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 June 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)
June 30, 2000
<TABLE>
<CAPTION>
Assets
<S> <C> <C>
Cash and cash equivalents $ 2,666
Receivables and deposits (net of allowance for
doubtful accounts of $683) 1,035
Restricted escrows 759
Other assets 975
Investment in joint venture 4
Investment properties:
Land $ 7,989
Buildings and related personal property 86,137
94,126
Less accumulated depreciation (59,963) 34,163
$39,602
Liabilities and Partners' Capital (Deficit)
Liabilities
Accounts payable $ 1,223
Tenant security deposit liabilities 891
Accrued property taxes 830
Other liabilities 578
Mortgage notes payable 55,772
Partners' Capital (Deficit)
General partners $ 82
Limited partners (44,718 units issued and
outstanding) (19,774) (19,692)
$ 39,602
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 Six Months Ended
June 30, June 30,
2000 1999 2000 1999
Revenues:
<S> <C> <C> <C> <C>
Rental income $ 4,820 $ 5,061 $ 9,547 $ 10,150
Other income 491 348 804 702
Casualty gain -- 101 380 101
(Loss) gain on sale of investment
property -- (184) -- 2,178
Total revenues 5,311 5,326 10,731 13,131
Expenses:
Operating 1,708 1,997 3,386 3,975
General and administrative 147 124 289 288
Depreciation 1,332 1,142 2,675 2,324
Interest 1,213 1,528 2,412 3,044
Property taxes 424 563 1,015 1,154
Total expenses 4,824 5,354 9,777 10,785
Income (loss) before equity in income
of joint venture and extraordinary
items 487 (28) 954 2,346
Equity in income of joint venture -- 82 -- 1,321
Income before extraordinary items 487 54 954 3,667
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 $ 487 $ 54 $ 954 $ 3,108
Net income allocated to general
partners (1%) $ 5 $ 0 $ 10 $ 31
Net income allocated to limited
partners (99%) 482 54 944 3,077
$ 487 $ 54 $ 954 $ 3,108
Net income per limited partnership unit:
Income before extraordinary items $ 10.78 $ 1.20 $ 21.11 $ 81.18
Extraordinary items -- -- -- (12.37)
$ 10.78 $ 1.20 $ 21.11 $ 68.81
Distributions per limited partnership
Unit $ 86.97 $ -- $ 86.97 $ 55.79
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 six months
ended June 30, 2000 -- 10 944 954
Partners' capital (deficit)
at June 30, 2000 44,718 $ 82 $(19,774) $ (19,692)
See Accompanying Notes to Consolidated Financial Statements
</TABLE>
d)
ANGELES PARTNERS XII
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
<TABLE>
<CAPTION>
Six Months Ended
June 30,
2000 1999
Cash flows from operating activities:
<S> <C> <C>
Net income $ 954 $ 3,108
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 2,675 2,324
Amortization of discounts, loan costs, and
leasing commissions 139 174
Equity in extraordinary loss on extinguishment of
debt of joint venture -- 3
Gain on disposal of investment properties -- (2,178)
Extraordinary loss on extinguishment of debt -- 556
Equity in income of joint venture -- (1,321)
Casualty gain (380) (101)
Change in accounts:
Receivables and deposits 829 224
Other assets (115) (137)
Accounts payable 501 (194)
Tenant security deposit liabilities (4) (17)
Accrued property taxes 41 45
Other liabilities (29) 220
Net cash provided by operating activities 4,611 2,706
Cash flows from investing activities:
Property improvements and replacements (4,229) (1,023)
Net deposits to restricted escrows (133) (183)
Repayment of advances to joint venture -- 149
Net proceeds from casualty gain -- 101
Proceeds from sale of investments properties -- 5,811
Distributions from joint venture -- 1,175
Net cash (used in) provided by investing activities (4,362) 6,030
Cash flows from financing activities:
Payments on mortgage notes payable (426) (395)
Repayment of loans -- (3,905)
Distributions to partners (4,048) (3,177)
Debt extinguishment costs -- (78)
Net cash used in financing activities (4,474) (7,555)
Net (decrease) increase in cash and cash equivalents (4,225) 1,181
Cash and cash equivalents at beginning of period 6,891 7,611
Cash and cash equivalents at end of period $ 2,666 $ 8,792
Supplemental disclosure of cash flow information:
Cash paid for interest $ 2,273 $ 2,515
