in
1993 and adjusted in 1994 causing the 1994 tenant reimbursements to be lower.
The Partnership has a 14.4% investment in the Princeton Meadows Golf Course
Joint Venture. For the year ended December 31, 1995, the Partnership realized
equity in the loss of the Joint Venture of $45,264, as compared to equity in the
loss of the Joint Venture of $27,111 for the year ended December 31, 1994 (See
"Note F - Investment in Joint Venture"). The increased loss for the year ended
December 31, 1995, versus the year ended December 31, 1994, can be attributed to
an environmental reserve of $199,000 established for the cost of the clean-up of
contamination relating to an underground fuel storage tank (See "Liquidity and
Capital Resources" for further discussion).
For the year ended December 31, 1995, the Partnership recognized a loss on
disposal of property of $40,328, as compared to a loss of $37,932 for the year
ended December 31, 1994. During 1995, the loss resulted from the write-off of
roofs replaced at Georgetown Apartments that were not yet fully depreciated in
the amount of $47,716 and a gain of $7,388 relating to Deer Creek Apartments for
a unit destroyed by fire damage which was covered by insurance. During 1994,
the losses were due to re-roofing work done at Deer Creek Apartments, Georgetown
Apartments, and Atlanta Crossing Shopping Center. These losses resulted from the
write-off of the original roofs that were not yet fully depreciated.
On March 20, 1995, the Partnership negotiated a Deed in Lieu of Foreclosure
for Executive Plaza Office Park located in Huntsville, Alabama and, as a result,
the property was transferred to the wrap note holder. The Managing General
Partner believes the Deed in Lieu of Foreclosure was in the best interest of the
Partnership. The Partnership realized a gain of $1,950,057 on this transaction
for the year ended December 31, 1995, which included a gain on transfer of
property in foreclosure of $1,385,286 and an extraordinary gain on
extinguishment of debt of $564,771. The gain on transfer of property in
foreclosure represents the difference between the fair value and the net book
value of the property surrendered. The extraordinary gain represents the
difference between the settlement amount of the debt (the fair value of the
property surrendered) and the recorded amount of the debt extinguished pursuant
to foreclosure.
The Managing General Partner continues to monitor the rental market
environment in each location of its properties to assess the feasibility of
increasing rents, to maintain or increase occupancy levels and to protect the
Partnership from increases in expense. The Managing General Partner expects to
be able, at a minimum, to continue protecting the Partnership from the burden of
inflation-related increases in expenses by increasing rents and maintaining a
high overall occupancy level. However, rental concessions and rental rate
reductions needed to offset softening market conditions could affect the ability
to sustain this plan.
Liquidity and Capital Resources
For the year ended December 31, 1995, the Partnership had unrestricted cash of
$1,708,221 as compared to $1,063,449 at December 31, 1994. Cash flows from
operating activities increased primarily as a result of the increase in net
income for the year ended December 31, 1995, as compared to December 31, 1994,
as discussed above. Cash used in investing activities increased primarily as a
result of decreased receipts from restricted escrows. Cash used in financing
activities decreased due to discontinued principal payments on long-term debt
secured by Executive Plaza Office Park due to its foreclosure.
The mortgage note payable secured by the Deer Creek Apartments investment
property matures in July 1996. The Managing General Partner is negotiating a
refinance of this debt and believes a refinance will be consummated prior to
maturity of the debt.
The Princeton Meadows Golf Course property had an underground fuel storage
tank that was removed in 1992. This fuel storage tank caused contamination to
the area. Management installed monitoring wells in the area where the tank was
formerly buried. Some samples from these wells indicated lead and phosphorous
readings that were higher than the range prescribed by the New Jersey Department
of Environmental Protection ("DEP"). The Joint Venture notified DEP of the
findings when they were first discovered. However, DEP had not given 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 plans to engage two firms.
One engineering firm will be contracted to conduct consulting and compliance
work while a second firm will perform the field work necessary for the clean-
up. Contracts to remediate the site have been received from these two
engineering and environmental firms and are being reviewed. The Joint Venture
has established a $199,000 reserve for the costs of the clean-up. The
contracts are expected to be executed in early 1996 with work commencing and
expected to be completed during 1996. The Managing General Partner believes
this reserve is sufficient to cover all costs and liabilities associated with
this incident.
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. Such assets are currently thought
to be sufficient for any near-term needs of the Partnership. The mortgage
indebtedness of $16,723,089 is being amortized over 30 years, 28.67 years, and
20 years with maturity dates of July 1996, October 2003, and July 1997. The
second mortgage on Georgetown Apartments is interest only, with the principal
balance due October 2003. Future cash distributions will depend on the levels
of net cash generated from operations, refinancings, property sale and the
availability of cash reserves.
The Partnership's primary source of cash is from the operations of its
properties and from financing placed on such properties. Cash from these
sources is utilized for property operations, capital improvements, and/or
repayment of debt. 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 investment properties to adequately
maintain the physical assets and other operating needs of the Partnership.
Future cash distributions will depend on the levels of net cash generated from
operations, refinancings and property sales. At this time, the Managing General
Partner does not anticipate a cash distribution during fiscal 1996.
