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 [NO FEE REQUIRED]
For the fiscal year ended December 31, 1996
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 (I.R.S. Employer
incorporation or organization)
Identification No.)
One Insignia Financial Plaza, P.O. Box 1089
Greenville, South Carolina 29602
(Address of principal executive offices) (Zip Code)
Issuer's telephone number (864) 239-1000
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 Yes X or No
State issuer's revenues for its most recent fiscal year. $6,868,000
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 "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.
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 169,168 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, 1996, 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's balance
sheet on the equity method and is included in "Investment in joint venture".
SCHEDULE OF PROPERTIES:
(dollar amounts in thousands)
Gross
Carrying Accumulated Federal
Property Value Depreciation Rate Method Tax Basis
Atlanta Crossing
Shopping Center $ 5,217 $ 4,219 5-20 yrs (1) $ 1,968
Deer Creek Apts. 10,958 6,672 5-20 yrs (1) 2,642
Georgetown Apts. 7,132 4,521 5-20 yrs (1) 1,220
Landmark Apts. 11,802 7,632 5-20 yrs (1) 2,746
$ 35,109 $ 23,044 $ 8,576
(1) Straight line and accelerated
See "Note A" of the financial statements included in "Item 7." for a description
of the Partnership's depreciation policy.
SCHEDULE OF MORTGAGES:
(dollar amounts in thousands)
Principal Principal
Balance At Balance
December 31, Interest Period Maturity Due At
Property 1996 Rate Amortized Date Maturity
Deer Creek Apts.
1st mortgage $ 6,295 7.33% 30 yrs 11/2003 $ 5,779
Georgetown Apts.
1st mortgage 5,402 7.83% 28.67 yrs 10/2003 4,806
2nd mortgage 173 7.83% (1) 10/2003 173
Landmark Apts.
1st mortgage 6,590 7.33% 30 yrs 11/2003 6,054
18,460 $16,812
Less unamortized
discounts (85)
$ 18,375
(1) Interest only payments.
SCHEDULE OF RENTAL RATES AND OCCUPANCY:
Average Annual Average Annual
Rental Rates Occupancy
Property 1996 1995 1996 1995
Atlanta Crossing $ 4.14/sf $ 3.68/sf 91% 89%
Shopping Center (2)
Deer Creek Apartments 8,451/unit 8,325/unit 95% 95%
Georgetown Apartments 7,135/unit 6,890/unit 97% 98%
Landmark Apartments (1) 7,748/unit 7,097/unit 92% 97%
(1) The decrease in occupancy at Landmark Apartments is due to lower interest
rates attracting new home buyers.
(2) The Managing General Partner is still working to lease several outparcels
at this property and hopes to increase occupancy in 1997.
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 1997-2006:
Number of Annual % of Gross
Atlanta Crossing Expirations Square Feet Rent Annual Rent
1997 1 1,600 $ 14,000 2%
1998 3 9,712 83,000 13%
1999 3 4,684 44,000 7%
2000 2 10,658(1) 70,000 11%
2001 1 1,600 15,000 2%
2002 -- -- -- --
2003 1 (1) 41,000 6%
2004 2 11,971(1) 76,000 12%
2005 2 53,820(1) 92,000 14%
2006 2 55,009 214,000 33%
(1) Includes a tenant that holds a ground lease and is not included in the
total square footage for the property (See "Note H" for further
information).
The following schedule reflects information on tenants occupying 10% or more of
the leasable square feet for each property:
Nature of Annual Rent Lease
Business Leased Per Square Foot Expiration
Atlanta Crossing Shopping Center
Grocery Store 53,820 $1.18 12/31/05
Discount Store 50,000 3.30 02/28/06
Real estate taxes and rates in 1996 for each property were: (dollar amounts
in thousands)
1996 1996
Billing Rate
Atlanta Crossing $ 49,000 3.16
Shopping Center
Deer Creek Apartments 247,000 2.31
Georgetown Apartments 123,000* 8.71
Landmark Apartments 118,000 1.21
*Amount per 1995 billings; tax bills for 1996 not yet received.
ITEM 3. LEGAL PROCEEDINGS
Angeles Corporation ("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 Partnership. 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 $63,000 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 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 99,784 Limited Partnership Units outstanding and 4,355
Limited Partners of record. During the year, the number of Limited Partnership
Units decreased by 67 Units 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.
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 loss for the year ended December 31, 1996, was $270,000
versus net income of $1,418,000 for the year ended December 31, 1995. The
decrease in net income is primarily due to a gain on foreclosure of Executive
Plaza Office Park on March 20, 1995 (see discussion below). A major contributor
to the net loss in 1996 was an extraordinary loss on refinancing of $173,000 due
to the refinancing of Landmark Apartments and Deer Creek Apartments (see
discussion below).
