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 0-13309
ANGELES PARTNERS XII
(Exact name of small business issuer as specified in its charter)
California 95-3903623
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
55 Beattie Place, Post Office 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 PARTNERS XII
CONSOLIDATED BALANCE SHEET
(Unaudited)
(in thousands, except unit data)
September 30, 1998
Assets
Cash and cash equivalents $ 7,095
Receivables and deposits, net of allowance for
doubtful accounts of $17 1,778
Restricted escrows 1,239
Other assets 1,481
Investment in, and advances of $149 to, joint venture 250
Investment properties:
Land $ 10,341
Buildings and related personal property 91,415
101,756
Less accumulated depreciation (64,000) 37,756
$ 49,599
Liabilities and Partners' Deficit
Liabilities
Accounts payable $ 762
Tenant security deposit liabilities 960
Accrued property taxes 1,108
Other liabilities 835
Mortgage notes payable 71,549
Partners' Deficit
General partners $ (641)
Limited partners (44,718 units issued and
outstanding) (24,974) (25,615)
$ 49,599
See Accompanying Notes to Consolidated Financial Statements
b)
ANGELES PARTNERS XII
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 $ 5,156 $ 4,970 $15,351 $14,822
Other income 405 371 1,080 976
Total revenues 5,561 5,341 16,431 15,798
Expenses:
Operating 2,358 2,276 6,623 6,865
General and administrative 153 127 463 380
Depreciation 1,250 1,250 3,720 3,694
Interest 1,604 1,685 4,823 5,007
Property taxes 571 573 1,709 1,619
Loss on disposal of property 141 28 153 28
Bad debt recovery, net -- (92) -- (149)
Total expenses 6,077 5,847 17,491 17,444
Equity in income of joint venture 32 76 60 110
Net loss $ (484) $ (430) $(1,000) $(1,536)
Net loss allocated to
general partners (1%) $ (5) $ (4) $ (10) $ (15)
Net loss allocated to
limited partners (99%) (479) (426) (990) (1,521)
Net loss $ (484) $ (430) $(1,000) $(1,536)
Net loss per limited
partnership unit $(10.71) $ (9.53) $(22.14) $(34.01)
See Accompanying Notes to Consolidated Financial Statements
c)
ANGELES PARTNERS XII
CONSOLIDATED STATEMENTS OF CHANGES IN PARTNERS' DEFICIT
(Unaudited)
(in thousands, except unit data)
Limited
Partnership General Limited
Units Partners Partners Total
Original capital contributions 44,773 $ 1 $ 44,773 $ 44,774
Partners' deficit at
December 31, 1997 44,718 $ (631) $(23,984) $(24,615)
Net loss for the nine months
ended September 30, 1998 -- (10) (990) (1,000)
Partners' deficit at
September 30, 1998 44,718 $ (641) $(24,974) $(25,615)
See Accompanying Notes to Consolidated Financial Statements
ANGELES PARTNERS XII
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
Nine Months Ended
September 30,
1998 1997
Cash flows from operating activities:
Net loss $(1,000) $(1,536)
Adjustments to reconcile net loss to net cash
provided by operating activities:
Depreciation 3,720 3,694
Amortization of discounts, loan costs, and
leasing commissions 319 326
Bad debt recovery, net -- (149)
Equity in income of joint venture (60) (110)
Loss on disposal of properties 153 28
Change in accounts:
Receivables and deposits (104) 465
Other assets 37 (155)
Accounts payable 232 (401)
Tenant security deposit liabilities -- 29
Accrued property taxes 63 (107)
Other liabilities (503) 554
Net cash provided by operating activities 2,857 2,638
Cash flows from investing activities:
Property improvements and replacements (1,624) (981)
Net receipts from restricted escrows 66 68
Advances to joint venture -- (6)
Net payments related to casualty loss (17) --
Net cash used in investing activities (1,575) (919)
Cash flows used in financing activities:
Payments on mortgage notes payable (646) (585)
Net increase in cash and cash equivalents 636 1,134
Cash and cash equivalents at beginning of period 6,459 4,827
Cash and cash equivalents at end of period $ 7,095 $ 5,961
Supplemental information:
Cash paid for interest $ 5,153 $ 4,183
See Accompanying Notes to Consolidated Financial Statements
Supplemental disclosure of non-cash activity:
At September 30, 1998, in connection with a fire at Pickwick Place
Apartments, accounts payable was adjusted by approximately $2,000 for non-
cash activity.