Item 7. Financial Statements
ANGELES INCOME PROPERTIES, LTD. II
LIST OF FINANCIAL STATEMENTS
Independent Auditors' Report
Balance Sheet - December 31, 1995
Statements of Operations - Years ended December 31, 1995 and 1994
Statements of Changes in Partners' Deficit - Years ended December 31,
1995 and 1994
Statements of Cash Flows - Years ended December 31, 1995 and 1994
Notes to Financial Statements
Report of Ernst & Young LLP, Independent Auditors
The Partners
Angeles Income Properties, Ltd. II
We have audited the accompanying balance sheet of Angeles Income Properties,
Ltd. II as of December 31, 1995, and the related statements of operations,
changes in partners' deficit and cash flows for each of the two years in the
period ended December 31, 1995. 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 generally accepted auditing
standards. 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 financial position of Angeles Income Properties, Ltd.
II as of December 31, 1995, and the results of its operations and its cash flows
for each of the two years in the period ended December 31, 1995, in conformity
with generally accepted accounting principles.
/S/ ERNST & YOUNG LLP
Greenville, South Carolina
February 12, 1996
ANGELES INCOME PROPERTIES, LTD. II
BALANCE SHEET
December 31, 1995
Assets
Cash and cash equivalents:
Unrestricted $ 1,708,221
Restricted--tenant security deposits 245,166
Accounts receivable (net of allowance for
doubtful accounts of $30,998) 109,710
Escrows for taxes 95,563
Restricted escrows 414,214
Other assets 519,258
Investment in joint venture (Note F) 21,962
Investment properties (Notes B and E):
Land $ 2,197,403
Buildings and related personal
property 32,344,050
34,541,453
Less accumulated depreciation (21,284,988) 13,256,465
$16,370,559
Liabilities and Partners' Deficit
Liabilities
Accounts payable $ 147,583
Tenant security deposits 243,937
Accrued taxes 114,201
Other liabilities 245,370
Mortgage notes payable (Notes B and E) 16,723,089
Partners' Deficit
General partners $ (449,346)
Limited partners (99,851 units issued
outstanding) (654,275) (1,103,621)
$ 16,370,559
See Accompanying Notes to Financial Statements
ANGELES INCOME PROPERTIES, LTD. II
STATEMENTS OF OPERATIONS
Years Ended December 31,
1995 1994
Revenues:
Rental income $ 6,636,116 $ 7,420,451
Other income 292,745 362,985
Total revenues 6,928,861 7,783,436
Expenses:
Operating 1,699,958 2,097,532
Administrative 339,439 489,761
Property management fees (Note D) 326,338 348,202
Maintenance 868,065 1,166,191
Depreciation 1,863,412 2,365,269
Amortization 26,417 60,410
Interest 1,776,985 2,418,964
Property taxes 608,609 570,141
Bad debt recovery (24,799) (18,756)
Tenant reimbursements (108,833) (65,394)
Total expenses 7,375,591 9,432,320
Equity in loss of joint venture (Note F) (45,264) (27,111)
Gain on transfer of
property in foreclosure (Note K) 1,385,286 --
Loss on disposal of property (40,328) (37,932)
Income (loss) before
extraordinary item 852,964 (1,713,927)
Extraordinary gain on
extinguishment of debt (Note K) 564,771 --
Net income (loss) $ 1,417,735 $(1,713,927)
Net income (loss) allocated
to general partners (1%) $ 14,177 $ (17,139)
Net income (loss) allocated
to limited partners (99%) 1,403,558 (1,696,788)
Net income (loss) $ 1,417,735 $(1,713,927)
Per limited partnership unit:
Income (loss) before
extraordinary item $ 8.46 $ (16.99)
Extraordinary gain on
extinguishment of debt 5.60 --
Net income (loss) $ 14.06 $ (16.99)
See Accompanying Notes to Financial Statements
ANGELES INCOME PROPERTIES, LTD. II
STATEMENT OF CHANGES IN PARTNERS' DEFICIT
<TABLE>
<CAPTION>
Limited
Partnership General Limited
Units Partners Partners Total
<S> <C> <C> <C> <C>
Original capital contributions 100,000 $ 1,000 $50,000,000 $50,001,000
Partners' deficit 100,000 $(444,815) $ (361,045) $ (805,860)
at December 31, 1993
Abandonment of Limited
Partnership Units (Note J) (148) -- -- --
Distributions (Note H) -- (1,569) -- (1,569)
Net loss for the year ended
December 31, 1994 -- (17,139) (1,696,788) (1,713,927)
Partners' deficit at
December 31, 1994 99,852 (463,523) (2,057,833) (2,521,356)
Abandonment of Limited
Partnership Units (Note J) (1) -- -- --
Net income for the year ended
December 31, 1995 -- 14,177 1,403,558 1,417,735
Partners' deficit
at December 31, 1995 99,851 $(449,346) $ (654,275) $(1,103,621)
<FN>
See Accompanying Notes to Financial Statements
</TABLE>
ANGELES INCOME PROPERTIES, LTD. II
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Years Ended December 31,
1995 1994
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 1,417,735 $(1,713,927)
Adjustments to reconcile net income (loss) to net
net cash provided by operating activities:
Depreciation 1,863,412 2,365,269
Amortization of discounts, loan costs and
lease commissions 133,572 170,450
Bad debt recovery (24,799) (18,756)
Equity in loss of joint venture 45,264 27,111
Gain on transfer of property in foreclosure (1,385,286) --
Loss on disposal of property 40,328 37,932
Extraordinary gain on extinguishment of debt (564,771) --
Change in accounts:
Restricted cash 11,147 29,811
Accounts receivable (67,690) 116,007
Escrows for taxes 40,361 (18,155)
Other assets (49,861) (168,358)
Accounts payable (75,348) 65,784
Tenant security deposit liabilities 196 1,031