The Partnership generated revenues of $6,868,000 for the year ended December 31,
1996, versus $7,038,000 for the year ended December 31, 1995. This decrease in
revenue is primarily due to rental revenue lost as a result of the foreclosure
of Executive Plaza Office Park. This decreased revenue was partially offset by
an increase in rental revenue at Deer Creek Apartments, Landmark Apartments and
Georgetown Apartments. Rental rate increases lead to an increase in rental
revenue. In addition, other income increased due to an increase in laundry
income at Deer Creek Apartments and utility collections at Atlanta Crossing
Shopping Center. Also contributing to the increase in other income was interest
earned on the capital reserve for Deer Creek Apartments, which was required by
the interim refinancing in July 1996.
The Partnership incurred expenses from operations of $6,943,000 for the year
ended December 31, 1996, versus $7,485,000 for the year ended December 31, 1995.
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, depreciation,
interest and property taxes. Administrative expenses decreased due to decreased
cost reimbursements for partnership administration services. Maintenance expense
increased at Landmark Apartments due to the repair of damages sustained from
Hurricane Fran. Also there was an increase in maintenance expense due to
interior and exterior building improvements and minor paving work completed at
Landmark Apartments.
The Managing General Partner determined that past due amounts from tenants of
the Atlanta Crossing Shopping Center amounting to $49,000 were uncollectible,
and therefore reserved these amounts, resulting in bad debt expense for the year
ended December 31, 1996. Partially offsetting this amount was $22,000 in bad
debt recovery by the Partnership from an affiliate of the former owner of the
Managing General Partner of the Partnership.
The Partnership has a 14.4% investment in the Princeton Meadows Golf Course
Joint Venture. For the year ended December 31, 1996, the Partnership realized
equity in the loss of the Joint Venture of $22,000, as compared to equity in the
loss of the Joint Venture of $45,000 for the year ended December 31, 1995, (See
"Note F - Investment in Joint Venture"). The decreased loss for the year ended
December 31, 1996, versus the year ended December 31, 1995, can be attributed to
an increase in revenue. These revenue increases are the result of maintenance
upgrades at the golf course that have improved the appearance of the property.
The increase in expense can be attributed to the purchase of liability
insurance, necessitated by the environmental issue at the property (See "Note
F"). Also, advertising expense increased as a result of an aggressive
advertising campaign and salary expense increased due to the hiring of
additional qualified personnel, including a full time golf pro for the course.
The Partnership also implemented a preventative maintenance program and
repairs were made to the cart paths and course.
On November 1, 1996, the Partnership refinanced the mortgages encumbering Deer
Creek Apartments and Landmark Apartments. As a result of the refinance the
Partnership incurred a $173,000 loss on refinancing due to the write-off of
unamortized loan costs and of prepayment penalties. The new mortgage
indebtedness of $6,300,000 for Deer Creek Apartments and $6,600,000 for Landmark
Apartments carries a stated interest rate of 7.33% and a maturity date of
November 2003. This financing was necessary due to the maturity of the mortgage
secured by Deer Creek Apartments in July 1996. Landmark Apartments was
refinanced to obtain a lower interest rate and to provide funds needed to help
close the Deer Creek Apartments refinancing.
The Partnership realized a $40,000 loss on disposal of property for the year
ended December 31, 1995. $47,000 of the loss related to Georgetown Apartments
and was due to the write-off of roofs due to replacement. These roofs were not
fully depreciated at the time of replacement. Offsetting this loss was a gain
of $7,000 in 1995 at Deer Creek Apartments related to one unit being written off
due to fire damage. This damage was covered by insurance.
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 $1,950,000 of which $1,385,000
represented a gain on transfer of property in foreclosure and $565,000
represented an extraordinary gain on early extinguishment of related debt. 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.
Included in maintenance expense for the year ended December 31, 1996 is $260,000
of major repair and maintenance mainly comprised of major landscaping, exterior
building improvements and interior building improvements.
As part of the ongoing business plan of the Partnership, the Managing General
Partner monitors the rental market environment of each of its investment
properties to assess the feasibility of increasing rents, maintaining or
increasing occupancy levels and protecting the Partnership from increases in
expense. As part of this plan, the Managing General Partner attempts to protect
the Partnership from 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 needed 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
For the year ended December 31, 1996, the Partnership had unrestricted cash of
$2,855,000 as compared to $1,708,000 at December 31, 1995. Net cash provided by
operating activities remained stable from 1995 to 1996. Net cash used in
investing activities increased primarily as a result of increased deposits to
restricted escrows required by the refinance of Deer Creek Apartments and
Landmark Apartments. Cash flows from financing activities increased due to the
proceeds received from these refinances.
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 engaged an engineering firm to
conduct consulting and compliance work and a second firm to perform the field
work necessary for the clean-up. The Joint Venture recorded a liability of
$199,000 for the costs of the clean-up. As of December 31, 1996, the field work
necessary for clean-up had been completed and all that remains is the completion
of the compliance requirements with the DEP, which the Managing General Partner
expects to complete in 1997. The Managing General Partner believes the
liability recorded is sufficient to cover all costs still 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 Partnership has
mortgage notes payable totaling $18,375,000. The first mortgages secured by
Deercreek Apartments and Landmark Apartments mature in November 2003. The
remaining debt, which is secured by Georgetown Apartments, matures in October
2003.