At December 31, 1999 and June 30, 2000 accounts payable and property
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 six month periods ended June 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 June 30, 1999, the Joint Venture recorded a gain on sale of
approximately $3,108,000 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 June 30, 1999
was approximately $1,383,000 and its equity in loss on operations of the Joint
Venture at June 30, 1999 amounted to approximately $62,000. 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 June 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 six months
ended June 30, 2000 and 1999 are summarized as follows (in thousands):
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
2000 1999 2000 1999
<S> <C> <C> <C> <C>
Revenues $ -- $ 61 $ -- $ 91
Costs and expenses -- (100) -- (231)
Loss before gain on sale of
investment property and extraordinary
loss on extinguishment of debt -- (39) -- (140)
Gain on sale of investment property -- 223 -- 3,108
Extraordinary loss on extinguishment
of debt -- -- -- (7)
Net income $ -- $ 184 $ -- $ 2,961
</TABLE>
The Partnership recognized its 44.5% equity income of approximately $1,321,000
in the Joint Venture for the six months ended June 31, 1999. The Partnership
also recognized equity in the extraordinary loss on extinguishment of debt of
approximately $3,000 for the six months ended June 30, 1999. Due to the sale of
Princeton Meadows Golf Course in February 1999, the Joint Venture had no
operations during the six months ended June 30, 2000. In addition, the
Partnership anticipates that after filing the final tax return of the Joint
Venture during the third quarter of 2000, all remaining assets and liabilities
of the Joint Venture will be liquidated.
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 New Jersey DEP
met and developed a plan of action to clean-up the contamination site at
Princeton Meadows Golf Course. The Joint Venture engaged an engineering firm to
conduct consulting and compliance work and a second firm to perform the field
work necessary for the clean-up. Field work was in process, with skimmers having
been installed at three test wells on the site. These skimmers were in place to
detect any residual fuel that may still be in the ground. Upon the sale of the
golf course, as noted above, the Joint Venture was released from any further
responsibility or liability with respect to the clean-up.
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 six months ended June 30, 2000 and 1999 were paid or accrued:
2000 1999
(in thousands)
Property management fees (included in
operating expense) $508 $519
Reimbursement for services of affiliates (included
in investment properties; operating and general and
administrative expenses) 324 191
During the six months ended June 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 $508,000 and $519,000 for the six months ended
June 30, 2000 and 1999, respectively.
Affiliates of the Managing General Partner received reimbursement of accountable
administrative expenses amounting to approximately $324,000 and $191,000 for the
six months ended June 30, 2000 and 1999, respectively. Included in these amounts
is approximately $144,000 and $19,000 of construction oversight reimbursements
for the six months ended June 30, 2000 and 1999, respectively.
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.
AIMCO and its affiliates currently own 26,752 limited partnership units in the
Partnership representing 59.82% 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. Under the Partnership Agreement, unitholders holding a majority of the
Units are entitled to take action with respect to a variety of matters. As a
result of its ownership of 59.82% 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 $2,178,000 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.
Note F - Casualty Gain
During the six months ended June 30, 2000, a net casualty gain of approximately
$380,000 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
$380,000. The destroyed property was fully depreciated.