Accrued taxes 30,716 67,831
Other liabilities 97,960 (8,088)
Net cash provided by operating
activities 1,512,936 953,942
Cash flows from investing activities:
Property improvements and replacements (575,256) (568,089)
Insurance proceeds 18,550 --
Deposits to restricted escrows (79,067) (59,959)
Receipts from restricted escrows 30,245 242,777
Net cash used in investing activities (605,528) (385,271)
Cash flows from financing activities:
Loan costs -- (36,776)
Payments on mortgage notes payable (262,636) (311,910)
Distributions -- (1,569)
Net cash used in financing activities (262,636) (350,255)
Net increase in cash balances 644,772 218,416
Cash and cash equivalents at beginning of year 1,063,449 845,033
Cash and cash equivalents at end of year $ 1,708,221 $ 1,063,449
Supplemental disclosure of cash flow
information:
Cash paid for interest $ 1,497,053 $ 2,267,434
<FN>
See Accompanying Notes to Financial Statements
</TABLE>
ANGELES INCOME PROPERTIES, LTD. II
SUPPLEMENTAL DISCLOSURES OF NON-CASH ACTIVITIES
Foreclosure
On March 20, 1995, the Partnership negotiated a Deed in Lieu of Foreclosure for
Executive Plaza Office Park, located in Huntsville, Alabama. The property was
lost to the wrap note holder. The Managing General Partner believes that the
Deed in Lieu of Foreclosure was in the best interest of the Partnership.
In connection with the foreclosure of Executive Plaza Office Park on March 20,
1995, the following accounts were adjusted by the following non-cash amounts:
Accounts receivable $ (101,035)
Investment properties (4,481,841)
Other assets (88,775)
Taxes 144,629
Tenant security deposits 39,919
Mortgage 5,987,086
Other liabilities 509,904
See Accompanying Notes to Financial Statements
ANGELES INCOME PROPERTIES, LTD. II
Notes to Financial Statements
December 31, 1995
Note A Organization and Significant Accounting Policies
Organization: Angeles Income Properties, Ltd. II (the "Partnership ) is a
California limited partnership organized on October 12, 1982 to acquire and
operate residential and commercial real estate properties. The Partnership's
Managing General Partner is Angeles Realty Corporation II ("ARC II"), an
affiliate of Insignia Financial Group, Inc. As of December 31, 1995, the
Partnership operates three residential and one commercial property located in or
near major urban areas in the United States.
Principles of Consolidation: The financial statements include all the accounts
of the Partnership and its majority owned partnerships. All significant
interpartnership balances have been eliminated. Minority interest is immaterial
and not shown separately in the financial statements.
Joint Venture: The Partnership accounts for its 14.4% investment in Princeton
Meadows Joint Venture using the equity method of accounting.
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 interests until the Limited
Partners have received proceeds equal 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 its Brokerage Compensation; (iv) Fourth, to the Partners in
proportion to their interests until the Limited Partners have received
distributions from all sources equal to their additional 2% Cumulative
Distribution; 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.
Note A Organization and Significant Accounting Policies (continued)
Depreciation: Depreciation is computed utilizing accelerated and straight-line
methods over the estimated useful lives of the investment properties and related
personal property. For Federal income tax purposes, depreciation is computed by
using the straight-line method over an estimated life of 5 to 20 years for
personal property and 15 to 40 years for real property.
Cash and Cash Equivalents: The Partnership considers all highly liquid
investments with a maturity when purchased of three months or less to be cash
equivalents. At certain times, the amount of cash deposited at a bank may
exceed the limit on insured deposits.
Investment Properties: Prior to the fourth quarter of 1995, investment
properties were carried at the lower of cost or estimated fair value, which was
determined using the higher of the property's non-recourse debt amount, when
applicable, or the net operating income of the investment property capitalized
at a rate deemed reasonable for the type of property. During the fourth quarter
of 1995 the Partnership adopted FASB Statement No. 121, Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of,
which requires impairment losses to be recorded on long-lived assets used in
operations when indicators of impairment are present and the undiscounted cash
flows estimated to be generated by those assets are less than the assets'
carrying amount. The impairment loss is measured by comparing the fair value of
the asset to its carrying amount. The effect of adoption was not material.
Loan Costs: Loan costs, included in other assets, of $770,800 are being
amortized on a straight-line basis over the lives of the loans. Current
accumulated amortization is $509,336.
Lease Commissions: Lease commissions are being amortized using the straight
line method over the term of the respective leases.
Leases: The Partnership generally leases apartment units for twelve-month terms
or less. Commercial building lease terms are generally from twelve months to
twenty five years.