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 and the availability of cash
reserves. There were no cash distributions for the years ended December 31,
1996, or December 31, 1995.
ITEM 7. FINANCIAL STATEMENTS
ANGELES INCOME PROPERTIES, LTD. II
LIST OF FINANCIAL STATEMENTS
Independent Auditors' Report
Consolidated Balance Sheet - December 31, 1996
Consolidated Statements of Operations - Years ended December 31, 1996
and 1995
Consolidated Statement of Changes in Partners' Deficit - Years ended
December 31, 1996 and 1995
Consolidated Statements of Cash Flows - Years ended December 31, 1996
and 1995
Notes to Consolidated Financial Statements
Report of Ernst & Young LLP, Independent Auditors
The Partners
Angeles Income Properties, Ltd. II
We have audited the accompanying consolidated balance sheet of Angeles Income
Properties, Ltd. II as of December 31, 1996, and the related consolidated
statements of operations, changes in partners' deficit and cash flows for each
of the two years in the period ended December 31, 1996. 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 consolidated financial position of Angeles Income
Properties, Ltd. II as of December 31, 1996, and the consolidated results of its
operations and its cash flows for each of the two years in the period ended
December 31, 1996, in conformity with generally accepted accounting principles.
/S/ ERNST & YOUNG LLP
Greenville, South Carolina
February 7, 1997
ANGELES INCOME PROPERTIES, LTD. II
CONSOLIDATED BALANCE SHEET
(in thousands, except unit data)
December 31, 1996
Assets
Cash and cash equivalents:
Unrestricted $ 2,855
Restricted--tenant security deposits 259
Accounts receivable (net of allowance for
doubtful accounts of $80) 199
Escrows for taxes 95
Restricted escrows 1,606
Other assets 735
Investment in, and advances of $44 to, joint
venture (Note F) 44
Investment properties (Notes B and E):
Land $ 2,198
Buildings and related personal
property 32,911
35,109
Less accumulated depreciation (23,044) 12,065
$ 17,858
Liabilities and Partners' Deficit
Liabilities
Accounts payable $ 252
Tenant security deposits 256
Accrued taxes 178
Other liabilities 171
Mortgage notes payable (Notes B and E) 18,375
Partners' Deficit
General partners $ (453)
Limited partners (99,784 units issued and
outstanding) (921) (1,374)
$ 17,858
See Accompanying Notes to Consolidated Financial Statements
ANGELES INCOME PROPERTIES, LTD. II
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except unit data)
Years Ended December 31,
1996 1995
Revenues:
Rental income $ 6,504 $ 6,745
Other income 364 293
Total revenues 6,868 7,038
Expenses:
Operating 1,878 2,054
General and administrative 317 339
Maintenance 873 868
Depreciation 1,759 1,863
Interest 1,537 1,777
Property taxes 552 609
Bad debt expense (recovery), net 27 (25)
Total expenses 6,943 7,485
Equity in loss of joint venture (Note F) (22) (45)
Gain on transfer of
property in foreclosure (Note K) -- 1,385
Loss on disposal of property -- (40)
(Loss) income before
extraordinary items (97) 853
Extraordinary item - gain on
extinguishment of debt (Note K) -- 565
Extraordinary item - loss on
refinancing (Note J) (173) --
Net (loss) income $ (270) $ 1,418
Net (loss) income allocated
to general partners (1%) $ (3) $ 14
Net (loss) income allocated
to limited partners (99%) (267) 1,404
Net (loss) income $ (270) $ 1,418
Per limited partnership unit:
(Loss) income before
extraordinary item $ (.96) $ 8.46
Extraordinary item - gain on
extinguishment of debt -- 5.60
Extraordinary item - loss on
refinancing (1.72) --
Net (loss) income $ (2.68) $ 14.06
See Accompanying Notes to Consolidated Financial Statements
ANGELES INCOME PROPERTIES, LTD. II
CONSOLIDATED STATEMENT OF CHANGES IN PARTNERS' DEFICIT
(in thousands, except unit data))
Limited
Partnership General Limited
Units Partners Partners Total
Original capital contributions 100,000 $ 1 $ 50,000 $ 50,001
Partners' deficit
at December 31, 1994 99,852 $ (464) $ (2,058) $ (2,522)
Abandonment of Limited
Partnership Units (Note I) (1) -- -- --
Net income for the year ended
December 31, 1995 -- 14 1,404 1,418
Partners' deficit at
December 31, 1995 99,851 (450) (654) (1,104)
Abandonment of Limited
Partnership units (Note I) (67) -- -- --
Net loss for the year ended
December 31, 1996 -- (3) (267) (270)
Partners' deficit
at December 31, 1996 99,784 $ (453) $ (921) $ (1,374)
See Accompanying Notes to Consolidated Financial Statements
ANGELES INCOME PROPERTIES, LTD. II
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
<TABLE>
<CAPTION>
Years Ended December 31,
1996 1995
<S> <C> <C>
Cash flows from operating activities:
Net (loss) income $ (270) $ 1,418
Adjustments to reconcile net (loss) income to net