ANGELES PARTNERS XII
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE A - BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements of Angeles Partners
XII (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"), 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 interest in Hunters Glen AP XII LP, Hunters Glen Phase I AP XII LP,
Hunters Glen GP LP, AP XII Associates LP, and Pickwick Place AP XII LP. The
Partnership may remove the General Partner of these limited partnerships;
therefore, these partnerships are deemed controlled and therefore, consolidated
by the Partnership. All significant interpartnership balances have been
eliminated. Minority interest is immaterial and not shown separately in the
financial statements.
NOTE B - INVESTMENT IN JOINT VENTURE
The Partnership owns a 44.5% interest in the Princeton Meadows Golf Course Joint
Venture ("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 summarized 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 $ 1,567
Other liabilities 852
Partners' capital 245
Total $ 2,664
The condensed statements of operations 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 realized equity income of approximately $60,000 and $110,000 in
the Joint Venture 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 the DEP of the
findings when they were first discovered. However, the DEP did not give any
directives as to corrective action until late 1995.
In November 1995, representatives of the Joint Venture and the 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 field 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 cover this excess.
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 C - TRANSACTIONS WITH AFFILIATED PARTIES
The Partnership has no employees and is dependent on the Managing General
Partner and its affiliates for the management and administration of all
partnership activities. The Partnership's partnership agreement provides for
payments to affiliates for services and as reimbursement for certain expenses
incurred by affiliates on behalf of the Partnership. The following amounts
owed to the Managing General Partner and affiliates for the nine months ended
September 30, 1998 and 1997, were paid or accrued:
1998 1997
(in thousands)
Property management fees (included in operating $776 $771
expenses)
Reimbursement for services of affiliates
(included in general and administrative
expenses) 395 309
Construction oversight reimbursements, included in investment properties and
operating expense, were approximately $62,000 and $45,000 for the periods ended
September 30, 1998 and September 30, 1997, respectively.
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 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 current year's
master policy. The agent assumed the financial obligations of the affiliate of
the Managing General Partner which receives 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.
Angeles Mortgage Invest Trust ("AMIT"), a real estate investment trust, provides
financing (the "AMIT Loans") to the Princeton Meadows Golf Course Joint Venture.
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 balance and any unpaid interest is due. Interest
expense on the debt secured by the Joint Venture was approximately $147,000 for
both 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
Insignia Properties Trust ("IPT"), the entity which controls the Managing
General Partner. As a result, IPT became the holder of the AMIT Loan.
The Partnership may make advances to the Joint Venture as deemed appropriate by
the Managing General Partner. These advances do not bear interest and do not
have stated terms of repayment. At September 30, 1998, the amount of advances
receivable from the Joint Venture was approximately $149,000.
On April 14, 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 18,500 of the outstanding
units of limited partnership interest in the Partnership, at $500 per Unit, net
to the seller in cash. In connection with this tender offer, the Purchaser
acquired 8,002 units.
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 12,000 of the outstanding units of limited partnership interest in the
Partnership at $600 per Unit, net to the seller in cash. The expiration date
for the tender offers was subsequently extended to November 16, 1998.
NOTE D - LOSS ON DISPOSAL OF PROPERTIES
In June 1998, there was a fire at Pickwick Place Apartments which extensively
damaged 12 apartment units. As a result, the Partnership recorded a loss on
disposal of property of approximately $79,000. In addition, there were two
smaller fires in May 1998 at Hunters Glen V and Hunters Glen VI which resulted
in losses on disposal of properties for approximately $2,000 and $4,000,
respectively. There was also some water damage at Southpointe Apartments which
resulted in damages of approximately $10,000. Finally, in the third quarter of
1998, a loss on disposal of properties was recorded at Chambers Ridge Apartments
and Twin Lake Towers Apartments for approximately $35,000 and $23,000,
respectively, as the result of re-roofing projects at both investment
properties. The losses occurred due to the write-off of the old roofs that were
not fully depreciated upon completion of the new roofing projects.