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.
Tenant Security Deposits: The Partnership requires security deposits from all
apartment lessees for the duration of the lease. Deposits are refunded when the
tenant vacates the apartment if there has been no damage to the unit.
Note A Organization and Significant Accounting Policies (continued)
Fair Value: In 1995, the Partnership implemented Statement of Financial
Accounting Standards No. 107, "Disclosure about Fair Value of Financial
Instruments," which requires disclosure of fair value information about
financial instruments for which it is practicable to estimate that value. The
carrying amount of the Partnership's cash and cash equivalents approximates fair
value due to short-term maturities. The Partnership estimates the fair value of
its fixed rate mortgages by discounted cash flow analysis, based on estimated
borrowing rates currently available to the Partnership (Note B).
Restricted Escrows:
Capital Improvement Reserves - At the time of the refinancing of Georgetown
Apartments, $228,608 of the proceeds were designated for "Capital Improvement
Escrows" for certain capital improvements. At December 31, 1995, the balance
remaining in the escrow was $90,630, which includes interest earned on these
funds. Upon completion of the scheduled property improvements, any excess will
be returned to the property for property operations.
Reserve Account - In addition to the Capital Improvement Reserves, general
Reserve Accounts of $80,000 were established with the refinancing proceeds for
the refinanced property. These funds were established to cover necessary
repairs and replacements of existing improvements, debt service, out-of-pocket
expenses incurred for ordinary and necessary administrative tasks, and payment
of real property taxes and insurance premiums. The Partnership is required to
deposit net operating income (as defined in the mortgage note) from the
refinanced property to the reserve account until the reserve account equals $400
per apartment unit, or $80,000 in total. At December 31, 1995, the balance was
$83,920, which includes interest earned on these funds.
Other Restricted Escrow - In addition to the above escrows, Landmark Apartments
maintains a replacement reserve escrow to fund replacement, refurbishment or
repair of improvements to the property pursuant to the mortgage note document.
As of December 31, 1995, the balance in the escrow account is $159,674, which
includes interest earned on these funds. An additional $79,990 is maintained
for Landmark and Deercreek Apartments.
Reclassifications: Certain reclassifications have been made to the 1994
balances to conform to the 1995 presentation.
Note B Mortgage Notes Payable
The principal terms of mortgage notes payable are as follows:
<TABLE>
<CAPTION>
Monthly Principal Principal
Payment Stated Balance Balance At
Including Interest Maturity Due At December
Property Interest Rate Date Maturity 1995
<S> <C> <C> <C> <C> <C>
Deer Creek Apts.
1st mortgage $ 68,142 9.13% 07/1996 $ 7,517,390 $ 7,581,542
Georgetown Apts.
1st mortgage 40,853 7.83% 10/2003 4,806,300 5,466,508
2nd mortgage 1,128 7.83% 10/2003 172,890 172,890
Landmark Apts.
1st mortgage 36,518 9.75% 07/1997 3,455,599 3,596,420
$146,641 $15,952,179 16,817,360
Less unamortized discounts
at a rate of 8.13% (94,271)
$16,723,089
The Partnership exercised an interest rate buy-down option for Georgetown
Apartments when the debt was refinanced, reducing the stated rate from 8.13% to
7.83%. The fee for the interest rate reduction amounted to $113,000 and is
being amortized as a mortgage discount on the interest method over the life of
the loan. The unamortized discount fee is reflected as a reduction of the
mortgage notes payable and increases the effective rate of the debt to 8.13%.
The carrying value of the Partnership's aggregate debt approximates its fair
value.
The mortgage notes payable are nonrecourse and are secured by pledge of certain
of the Partnership s rental properties and by pledge of revenues from the
respective rental properties. Certain of the notes require prepayment penalties
if repaid prior to maturity.
Scheduled principal payments of mortgage notes payable subsequent to December
31, 1995 are as follows:
1996 $ 7,737,617
1997 3,574,560
1998 75,384
1999 81,504
2000 88,120
Thereafter 5,260,175
$16,817,360
Note C - Income Taxes
Taxable income or loss of the Partnership is reported in the income tax returns
of its partners. Accordingly, no provision for income taxes is made in the
financial statements of the Partnership.
