FORM 10-QSB-QUARTERLY OR TRANSITIONAL REPORT UNDER SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
Quarterly or Transitional Report
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-QSB
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2000
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _________to _________
Commission file number 0-13309
ANGELES PARTNERS XII
(Exact name of small business issuer as specified in its charter)
California 95-3903623
(State or other jurisdiction of (I.R.S.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 PARTNERS XII
CONSOLIDATED BALANCE SHEET
(Unaudited)
(in thousands, except unit data)
September 30, 2000
<TABLE>
<CAPTION>
Assets
<S> <C> <C>
Cash and cash equivalents $ 2,873
Receivables and deposits (net of allowance for
doubtful accounts of $677) 1,109
Restricted escrows 1,020
Other assets 1,004
Investment in joint venture 4
Investment properties:
Land $ 7,989
Buildings and related personal property 86,823
94,812
Less accumulated depreciation (61,224) 33,588
$39,598
Liabilities and Partners' Capital (Deficit)
Liabilities
Accounts payable $ 816
Tenant security deposit liabilities 920
Accrued property taxes 739
Other liabilities 793
Mortgage notes payable 55,568
Partners' Capital (Deficit)
General partners $ 86
Limited partners (44,718 units issued and
outstanding) (19,324) (19,238)
$ 39,598
See Accompanying Notes to Consolidated Financial Statements
</TABLE>
b)
ANGELES PARTNERS XII
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(in thousands, except unit data)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
2000 1999 2000 1999
evenues:
<S> <C> <C> <C> <C>
Rental income $ 4,895 $ 4,979 $ 14,442 $ 15,129
Other income 384 377 1,188 1,079
Casualty gain (loss) 126 (160) 506 (59)
Gain on sale of investment
property -- 8,649 -- 10,827
Total revenues 5,405 13,845 16,136 26,976
Expenses:
Operating 1,641 1,875 5,027 5,850
General and administrative 293 153 582 441
Depreciation 1,319 1,099 3,994 3,423
Interest 1,178 1,243 3,590 4,287
Property taxes 520 402 1,535 1,556
Total expenses 4,951 4,772 14,728 15,557
Income before equity in (loss) income of
joint venture and extraordinary items 454 9,073 1,408 11,419
Equity in (loss) income of joint venture -- (7) -- 1,314
Income before extraordinary items 454 9,066 1,408 12,733
Equity in extraordinary loss on the
extinguishment of debt of joint
venture (Note C) -- -- -- (3)
Extraordinary loss on extinguishment
of debt (Note E) -- -- -- (556)
Net income $ 454 $ 9,066 $ 1,408 $ 12,174
Net income allocated to general
partners (1%) $ 4 $ 91 $ 14 $ 969
Net income allocated to limited
partners (99%) 450 8,975 1,394 11,205
$ 454 $ 9,066 $ 1,408 $ 12,174
Net income per limited partnership
unit:
Income before extraordinary items $ 10.06 $200.70 $ 31.17 $ 262.94
Extraordinary items -- -- -- (12.37)
$ 10.06 $200.70 $ 31.17 $ 250.57
Distributions per limited partnership
Unit $ -- $ 10.00 $ 86.97 $ 65.79
See Accompanying Notes to Consolidated Financial Statements
</TABLE>
c)
ANGELES PARTNERS XII
CONSOLIDATED STATEMENT OF CHANGES IN PARTNERS' CAPITAL (DEFICIT)
(Unaudited)
(in thousands, except unit data)
<TABLE>
<CAPTION>
Limited
Partnership General Limited
Units Partners Partners Total
<S> <C> <C> <C> <C>
Original capital contributions 44,773 $ 1 $ 44,773 $ 44,774
Partners' capital (deficit) at
December 31, 1999 44,718 $ 111 $(16,829) $ (16,718)
Distribution to partners -- (39) (3,889) (3,928)
Net income for the nine months
ended September 30, 2000 -- 14 1,394 1,408
Partners' capital (deficit)
at September 30, 2000 44,718 $ 86 $(19,324) $ (19,238)
See Accompanying Notes to Consolidated Financial Statements
</TABLE>
d)
ANGELES PARTNERS XII
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
2000 1999
Cash flows from operating activities:
<S> <C> <C>
Net income $ 1,408 $ 12,174
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 3,994 3,423
Amortization of discounts, loan costs, and
leasing commissions 208 251
Equity in extraordinary loss on extinguishment of
debt of joint venture -- 3
Gain on disposal of investment properties -- (10,827)
Extraordinary loss on extinguishment of debt -- 556
Equity in income of joint venture -- (1,314)
Casualty (gain) loss (506) 59
Change in accounts:
Receivables and deposits 737 381
Other assets (197) (126)
Accounts payable 94 305
Tenant security deposit liabilities 25 21
Accrued property taxes (50) (174)
Other liabilities 186 411
Net cash provided by operating activities 5,899 5,143
Cash flows from investing activities:
Property improvements and replacements (4,990) (2,860)
Net (deposits to) receipts from restricted escrows (394) 384
Repayment of advances to joint venture -- 149
Net proceeds from casualty 161 101
Proceeds from sale of investment properties -- 5,996
Distributions from joint venture -- 1,175
Net cash (used in) provided by investing activities (5,223) 4,945
Cash flows from financing activities:
Payments on mortgage notes payable (646) (598)
Repayment of loans -- (3,905)
Distributions to partners (4,048) (3,815)
Debt extinguishment costs -- (78)
Net cash used in financing activities (4,694) (8,396)
Net (decrease) increase in cash and cash equivalents (4,018) 1,692
Cash and cash equivalents at beginning of period 6,891 7,611
Cash and cash equivalents at end of period $ 2,873 $ 9,303
Supplemental disclosure of cash flow information:
Cash paid for interest $ 3,402 $ 4,149
At December 31, 1999 and September 30, 2000 accounts payable and property
improvements improvements and replacements were adjusted by $1,124,000 for
non-cash activity. Distributions of approximately $120,000 were declared at
December 31, 1999 and paid in January 2000.