For the nine months ended September 30, 1997, a loss on disposal of properties
of approximately $28,000 was recorded as the result of balcony replacements at
Twin Lake Towers and carport replacements at Pickwick Place for approximately
$10,000 and $18,000, respectively.
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. 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 nine apartment complexes and
one commercial complex. The following table sets forth the average occupancy of
the properties for the nine months ended September 30, 1998 and 1997:
Average Occupancy
Property 1998 1997
Briarwood Apartments 97% 96%
Cedar Rapids, Iowa (1)
Chambers Ridge Apartments (1) 92% 91%
Harrisburg, Pennsylvania
Gateway Gardens Apartments (1) 97% 93%
Cedar Rapids, Iowa
Hunters Glen - IV Apartments (1) 97% 96%
Plainsboro, New Jersey
Hunters Glen - V Apartments (1) 97% 95%
Plainsboro, New Jersey
Hunters Glen - VI Apartments 96% 96%
Plainsboro, New Jersey
Pickwick Place Apartments (1) 94% 92%
Indianapolis, Indiana
Southpointe Apartments (2) 69% 63%
Bedford Heights, Ohio
Twin Lake Towers Apartments 96% 96%
Westmont, Illinois
Cooper Point Plaza (3) 53% 55%
Olympia, Washington
1) The occupancy at these investment properties has increased due to the
improvement of the markets in the Indianapolis, Harrisburg, Cedar Rapids and
Plainsboro areas, an increased emphasis on resident relations and improved
marketing efforts by property managers.
2) The mortgage indebtedness encumbering this property was modified in December
1997. As part of the agreement, the Partnership was required to advance funds
to Southpointe Apartments for capital improvement projects. As of September
30, 1998, all of the improvements have been completed. Southpointe
Apartment's low occupancy is due to delays in renovations and the past poor
condition of the property. The appearance of the property has improved
dramatically since September 1997 resulting in the increased occupancy.
3) Cooper Point Plaza has been adversely affected by the moving out of several
tenants who, on average, occupied less than 2% of the total leasable space.
The Managing General Partner has entered into a contract with a potential
buyer for Cooper Point Plaza. The contract is subject to due diligence and
the Managing General Partner cannot assure that the sale will be consummated.
The Partnership incurred net losses of approximately $484,000 and $1,000,000 for
the three and nine months ended September 30, 1998, as compared to net losses of
approximately $430,000 and $1,536,000 for the three and nine months ended
September 30, 1997. This decrease in net loss for the nine month period ended
September 30, 1998 is primarily due to an increase in revenues and a decrease in
operating expenses, partially offset by an increase in the loss on disposal of
property and property taxes.
Rental revenue increased for the nine months ended September 30, 1998, as
compared to the nine months ended September 30, 1997 due to an increase in
average occupancy at seven of the Partnership's nine residential investment
properties. Cooper Point Plaza, the Partnership's only commercial property,
experienced a decrease in occupancy, which is discussed above. Also
contributing to the increase in rental revenue is an increase in average annual
rental rates at all ten investment properties.
The loss on disposal of property is attributable to a fire in June 1998 at
Pickwick Place Apartments which extensively damaged 12 apartment units. As a
result, the Partnership recorded a loss on disposal of property for
approximately $79,000. In addition, there were two smaller fires in May 1998 at
Hunters Glen V and Hunters Glen VI which resulted in losses on disposal of
properties for approximately $2,000 and $4,000, respectively. There was also
some water damage at Southpointe Apartments which resulted in damage of
approximately $10,000. Finally, in the third quarter of 1998, a loss on
disposal of properties was recorded at Chambers Ridge Apartments and Twin Lake
Towers Apartments for approximately $35,000 and $23,000, respectively, as the
result of re-roofing projects at both investment properties. The losses
occurred due to the write-off of the old roofs that were not fully depreciated
upon completion of the new roofing projects.
