FORM 10-QSB--QUARTERLY OR TRANSITIONAL REPORT UNDER SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
QUARTERLY OR TRANSITIONAL REPORT
U.S. Securities and Exchange Commission
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended September 30, 1998
[ ] TRANSITION REPORT PURSUANT TO 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from.........to.........
Commission file number 0-11767
ANGELES INCOME PROPERTIES, LTD. II
(Exact name of small business issuer as specified in its charter)
California 95-3793526
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
55 Beattie Place, P. O. Box 1089
Greenville, South Carolina 29602
(Address of principal executive offices)
(864) 239-1000
(Issuer's telephone number)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes X No
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
a)
ANGELES INCOME PROPERTIES, LTD. II
CONSOLIDATED BALANCE SHEET
(Unaudited)
September 30, 1998
(in thousands, except unit data)
Assets
Cash and cash equivalents $ 2,057
Receivables and deposits, net of allowance
for doubtful accounts of $220 706
Restricted escrows 802
Other assets 706
Investment in, and advances of $46 to,
joint venture 79
Investment properties:
Land $ 2,198
Buildings and related personal property 34,425
36,623
Less accumulated depreciation (25,504) 11,119
$15,469
Liabilities and Partners' Deficit
Liabilities
Accounts payable $ 213
Tenant security deposit liabilities 276
Accrued property taxes 317
Other liabilities 188
Mortgage notes payable 18,050
Partners' Deficit
General partners' $ (476)
Limited partners' (99,784 units issued and
outstanding) (3,099) (3,575)
$15,469
See Accompanying Notes to Consolidated Financial Statements
b)
ANGELES INCOME PROPERTIES, LTD. II
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(in thousands, except unit data)
Three Months Ended Nine Months Ended
September 30, September 30,
1998 1997 1998 1997
Revenues:
Rental income $1,785 $1,724 $5,263 $5,100
Other income 124 124 357 346
Total revenues 1,909 1,848 5,620 5,446
Expenses:
Operating 795 709 2,282 2,019
General and administrative 71 69 213 188
Depreciation 470 460 1,387 1,348
Interest 360 367 1,081 1,101
Property taxes 145 147 434 424
Bad debt expense (recoveries), net 61 79 (16) 59
Loss on disposal of property 78 30 117 141
Total expenses 1,980 1,861 5,498 5,280
Equity in income of
joint venture (Note C) 10 25 19 36
Net (loss) income $ (61) $ 12 $ 141 $ 202
Net (loss) income allocated
to general partners (1%) $ (1) $ 0 $ 1 $ 2
Net (loss) income allocated
to limited partners (99%) (60) 12 140 200
$ (61) $ 12 $ 141 $ 202
Net (loss) income per limited
partnership unit $(0.60) $ .12 $ 1.40 $ 2.00
Distributions per limited
partnership unit $14.75 $ -- $14.75 $ 9.92
See Accompanying Notes to Consolidated Financial Statements
c)
ANGELES INCOME PROPERTIES, LTD. II
CONSOLIDATED STATEMENT OF CHANGES IN PARTNERS' DEFICIT
(Unaudited)
(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, 1997 99,784 $ (462) $(1,767) $(2,229)
Distribution to Partners (15) (1,472) (1,487)
Net income for the nine months
ended September 30, 1998 -- 1 140 141
Partners' deficit
at September 30, 1998 99,784 $ (476) $(3,099) $(3,575)
See Accompanying Notes to Consolidated Financial Statements
d)
ANGELES INCOME PROPERTIES, LTD. II
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
Nine Months Ended
September 30,
1998 1997
Cash flows from operating activities:
Net income $ 141 $ 202
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation 1,387 1,348
Amortization of discounts, loan costs and lease
commissions 73 78
Bad debt (recoveries) expense, net (16) 59
Equity in income of joint venture (19) (36)
Loss on disposal of property 117 141
Change in accounts:
Receivables and deposits (126) (159)
Other assets (71) (42)
Accounts payable (7) (200)
Tenant security deposit liabilities 15 13
Accrued property taxes 64 118
Other liabilities 22 6
Net cash provided by operating activities 1,580 1,528
Cash flows from investing activities:
Property improvements and replacements (1,285) (776)
Net withdrawals from (deposits to) restricted escrows 305 (152)
Advances to joint venture -- (3)
Net cash used in investing activities (980) (931)
Cash flows from financing activities:
Loan costs paid -- (10)
Payments on mortgage notes payable (155) (139)
Distributions to partners (1,487) (1,000)
Net cash used in financing activities (1,642) (1,149)
Net decrease in cash and cash equivalents (1,042) (552)
Cash and cash equivalents at beginning of period 3,099 2,855
Cash and cash equivalents at end of period $ 2,057 $ 2,303
Supplemental disclosure of cash flow information:
Cash paid for interest $ 1,021 $ 1,038
Fixed assets financed by accounts payable $ -- $ 103
See Accompanying Notes to Consolidated Financial Statements
e)
ANGELES INCOME PROPERTIES, LTD. II
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE A - BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements of Angeles Income
Properties, Ltd. II (the "Partnership") have been prepared in accordance with
generally accepted accounting principles for interim financial information and
with the instructions to Form 10-QSB and Item 310(b) of Regulation S-B.