Note G - Distributions
During the six months ended June 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 six months ended June 30,
1999, a distribution of approximately $2,527,000 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 $2,032,000
($2,011,000 paid to the limited partners $44.97 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 six 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 six month periods ended June 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 June 30, 2000 Residential Other Totals
Rental income $ 4,820 $ -- $ 4,820
Other income 467 24 491
Interest expense 1,213 -- 1,213
Depreciation 1,332 -- 1,332
General and administrative expense -- 147 147
Segment profit (loss) 610 (123) 487
Six Months Ended June 30, 2000 Residential Other Totals
Rental income $ 9,547 $ -- $ 9,547
Other income 745 59 804
Casualty gain 380 -- 380
Interest expense 2,412 -- 2,412
Depreciation 2,675 -- 2,675
General and administrative expense -- 289 289
Segment profit (loss) 1,184 (230) 954
Total assets 38,510 1,092 39,602
Capital expenditures for investment
properties 3,105 -- 3,105
Three Months Ended June 30, 1999 Residential Other Totals
Rental income $ 5,061 $ -- $ 5,061
Other income 299 49 348
Casualty gain 101 -- 101
Loss on sale of property -- (184) (184)
Interest expense 1,528 -- 1,528
Depreciation 1,142 -- 1,142
General and administrative expense -- 124 124
Equity in income of joint venture -- 82 82
Segment profit (loss) 232 (178) 54
Six Months Ended June 30, 1999 Residential Other Totals
Rental income $10,139 $ 11 $10,150
Other income 590 112 702
Casualty gain 101 -- 101
Gain on sale of property -- 2,178 2,178
Interest expense 3,038 6 3,044
Depreciation 2,324 -- 2,324
General and administrative expense -- 288 288
Equity in income of joint venture -- 1,321 1,321
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 346 2,762 3,108
Total assets 38,298 6,809 45,107
Capital expenditures for investment
properties 1,023 -- 1,023
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 will entertain applications for lead
counsel which must be filed by August 4, 2000. The Court has scheduled a hearing
on August 21, 2000 to address the issue of appointing lead counsel. 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 has commenced an action 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 in which the
Partnership is also named as a defendant. The plaintiff was hired by AIMCO on
behalf of the Partnership to perform repairs at Southpointe Apartments from a
fire that occurred in October 1998 and is seeking $330,000 in damages from the
amount of the work it performed at this property. Although the property damage
insurance company may be liable for the amount owed to the plaintiff, it has
refused to pay, and the plaintiff is seeking recovery, in the alternative, from
the owner and manager of the property. The property damage insurance broker and
the property damage insurer were recently added as third party defendants to the
claim. The Partnership has also brought suit against the property damage
insurance broker and the property damage insurer for payment of this claim, plus
damages and other losses. 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.
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
six months ended June 30, 2000 and 1999:
Average Occupancy
Property 2000 1999
Hunters Glen - IV Apartments 97% 97%
Plainsboro, New Jersey
Hunters Glen - V Apartments 96% 97%
Plainsboro, New Jersey
Hunters Glen - VI Apartments 97% 96%
Plainsboro, New Jersey
Gateway Gardens Apartments 96% 97%
Cedar Rapids, Iowa
Chambers Ridge Apartments 96% 96%
Harrisburg, Pennsylvania
Briarwood Apartments 98% 98%
Cedar Rapids, Iowa
Twin Lake Towers Apartments 97% 98%
Westmont, Illinois
Pickwick Place Apartments (1) 90% 87%
Indianapolis, Indiana
(1) The occupancy at Pickwick Place Apartments has increased due to
increased marketing efforts at the property.
Results from Operations
The Partnership's net income for the six months ended June 30, 2000 was
approximately $954,000 compared to net income of approximately $3,108,000 for
the corresponding period in 1999. The Partnership recorded net income of
approximately $487,000 for the three months ended June 30, 2000 compared to net
income of approximately $54,000 for the three months ended June 30, 1999. The
decrease in net income for the six months ended June 30, 2000 is primarily due
to the decrease in total revenues resulting from the gain on sale of Cooper
Point Plaza and the equity in income from the sale of the Princeton Meadows Golf
Course in the first 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 $2,178,000 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 the 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 June 30,
1999, the Joint Venture recorded a gain on sale of approximately $3,108,000
after the write-off of undepreciated fixed assets. For the six months ended June
30, 1999 the Partnership realized equity in income of the Joint Venture of
approximately $1,321,000, which included its equity in the gain on disposal of
Princeton Meadows Golf Course of $1,383,000 and the equity in loss on operations
of $62,000. For the six months ended June 30, 2000, Princeton Meadows Golf
Course did not have any operations, therefore, the Partnership did not recognize
any equity from the Joint Venture.