Differences between the net loss as reported and Federal taxable loss result
primarily from changes in rental income received in advance and depreciation
over different methods and lives and on differing cost basis of investment
properties. The following is a reconciliation of reported net loss and Federal
taxable loss:
1995 1994
Net income (loss) as reported $ 1,417,735 $(1,713,927)
Add (deduct):
Depreciation differences (168,686) (337,301)
Unearned income (80,143) (113,953)
Accrued audit (3,260) (36,000)
Gain on foreclosure (1,941,795) --
Other (11,462) 24,876
Federal taxable loss $ (787,611) $(2,176,305)
Federal taxable loss per limited
partnership unit $ (7.81) $ (21.58)
Note C - Income Taxes (continued)
The following is a reconciliation between the Partnership's reported amounts and
Federal tax basis of net assets and liabilities:
Net liabilities as reported $(1,103,621)
Land and buildings 2,845,994
Accumulated depreciation (6,254,966)
Syndication and distribution costs 6,147,678
Investment in Joint Venture 197,934
Unearned income 84,881
Accrued audit 23,240
Other (179,229)
Net liabilities - Federal tax basis $(1,761,911)
Note D Transactions with Affiliated Parties
The Partnership has no employees and is dependent on the Managing General
Partner and its affiliates for the management and administration of all
partnership activities. The Partnership Agreement provides for payments to
affiliates for services and as reimbursement of certain expenses incurred by
affiliates on behalf of the Partnership. The following payments were paid to
the Managing General Partner and affiliates in 1995 and in 1994:
1995 1994
Property management fees $326,338 $348,202
Marketing services 4,756 5,760
Reimbursement for services of affiliates 256,454 390,400
The Partnership insures its properties under a master policy through an agency
and insurer unaffiliated with the Managing General Partner. An affiliate of the
Managing General Partner acquired, in the acquisition of a business, certain
financial obligations from an insurance agency which were later acquired by the
agent who placed the current year's master policy. The current agent assumed
the financial obligations to the affiliate of the Managing General Partner, who
receives payment on these obligations from the agent. The amount of the
Partnership's insurance premiums accruing to the benefit of the affiliate of the
Managing General Partner by virtue of the agent's obligations is not
significant.
Note D - Transactions with Affiliated Parties (continued)
Angeles Mortgage Investment Trust ("AMIT"), a real estate investment trust,
provided financing to the Joint Venture which is secured by the Joint Venture's
investment property known as the Princeton Meadows Golf Course, in the original
amount of $1,280,000. Total interest expense was $203,255 and $196,630 for the
years ended December 31, 1995 and 1994, respectively.
MAE GP Corporation ("MAE GP"), an affiliate of the Managing General Partner,
owns 1,675,113 Class B Shares of AMIT. MAE GP has the option to convert these
Class B Shares, in whole or in part, into Class A Shares on the basis of 1 Class
A Share for every 49 Class B Shares. These Class B Shares entitle MAE GP to
receive 1.2% of the distributions of net cash distributed by AMIT. The Class B
Shares also entitle MAE GP to vote on the same basis as Class A Shares which
allows MAE GP to vote approximately 37% of the total shares (unless and until
converted to Class A Shares at which time the percentage of the vote controlled
represented by the shares held by MAE GP would approximate 1.2% of the vote).
Between the date of acquisition of these shares (November 24, 1992) and March
31, 1995, MAE GP declined to vote these shares. Since that date, MAE GP voted
its shares at the 1995 annual meeting in connection with the election of
trustees and other matters. MAE GP has not exerted, and continues to decline to
exert, any management control over or participate in the management of AMIT.
MAE GP may choose to vote these shares as it deems appropriate in the future.
In addition, Liquidity Assistance, LLC, ("LAC"), an affiliate of the Managing
General Partner and an affiliate of Insignia Financial Group, Inc., which
provides property management and partnership administration services to the
Partnership, owns 63,200 Class A Shares of AMIT. These Class A Shares entitle
LAC to vote approximately 1.5% of the total shares.
As part of a settlement of certain disputes with AMIT, MAE GP granted to AMIT an
option to acquire the Class B Shares. This option can be exercised at the end
of 10 years or when all loans made by AMIT to partnerships affiliated with MAE
GP as of November 9, 1994, (which is the date of execution of a definitive
Settlement Agreement) have been paid in full, but in no event prior to November
9, 1997. AMIT delivered to MAE GP cash in the sum of $250,000 at closing, which
occurred April 14, 1995, as payment for the option. Upon exercise of the
option, AMIT would remit to MAE GP an additional $94,000.
Simultaneously with the execution of the option, MAE GP executed an irrevocable
proxy in favor of AMIT, the result of which is MAE GP will be able to vote the
Class B Shares on all matters except those involving transactions between AMIT
and MAE GP affiliated borrowers or the election of any MAE GP affiliate as an
officer or trustee of AMIT. On those matters, MAE GP granted to the AMIT
trustees, in their capacity as trustees of AMIT, proxies with regard to the
Class B Shares instructing such trustees to vote said Class B Shares in
accordance with the vote of the majority of the Class A Shares voting to be
determined without consideration of the votes of "Excess Class A Shares" as
defined in Section 6.13 of the Declaration of Trust of AMIT.
Note E - Investment Properties and Accumulated Depreciation
</TABLE>
<TABLE>
<CAPTION>
Initial Cost
To Partnership
Cost
Buildings Capitalized
and Related (Removed)
Personal Subsequent to
Description Encumbrances Land Property Acquisition
<S> <C> <C> <C> <C>
Atlanta Crossing
Shopping Center $ -- $ 213,104 $ 6,070,896 $(1,091,891)
Deer Creek Apts. 7,581,542 952,932 8,863,067 876,978
Georgetown Apts. 5,639,398 293,416 6,544,584 191,418
Landmark Apts. 3,596,420 737,951 9,885,049 1,003,949
Totals $16,817,360 $2,197,403 $31,363,596 $ 980,454
Less unamortized
discounts (94,271)
$16,723,089
</TABLE>
<TABLE>
<CAPTION>
Gross Amount At Which Carried
At December 31, 1995
Buildings
And Related
Personal Accumulated Date Depreciable
Description Land Property Total Depreciation Acquired Life-Years
<S> <C> <C> <C> <C> <C> <C>
Atlanta Crossing
Shopping Center $ 213,104 $ 4,979,005 $ 5,192,109 $ 3,941,425 09/27/83 10-20
Deer Creek Apts. 952,932 9,740,045 10,692,977 6,122,400 09/28/83 10-20
Georgetown Apts. 293,416 6,736,002 7,029,418 4,164,032 11/21/83 10-20
Landmark Apts. 737,951 10,888,998 11,626,949 7,057,131 12/16/83 10-20
Totals $2,197,403 $32,344,050 $34,541,453 $21,284,988
</TABLE>
The depreciable lives included above are for the buildings and components. The
depreciable lives for related personal property are for 5 to 7 years.