Accordingly, they do not include all of the information and footnotes required
by generally accepted accounting principles for complete financial statements.
In the opinion of Angeles Realty Corporation II (the "Managing General
Partner"), a wholly-owned subsidiary of Insignia Properties Trust ("IPT") all
adjustments (consisting of normal recurring accruals) considered necessary for a
fair presentation have been included. Operating results for the three and nine
month periods ended September 30, 1998, are not necessarily indicative of the
results that may be expected for the fiscal year ending December 31, 1998. For
further information, refer to the consolidated financial statements and
footnotes thereto included in the Partnership's annual report on Form 10-KSB for
the fiscal year ended December 31, 1997.
Certain reclassifications have been made to the 1997 information to conform to
the 1998 presentation.
Principles of Consolidation
The consolidated financial statements of the Partnership include its 99% limited
partnership interests in AIP II GP, LP and Georgetown AIP II, LP for the period
ended September 30, 1997. The Partnership had the ability to remove the general
partner of both AIP II GP, LP and Georgetown AIP II, LP; therefore, the
partnerships were controlled and consolidated by the Partnership. At December
31, 1997, AIP II Georgetown GP, L.L.C. was formed as a wholly-owned subsidiary
of the Partnership. AIP II GP LP's interest in Georgetown AIP II, LP was
transferred to this new subsidiary. Therefore, for the nine month period ended
September 30, 1998, Georgetown AIP II LP was wholly owned by the Partnership.
All significant interpartnership balances have been eliminated.
NOTE B - 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. Affiliates of the Managing General Partner provide
property management and asset management services to the partnership. 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 made to the Managing General Partner and/or its
affiliates during the nine months ended September 30, 1998 and 1997:
Nine Months Ended
September 30,
(in thousands)
1998 1997
Property management fees (included in operating expenses) $262 $250
Reimbursement for services of affiliates, including
approximately $45,000 and $40,000 of construction
services reimbursements for the nine months ended
September 30, 1998 and September 30, 1997, respectively
(included in investment properties, general and
administrative, and operating expenses) 232 154
Additionally, the Partnership paid approximately $57,000, during the nine months
ended September 30, 1998, to an affiliate of the Managing General Partner for
lease commissions at the Partnership's commercial property. These lease
commissions are included in other assets and are amortized over the terms of the
respective leases.
For the period from January 1, 1997, to August 31, 1997, the Partnership insured
its properties under a master policy through an agency affiliated with the
Managing General Partner, but with an insurer unaffiliated with the Managing
General Partner. An affiliate of the Managing General Partner acquired, in the
acquisition of a business, certain financial obligations from an insurance
agency which was later acquired by the agent who placed the master policy. The
agent assumed the financial obligations to the affiliate of the Managing General
Partner which received payments on these obligations from the agent. The amount
of the Partnership's insurance premiums that accrued to the benefit of the
affiliate of the Managing General Partner by virtue of the agent's obligations
was not significant.