For the nine months ended September 30, 1997, a loss on disposal of properties
of approximately $28,000 was recorded as the result of balcony replacements at
Twin Lake Towers and carport replacements at Pickwick Place for approximately
$10,000 and $18,000, respectively.
Total expenses, excluding bad debt recovery, decreased for the nine months ended
September 30, 1998 as compared to the same period in 1997 due to decreases in
operating expense and interest expense. Operating expenses decreased at Hunters
Glen Apartments - IV, V, and VI primarily as a result of the decrease in the
number of corporate units available. The expenses associated with operating
these units are higher because they are fully furnished and utilities are
included. Also contributing to the decrease in operating expenses was the
completion of a landscaping project and less interior painting at Hunters Glen
Apartments - IV, V and VI. As occupancy has increased at this investment
property, fewer tenants have vacated their units resulting in less interior
painting. Also, at Gateway Gardens Apartments an exterior painting project was
completed during 1997. Interest expense decreased primarily due to the
modification of the mortgage encumbering Southpointe Apartments. This mortgage
was in default from April 1997 until December 1997 during which time interest
was accruing at the default rate of 10.59% (see discussion below). Partially
offsetting these decreases was an increase in general and administrative expense
primarily due to an increase in expense reimbursements to affiliates of the
Managing General Partner.
Bad debt recovery for the nine months ended September 30, 1997 resulted from a
reduction of the reserve necessary at Cooper Point Plaza and Southpointe
Apartments based on a review of their tenants accounts receivable.
The increase in net loss for the three months ended September 30, 1998, compared
to the same period in 1997 is due to an increase in operating expense, general
and administrative expense and the loss on disposal of properties, as previously
discussed. Partially offsetting the increased expenses is an increase in rental
revenue. The increase in operating expense is primarily due to an increase in
major landscaping and exterior building improvements during the three month
period in 1998. The increase in general and administrative expense is due to
higher expense reimbursements to affiliates of the Managing General Partner and
increased administrative costs.
The Partnership has a 44.5% investment in the Princeton Meadows Golf Course
Joint Venture. For the period ended September 30, 1998, the Partnership realized
equity in income of the Joint Venture of approximately $60,000, as compared to
equity in income of the Joint Venture of approximately $110,000 for the period
ended September 30, 1997. 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.
Included in operating expense for the nine months ended September 30, 1998, is
approximately $385,000 of major repairs and maintenance mainly comprised of
major landscaping, exterior building repairs, and window covering replacements.
For the nine months ended September 30, 1997, approximately $272,000 of major
repairs and maintenance is included in operating expense mainly comprised of
major landscaping, parking lot repairs, window covering replacements and
exterior painting.
As part of the ongoing business plan of the Partnership, the Managing General
Partner monitors the rental market environment of its investment properties to
assess the feasibility of increasing rent, 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
approximately $7,095,000, compared to approximately $5,961,000 at September 30,
1997. Cash and cash equivalents increased approximately $636,000 and $1,134,000
for the periods ended September 30, 1998 and 1997, respectively. Net cash
provided by operating activities increased for the nine months ended September
30, 1998, versus the nine months ended September 30, 1997. This increase is
primarily due to an increase in accounts payable and a decrease in the net loss,
as previously explained, but was partially offset by a decrease in other
liabilities and an increase in receivables and deposits. The decrease in other
liabilities is due to the payment made to the lender of the Southpointe mortgage
to satisfy all of the accrued interest and to secure the modification of the
note, as explained below. The increase in receivables and deposits is due to the
timing of tax and insurance payments at some of the Partnership's investment
properties. Net cash used in investing activities increased due to an increase
in property improvements and replacements. Net cash used in financing
activities resulted from principal payments made on the mortgage notes payable
for the nine months ended September 30, 1998.
The mortgage encumbering Southpointe Apartments was in default from April 1997
until December 31, 1997 due to non-payment of the monthly debt-service
requirements. This property had increasing maintenance needs which have been
completed as of September 30, 1998. Historically, monthly payments of debt
service had been late as the property rents for the current month were used to
pay the prior month's debt service. In February 1997, the tenants at Southpointe
Apartments orchestrated a rent strike. The tenants demanded that until certain
capital improvements were made at the property, rents would be held in escrow.
