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 March 31, 1998
[ ] TRANSITION REPORT PURSUANT TO 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
For the transition period from.........to.........
Commission file number 0-14248
ANGELES PARTNERS XIV
(Exact name of small business issuer as specified in its charter)
California 95-3959771
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
One Insignia Financial Plaza
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 XIV
CONSOLIDATED BALANCE SHEET
(Unaudited)
(in thousands, except unit data)
March 31, 1998
Assets
Cash and cash equivalents $ 880
Receivables and deposits, net of allowance
for doubtful accounts of $7 375
Restricted escrows 325
Other assets 367
Investment properties:
Land $ 3,083
Buildings and related personal property 35,470
38,553
Less accumulated depreciation (23,918) 14,635
$ 16,582
Liabilities and Partners' Deficit
Liabilities
Accounts payable $ 31
Tenant security deposit liabilities 93
Accrued taxes 407
Accrued interest 5,107
Due to affiliates 1,235
Other liabilities 51
Notes payable, including $15,867 in default 41,635
Partners' Deficit
General partners $ (703)
Limited partners (43,887 units
issued and outstanding) (31,274) (31,977)
$ 16,582
See Accompanying Notes to Consolidated Financial Statements
b)
ANGELES PARTNERS XIV
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(in thousands, except unit data)
Three Months Ended
March 31,
1998 1997
Revenues:
Rental income $ 1,326 $ 1,342
Other income 35 38
Total revenues 1,361 1,380
Expenses:
Operating 490 558
General and administrative 53 80
Depreciation 308 301
Interest 1,110 1,148
Property taxes 114 115
Bad debt recovery, net -- (27)
Total expenses 2,075 2,175
Net loss before extraordinary item $ (714) $ (795)
Extraordinary gain on extinguishment of debt 2,244 --
Net income (loss) $ 1,530 $ (795)
Net income (loss) allocated to general partners (1%) $ 15 $ (8)
Net income (loss) allocated to limited partners (99%) 1,515 (787)
Net income (loss) $ 1,530 $ (795)
Per limited partnership unit:
Net loss before extraordinary item $ (16.10) $ (17.93)
Extraordinary gain on extinguishment of debt 50.62 --
Net income (loss) $ 34.52 $ (17.93)
See Accompanying Notes to Consolidated Financial Statements
c)
ANGELES PARTNERS XIV
CONSOLIDATED STATEMENTS OF CHANGES IN PARTNERS' 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 44,390 $ 1 $ 44,390 $ 44,391
Partners' deficit at
December 31, 1997 43,887 $ (718) $ (32,789) $ (33,507)
Net income for the three months
ended March 31, 1998 -- 15 1,515 1,530
Partners' deficit at
March 31, 1998 43,887 $ (703) $ (31,274) $ (31,977)
<FN>
See Accompanying Notes to Consolidated Financial Statements
</FN>
</TABLE>
d)
ANGELES PARTNERS XIV
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
1998 1997
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 1,530 $ (795)
Adjustments to reconcile net income (loss) to net
cash provided by operating activities:
Extraordinary gain on extinguishment of debt (2,244) --
Depreciation 308 301
Amortization of discounts, loan costs, and
leasing commissions 7 14
Bad debt recovery, net -- (27)
Change in accounts:
Receivables and deposits (119) (37)
Other assets 48 47
Accounts payable (2) 39
Tenant security deposit liabilities (3) 1
Accrued taxes 63 40
Accrued interest 694 798
Due to affiliates 35 79
Other liabilities (25) (30)
Net cash provided by operating activities 292 430
Cash flows from investing activities:
Property improvements and replacements (79) (47)
Net receipts from (deposits to) restricted escrows 66 (18)
Net cash used in investing activities (13) (65)
Cash flows from financing activities:
Principal payments on notes payable (80) (166)
Additions to notes payable 32 67
Net cash used in financing activities (48) (99)
Net increase in cash and cash equivalents 231 266
Cash and cash equivalents at beginning of period 649 318
Cash and cash equivalents at end of period $ 880 $ 584
Supplemental disclosure of cash flow information:
Cash paid for interest $ 394 $ 321
Supplemental disclosure of non-cash investing and
financing activities:
Interest on notes transferred to notes payable $ 186 $ 215
<FN>
See Accompanying Notes to Consolidated Financial Statements
</FN>
</TABLE>
ANGELES PARTNERS XIV
CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)
(Unaudited)
(in thousands)
Supplemental disclosure of non-cash activities
Foreclosure
During the three months ended March 31, 1998, Building 53 of the Dayton
Industrial Complex was foreclosed upon by the lender. In connection with this
non-cash transaction, the following accounts were adjusted:
1998
Receivables and deposits $ (35)
Other assets (9)
Investment properties (660)
Property tax payable 64
Tenant security deposit liabilities 12
Accrued interest 175
Mortgage notes payable 2,697
See Accompanying Notes to Consolidated Financial Statements
ANGELES PARTNERS XIV
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE A - GOING CONCERN
The accompanying financial statements have been prepared assuming Angeles
Partners XIV (the "Partnership" or "Registrant") will continue as a going
concern. The Partnership continues to incur recurring operating losses and
suffers from inadequate liquidity. Non-recourse and recourse indebtedness of
approximately $8,965,000 and $6,902,000 is in default at March 31, 1998, due to
nonpayment of interest and principal when due.