cash provided by operating activities:
Depreciation 1,759 1,863
Amortization of discounts, loan costs and
lease commissions 91 134
Bad debt expense (recovery), net 27 (25)
Equity in loss of joint venture 22 45
Gain on transfer of property in foreclosure -- (1,385)
Loss on disposal of property -- 40
Extraordinary item - loss on refinancing 173 --
Extraordinary item - gain on extinguishment of debt -- (565)
Change in accounts:
Restricted cash (14) 11
Accounts receivable (116) (68)
Escrows for taxes 1 40
Other assets (44) (50)
Accounts payable (48) (75)
Tenant security deposit liabilities 11 --
Accrued taxes 64 31
Other liabilities (74) 99
Net cash provided by operating
activities 1,582 1,513
Cash flows from investing activities:
Property improvements and replacements (416) (575)
Insurance proceeds -- 19
Deposits to restricted escrows (1,531) (79)
Receipts from restricted escrows 339 30
Advances to joint venture (29) --
Net cash used in investing activities (1,637) (605)
Cash flows from financing activities:
Loan costs (309) --
Payments on mortgage notes payable (183) (263)
Repayments of mortgage notes payable (23,974) --
Proceeds from mortgage notes payable 25,800 --
Debt extinguishment costs (132) --
Net cash provided by (used in)
financing activities 1,202 (263)
Net increase in cash and cash equivalents 1,147 645
Unrestricted cash and cash equivalents at beginning of year 1,708 1,063
Unrestricted cash and cash equivalents at end of year $ 2,855 $ 1,708
Supplemental disclosure of cash flow
information:
Cash paid for interest $ 1,473 $ 1,497
Fixed assets included in accounts payable $ 152 $ --
<FN>
See Accompanying Notes to Consolidated 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, the following
accounts were adjusted by the following non-cash amounts: (dollar amounts in
thousands)
Accounts receivable $ (101)
Investment properties (4,482)
Other assets (89)
Taxes 145
Tenant security deposits 40
Mortgage 5,987
Other liabilities 510
See Accompanying Notes to Consolidated Financial Statements
ANGELES INCOME PROPERTIES, LTD. II
Notes to Consolidated Financial Statements
December 31, 1996
NOTE A - ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
Organization: Angeles Income Properties, Ltd. II (the "Partnership" or
"Registrant") 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, 1996,
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 ("Joint Venture") using the equity method of accounting.
Allocations and Distributions to Partners: In accordance with the Partnership
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.
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.
Unrestricted 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.
Restricted Cash - Tenant Security Deposits: The Partnership requires security
deposits from all apartment lessees for the duration of the lease and considers
the deposits to be restricted cash. Deposits are refunded when the tenant
vacates the apartment if there has been no damage to the unit.
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" on the balance sheet, of
$547,000 are being amortized on a straight-line basis over the lives of the
loans. Current accumulated amortization is $81,000 and is also included in
"Other assets" on the balance sheet.
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.
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 (see "Note B").
Restricted Escrows:
Capital Improvement Reserves - At the time of the refinancing of Deer Creek and
Landmark Apartments, $1,313,000 of the proceeds for Deer Creek Apartments and
$150,000 of the proceeds for Landmark Apartments were designated for "Capital
Improvement Escrows" for certain capital improvements. At December 31, 1996,
the balance remaining in the escrows were, $1,336,000 and $150,000,
respectively, which includes interest earned on these funds. Upon completion of
the scheduled property improvements any excess funds 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 Georgetown Apartments. 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, 1996, the balance was
$88,000, which includes interest earned on these funds.
Reclassifications: Certain reclassifications have been made to the 1995
balances to conform to the 1996 presentation.
NOTE B - MORTGAGE NOTES PAYABLE
The principal terms of mortgage notes payable are as follows (dollar amounts in
thousands):
Monthly Principal Principal
Payment Stated Balance Balance At
Including Interest Maturity Due At December 31,
Property Interest Rate Date Maturity 1996
Deer Creek Apts.
1st mortgage $ 43 7.33% 11/2003 $ 5,779 $ 6,295
Georgetown Apts.
1st mortgage 41 7.83% 10/2003 4,806 5,402
2nd mortgage 1 7.83% 10/2003 173 173
Landmark Apts.