Note E - Investment Properties and Accumulated Depreciation (continued)
Reconciliation of "Investment Properties and Accumulated Depreciation":
Year Ended December 31,
1995 1994
Investment Properties
Balance at beginning of year $ 47,681,683 $47,250,106
Property improvements 575,256 568,089
Write-offs due to replacements (206,837) (136,512)
Foreclosure of Executive Plaza (13,508,649) --
Balance at end of year $ 34,541,453 $47,681,683
Accumulated Depreciation
Balance at beginning of year $ 28,596,342 $26,329,653
Additions charged to expense 1,863,412 2,365,269
Write-offs due to replacements (147,959) (98,580)
Foreclosure of Executive Plaza (9,026,807) --
Balance at end of year $ 21,284,988 $28,596,342
The aggregate cost of the real estate for Federal income tax purposes at
December 31, 1995 and 1994 is $37,387,447 and $55,009,081. The accumulated
depreciation taken for Federal income tax purposes at December 31, 1995 and 1994
is $27,539,954 and $37,262,575.
Note F - Investment in Joint Venture
Condensed balance sheet information of the Joint Venture at December 31, 1995 is
as follows:
Assets
Cash $ 114,589
Deferred charges and other assets 116,790
Investment properties, net 1,897,831
Total $2,129,210
Liabilities and Partners' Capital
Notes payable to AMIT (Note D) $1,567,301
Other liabilities 412,688
Partners' capital 149,221
Total $2,129,210
Note F - Investment in Joint Venture (continued)
The condensed profit and loss statement of the Joint Venture are summarized as
follows:
Year Ended
December 31,
1995 1994
Revenue $ 1,158,070 $ 1,169,094
Costs and expenses (1,472,406) (1,357,362)
Net loss $ (314,336) $ (188,268)
The Partnership's equity interest in the loss of the Joint Venture for the years
ended December 31, 1995, and 1994 was $45,264 and $27,111, respectively.
The Princeton Meadows Golf Course property had an underground fuel storage tank
that was removed in 1992. This fuel storage tank caused contamination to the
area. Management installed monitoring wells in the area where the tank was
formerly buried. Some samples from these wells indicated lead and phosphorous
readings that were slightly higher than the range prescribed by the New Jersey
Department of Environmental Protection ("DEP"). The Joint Venture notified DEP
of the findings when they were first discovered. However, DEP had not given 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 plans to engage two firms.
One engineering firm will be contracted to conduct consulting and compliance
work while a second firm will perform the field work necessary for the clean-
up. Contracts to remediate the site have been received from these two
engineering and environmental firms and are being reviewed. The Joint Venture
has established a $199,000 reserve for the costs of the clean-up. The
contracts are expected to be executed in early 1996 with work commencing and
expected to be completed during 1996. The Managing General Partner believes
this reserve is sufficient to cover all costs and liabilities associated with
this incident.
Note G - Operating Leases
Tenants of the commercial properties are responsible for their own utilities and
maintenance of their space, and payment of their proportionate share of common
area maintenance, utilities, insurance and real estate taxes. Tenants are
generally not required to pay a security deposit. Bad debt expense has been
within the Managing General Partner's expectations.
Note G - Operating Leases (continued)
As of December 31, 1995, the Partnership had minimum future rentals under
noncancellable leases with terms ranging from twelve months to twenty five
years.
1996 $ 605,096
1997 590,710
1998 487,313
1999 453,754
2000 427,147
Thereafter 1,948,937
$4,512,957
Note H - Distributions
Distributions of $156,871 were made in 1994, by Georgetown AIP II, L.P., the
lower tier partnership. Of these distributions, Angeles Income Properties, Ltd.
II, the Limited Partner, received $155,302 or 99% of the distribution. AIP II,
G.P., Limited Partnership, the general partner of Georgetown AIP II, L.P.,
received $1,569 or 1% of the distribution.
Note I - Ground Lease
The Partnership assumed three operating leases in connection with the
acquisition of a leasehold interest in the Atlanta Crossing Shopping Center.
The aggregate annual lease expense for the years ended December 31, 1995 and
1994 was $52,655 and $52,126, respectively. Such amounts are included in the
statements of operation as operating expenses. The terms of these leases
provide for increases in rent every five years, based on the Consumer Price
Index.