On April 24, 1998, an affiliate of the Managing General Partner ("the
Purchaser") commenced a tender offer for limited partnership interests in the
Partnership. The Purchaser offered to purchase up to 40,000 of the outstanding
units of limited partnership interest ("Units") in the Partnership at a purchase
price of $150 per Unit, net to the seller in cash. On May 21, 1998, the tender
offer was officially closed with 8,908 Limited Partner Units being acquired by
the Purchaser.
On August 13, 1998, the Purchaser commenced a second tender offer for limited
partnership interests in the Partnership. The Purchaser offered to purchase up
to 30,000 of the outstanding units of limited partnership interest ("Units") in
the Partnership at a purchase price of $175 per Unit, net to the seller in cash.
The expiration date for the tender offer was extended to November 16, 1998.
Angeles Mortgage Investment Trust, ("AMIT"), a real estate investment trust,
provides financing (the "AMIT Loan") to the Princeton Meadows Golf Course Joint
Venture ("Joint Venture"), (see "Note C" below). The AMIT Loan had a principal
balance of $1,567,000 at September 30, 1998, accrues interest at a rate of 12.5%
per annum and matures on September 1, 2000, at which time the outstanding
principal and any unpaid interest is due. Interest expense on the debt secured
by the Joint Venture was approximately $147,000 for each of the nine months
ended September 30, 1998 and 1997, respectively. Accrued interest was $18,000 at
September 30, 1998. Pursuant to a series of transactions, affiliates of the
Managing General Partner acquired ownership interests in AMIT. On September 17,
1998, AMIT was merged with and into IPT, the entity which controls the Managing
General Partner. As a result, IPT became the holder of the AMIT loan.
NOTE C - INVESTMENT IN JOINT VENTURE
The Partnership owns a 14.4% interest in the Joint Venture. The Partnership
accounts for its interest in the Joint Venture using the equity method of
accounting.
Condensed balance sheet information of the Joint Venture is as follows:
September 30, 1998
(in thousands)
Assets
Cash $ 357
Other assets 268
Investment property, net 2,039
Total $2,664
Liabilities and Partners' Capital
Note payable to AMIT (Note B) $1,567
Other liabilities 852
Partners' capital 245
Total $2,664
The condensed profit and loss statements of the Joint Venture are summarized as
follows:
Three Months Ended Nine Months Ended
September 30, September 30,
1998 1997 1998 1997
(in thousands) (in thousands)
Revenue $ 575 $ 620 $ 1,319 $ 1,361
Costs and expenses (490) (449) (1,171) (1,113)
Net income $ 85 $ 171 $ 148 $ 248
The Partnership's equity interest in the income of the Joint Venture was
approximately $19,000 and $36,000 for the nine months ended September 30, 1998
and September 30, 1997, respectively.
The Princeton Meadows Golf Course property had an underground fuel storage tank
that was removed in 1992. This fuel storage tank caused contamination to the
area. Management installed monitoring wells in the area where the tank was
formerly buried. Some samples from these wells indicated lead and phosphorous
readings that were higher than the range prescribed by the New Jersey Department
of Environmental Protection ("DEP"). The Joint Venture notified DEP of the
findings when they were first discovered. However, DEP 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. Field work is in process, with skimmers
having been installed at three test wells on the site. These skimmers are in
place to detect any residual fuel that may still be in the ground. The expected
completion date of the compliance work should be sometime in 1999. The Joint
Venture originally recorded a liability of $199,000 for the costs of the clean-
up; subsequently, in 1997, the Joint Venture recorded an additional liability of
approximately $45,000 as an adjustment to estimated costs remaining to complete
the clean-up. At September 30, 1998, the balance in the liability for clean-up
costs is $54,000. Funds from the property will be used to pay the outstanding
costs.
Representatives of the Joint Venture have entered into negotiations with a
potential buyer for the Princeton Meadows Golf Course. However, the contract
for the sale has not been finalized and Joint Venture Representatives cannot
assure that the sale will be consummated.