See Accompanying Notes to Consolidated Financial Statements
</TABLE>
e)
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" or "Registrant") have been prepared in accordance with
generally accepted accounting principles for interim financial information and
with the instructions to Form 10-QSB and Item 310(b) of Regulation S-B.
Accordingly, they do not include all of the information and footnotes required
by generally accepted accounting principles for complete financial statements.
In the opinion of Angeles Realty Corporation II (the "Managing General
Partner"), all adjustments (consisting of normal recurring accruals) considered
necessary for a fair presentation have been included. Operating results for the
three and nine month periods ended September 30, 2000, are not necessarily
indicative of the results that may be expected for the fiscal year ending
December 31, 2000. For further information, refer to the consolidated financial
statements and footnotes thereto included in the Partnership's Annual Report on
Form 10-KSB for the fiscal year ended December 31, 1999.
Principles of Consolidation
The consolidated financial statements of the Partnership include its 99.99%
limited partnership interest in Pickwick Place AP XII LP. Because the
Partnership may remove the general partner of Pickwick Place AP XII LP, this
partnership is controlled and consolidated by the Partnership. The consolidated
financial statements also include the Partnership's interests in AP XII
Associate GP, LLC, Hunters Glen Phase I GP, LLC and Hunters Glen Phase V GP,
LLC, single member limited liability corporations, which are wholly-owned by the
Registrant. All significant inter-entity balances have been eliminated. Minority
interest is immaterial and not shown separately in the financial statements.
Note B - Transfer of Control
Pursuant to a series of transactions which closed on October 1, 1998 and
February 26, 1999, Insignia Financial Group, Inc. and Insignia Properties Trust
("IPT") merged into Apartment Investment and Management Company ("AIMCO"), a
publicly traded real estate investment trust, with AIMCO being the surviving
corporation (the "Insignia Merger"). As a result, AIMCO acquired 100% ownership
interest in the Managing General Partner. The Managing General Partner does not
believe that this transaction has had or will have a material effect on the
affairs and operations of the Partnership.
Note C - Investment in Joint Venture
The Partnership has a 44.5% investment in Princeton Golf Course Joint Venture
("Joint Venture"). On February 26, 1999, the Joint Venture sold its only
investment property, Princeton Meadows Golf Course, to an unaffiliated third
party. The sale resulted in net proceeds of approximately $3,411,000 after
payment of closing costs and repayment of mortgage principal and accrued
interest. As of September 30, 1999, the Joint Venture recorded a gain on sale of
approximately $3,088,000 after the write-off of undepreciated fixed assets. In
connection with the sale, a commission of approximately $153,000 was paid to the
Joint Venture's managing general partner in accordance with the Joint Venture
Agreement. The Partnership's 1999 pro-rata share of this gain at September 30,
1999 was approximately $1,374,000 and its equity in loss on operations of the
Joint Venture at September 30, 1999 amounted to approximately $60,000. The Joint
Venture also recognized an extraordinary loss on early extinguishment of debt of
approximately $7,000 as a result of unamortized loan costs being written off.
The Partnership's pro-rata share of this extraordinary loss was approximately
$3,000.
Condensed balance sheet information of the Joint Venture at September 30, 2000,
is as follows (in thousands):
Assets
Cash $ 16
Total $ 16
Liabilities and Partners' Capital
Other liabilities $ 6
Partners' capital 10
Total $ 16
The condensed statements of operations of the Joint Venture for the nine months
ended September 30, 2000 and 1999 are summarized as follows (in thousands):
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
2000 1999 2000 1999
<S> <C> <C> <C> <C>
Revenues $ -- $ 4 $ -- $ 94
Costs and expenses -- -- -- (230)
Income (loss) before gain on sale of
investment property and extraordinary
loss on extinguishment of debt -- 4 -- (136)
(Loss) gain on sale of investment property -- (20) -- 3,088
Extraordinary loss on extinguishment
of debt -- -- -- (7)
Net (loss) income $ -- $ (16) $ -- $ 2,945
</TABLE>
The Partnership recognized its 44.5% equity income of approximately $1,314,000
in the Joint Venture for the nine months ended September 30, 1999. The
Partnership also recognized equity in the extraordinary loss on extinguishment
of debt of approximately $3,000 for the nine months ended September 30, 1999.