As of December 31, 1995, the aggregate minimum rental payments under the land
leases were as follows:
1996 $ 52,655
1997 52,655
1998 52,655
1999 52,655
2000 52,655
Thereafter 1,053,100
Total $1,316,375
Note J - Abandoned Limited Partnership Units
In 1995 and 1994, the number of Limited Partnership Units decreased by 1 unit
and 148 units, respectively, due to limited partners abandoning their units. In
abandoning his or her Limited Partnership Unit, a limited partner relinquishes
all right, title and interest in the Partnership as of the date of abandonment.
However, during the year of abandonment, the Limited Partner will still be
allocated his or her share of the income or loss. The loss per Limited
Partnership Unit in the accompanying Statements of Operations is calculated
based on the number of units outstanding at the beginning of the year.
Note K - Foreclosure of Executive Plaza
On March 20, 1995 the Partnership negotiated a Deed in Lieu of Foreclosure for
Executive Plaza Office Park, located in Huntsville, Alabama. The total
outstanding debt on the property at the time of foreclosure was $6,429,997
including $442,911 in accrued interest. The net fair value and the recorded net
book value less related net operating liabilities as of the date of foreclosure
totaled $5,867,127 and $4,481,841, respectively. The net gain on foreclosure
amounted to $1,950,057 of which $1,385,286 represented a gain on transfer of
property in foreclosure and $564,771 represented a gain on the extinguishment of
related debt. The gain on transfer of assets represents the difference between
fair value and the net book value of the property surrendered. The
extraordinary gain represents the difference between the settlement amount of
the debt and the recorded amount of the debt extinguished pursuant to the
foreclosure.
Item 8. Changes in and Disagreements with Accountant on Accounting and
Financial Disclosures
There were no disagreements with Ernst & Young, LLP regarding the 1994 or
1995 audits of the Partnership's financial statements.
PART III
Item 9. Directors, Executive Officers, Promoters and Control Persons;
Compliance with Section 16(a) of the Exchange Act
The name of the directors and executive officers of Angeles Realty
Corporation II ("ARC II"), the Partnership's Managing General Partner as of
December 31, 1995, their age and the nature of all positions with ARC II
presently held by them are as follows:
Name Age Position
Carroll D. Vinson 55 President
Robert D. Long, Jr. 28 Controller and Principal
Accounting Officer
William H. Jarrard, Jr. 49 Vice President
John K. Lines 36 Secretary
Kelley M. Buechler 38 Assistant Secretary
Carroll D. Vinson has been President of Metropolitan Asset Enhancement, L.P.,
and subsidiaries since August of 1994. Prior to that, during 1993 to August
1994, Mr. Vinson was affiliated with Crisp, Hughes & Co. (regional CPA firm) and
engaged in various other investment and consulting activities. Briefly, in
early 1993, Mr. Vinson served as President and Chief Executive Officer of
Angeles Corporation, a real estate investment firm. From 1991 to 1993, Mr.
Vinson was employed by Insignia in various capacities including Managing
Director-President during 1991. From 1986 to 1990, Mr. Vinson was President and
a Director of U.S. Shelter Corporation, a real estate services company, which
sold substantially all of its assets to Insignia in December 1990.
Robert D. Long, Jr. is Controller and Principal Accounting Officer. Prior to
joining Metropolitan Asset Enhancement, L.P., and subsidiaries, he was an
auditor for the State of Tennessee and was associated with the accounting firm
of Harshman Lewis and Associates. He is a graduate of the University of
Memphis.
William H. Jarrard, Jr. is Managing Director - Partnership Administration of
Insignia Financial Group, Inc. ("Insignia"). During the five years prior to
joining Insignia in 1991, he served in a similar capacity for U.S. Shelter. He
was previously associated with the accounting firm, Ernst & Whinney, for eleven
years. Mr. Jarrard is a graduate of the University of South Carolina and a
certified public accountant.
John K. Lines has been General Counsel and Secretary of Insignia since June
1994. From May 1993 until June 1994, Mr. Lines was the Assistant General
Counsel and Vice President of Ocwen Financial Corporation in West Palm Beach,
Florida. From October 1991 until April 1993, Mr. Lines was a Senior Attorney
with Banc One Corporation in Columbus, Ohio. From May 1984 until October 1991,
Mr. Lines was employed as an Associate Attorney with Squire Sanders & Dempsey in
Columbus, Ohio.
Kelley M. Buechler is Assistant Secretary of Insignia. During the five years
prior to joining Insignia in 1991, she served in a similar capacity for U.S.
Shelter. Ms. Buechler is a graduate of the University of North Carolina.
Item 10. Executive Compensation
No direct form of compensation or remuneration was paid by the Partnership to
any officer or director of ARC II. The Partnership has no plan, nor does the
Partnership presently propose a plan, which will result in any remuneration
being paid to any officer or director upon termination of employment. However,
fees and other payments have been made to the Partnership's Managing General
Partner and its affiliates, as described in Note D of the Financial Statements
included under Item 7, which is incorporated herein by reference.
Item 11. Security Ownership of Certain Beneficial Owners and Management
As of December 31, 1995, no person owned of record more than 5% of Limited
Partnership Units of the Partnership nor was any person known by the Partnership
to own of record and beneficially, or beneficially only, more than 5% of such
securities.