NOTE D - DISTRIBUTIONS TO PARTNERS
In July 1998, the Partnership paid a distribution from operations of
approximately $1,487,000. Of this amount, approximately $15,000 was paid to the
general partners and approximately $1,472,000 was paid to the limited partners.
During the second quarter of 1997, the Partnership distributed $1,000,000 from
operations to the partners.
NOTE E - TRANSFER OF CONTROL; SUBSEQUENT EVENT
On October 1, 1998, Insignia Financial Group, Inc. completed its merger with and
into Apartment Investment and Management Company ("AIMCO"), a publicly traded
real estate investment trust, with AIMCO being the surviving corporation (the
"Insignia Merger"). As a result of the Insignia Merger, AIMCO acquired control
of the Managing General Partner. In addition, AIMCO also acquired approximately
51% of the outstanding common shares of beneficial interest of IPT, the entity
which controls the General Partner of the Partnership. Also, effective October
1, 1998 IPT and AIMCO entered into an Agreement and plan of Merger pursuant to
which IPT is to be merged with and into AIMCO or a subsidiary of AIMCO (the "IPT
Merger"). The IPT Merger requires the approval of the holders of a majority of
the outstanding IPT Shares. AIMCO has agreed to vote all of the IPT Shares owned
by it in favor of the IPT Merger and has granted an irrevocable limited proxy to
unaffiliated representatives of IPT to vote the IPT Shares acquired by AIMCO and
its subsidiaries in favor of the IPT Merger. As a result of AIMCO's ownership
and its agreement, the vote of no other holder of IPT is required to approve the
merger. The Managing General Partner does not believe that this transaction
will have a material effect on the affairs and operations of the Partnership.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS
The Partnership's investment properties consist of three apartment complexes and
one commercial property. The following table sets forth the average occupancy
of the properties for the nine months ended September 30, 1998 and September 30,
1997:
Average Occupancy
Property 1998 1997
Atlanta Crossing Shopping Center 89% 90%
Montgomery, Alabama
Deer Creek Apartments 97% 96%
Plainsboro, New Jersey
Georgetown Apartments 96% 97
South Bend, Indiana
Landmark Apartments 91% 91%
Raleigh, North Carolina
The Partnership's net income for the nine months ended September 30, 1998, was
approximately $141,000 compared to net income of approximately $202,000 for the
nine months ended September 30, 1997. The Partnership recorded a net loss for
the three months ended September 30, 1998, of approximately $61,000 versus net
income of approximately $12,000 for the three months ended September 30, 1997.
The decrease in net income for both the three months and the nine months ended
September 30, 1998 is primarily due to an increase in operating expenses for
major repairs and maintenance. Included in operating expense for the nine
months ended September 30, 1998, is approximately $414,000 of major repairs and
maintenance expense comprised primarily of exterior building repairs, gutter
repairs, exterior painting, and landscaping. These repairs were mostly related
to a renovation project at Landmark Apartments. This renovation project
includes the correction of drainage problems and related foundation repairs
along with exterior building repairs and painting in order to improve the
appearance of the property. Included in operating expense for the three and nine
months ended September 30, 1997, is approximately $116,000 of major repairs and
maintenance primarily comprised of exterior building repairs, parking lot
repairs, landscaping, and exterior painting. Partially offsetting the decrease
in net income for the nine months ended September 30, 1998 was increased rental
income. Rental income increased primarily due to increased rental rates at all
the partnership's properties and improved occupancy at Deer Creek Apartments.
The partnership recorded losses on disposal of property of approximately
$117,000 and $141,000 for the nine months ended September 30, 1998 and 1997
respectively. The 1998 loss resulted from the write-off of siding at Deer Creek
Apartments, while the 1997 loss resulted from the write-off of roofs at Deer
Creek. Both of these losses were the result of write-off of assets not fully
depreciated at the time of replacement.
The Partnership has a 14.4% investment in the Princeton Meadows Golf Course
Joint Venture. For the three and nine months ended September 30, 1998, the
Partnership realized equity in net income of the Joint Venture of approximately
$10,000 and $19,000, respectively as compared to income of approximately $25,000
and $36,000 for the three and nine months ended September 30, 1997. The
decrease in equity in net income of the Joint Venture is primarily attributable
to a decrease in revenue as a result of poor weather conditions.