Due to the sale of Princeton Meadows Golf Course in February 1999, the Joint
Venture had no operations during the nine months ended September 30, 2000. The
Partnership anticipates that during the fourth quarter of 2000, all remaining
assets and liabilities of the Joint Venture will be liquidated.
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 (i) payments to
affiliates for services and (ii) reimbursement of certain expenses incurred by
affiliates on behalf of the Partnership.
The following payments owed to the Managing General Partner and its affiliates
during the nine months ended September 30, 2000 and 1999 were paid or accrued:
2000 1999
(in thousands)
Property management fees (included in
operating expense) $772 $782
Reimbursement for services of affiliates (included
in investment properties; operating and general and
administrative expenses) 614 543
Due to affiliate (included in other liabilities) 144 --
During the nine months ended September 30, 2000 and 1999, affiliates of the
Managing General Partner were entitled to receive 5% of gross receipts from all
of the Registrant's residential properties (except Southpointe which was 3%) as
compensation for providing property management services. The Registrant paid to
such affiliates approximately $772,000 and $782,000 for the nine months ended
September 30, 2000 and 1999, respectively.
Affiliates of the Managing General Partner received reimbursement of accountable
administrative expenses amounting to approximately $614,000 and $543,000 for the
nine months ended September 30, 2000 and 1999, respectively. Included in these
amounts is approximately $186,000 and $268,000 of construction oversight
reimbursements for the nine months ended September 30, 2000 and 1999,
respectively. At September 30, 2000, approximately $144,000 of the current year
expense was accrued and is included in other liabilities in the accompanying
consolidated balance sheet.
Pursuant to the Partnership Agreement, the Managing General Partner is entitled
to receive a distribution equal to 3% of the aggregate disposition price of sold
properties. During the second quarter of 1999, the Partnership paid a
distribution of approximately $186,000 to the Managing General Partner related
to the sale of Cooper Point Plaza in January 1999. This distribution is
subordinate to the limited partners receiving their original capital
contributions plus a cumulative preferred return of 6% per annum of their
adjusted capital investment, as defined in the Partnership Agreement. If the
limited partners have not received these returns when the Partnership
terminates, the Managing General Partner will return this amount to the
Partnership.
Angeles Mortgage Investment Trust ("AMIT"), a real estate investment trust,
provided financing (the "AMIT Loan") to the Princeton Meadows Golf Course Joint
Venture (see "Note C"). Pursuant to a series of transactions, affiliates of the
Managing General Partner acquired ownership interests in AMIT. On September 17,
1998, AMIT was merged with and into IPT, the entity which controlled the
Managing General Partner. Effective February 26, 1999, IPT was merged into
AIMCO. As a result, AIMCO became the current holder of the AMIT loan. On
February 26, 1999, Princeton Meadows Golf Course was sold to an unaffiliated
third party. Upon closing, the AMIT principal balance of $1,567,000 plus accrued
interest of approximately $17,000 was paid off.
The Partnership was permitted to make advances to the Joint Venture as deemed
appropriate by the Managing General Partner. These advances did not bear
interest nor have stated terms of repayment. In June 1999, the advance
receivable was paid off from the proceeds of the sale of the golf course.
In addition to its indirect ownership of the general partner interest in the
Partnership, AIMCO and its affiliates currently own 29,004 limited partnership
units in the Partnership representing 64.86% of the outstanding units. A number
of these units were acquired pursuant to tender offers made by AIMCO or its
affiliates. It is possible that AIMCO or its affiliates will make one or more
additional offers to acquire additional limited partnership interests in the
Partnership for cash or in exchange for units in the operating partnership of
AIMCO. In this regard, on July 24, 2000, an affiliate of AIMCO commenced a
tender offer to purchase any and all of the remaining partnership interests for
a purchase price of $804. This offer expired on September 28, 2000 with a total
of 1996 units acquired by an affiliate of AIMCO. Under the Partnership
Agreement, unitholders holding a majority of the Units are entitled to take
action with respect to a variety of matters, which would include without
limitation, voting on certain amendments to the Partnership Agreement and voting
to remove the Managing General Partner. As a result of its ownership of 64.86%
of the outstanding units, AIMCO is in a position to influence all voting
decisions with respect to the Registrant. When voting on matters, AIMCO would in
all likelihood vote the Units it acquired in a manner favorable to the interest
of the Managing General Partner because of their affiliation with the Managing
General Partner.
Note E - Sale of Investment Property
On January 4, 1999, the Partnership sold its only commercial property, Cooper
Point Plaza, to an unaffiliated third party for net sales proceeds of
approximately $5,995,000 after payment of closing costs. The Partnership
realized a gain of approximately $2,364,000 on the sale. In addition, the
Partnership recorded an extraordinary loss on early extinguishment of debt of
approximately $556,000 as a result of unamortized loan costs being written off
and the payment of a prepayment penalty of approximately $78,000 relating to the
prepayment of the mortgage encumbering the property. In conjunction with the
sale, a distribution of approximately $186,000 was paid to the Managing General
Partner in accordance with the Partnership Agreement (see "Note D"). In February
1999, the Partnership made a distribution of approximately $2,032,000
representing proceeds from the sale of Cooper Point Plaza.