At December 31, 1997, certain improvements had been made and the remaining rents
were released from escrow. The Managing General Partner had been unsuccessful in
attempts to refinance the $11,000,000 mortgage indebtedness secured by
Southpointe Apartments, which carried a maturity date of July 1999 and a stated
interest rate of 8.59%. However, a modification was agreed upon at December 31,
1997 which extends the maturity date of the loan until January 2002. The
modification was contingent upon the payment of all delinquent accrued interest,
the installation of new boilers at the property with a cost of approximately
$70,000, approximately $80,000 in capital improvements to be made over the next
two years and a reduction in the management fee taken by the management company
from 5% of gross revenues to 3% of gross revenues. In addition, in accordance
with the mortgage agreement, the lender advanced the Partnership an additional
$23,000 to be used to pay real estate taxes. This advance is secured by the
mortgage agreement and accrues interest at 9%. The advance matures January
2002. In January 1998, a payment was made to the lender to satisfy all the
accrued interest and secure the modification. All other terms of the debt
remain the same.
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 and to
comply with federal, state and local legal and regulatory requirements. 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 affected at least in the short term. The
Partnership indebtedness amounts to approximately $71,549,000, net of
unamortized discounts, with maturity dates ranging from January 2002 to
September 2012, with a balloon payment totaling $63,822,000. The Managing
General Partner will attempt to refinance such remaining indebtedness or sell
the properties prior to such maturity dates. If the properties cannot be
refinanced or sold for a sufficient amount, the Partnership will risk losing
such properties through foreclosure. There were no cash distributions during
the nine months ended September 30, 1998, or September 30, 1997. Future cash
distributions will depend on the levels 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 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 Managing General
Partner. 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 (the "Reform Act") 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 PROCEEDING
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 one time, affiliates of Insignia
("Insignia Affiliates") of interests in certain general partner entities, past
tender offers by Insignia Affiliates to acquire limited partnership units, the
management of partnerships by Insignia Affiliates as well as a recently
announced agreement between Insignia and Apartment Investment and Management
Company. 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 schedule
to be heard on January 8, 1999. The Managing General Partner believes this
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., ET AL. in the Superior Court of the State of
California, county of Los Angeles. The action involves 44 real estate limited
partnership (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 Subject 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.
In July 1998, a limited partner of the Partnership commenced an action in the
Circuit Court for Jackson County, Missouri entitled BOND PURCHASE LLC V. ANGELES
PARTNERS XII, ET AL. The complaint claims that the Partnership and an affiliate
of the Managing General Partner breached certain contractual and fiduciary
duties allegedly owed to the claimant and seeks damages and injunctive relief.
The Managing General Partner believes the claims to be without merit and intends
to vigorously defend the claims.
The Partnership is unaware of any other pending or outstanding litigation that
is not of a routine nature. The Managing General Partner 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 is filed as an exhibit to this report.
b) Reports on Form 8-K:
None filed during the nine months 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 PARTNERS XII
By: Angeles Realty Corporation II
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 13, 1998
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from
Angeles Partners XII 1998 Third Quarter 10-QSB and is qualified in its
entirety by reference to such 10-QSB filing.
</LEGEND>
<CIK> 0000720392
<NAME> ANGELES PARTNERS XII
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> SEP-30-1998
<CASH> 7,095
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0<F1>
<PP&E> 101,756
<DEPRECIATION> (64,000)
<TOTAL-ASSETS> 49,599
<CURRENT-LIABILITIES> 0<F1>
<BONDS> 71,549
0
0
<COMMON> 0
<OTHER-SE> (25,615)
<TOTAL-LIABILITY-AND-EQUITY> 49,599
<SALES> 0
<TOTAL-REVENUES> 16,431
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 17,491
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 4,823
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,000)
<EPS-PRIMARY> (22.14)<F2>
<EPS-DILUTED> 0
<FN>
<F1>Registrant has an unclassified balance sheet.
<F2>Multiplier is 1.
</FN>
</TABLE>