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 to offset softening market conditions, there is no
guarantee that the Managing General Partner will be able to sustain such a plan.
At September 30, 1998, the Partnership had cash and cash equivalents of
$2,057,000 versus $2,303,000 at September 30, 1997. The net decrease in cash and
cash equivalents for the nine months ended September 30, 1998, was approximately
$1,042,000 compared to a decrease of approximately $552,000 for the nine months
ended September 30, 1997. Net cash provided by operating activities increased
primarily due to a decrease in cash used for accounts payable due to the timing
of payments. This increase was partially offset by reduced net income as
discussed above and lower cash provided by accrued property taxes due to the
timing of payments. Net cash used in investing activities increased due to an
increase in property improvements and replacements, partially offset by
increased withdrawals from restricted escrows. Net cash used in financing
activities increased due to increased distributions to partners during the nine
months ended September 30, 1998 as compared to the comparable period in 1997.
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 properties to adequately maintain the physical
assets and other operating needs of the Partnership and to comply with Federal,
State and local legal and regulatory requirements. Such assets are currently
thought to be sufficient for any near-term needs of the Partnership. A major
vinyl siding and exterior lighting project totaling approximately $1,300,000 was
budgeted for 1998 at Deer Creek Apartments. Through September 30, 1998,
approximately $904,000 in costs have been capitalized with regard to this
project. The Managing General Partner is currently assessing the need for
capital improvements at each of the Partnership's properties. To the extent that
additional capital improvements are required, the Partnership's distributable
cash flow, if any, may be adversely effected. The Partnership has mortgage
notes payable totaling $18,050,000, net of discounts, with various maturity
dates and balloon payments due at maturity. The first mortgages secured by Deer
Creek Apartments and Landmark Apartments mature in November 2003. The remaining
debt, which is secured by Georgetown Apartments, matures in October 2003. The
Partnership's Atlanta Crossing Shopping Center is currently unencumbered by
debt. The Managing General Partner will attempt to refinance such indebtedness
or sell the properties prior to such maturity date. If the properties cannot be
refinanced or sold for a sufficient amount, the Partnership will risk losing
such properties through foreclosure. A distribution from operations totaling
$1,000,000 was paid in April 1997. A distribution from operations in the amount
of $1,487,000 was paid in July 1998. Future cash distributions will depend on
the level of net cash generated from operations, refinancings, property sales,
and the availability of cash reserves. The Partnership's distribution policy
will be reviewed on a quarterly basis. There can be no assurance, however, that
the Partnership will generate sufficient funds from operations to permit further
distributions to its partners in 1998 or subsequent periods.
Transfer of Control; Subsequent Event
On October 1, 1998, Insignia Financial Group, Inc. completed its merger with and
into Apartment Investment and Management Company ("AIMCO"), a publicly traded
real estate investment trust, with AIMCO being the surviving corporation (the
"Insignia Merger"). As a result of the Insignia Merger, AIMCO acquired control
of the Managing General Partner. In addition, AIMCO also acquired approximately
51% of the outstanding common shares of beneficial interest of Insignia
Properties Trust ("IPT"), the entity which controls the General Partner of the
Partnership. Also, effective October 1, 1998 IPT and AIMCO entered into an
Agreement and plan of Merger pursuant to which IPT is to be merged with and into
AIMCO or a subsidiary of AIMCO (the "IPT Merger"). The IPT Merger requires the
approval of the holders of a majority of the outstanding IPT Shares. AIMCO has
agreed to vote all of the IPT Shares owned by it in favor of the IPT Merger and
has granted an irrevocable limited proxy to unaffiliated representatives of IPT
to vote the IPT Shares acquired by AIMCO and its subsidiaries in favor of the
IPT Merger. As a result of AIMCO's ownership and its agreement, the vote of no
other holder of IPT is required to approve the merger. The Managing General
Partner does not believe that this transaction will have a material effect on
the affairs and operations of the Partnership.