On August 6, 1999, the Partnership sold Southpointe Apartments to an
unaffiliated third party. Upon closing, the purchaser agreed to assume the
mortgage note payable and other liabilities encumbering the property of
approximately $11,017,000 and to pay the related accrued interest of
approximately $487,000 and outstanding property taxes of approximately $135,000.
Consequently, the Registrant received no proceeds relating to this transaction.
The Partnership realized a gain of approximately $8,463,000 on the sale due to
the purchaser's assumption of the mortgage balance which exceeded the
undepreciated value of the property being written off.
Note F - Casualty Gain
During the nine months ended September 30, 2000, a net casualty gain of
approximately $506,000 was recorded at Pickwick Place Apartments. The casualty
gain related to a fire that destroyed the indoor tennis courts and nearby
maintenance shed in August 1999. The gain was the result of insurance proceeds
of approximately $506,000. The destroyed property was fully depreciated.
During the nine months ended September 30, 1999, a net casualty loss of
approximately $59,000 was recorded due to the recognition of a casualty gain of
approximately $101,000 at Pickwick Place Apartments and a casualty loss of
approximately $160,000 at Southpointe Apartments. The casualty gain at Pickwick
Place related to storm damage in January 1999 and a small fire in February 1999.
The casualty loss at Southpointe Apartments resulted from the write-off of
assets that were replaced in 1999 as a result of damage caused by a fire at the
property in October 1998.
Note G - Distributions
During the nine months ended September 30, 2000, the Partnership paid a
distribution from operations of approximately $3,928,000 ($3,889,000 paid to
limited partners or $86.97 per limited partnership unit). In addition, the
Partnership paid a distribution of approximately $120,000 ($119,000 paid to
limited partners or $2.66 per limited partnership unit) relating to a
distribution payable from operations declared at December 31, 1999. During the
nine months ended September 30, 1999, a distribution of approximately $3,165,000
was paid to partners, of which approximately $495,000 ($484,000 paid to the
limited partners or $10.82 per limited partnership unit) was paid from
operations and approximately $2,670,000 ($2,458,000 paid to the limited partners
$54.97 per limited partnership unit) was paid from surplus funds. In addition,
the Partnership paid a distribution of approximately $650,000 to limited
partners ($14.54 per limited partnership unit) relating to a distribution
payable from surplus cash declared at December 31, 1998.
Note H - Segment Reporting
Description of the types of products and services from which the reportable
segment derives its revenues:
The Partnership has one reportable segment: residential properties consisting of
eight apartment complexes located in five states - Iowa (2 properties),
Pennsylvania (1 property), New Jersey (3 properties), Illinois (1 property), and
Washington (1 property). The Partnership rents apartment units to tenants for
terms that are typically twelve months or less.
Measurement of segment profit or loss:
The Partnership evaluates performance based on segment profit (loss) before
depreciation. The accounting policies of the reportable segment are the same as
those described in the summary of significant accounting policies in the
Partnership's Annual Report on Form 10-KSB for the year ended December 31, 1999.
Factors management used to identify the Partnership's reportable segment:
The Partnership's reportable segment consists of investment properties that
offer similar products and services. Although each of the investment properties
are managed separately, they have been aggregated into one segment as they
provide services with similar types of products and customers.
Segment information for the three and nine month periods ended September 30,
2000 and 1999 is shown in the tables below (in thousands). The "Other" column
includes Partnership administration related items and income and expense not
allocated to the reportable segment.
Three Months Ended September 30, 2000 Residential Other Totals
Rental income $ 4,895 $ -- $ 4,895
Other income 376 8 384
Casualty gain 126 -- 126
Interest expense 1,178 -- 1,178
Depreciation 1,319 -- 1,319
General and administrative expense -- 293 293
Segment profit (loss) 739 (285) 454
Nine Months Ended September 30, 2000 Residential Other Totals
Rental income $14,442 $ -- $14,442
Other income 1,121 67 1,188
Casualty gain 506 -- 506
Interest expense 3,590 -- 3,590
Depreciation 3,994 -- 3,994
General and administrative expense -- 582 582
Segment profit (loss) 1,923 (515) 1,408
Total assets 38,849 749 39,598
Capital expenditures for investment
properties 3,866 -- 3,866
Three Months Ended September 30, 1999 Residential Other Totals
Rental income $ 4,981 $ (2) $ 4,979
Other income 334 43 377
Casualty loss (160) -- (160)
Gain on sale of property 8,463 186 8,649
Interest expense 1,243 -- 1,243
Depreciation 1,099 -- 1,099
General and administrative expense -- 153 153
Equity in loss of joint venture -- (7) (7)
Segment profit 8,998 68 9,066
Nine Months Ended September 30, 1999 Residential Other Totals
Rental income $15,120 $ 9 $15,129
Other income 924 155 1,079
Casualty loss (59) -- (59)
Gain on sale of property 8,463 2,364 10,827
Interest expense 4,281 6 4,287
Depreciation 3,423 -- 3,423
General and administrative expense -- 441 441
Equity in income of joint venture -- 1,314 1,314
Extraordinary loss on the
extinguishment of debt -- (556) (556)
Equity in extraordinary loss on early
extinguishment of debt of joint
venture -- (3) (3)
Segment profit 9,344 2,830 12,174
Total assets 36,476 6,372 42,848
Capital expenditures for investment
properties 2,860 -- 2,860
Note I - Legal Proceedings
In March 1998, several putative unit holders of limited partnership units of the
Partnership commenced an action entitled Rosalie Nuanes, et al. v. Insignia
Financial Group, Inc., et al. in the Superior Court of the State of California
for the County of San Mateo. The plaintiffs named as defendants, among others,
the Partnership, its Managing General Partner and several of their affiliated
partnerships and corporate entities. The action purports to assert claims on
behalf of a class of limited partners and derivatively on behalf of a number of
limited partnerships (including the Partnership) which are named as nominal
defendants, challenging the acquisition of interests in certain general partner
entities by Insignia Financial Group, Inc. and entities which were, at one time,
affiliates of Insignia; past tender offers by the Insignia affiliates to acquire
limited partnership units; the management of partnerships by the Insignia
affiliates; and the Insignia Merger. The plaintiffs seek monetary damages and
equitable relief, including judicial dissolution of the Partnership. On June 25,
1998, the Managing General Partner filed a motion seeking dismissal of the
action. In lieu of responding to the motion, the plaintiffs have filed an
amended complaint. The Managing General Partner filed demurrers to the amended
complaint which were heard February 1999.