Excluding the impact of the sale of Cooper Point Plaza, Southpointe Apartments
(which was sold August 6, 1999) and the Princeton Meadows Golf Course, net
income decreased approximately $20,000 for the three month period ended June 30,
2000, compared to the corresponding period in 1999. Net income increased
$200,000 for the six month period ended June 30, 2000, compared to the
corresponding period in 1999. The increase in net income for the six 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 net casualty gain at Pickwick Place Apartments, an increase in
rental income and an increase in 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 as well as an increase in the average
occupancy at Pickwick Place Apartments and Hunters Glen VI, which more than
offset the decrease in occupancy at Hunters Glen V, Gateway Gardens and Twin
Lake Towers. 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 six months was primarily
the result of an increase in depreciation expense 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 first half of 2000. Interest expense decreased as a result of
scheduled principal payments made on the investment properties' first mortgages.
Included in general and administrative expenses for both of the six month
periods ended June 30, 2000 and 1999 are reimbursements to the Managing General
Partner 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 June 30, 2000, the Partnership had cash and cash equivalents of approximately
$2,666,000 as compared to approximately $8,792,000 at June 30, 1999. Cash and
cash equivalents decreased approximately $4,225,000 for the six months ended
June 30, 2000 from the Registrant's year ended December 31, 1999. The decrease
is primarily due to approximately $4,362,000 of cash used in investing
activities and approximately $4,474,000 of cash used in financing activities,
which was partially offset by approximately $4,611,000 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. 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 June 30, 2000 the Partnership
has spent approximately $132,000 consisting primarily of appliance replacement,
parking lot upgrades, 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 June 30, 2000 the Partnership
has spent approximately $541,000 consisting primarily of structural
improvements, major landscaping, 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 June 30, 2000 the Partnership
has spent approximately $154,000 consisting primarily of major landscaping,
interior decoration, carpet and vinyl replacements, parking lot upgrades, 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
June 30, 2000 the Partnership has spent approximately $77,000 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 for Chambers Ridge Apartments. The budget includes amounts to cover
the following capital improvement needs at the property: clubhouse renovations,
parking lot and plumbing upgrades, carpet and tile replacements, appliances and
interior building improvements. As of June 30, 2000 the Partnership has spent
approximately $346,000 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 June 30, 2000 the
Partnership has spent approximately $14,000 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 for Twin Lake Towers Apartments. The budget includes
amounts to cover the following capital improvement needs at the property:
recreational facility upgrades, structural improvements, heating and air system
upgrades, sprinkler system improvements, carpet and flooring replacements and
appliances. As of June 30, 2000 the Partnership has spent approximately
$1,133,000 on budgeted and non-budgeted 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 $244,000 in capital
improvements at Pickwick Place Apartments consisting primarily of carpet and
vinyl replacements, new appliances, parking lot upgrades and structural
improvements. As of June 30, 2000 the Partnership has spent approximately
$157,000 consisting primarily of carpet and vinyl replacement and new
appliances. These improvements were funded primarily from operating cash flow.
In addition approximately $551,000 was capitalized during the six months ended
June 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
$55,772,000, 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 six months ended June 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 six months ended June 30,
1999, a distribution of approximately $2,527,000 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 $2,032,000
($2,011,000 paid to the limited partners $44.97 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 the 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 will entertain applications for lead
counsel which must be filed by August 4, 2000. The Court has scheduled a hearing
on August 21, 2000 to address the issue of appointing lead counsel. 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 has commenced an action 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 in which the
Partnership is also named as a defendant. The plaintiff was hired by AIMCO on
behalf of the Partnership to perform repairs at Southpointe Apartments from a
fire that occurred in October 1998 and is seeking $330,000 in damages from the
amount of the work it performed at this property. Although the property damage
insurance company may be liable for the amount owed to the plaintiff, it has
refused to pay, and the plaintiff is seeking recovery, in the alternative, from
the owner and manager of the property. The property damage insurance broker and
the property damage insurer were recently added as third party defendants to the
claim. The Partnership has also brought suit against the property damage
insurance broker and the property damage insurer for payment of this claim, plus
damages and other losses. 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 June 30, 2000:
None.
<PAGE>
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: August 9, 2000