Year 2000
General Description of the Year 2000 Issue and the Nature and Effects of the
Year 2000 on Information Technology (IT) and Non-IT Systems
The Year 2000 Issue is the result of computer programs being written using two
digits rather than four to define the applicable year. The Partnership is
dependent upon the Managing General Partner and its affiliates for management
and administrative services ("Managing Agent"). Any computer programs or
hardware that have date-sensitive software or embedded chips may recognize a
date using "00" as the year 1900 rather than the year 2000. This could result
in a system failure or miscalculations causing disruptions of operations,
including, among other things, a temporary inability to process transactions,
send invoices, or engage in similar normal business activities.
The Managing Agent has determined that it will be required to modify or replace
significant portions of its software and certain hardware so that those systems
will properly utilize dates beyond December 31, 1999. The Managing Agent
presently believes that with modifications or replacements of existing software
and certain hardware, the Year 2000 Issue can be mitigated. However, if such
modifications and replacements are not made, or are not completed timely, the
Year 2000 Issue could have a material impact on the operations of the Managing
Agent and the Partnership.
Status of Progress in Becoming Year 2000 Compliant
The Managing Agent's plan to resolve the Year 2000 Issue involves the following
four phases: assessment, remediation, testing and implementation. To date, the
Managing Agent has fully completed its assessment of all information systems
that could be significantly affected by the Year 2000, and has begun the
remediation, testing and implementation phase on both hardware and software
systems. Assessments are continuing in regards to embedded systems in operating
equipment. The Managing Agent anticipates having all phases complete by June 1,
1999.
In addition to the areas the Partnership is relying on the Managing Agent to
verify compliance with, the Partnership has certain operating equipment,
primarily at the property sites, which needed to be evaluated for Year 2000
compliance. The focus of the Managing General Partner was to the security
systems, elevators, heating-ventilation-air-conditioning systems, telephone
systems and switches, and sprinkler systems. The Managing General Partner is
currently engaged in the identification of all non-compliant operational
systems, and is in the process of estimating the costs associated with any
potential modifications or replacements needed to such systems in order for them
to be Year 2000 compliant. It is not expected that such costs would have a
material adverse affect upon the operations of the Partnership.
Risk Associated with the Year 2000
The Managing General Partner believes that the Managing Agent has an effective
program in place to resolve the Year 2000 issue in a timely manner and has
appropriate contingency plans in place for critical applications that could
affect the Partnership's operations. To date, the Managing General Partner is
not aware of any external agent with a Year 2000 issue that would materially
impact the Partnership's results of operations, liquidity or capital resources.
However, the Managing General Partner has no means of ensuring that external
agents will be Year 2000 compliant. The Managing General Partner does not
believe that the inability of external agents to complete their Year 2000
resolution process in a timely manner will have a material impact on the
financial position or results of operations of the Partnership. However, the
effect of non-compliance by external agents is not readily determinable.
Other
Certain items discussed in this quarterly report may constitute forward-looking
statements within the meaning of the Private Securities Litigation Reform Act of
1995 and as such may involve known and unknown risks, uncertainties and other
factors which may cause the actual results, performance or achievements of the
Partnership to be materially different from any future results, performance, or
achievements expressed or implied by such forward-looking statements. Such
forward-looking statements speak only as of the date of this quarterly report.
The Partnership expressly disclaims any obligation or undertaking to release
publicly any updates or revisions to any forward-looking statements contained
herein to reflect any change in the Partnership's expectations with regard
thereto or any change in events, conditions or circumstances on which any such
statement is based.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
In March 1998, several putative unit holders of limited partnership units of the
Partnership commenced an action entitled Rosalie Nuanes, et al. v. Insignia
Financial Group, Inc., et al. in the Superior Court of the State of California
for the County of San Mateo. The plaintiffs named as defendants, among others,
the Partnership, the Managing General Partner and several of their affiliated
partnerships and corporate entities. The complaint purports to assert claims on
behalf of a class of limited partners and derivatively on behalf of a number of
limited partnerships (including the Partnership) which are named as nominal
defendants, challenging the acquisition by Insignia Financial Group, Inc.