Pending the ruling on such demurrers, settlement negotiations commenced. On
November 2, 1999, the parties executed and filed a Stipulation of Settlement,
settling claims, subject to final court approval, on behalf of the Partnership
and all limited partners who owned units as of November 3, 1999. Preliminary
approval of the settlement was obtained on November 3, 1999 from the Court, at
which time the Court set a final approval hearing for December 10, 1999. Prior
to the December 10, 1999 hearing, the Court received various objections to the
settlement, including a challenge to the Court's preliminary approval based upon
the alleged lack of authority of prior lead counsel to enter the settlement. On
December 14, 1999, the Managing General Partner and its affiliates terminated
the proposed settlement. In February 2000, counsel for some of the named
plaintiffs filed a motion to disqualify plaintiff's lead and liaison counsel who
negotiated the settlement. On June 27, 2000, the Court entered an order
disqualifying them from the case. The Court is considering applications for lead
counsel and has currently scheduled a hearing on the matter for November 20,
2000. The Managing General Partner does not anticipate that costs associated
with this case will be material to the Partnership's overall operations.
Yanesh Brothers Construction commenced an action against the Partnership
entitled Yanesh Brothers Construction Company, Inc. v. Insignia Residential
Group, L.P., AIMCO Management Company, et al. in the Court of Common Pleas in
Lake County, Ohio. The plaintiff was hired by AIMCO on behalf of the Partnership
to repair damages caused by a fire at Southpointe Apartments in October 1998 and
is seeking $330,000 under its repair contract. Although the Partnership had
insured Southpointe Apartments against this type of loss, the insurance company
has refused to pay the claim. The plaintiff is seeking recovery, in the
alternative, from the owner and manager of the property. The Partnership's
insurance broker and the property damage insurer were added as third party
defendants to the Yanesh Brothers claim. The Partnership has recorded a reserve
for $330,000, which is the amount of the claim.
The Partnership is unaware of any other pending or outstanding litigation that
is not of a routine nature arising in the ordinary course of business.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS
The matters discussed in this Form 10-QSB contain certain forward-looking
statements and involve risks and uncertainties (including changing market
conditions, competitive and regulatory matters, etc.) detailed in the
disclosures contained in this Form 10-QSB and the other filings with the
Securities and Exchange Commission made by the Registrant from time to time. The
discussion of the Registrant's business and results of operations, including
forward-looking statements pertaining to such matters, does not take into
account the effects of any changes to the Registrant's business and results of
operation. Accordingly, actual results could differ materially from those
projected in the forward-looking statements as a result of a number of factors,
including those identified herein.
The Partnership's investment properties consist of eight apartment complexes.
The following table sets forth the average occupancy of the properties for the
nine months ended September 30, 2000 and 1999:
Average Occupancy
Property 2000 1999
Hunters Glen - IV Apartments 97% 96%
Plainsboro, New Jersey
Hunters Glen - V Apartments 96% 97%
Plainsboro, New Jersey
Hunters Glen - VI Apartments 97% 96%
Plainsboro, New Jersey
Gateway Gardens Apartments 97% 97%
Cedar Rapids, Iowa
Chambers Ridge Apartments 96% 96%
Harrisburg, Pennsylvania
Briarwood Apartments 97% 98%
Cedar Rapids, Iowa
Twin Lake Towers Apartments 97% 98%
Westmont, Illinois
Pickwick Place Apartments 91% 93%
Indianapolis, Indiana
Results from Operations
The Partnership's net income for the nine months ended September 30, 2000 was
approximately $1,408,000 compared to net income of approximately $12,174,000 for
the corresponding period in 1999. The Partnership recorded net income of
approximately $454,000 for the three months ended September 30, 2000 compared to
net income of approximately $9,066,000 for the three months ended September 30,
1999. The decrease in net income for both the three and nine months ended
September 30, 2000 is primarily due to the decrease in total revenues resulting
from the gain on the sale of Cooper Point Plaza and the equity in income from
the sale of Princeton Meadows Golf Course in the first quarter of 1999 and the
gain on the sale of Southpointe Apartments in the third quarter of 1999.