The Partnership incurred net income of approximately $1,530,000 for the quarter
ended March 31, 1998. This was due to the recognition of an extraordinary gain
on the extinguishment of debt related to the transfer of property in foreclosure
of approximately $2,244,000, relating to the foreclosure of Building 53 in the
Dayton Industrial Complex. The Partnership realized a loss before the
extraordinary gain of approximately $714,000. Angeles Realty Corporation II,
(the "Managing General Partner" or "ARC II") expects the Partnership to continue
to incur such losses. The Partnership generated cash from operations of
approximately $292,000 during the quarter ended March 31, 1998; however, this
primarily was the result of accruing interest of approximately $694,000 on its
indebtedness and $35,000 for services provided by affiliates.
In January 1998, Building 53 of the Dayton Industrial Complex was foreclosed on.
Historically, the Dayton Industrial Complex has not been able to retain tenants
and has never generated operating cash. Effective October 1, 1996, the
Partnership determined that, based on economic conditions at the time as well as
projected future operational cash flows, the decline in value of the property
was other than temporary and recovery of the carrying value was not likely.
Accordingly, the Dayton Industrial Complex's carrying value was reduced to an
amount equal to its estimated fair value. The Partnership ceased making debt
service payments on Building 53 in 1996 and the building was placed in
receivership in 1997. In the Managing General Partner's opinion, it was not in
the Partnership's best interest to contest the foreclosure action. As a result
of the foreclosure, the Partnership recorded an extraordinary gain on
extinguishment of debt of approximately $2,244,000. Prior to the foreclosure,
the outstanding debt on the property was a first mortgage in the amount of
approximately $1,043,000 and a second mortgage in the amount of approximately
$1,669,000. Related accrued interest amounted to approximately $175,000.
The Dayton Industrial Complex has three remaining buildings at March 31, 1998.
The Partnership is in default on Building 59's non-recourse first mortgage in
the amount of $2,895,000 due to nonpayment of interest and principal when due.
The first mortgage on Building 55 and the second mortgages on Buildings 41 and
59, which total approximately $6,069,000 and are all nonrecourse to the
Partnership, matured in December 1997 and are in default due to nonpayment of
interest and principal when due. The lender on Building 59 of the Dayton
Industrial Complex initiated foreclosure proceedings on December 27, 1996 and
this building was lost to foreclosure on April 3, 1998. The Managing General
Partner has entered into sales agreements for Buildings 41 and 55 of the Dayton
Industrial Complex and anticipates selling these buildings to unrelated parties
in 1998. The Dayton Industrial Complex has not generated any operating cash for
the Partnership since it was purchased nor has the Partnership expended any cash
to support the property. The Managing General Partner will not use any
Partnership funds on these buildings in 1998.
The Partnership has unsecured working capital loans to Angeles Acceptance Pool,
L.P. ("AAP") in the amount of approximately $4,576,000 plus related accrued
interest that was due in November 1997. This indebtedness is recourse to the
Partnership. The Partnership does not have the means with which to satisfy
this obligation. The Managing General Partner does not plan to enter into
negotiations with AAP on this indebtedness at this time. The Managing General
Partner believes that the possibility that AAP will initiate collection
proceedings on this indebtedness is remote, as the estimated value of the
Partnership's investment properties and other assets are significantly less than
the existing first mortgages and other secured Partnership indebtedness. If AAP
initiates proceedings, then the Managing General Partner will enter into
negotiations to restructure this indebtedness.
The Partnership has two recourse notes to Angeles Mortgage Investment Trust
("AMIT") in the amount of approximately $2,326,000 plus related accrued interest
that matured in March 1998. The Managing General Partner is currently in
negotiations with AMIT to extend this indebtedness, but there is no guarantee as
to the outcome of these negotiations.
No other sources of additional financing have been identified by the
Partnership, nor does the Managing General Partner have any other plans to
remedy the liquidity problems the Partnership is currently experiencing. The
Managing General Partner anticipates that Fox Crest Apartments and Waterford
Square Apartments will generate sufficient cash flows for the next twelve months
to meet all property operating expenses, debt service requirements and to fund
capital expenditures.
As a result of the above, there is substantial doubt about the Partnership's
ability to continue as a going concern. The financial statements do not include
any adjustments to reflect the possible future effects on the recoverability and
classification of assets or amounts and classifications of liabilities that may
result from these uncertainties.