("Insignia") and entities which were, at the time, affiliates of Insignia
("Insignia Affiliates") of interests in certain general partner entities, past
tender offers by Insignia Affiliates to acquire limited partnership units, the
management of partnerships by Insignia Affiliates as well as a recently
announced agreement between Insignia and AIMCO. The complaint seeks monetary
damages and equitable relief, including judicial dissolution of the Partnership.
On June 25, 1998, the Managing General Partner filed a motion seeking dismissal
of the action. In lieu of responding to the motion, the plaintiffs have filed
an amended complaint. The Managing General Partner has filed demurrers to the
amended complaint, which are scheduled to be heard on January 8, 1999. The
Managing General Partner believes the action to be without merit, and intends to
vigorously defend it.
On July 30, 1998 certain entities claiming to own limited partnership interests
in certain limited partnerships whose general partners were, at the time,
affiliates of Insignia filed a complaint entitled Everest Properties LLC v.
Insignia Financial Group, Inc. in the Superior Court of the State of California,
County of Los Angeles. The action involves 44 real estate limited partnerships
(including the Partnership) in which the plaintiffs allegedly own interests and
which Insignia Affiliates allegedly manage or control (the "Subject
Partnerships"). The complaint names as defendants Insignia, several Insignia
Affiliates alleged to be managing partners of the defendant limited
partnerships, the Partnership and the Managing General Partner. Plaintiffs
allege that they have requested from, but have been denied by each of the
Subject Partnerships, lists of their respective limited partners for the purpose
of making tender offers to purchase up to 4.9% of the limited partner units of
each of the Subject Partnerships. The complaint also alleges that certain of
the defendants made tender offers to purchase limited partner units in many of
the Subject Partnerships, with the alleged result that plaintiffs have been
deprived of the benefits they would have realized from ownership of the
additional units. The plaintiffs assert eleven causes of action, including
breach of contract, unfair business practices, and violations of the partnership
statutes of the states in which the Subject Partnerships are organized.
Plaintiffs seek compensatory, punitive and treble damages. The Managing General
Partner filed an answer to the complaint on September 15, 1998. The Managing
General Partner believes the claims to be without merit and intends to defend
the action vigorously.
The Partnership is unaware of any other pending or outstanding litigation that
is not of a routine nature. The Managing General Partner of the Partnership
believes that all such pending or outstanding litigation will be resolved
without a material adverse effect upon the business, financial condition or
operations of the Partnership.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a) Exhibits:
Exhibit 27, Financial Data Schedule, is filed as an exhibit to this
report.
b) Reports on Form 8-K:
No reports on form 8-K were filed during the quarter ended
September 30, 1998.
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
ANGELES INCOME PROPERTIES, LTD. II
By: Angeles Realty Corporation II
Its Managing General Partner
By: /s/Patrick Foye
Patrick Foye
Executive Vice President
By: /s/Timothy R. Garrick
Timothy R. Garrick
Vice President - Accounting
(Duly Authorized Officer)
Date: November 16, 1998
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from Angeles
Income Properties, Ltd. II 1998 Third Quarter 10-QSB and is qualified in its
entirety by reference to such 10-QSB filing.
</LEGEND>
<CIK> 0000711642
<NAME> ANGELES INCOME PROPERTIES, LTD. II
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-30-1998
<PERIOD-END> SEP-30-1998
<CASH> 2,057
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0<F1>
<PP&E> 36,623
<DEPRECIATION> 25,504
<TOTAL-ASSETS> 15,469
<CURRENT-LIABILITIES> 0<F1>
<BONDS> 18,050
0
0
<COMMON> 0
<OTHER-SE> (3,575)
<TOTAL-LIABILITY-AND-EQUITY> 15,469
<SALES> 0
<TOTAL-REVENUES> 5,620
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 5,498
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,081
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 141
<EPS-PRIMARY> 1.40<F2>
<EPS-DILUTED> 0
<FN>
<F1>Registrant has an unclassified balance sheet.
<F2>Multiplier is 1.
</FN>
</TABLE>