1st mortgage 45 7.33% 11/2003 6,054 6,590
$ 130 $ 16,812 18,460
Less unamortized discounts
at a rate of 8.13% (85)
$ 18,375
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, 1996, are as follows (dollar amounts in thousands):
1997 194
1998 209
1999 225
2000 243
2001 261
Thereafter 17,328
$18,460
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 income (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 bases of
investment properties. The following is a reconciliation of reported net income
(loss) and Federal taxable loss:
1996 1995
Net income (loss) as reported $ (270) $ 1,418
Add (deduct):
Depreciation differences (69) (169)
Unearned income 13 (80)
Accrued audit (3) (3)
Gain on foreclosure -- (1,942)
Other (14) (12)
Federal taxable loss $ (343) $ (788)
Federal taxable loss per limited
partnership unit $ (3.41) $ (7.81)
The following is a reconciliation between the Partnership's reported amounts and
Federal tax basis of net assets and liabilities:
Net deficiency as reported $ (1,374)
Land and buildings 2,836
Accumulated depreciation (6,325)
Syndication and distribution costs 6,148
Investment in Joint Venture 199
Unearned income (88)
Accrued audit 20
Other (7)
Net assets - Federal tax basis $ 1,409
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 1996 and in 1995:
1996 1995
Property management fees $ 322 $ 326
Reimbursement for services of affiliates 223 261
A director of Insignia Financial Group, Inc. is affiliated with a professional
legal association that received fees of $24,000 in connection with the 1996
refinancing of Deercreek Apartments and Landmark Apartments (See "Note J").
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.
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 amount of
$1,567,000. Total interest expense was $200,000 and $203,000 for the years ended
December 31, 1996 and 1995, 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% 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 39% 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 1.3% 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 and 1996 annual meetings 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.
However, 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.,
("Insignia") which provides property management and partnership administration
services to the Partnership, owns 126,500 Class A Shares of AMIT at December 31,
1996. As of February 1, 1997, the number of shares owned by LAC decreased to
96,800. These Class A Shares entitle LAC to vote approximately 2.2% of the
total shares. In addition, Insignia has engaged and continues to engage in
discussions with AMIT regarding various potential business combinations with
affiliates of Insignia.
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>
<CAPTION>
Initial Cost
To Partnership
(in thousands)
Cost
Buildings Capitalized
and Related (Removed)
Personal Subsequent to
Description Encumbrances Land Property Acquisition
<S> <C> <C> <C> <C>
Atlanta Crossing
Shopping Center $ -- $ 213 $ 6,071 $ (1,067)
Deer Creek Apts. 6,295 953 8,863 1,142
Georgetown Apts. 5,575 294 6,545 293
Landmark Apts. 6,590 738 9,885 1,179
Totals 18,460 $2,198 $ 31,364 $ 1,547
Less unamortized
discounts (85)
$18,375
</TABLE>
<TABLE>
<CAPTION>
Gross Amount At Which Carried
At December 31, 1996
(in thousands)
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 $ 5,004 $ 5,217 $ 4,219 09/27/83 10-20
Deer Creek Apts. 953 10,005 10,958 6,672 09/28/83 10-20
Georgetown Apts. 294 6,838 7,132 4,521 11/21/83 10-20
Landmark Apts. 738 11,064 11,802 7,632 12/16/83 10-20
Totals $ 2,198 $ 32,911 $ 35,109 $ 23,044
</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.
Reconciliation of "Investment Properties and Accumulated Depreciation":
Year Ended December 31,
1996 1995
(in thousands)
Investment Properties
Balance at beginning of year $ 34,541 $ 47,682
Property improvements 568 575
Write-offs due to replacements -- (207)
Foreclosure of Executive Plaza -- (13,509)
Balance at end of year $ 35,109 $ 34,541
Accumulated Depreciation
Balance at beginning of year $ 21,285 $ 28,596
Additions charged to expense 1,759 1,863
Write-offs due to replacements -- (147)
Foreclosure of Executive Plaza -- (9,027)
Balance at end of year $ 23,044 $ 21,285
The aggregate cost of the real estate for Federal income tax purposes at
December 31, 1996 and 1995, is $37,944,000 and $37,387,000. The accumulated
depreciation taken for Federal income tax purposes at December 31, 1996 and
1995, is $29,368,000 and $27,540,000.
NOTE F - INVESTMENT IN JOINT VENTURE
Condensed balance sheet information of the Joint Venture at December 31, 1996,
is as follows (in thousands):
Assets
Cash $ 76
Deferred charges and other assets 124
Investment properties, net 1,894
Total $ 2,094
Liabilities and Partners' Capital
Notes payable to AMIT (Note D) $ 1,567
Other liabilities 527
Partners' capital --
Total $ 2,094
The condensed profit and loss statement of the Joint Venture is summarized as
follows:
Year Ended
December 31,
(in thousands)
1996 1995
Revenue $ 1,417 $ 1,158
Costs and expenses (1,567) (1,472)
Net loss $ (150) $ (314)
The Partnership's equity interest in the loss of the Joint Venture for the years
ended December 31, 1996 and 1995, was $22,000 and $45,000, respectively.