On January 4, 1999, the Partnership sold its only commercial property, Cooper
Point Plaza, to an unaffiliated third party for net sales proceeds of
approximately $5,995,000 after payment of closing costs. The Partnership
realized a gain of approximately $2,364,000 on the sale. In addition, the
Partnership recorded an extraordinary loss on early extinguishment of debt of
approximately $556,000 as a result of unamortized loan costs being written off
and the payment of a prepayment penalty of approximately $78,000 relating to the
prepayment of the mortgage encumbering the property.
The Partnership has a 44.5% investment in Princeton Meadows Golf Course Joint
Venture. On February 26, 1999, the Joint Venture sold its only investment
property, Princeton Meadows Golf Course, to an unaffiliated third party for
gross sale proceeds of $5,100,000. The Joint Venture received net proceeds of
$3,411,000 after payment of closing costs, and repayment of mortgage principal
and accrued interest. As of September 30, 1999, the Joint Venture recorded a
gain on sale of approximately $3,088,000 after the write-off of undepreciated
fixed assets. For the nine months ended September 30, 1999 the Partnership
realized equity in income of the Joint Venture of approximately $1,314,000,
which included its equity in the gain on disposal of Princeton Meadows Golf
Course of $1,374,000 and the equity in loss on operations of $60,000. For the
nine months ended September 30, 2000, Princeton Meadows Golf Course did not have
any operations, therefore, the Partnership did not recognize any equity from the
Joint Venture.
On August 6, 1999, the Partnership sold Southpointe Apartments to an
unaffiliated third party. Upon closing, the purchaser agreed to assume the
mortgage note payable and other liabilities encumbering the property of
approximately $11,017,000 and to pay the related accrued interest of
approximately $487,000 and outstanding property taxes of approximately $135,000.
Consequently, the Partnership received no proceeds relating to this transaction.
The Partnership realized a gain of approximately $8,463,000 on the sale due to
the purchaser's assumption of the mortgage balance which exceeded the
undepreciated value of the property being written off.
Excluding the impact of the operations and sale of Cooper Point Plaza,
Southpointe Apartments and the Princeton Meadows Golf Course, net income
decreased approximately $591,000 for the three months ended September 30, 2000,
compared to the corresponding period in 1999. Net income increased $176,000 for
the nine months ended September 30, 2000, compared to the corresponding period
in 1999. The increase in net income for the nine month period was due to an
increase in total revenues partially offset by an increase in total expenses.
The increase in total revenues was attributable to the recognition of a casualty
gain at Pickwick Place Apartments, and increases in rental and other income. The
casualty gain at Pickwick Place Apartments related to a fire which destroyed the
indoor tennis courts and a nearby maintenance shed. The gain represents the
insurance proceeds received. Rental income increased as a result of increases in
the average rental rates at all of the Partnership's properties, despite
decreases in occupancy at Hunters Glen V, Briarwood Apartments, Twin Lake Towers
Apartments, and Pickwick Place Apartments. Other income increased as a result of
increased corporate unit rentals at Hunters Glen IV, V and VI and cable rebates
at all of the investment properties. The decrease in net income for the three
month period was due to an increase in total expenses partially offset by an
increase in total revenues. The increase in total revenues for the three months
was attributable to an increase in both rental income and other income as
discussed above.
The increase in total expenses for both the three and nine month periods was
primarily the result of an increase in depreciation and general and
administrative expenses, which were partially offset by a decrease in interest
expense. Depreciation expense increased due to increased property improvements
and replacements at the properties during the year ended December 31, 1999 and
the nine months of 2000. Interest expense decreased as a result of scheduled
principal payments made on the investment properties' first mortgages.
General and administrative expenses increased for the nine months ended
September 30, 2000, due to an increase in the costs of services included in the
management reimbursements to the General Partner as allowed under the
Partnership Agreement. In addition, costs associated with the quarterly and
annual communications with investors and regulatory agencies and the annual
audit required by the Partnership Agreement are also included.
As part of the ongoing business plan of the Partnership, the Managing General
Partner monitors the rental market environment at its investment properties to
assess the feasibility of increasing rents, maintaining or increasing occupancy
levels and protecting the Partnership from increases in expenses. As part of
this plan, the Managing General Partner attempts to protect the Partnership from
the burden of inflation-related increases in expenses by increasing rents and
maintaining a high overall occupancy level. However, due to changing market
conditions, which can result in the use of rental concessions and rental
reductions to offset softening market conditions, there is no guarantee that the
Managing General Partner will be able to sustain such a plan.
Liquidity and Capital Resources
At September 30, 2000, the Partnership had cash and cash equivalents of
approximately $2,873,000 as compared to approximately $9,303,000 at September
30, 1999. Cash and cash equivalents decreased approximately $4,018,000 for the
nine months ended September 30, 2000 from the Registrant's year ended December
31, 1999. The decrease is primarily due to approximately $5,223,000 of cash used
in investing activities and approximately $4,694,000 of cash used in financing
activities, which was partially offset by approximately $5,899,000 of cash
provided by operating activities. Cash used in investing activities consisted
primarily of property improvements and replacements and, to a lesser extent, net
deposits to restricted escrows maintained by the mortgage lender offset by net
proceeds from a casualty. Cash used in financing activities consisted primarily
of distributions to partners and, to a lesser extent, payments of principal made
on the mortgages encumbering the Registrant's properties. The Registrant invests
its working capital reserves in a money market account.