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 provide 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 successor general
partners have 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 Partners' capital account and (ii) the fair market value
of the share of Distributable Net Proceeds to which the General Partners 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.
During the year ended December 31, 1995, the transactions that occurred
between the Partnership and ARC II and affiliates of ARC II pursuant to the
terms of the Agreement are disclosed under Note D of the Partnership's Financial
Statements included under Item 7, which is hereby incorporated by reference.
PART IV
Item 13. Exhibits and Reports on Form 8-K
(a) Exhibits required by Item 601 of Regulation S-B: Refer to
Exhibit Index.
(b) No reports on Form 8-K were filed during the fourth quarter of
1995.
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 INCOME PROPERTIES, LTD. II
(A California Limited Partnership)
(Registrant)
By: Angeles Realty Corporation II
Managing General Partner
By: /s/Carroll D. Vinson
Carroll D. Vinson
President, Director
Date: March 11, 1996
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/Carroll D. Vinson President, Director March 11, 1996
Carroll D. Vinson
/s/Robert D. Long, Jr. Controller and March 11, 1996
Robert D. Long, Jr. Principal
Accounting Officer
ANGELES INCOME PROPERTIES, LTD. II
EXHIBIT INDEX
Exhibit Number Description of Exhibit
3.1 Amendment Agreement of Limited Partnership of the
Partnership dated October 12, 1982 filed in Form
10K dated November 30, 1983, incorporated herein
by reference
3.2 Amended Agreement of Limited Partnership of the
Partnership dated March 31, 1983 filed in the
Prospectus, of the Partnership, as Exhibit A,
dated March 31, 1983 incorporated herein by
reference
10.1 Agreement of Purchase and of Real Property with
Exhibits - Executive Plaza filed in Form 8K dated
September 27, 1983, incorporated herein by
reference
10.2 Agreement of Purchase and Sale of Real Property
with Exhibits - Atlanta Crossing Shopping Center
filed in Form 8K dated September 27, 1983,
incorporated herein by reference.
10.3 Agreement of Purchase and Sale of Real Property
with Exhibits - Deer Creek Apartments filed in
Form 8K dated September 28, 1983, incorporated
herein by reference.
10.4 Agreement of Purchase and Sale of Real
Property with Exhibits - Georgetown
Apartments filed in Form 8K dated November
21, 1983, incorporated herein by reference
10.5 Agreement of Purchase and Sale of Real
Property with Exhibits - Landmark Apartments
filed in Form 8K dated December 16, 1983,
incorporated herein by reference
10.6 Multifamily Note - Deer Creek Apartments,
dated June 11, 1986 filed in Form 10K dated
February 25, 1987, incorporated herein by
reference.
10.7 Multifamily Note - Georgetown Apartments,
dated June 16, 1985, incorporated herein by
reference.
10.8 Additional Financing - Deer Creek Apartments,
dated September 22, 1987. Funded November
1988 filed in Form 10K dated March 29, 1989,
incorporated herein by reference.
ANGELES INCOME PROPERTIES, LTD. II
EXHIBIT INDEX
Exhibit Number Description of Exhibit
10.9 Additional Financing - Georgetown Apartments,
dated September 22, 1989, incorporated herein
by reference.
10.10 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.
10.11 Princeton Golf Course Joint Venture Agreement
with Exhibits - dated August 21, 1991 between
the Partnership, Angeles Partners XI and
Angeles Partners XII filed in Form 10-K dated
March 27, 1992, incorporated herein by
reference.
10.12 Stock Purchase Agreement dated November 24,
1992 showing the purchase of 100% of the
outstanding stock of Angeles Realty
Corporation II, a subsidiary of MAE GP
Corporation, filed in Form 8-K dated December
31, 1993, which is incorporated herein by
reference.
10.13 Deed in Lieu of Foreclosure between Executive
Plaza, L.P. and Capshaw Investment Company, L.L.C.
dated March 20, 1995, incorporated herein by
reference.
16 Letter from the Registrant's former
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.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from Angeles
Income Properties, Ltd. II Year-End 1995 10-KSB and is qualified in it entirety
by reference to such 10-KSB filing.
</LEGEND>
<CIK> 0000711642
<NAME> ANGELES INCOME PROPERTIES, LTD. II
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<CASH> 1,708,221
<SECURITIES> 0
<RECEIVABLES> 140,708
<ALLOWANCES> (30,998)
<INVENTORY> 0
<CURRENT-ASSETS> 0<F1>
<PP&E> 34,541,453
<DEPRECIATION> (21,284,988)
<TOTAL-ASSETS> 16,370,559
<CURRENT-LIABILITIES> 0<F1>
<BONDS> 16,723,089
0
0
<COMMON> 0
<OTHER-SE> (1,103,621)
<TOTAL-LIABILITY-AND-EQUITY> 16,370,559
<SALES> 0
<TOTAL-REVENUES> 6,928,861
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 7,375,591
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,776,985
<INCOME-PRETAX> 1,417,735
<INCOME-TAX> 0
<INCOME-CONTINUING> 1,417,735
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,417,735
<EPS-PRIMARY> 14.06
<EPS-DILUTED> 0
<FN>
<F1>The Partnership has an unclassified balance sheet.
</FN>
</TABLE>