The Princeton Meadows Golf Course property had an underground fuel storage tank
that was removed in 1992. This fuel storage tank caused contamination to the
area. Management installed monitoring wells in the area where the tank was
formerly buried. Some samples from these wells indicated lead and phosphorous
readings that were 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 has engaged an engineering firm
to conduct consulting and compliance work and a second firm to perform the field
work necessary for the clean-up. The Joint Venture has recorded a liability of
$199,000 for the costs of the clean-up. The contracts have been executed and
field work has been completed with the expected completion date of the
compliance work to be sometime in 1997. The Managing General Partner believes
the liability recorded is sufficient to cover all costs 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.
As of December 31, 1996, the Partnership had minimum future rentals under
noncancellable leases with terms ranging from twelve months to twenty five
years.
(in thousands)
1997 $ 647
1998 581
1999 530
2000 493
2001 452
Thereafter 1,811
$ 4,514
NOTE H - 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, 1996 and
1995, was $56,000 and $53,000, respectively. Such amounts are included in the
statements of operations 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, 1996, the aggregate minimum rental payments under the land
leases were as follows (in thousands):
1997 $ 56
1998 56
1999 56
2000 56
2001 56
Thereafter 1,064
Total $1,344
NOTE I - ABANDONED LIMITED PARTNERSHIP UNITS
In 1996 and 1995, the number of Limited Partnership Units decreased by 67 units
and 1 unit, 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 income or 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 J - REFINANCINGS
On November 1, 1996, the Partnership refinanced the mortgages encumbering Deer
Creek Apartments and Landmark Apartments. As a result of the refinance, the
Partnership incurred a $173,000 loss on refinancing due to the write-off of
unamortized loan costs and prepayment penalties incurred. The new mortgage
indebtedness of $6,300,000 for Deer Creek Apartments and $6,600,000 for Landmark
Apartments carries a stated interest rate of 7.33% and a maturity date of
November 2003. This financing was necessary due to the maturity of the mortgage
secured by Deer Creek Apartments in July 1996. Landmark Apartments was
refinanced to obtain a lower interest rate and to provide funds needed to help
close the Deer Creek Apartments refinancing.
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 $6,430,000
including $443,000 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 $5,867,000 and $4,482,000, respectively. The net gain on foreclosure
amounted to $1,950,000 of which $1,385,000 represented a gain on transfer of
property in foreclosure and $565,000 represented an extraordinary 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 1995 or 1996
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 names of the directors and executive officers of Angeles Realty Corporation
II ("ARC II"), the Partnership's Managing General Partner as of December 31,
1996, their ages and the nature of all positions with ARC II presently held by
them are as follows:
Name Age Position
Carroll D. Vinson 56 President, Director
Robert D. Long, Jr. 29 Controller, Principal
William H. Jarrard, Jr. 50 Vice President
John K. Lines, Esq. 37 Vice President and
Secretary
Kelley M. Buechler 39 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.
William H. Jarrard, Jr. has been Managing Director - Partnership Administration
of Insignia since January 1991. Mr. Jarrard served as Managing Director -
Partnership Administration and Asset Management from July 1994 until January
1996.
John K. Lines, Esq. has been Insignia's General Counsel since June 1994 and
General Counsel and Secretary since July 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 May
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 the General Partner and has served
as Secretary of Insignia since 1991.
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 January 1, 1997, 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, 1996, 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
1996.
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 21, 1997
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
Carroll D. Vinson
/s/Robert D. Long, Jr. Controller and Principal
Robert D. Long, Jr. Accounting Officer
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.
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.
10.14 Multifamily Note - Deercreek Apartments
between Angeles Income Properties, Ltd. II
and Lehman Brothers Holdings, Inc. d/b/a
Lehman Capital, a division of Lehman
Brothers Holdings, Inc. dated November 1,
1996.
10.15 Multifamily Note - Landmark Apartments
between Angeles Income Properties, Ltd. II
and Lehman Brothers Holdings, Inc. d/b/a
Lehman Capital, a division of Lehman
Brothers Holdings, Inc. dated November 1,
1996.
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.
27 Financial Data Schedule is filed as an
Exhibit to this report.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from Angeles
Income Properties, Ltd. II 1996 Year-End 10-KSB and is qualified in its entirety
by reference to such 10-KSB filing.