The sufficiency of existing liquid assets to meet future liquidity and capital
expenditure requirements is directly related to the level of capital
expenditures required at the investment properties to adequately maintain the
physical assets and other operating needs of the Registrant and to comply with
Federal, state, and local legal and regulatory requirements. Capital
improvements planned for each of the Registrant's properties are detailed below.
Hunters Glen Apartments IV
The Partnership has budgeted for the year 2000 approximately $1,300,000 in
capital improvements at Hunters Glen Apartments IV consisting primarily of
carpet and vinyl replacements, major landscaping, exterior painting, exterior
improvements, new appliances and cabinets. As of September 30, 2000 the
Partnership has spent approximately $172,000 consisting primarily of appliance
replacement, parking lot upgrades, exterior painting, carpet replacement and
major landscaping. These improvements were funded primarily from operating cash
flow.
Hunters Glen Apartments V
The Partnership has budgeted for the year 2000 approximately $1,510,000 in
capital improvements at Hunters Glen Apartments V consisting primarily of carpet
and vinyl replacements, major landscaping, exterior painting, structural
improvements, new appliances and cabinets. As of September 30, 2000 the
Partnership has spent approximately $600,000 consisting primarily of structural
improvements, major landscaping, exterior painting, carpet replacement, parking
lot upgrades and cabinet replacements. These improvements were funded primarily
from operating cash flow and replacement reserves.
Hunters Glen Apartments VI
The Partnership has budgeted for the year 2000 approximately $1,650,000 in
capital improvements at Hunters Glen Apartments VI consisting primarily of
carpet replacements, major landscaping, exterior painting, exterior
improvements, new appliances and cabinets. As of September 30, 2000 the
Partnership has spent approximately $507,000 consisting primarily of structural
improvements, major landscaping, interior decoration, carpet and vinyl
replacements, parking lot upgrades, exterior painting, air conditioning
improvements and cabinet replacements. These improvements were funded primarily
from operating cash flow.
Gateway Gardens Apartments
The Partnership has budgeted for the year 2000 approximately $106,000 in capital
improvements at Gateway Gardens Apartments consisting primarily of carpet
replacements, new appliances and heating and air conditioning upgrades. As of
September 30, 2000 the Partnership has spent approximately $111,000 on budgeted
and non-budgeted items consisting primarily of carpet replacement, recreational
facility upgrades, appliance replacements and interior decoration. These
improvements were funded primarily from operating cash flow.
Chambers Ridge Apartments
The Partnership has budgeted for the year 2000 approximately $663,000 in capital
improvements at Chambers Ridge Apartments consisting primarily of clubhouse
renovations, parking lot and plumbing upgrades, carpet and tile replacements,
appliances and interior building improvements. As of September 30, 2000 the
Partnership has spent approximately $408,000 consisting primarily of heating
upgrades, structural improvements, carpet and vinyl replacement, major
landscaping, new appliances, parking lot and plumbing upgrades and interior
decoration. These improvements were funded primarily from operating cash flow.
Briarwood Apartments
The Partnership has budgeted for the year 2000 approximately $22,000 in capital
improvements at Briarwood Apartments consisting primarily of carpet and vinyl
replacements and air conditioning improvements. As of September 30, 2000 the
Partnership has spent approximately $24,000 on budgeted and non-budgeted items
consisting primarily of carpet and vinyl replacement, appliance replacements,
and HVAC condensing units. These improvements were funded primarily from
operating cash flow.
Twin Lake Towers Apartments
The Partnership has budgeted for the year 2000 approximately $1,023,000 in
capital improvements at Twin Lake Towers Apartments consisting primarily of
recreational facility upgrades, structural improvements, heating and air system
upgrades, sprinkler system improvements, carpet and flooring replacements and
appliances. As of September 30, 2000 the Partnership has spent approximately
$1,151,000 on budgeted and non-budgeted items consisting primarily of appliance
replacement, heating and air conditioning upgrades, sprinkler system
improvements, cabinet replacements and other building and structural
improvements. These improvements were funded primarily from operating cash flow.
Pickwick Place Apartments
The Partnership has budgeted for the year 2000 approximately $821,000 in capital
improvements at Pickwick Place Apartments consisting primarily of carpet and
vinyl replacements, new appliances, parking lot upgrades and structural
improvements. As of September 30, 2000 the Partnership has spent approximately
$342,000 consisting primarily of carpet and vinyl replacement, other building
improvements, and new appliances. These improvements were funded primarily from
operating cash flow. In addition approximately $551,000 was capitalized during
the nine months ended September 30, 2000 associated with reconstruction of the
property's indoor tennis court and nearby maintenance shed which were destroyed
by a fire in August 1999. These improvements were funded by operating cash flow
and insurance proceeds.
The additional capital expenditures will be incurred only if cash is available
from operations, capital reserve accounts or from Partnership reserves. To the
extent that such budgeted capital improvements are completed, the Registrant's
distributable cash flow, if any, may be adversely affected at least in the short
term.