</LEGEND>
<CIK> 0000711642
<NAME> ANGELES INCOME PROPERTIES LTD. II
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<CASH> 2,855
<SECURITIES> 0
<RECEIVABLES> 199
<ALLOWANCES> 80
<INVENTORY> 0
<CURRENT-ASSETS> 0<F1>
<PP&E> 35,109
<DEPRECIATION> 23,044
<TOTAL-ASSETS> 17,858
<CURRENT-LIABILITIES> 0<F1>
<BONDS> 18,375
0
0
<COMMON> 0
<OTHER-SE> (1,374)
<TOTAL-LIABILITY-AND-EQUITY> 17,858
<SALES> 0
<TOTAL-REVENUES> 6,868
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 6,943
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,537
<INCOME-PRETAX> (0)
<INCOME-TAX> 0
<INCOME-CONTINUING> (270)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (97)
<EPS-PRIMARY> (2.68)
<EPS-DILUTED> (173)
<FN>
<F1>Registrant has an unclassified balance sheet.
</FN>
</TABLE>
Loan No. 734054653
Deercreek
MULTIFAMILY NOTE
US $6,300,000.00 New York, New York
As of November 1, 1996
FOR VALUE RECEIVED, the undersigned promise to pay LEHMAN BROTHERS HOLDINGS
INC. d/b/a Lehman Capital, A Division of Lehman Brothers Holdings Inc., 3 World
Financial Center, New York, New York 10285, or order, the principal sum of Six
Million Three Hundred Thousand and 00/100 Dollars, with interest on the unpaid
principal balance from the date of this Note, until paid, at the rate of 7.33
percent per annum. Principal and interest shall be payable at 3 World Financial
Center, New York, New York 10285, or such other place as the holder hereof may
designate in writing, in consecutive monthly installments of Forty-three
Thousand Three Hundred Nineteen and 48/100 Dollars (US $43,319,48) on the first
day of each month beginning December 1, 1996, until the entire indebtedness
evidenced hereby is fully paid, except that any remaining indebtedness, if not
sooner paid, shall be due and payable on November 1, 2003.
If any installment under this Note is not paid when due, the entire
principal amount outstanding hereunder and accrued interest thereon shall at
once become due and payable, at the option of the holder hereof. The holder
hereof may exercise this option to accelerate during any default by the
undersigned regardless of any prior forbearance. In the event of any default in
the payment of this Note, and if the same is referred to an attorney at law for
collection or any action at law or in equity is brought with respect hereto, the
undersigned shall pay the holder hereof all expenses and costs, including, but
not limited to, attorney's fees.
Prepayments shall be applied against the outstanding principal balance of
this Note and shall not extend or postpone the due date of any subsequent
monthly installments or change the amount of such installments, unless the
holder hereof shall agree otherwise in writing. The holder hereof may require
that any partial prepayments be made on the date monthly installments are due
and be in the amount of that part of one or more monthly installments which
would be applicable to principal.
From time to time, without affecting the obligation of the undersigned or
the successors or assigns of the undersigned to pay the outstanding principal
balance of this Note and observe the covenants of the undersigned contained
herein, without affecting the guaranty of any person, corporation, partnership
or other entity for payment of the outstanding principal balance of this Note,
without giving notice to or obtaining the consent of the undersigned, the
successors or assigns of the undersigned or guarantors, and without liability on
the part of the holder hereof, the holder hereof may, at the option of the
holder hereof, extend the time for payment of said outstanding principal balance
or any part thereof, reduce the payments thereon, release anyone liable on any
of said outstanding principal balance, accept a renewal of this Note, modify the
terms and time of payment of said outstanding principal balance, join in any
extension or subordination agreement, release any security given herefor, take
or release other or additional security, and agree in writing with the
undersigned to modify the rate of interest or period of amortization of this
Note or change the amount of the monthly installments payable hereunder.
Presentment, notice of dishonor, and protest are hereby waived by all
makers, sureties, guarantors and endorsers hereof. This Note shall be the joint
and several obligation of all makers, sureties, guarantors and endorsers, and
shall be binding upon them and their successors and assigns.
The indebtedness evidenced by this Note is secured by a Mortgage or Deed of
Trust dated as of the date hereof, and reference is made thereto for rights as
to acceleration of the indebtedness evidenced by this Note. This Note shall be
governed by the law of the jurisdiction in which the Property subject to the
Mortgage or Deed of Trust is located.
The undersigned shall pay any installment of principal and/or interest due
hereunder within ten (10) calendar days after such installment of principal
and/or interest is due. The undersigned shall pay any other installment due
hereunder or due in accordance with the terms of the Mortgage or Deed of Trust
securing this Note, within thirty (30) calendar days of the date such
installment is due.
IN WITNESS WHEREOF, Borrower has executed this Note or has caused the same
to be executed by its representatives thereunto duly authorized.
ANGELES INCOME PROPERTIES, LTD. II,
a California limited partnership
By: Angeles Realty Corporation II, a
California corporation, its general
partner
By:/s/ William H. Jarrard, Jr.
Name: William H. Jarrard, Jr.
Title: Vice President
PAY TO THE ORDER OF FEDERAL HOME LOAN
MORTGAGE CORPORATION WITHOUT RECOURSE.
This 1st day of November, 1996.
LEHMAN BROTHERS HOLDINGS INC. d/b/a
Lehman Capital, A Division of Lehman
Brothers Holdings Inc., a Delaware
corporation
By:/s/ Larry J. Kravetz
Name: Larry J. Kravetz
Title: Vice President
Loan No. 734079818
Landmark
MULTIFAMILY NOTE
US $6,600,000.00 New York, New York
As of November 1, 1996
FOR VALUE RECEIVED, the undersigned promise to pay LEHMAN BROTHERS HOLDINGS
INC. d/b/a Lehman Capital, A Division of Lehman Brothers Holdings Inc., 3 World
Financial Center, New York, New York 10285, or order, the principal sum of Six
Million Six Hundred Thousand and 00/100 Dollars, with interest on the unpaid
principal balance from the date of this Note, until paid, at the rate of 7.33
percent per annum. Principal and interest shall be payable at 3 World Financial
Center, New York, New York 10285, or such other place as the holder hereof may
designate in writing, in consecutive monthly installments of Forty-five Thousand
Three Hundred Eighty-two and 32/100 Dollars (US $45,382.32) on the first day of
each month beginning December 1, 1996, until the entire indebtedness evidenced
hereby is fully paid, except that any remaining indebtedness, if not sooner
paid, shall be due and payable on November 1, 2003.
If any installment under this Note is not paid when due, the entire
principal amount outstanding hereunder and accrued interest thereon shall at
once become due and payable, at the option of the holder hereof. The holder
hereof may exercise this option to accelerate during any default by the
undersigned regardless of any prior forbearance. In the event of any default in
the payment of this Note, and if the same is referred to an attorney at law for
collection or any action at law or in equity is brought with respect hereto, the
undersigned shall pay the holder hereof all expenses and costs, including, but
not limited to, attorney's fees.
Prepayments shall be applied against the outstanding principal balance of
this Note and shall not extend or postpone the due date of any subsequent
monthly installments or change the amount of such installments, unless the
holder hereof shall agree otherwise in writing. The holder hereof may require
that any partial prepayments be made on the date monthly installments are due
and be in the amount of that part of one or more monthly installments which
would be applicable to principal.
From time to time, without affecting the obligation of the undersigned or
the successors or assigns of the undersigned to pay the outstanding principal
balance of this Note and observe the covenants of the undersigned contained
herein, without affecting the guaranty of any person, corporation, partnership
or other entity for payment of the outstanding principal balance of this Note,
without giving notice to or obtaining the consent of the undersigned, the
successors or assigns of the undersigned or guarantors, and without liability on
the part of the holder hereof, the holder hereof may, at the option of the
holder hereof, extend the time for payment of said outstanding principal balance
or any part thereof, reduce the payments thereon, release anyone liable on any
of said outstanding principal balance, accept a renewal of this Note, modify the
terms and time of payment of said outstanding principal balance, join in any
extension or subordination agreement, release any security given herefor, take
or release other or additional security, and agree in writing with the
undersigned to modify the rate of interest or period of amortization of this
Note or change the amount of the monthly installments payable hereunder.
Presentment, notice of dishonor, and protest are hereby waived by all
makers, sureties, guarantors and endorsers hereof. This Note shall be the joint
and several obligation of all makers, sureties, guarantors and endorsers, and
shall be binding upon them and their successors and assigns.
The indebtedness evidenced by this Note is secured by a Mortgage or Deed of
Trust dated as of the date hereof, and reference is made thereto for rights as
to acceleration of the indebtedness evidenced by this Note. This Note shall be
governed by the law of the jurisdiction in which the Property subject to the
Mortgage or Deed of Trust is located.
The undersigned shall pay any installment of principal and/or interest due
hereunder within ten (10) calendar days after such installment of principal
and/or interest is due. The undersigned shall pay any other installment due
hereunder or due in accordance with the terms of the Mortgage or Deed of Trust
securing this Note, within thirty (30) calendar days of the date such
installment is due.
The monthly installment payable on December 1, 1996 shall include interest
on the outstanding principal balance of this Note for a full month at the above-
specified interest rate, notwithstanding the fact that as of the due date of
that installment principal may not have been outstanding for a full month.
IN WITNESS WHEREOF, Borrower has executed this Note or has caused the same
to be executed by its representatives thereunto duly authorized.
ANGELES INCOME PROPERTIES, LTD. II,
a California limited partnership
By: Angeles Realty Corporation II, a
California corporation, its general
partner
By:/s/ William H. Jarrard, Jr.
Name: William H. Jarrard, Jr.
Title: Vice President
PAY TO THE ORDER OF FEDERAL HOME LOAN
MORTGAGE CORPORATION WITHOUT RECOURSE.
This 1st day of November, 1996.
LEHMAN BROTHERS HOLDINGS INC. d/b/a
Lehman Capital, A Division of Lehman
Brothers Holdings Inc., a Delaware
corporation
By:/s/ Larry J. Kravetz
Name: Larry J. Kravetz
Title: Vice President