The Registrant's current assets are thought to be sufficient for any near-term
needs (exclusive of capital improvements) of the Registrant. The Registrant's
mortgage indebtedness encumbering its properties amounts to approximately
$55,568,000, net of unamortized discounts, with maturity dates ranging from
October 2003 to May 2005, during which time balloon payments totaling
$52,778,000 are due. The Managing General Partner may attempt to refinance such
indebtedness and/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.
During the nine months ended September 30, 2000, the Partnership paid a
distribution from operations of approximately $3,928,000 ($3,889,000 paid to
limited partners or $86.97 per limited partnership unit). In addition, the
Partnership paid a distribution of approximately $120,000 ($119,000 paid to
limited partners or $2.66 per limited partnership unit) relating to a
distribution payable from operations declared at December 31, 1999. During the
nine months ended September 30, 1999, a distribution of approximately $3,165,000
was paid to partners, of which approximately $495,000 ($484,000 paid to the
limited partners or $10.82 per limited partnership unit) was paid from
operations and approximately $2,670,000 ($2,458,000 paid to the limited partners
$54.97 per limited partnership unit) was paid from surplus funds. In addition,
the Partnership paid a distribution of approximately $650,000 to limited
partners ($14.54 per limited partnership unit) relating to a distribution
payable from surplus cash declared at December 31, 1998. Future cash
distributions will depend on the levels of net cash generated from operations,
the availability of cash reserves and the timing of debt maturities,
refinancings and/or property sales. The Partnership's distribution policy is
reviewed on a semi-annual basis. There can be no assurance, however, that the
Partnership will generate sufficient funds from operations, after required
capital improvement expenditures, to permit further distributions to its
partners during the remainder of 2000 or subsequent periods.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
In March 1998, several putative unit holders of limited partnership units of the
Partnership commenced an action entitled Rosalie Nuanes, et al. v. Insignia
Financial Group, Inc., et al. in the Superior Court of the State of California
for the County of San Mateo. The plaintiffs named as defendants, among others,
the Partnership, its Managing General Partner and several of their affiliated
partnerships and corporate entities. The action purports to assert claims on
behalf of a class of limited partners and derivatively on behalf of a number of
limited partnerships (including the Partnership) which are named as nominal
defendants, challenging the acquisition of interests in certain general partner
entities by Insignia Financial Group, Inc. and entities which were, at one time,
affiliates of Insignia; past tender offers by the Insignia affiliates to acquire
limited partnership units; the management of partnerships by the Insignia
affiliates; and the Insignia Merger. The plaintiffs seek monetary damages and
equitable relief, including judicial dissolution of the Partnership. On June 25,
1998, the Managing General Partner filed a motion seeking dismissal of the
action. In lieu of responding to the motion, the plaintiffs have filed an
amended complaint. The Managing General Partner filed demurrers to the amended
complaint which were heard February 1999.
Pending the ruling on such demurrers, settlement negotiations commenced. On
November 2, 1999, the parties executed and filed a Stipulation of Settlement,
settling claims, subject to final court approval, on behalf of the Partnership
and all limited partners who owned units as of November 3, 1999. Preliminary
approval of the settlement was obtained on November 3, 1999 from the Court, at
which time the Court set a final approval hearing for December 10, 1999. Prior
to the December 10, 1999 hearing, the Court received various objections to the
settlement, including a challenge to the Court's preliminary approval based upon
the alleged lack of authority of prior lead counsel to enter the settlement. On
December 14, 1999, the Managing General Partner and its affiliates terminated
the proposed settlement. In February 2000, counsel for some of the named
plaintiffs filed a motion to disqualify plaintiff's lead and liaison counsel who
negotiated the settlement. On June 27, 2000, the Court entered an order
disqualifying them from the case. The Court is considering applications for lead
counsel and has currently scheduled a hearing on the matter for November 20,
2000. The Managing General Partner does not anticipate that costs associated
with this case will be material to the Partnership's overall operations.
Yanesh Brothers Construction commenced an action against the Partnership
entitled Yanesh Brothers Construction Company, Inc. v. Insignia Residential
Group, L.P., AIMCO Management Company, et al. in the Court of Common Pleas in
Lake County, Ohio. The plaintiff was hired by AIMCO on behalf of the Partnership
to repair damages caused by a fire at Southpointe Apartments in October 1998 and
is seeking $330,000 under its repair contract. Although the Partnership had
insured Southpointe Apartments against this type of loss, the insurance company
has refused to pay the claim. The plaintiff is seeking recovery, in the
alternative, from the owner and manager of the property. The Partnership's
insurance broker and the property damage insurer were added as third party
defendants to the Yanesh Brothers claim. The Partnership has recorded a reserve
for $330,000, which is the amount of the claim. The Managing General Partner
does not anticipate that the Partnership will incur material costs in excess of
the reserve in connection with this litigation.
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 filed during the quarter ended September
30, 2000:
None.
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
Its Managing General Partner
By: /s/Patrick J. Foye
Patrick J. Foye
Executive Vice President
By: /s/Martha L. Long
Martha L. Long
Senior Vice President and
Controller
Date: November 9, 2000