NOTE B - BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements 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 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 month
period ended March 31, 1998, are not necessarily indicative of the results that
may be expected for the fiscal year ending December 31, 1998. For further
information, refer to the consolidated financial statements and footnotes
thereto included in the Partnership's annual report on Form 10-KSB for the
fiscal year ended December 31, 1997.
Effective October 1, 1996, the Dayton Industrial Complex buildings were
classified as an investment property "held for disposal". Accordingly, the
buildings have been recorded at the lower of carrying amount or fair value, less
costs to sell, and no additional depreciation expense will be recorded during
the period the assets are held for disposal.
Certain reclassifications have been made to the 1997 information to conform to
the 1998 presentation.
NOTE C - TRANSACTIONS WITH AFFILIATED PARTIES
The Partnership has no employees and is dependent on the Managing General
Partner and its affiliates for the management and administration of all
Partnership activities. The Managing General Partner is a wholly-owned
subsidiary of Insignia Properties Trust ("IPT"), an affiliate of Insignia
Financial Group, Inc. ("Insignia"). The Partnership Agreement provides for
payments to affiliates for services and as reimbursement of certain expenses
incurred by affiliates on behalf of the Partnership.
The following payments were paid or accrued to the Managing General Partner and
affiliates during each of the three months ended March 31, 1998 and 1997:
1998 1997
(in thousands)
Property management fees (included in operating $ 65 $ 61
expenses)
Reimbursement for services of affiliates,
including $1,235 accrued at March 31, 1998
(included in general and administrative
expenses and investment property) 38 74
Included in reimbursements for services of affiliates at March 31, 1998, is
approximately $3,000 of construction oversight reimbursements.
For the period from January 1, 1997, to August 31, 1997, the Partnership insured
its properties under a master policy through an agency affiliated with the
Managing General Partner with an insurer unaffiliated with the Managing General
Partner. An affiliate of the Managing General Partner acquired, in the
acquisition of a business, certain financial obligations from an insurance
agency which was later acquired by the agent who placed the master policy. The
agent assumed the financial obligations to the affiliate of the Managing General
Partner which receives payment on these obligations from the agent. The amount
of the Partnership's insurance premiums accruing to the benefit of the affiliate
of the Managing General Partner by virtue of the agent's obligations was not
significant.
In November 1992, AAP, a Delaware limited partnership, was organized to acquire
and hold the obligations evidencing the working capital loans previously
provided to the Partnership by Angeles Capital Investments, Inc. ("ACII").
Angeles Corporation ("Angeles") is the 99% limited partner of AAP and Angeles
Acceptance Directives, Inc.("AAD"), which is wholly owned by IPT, was, until
April 14, 1995, the 1% general partner of AAP. On April 14, 1995, as part of a
settlement of claims between affiliates of the Managing General Partner and
Angeles, AAD resigned as general partner of AAP and simultaneously received a
1/2% limited partner interest in AAP. An affiliate of Angeles now serves as the
general partner of AAP.
These working capital loans funded the Partnership's operating deficits in prior
years. Total indebtedness was approximately $4,576,000, plus accrued interest,
at March 31, 1998, with monthly interest accruing at prime plus two percent.
Upon maturity on November 25, 1997, the Partnership did not have the means with
which to satisfy this maturing debt obligation. Total interest expense for this
loan was approximately $120,000 and approximately $118,000 for the three months
ended March 31, 1998 and 1997, respectively. Accrued interest payable was
approximately $2,393,000 at March 31, 1998.
AMIT currently holds notes receivable from the Partnership in the amount of
approximately $7,090,000. Approximately $2,326,000 of this indebtedness plus
related accrued interest is in default at March 31, 1998. The Managing General
Partner is currently in negotiations with AMIT to extend this indebtedness but
there is no guarantee as to the outcome of these negotiations. Total interest
expense on this financing was approximately $273,000 and approximately $245,000
for the quarters ended March 31, 1998 and March 31, 1997, respectively. Accrued
interest was approximately $1,859,000 at March 31, 1998.
In November 1992, MAE GP acquired 1,675,113 Class B Common Shares of
AMIT. The terms of the Class B shares provide that they are convertible, in
whole or in part, into Class A Common Shares of AMIT on the basis of one Class A
share for every 49 Class B shares (however, in connection with the settlement
agreement described in the following paragraph, MAE GP agreed not to convert the
Class B shares so long as AMIT's option is outstanding). These Class B Shares
entitle the holder to receive 1% of the distributions of net cash distributed by
AMIT (however, in connection with the settlement agreement described in the
following paragraph, MAE GP agreed to waive its right to receive dividends and
distributions so long as AMIT's option is outstanding). The holder of the Class
B shares is also entitled to vote on the same basis as the holders of Class A
shares, providing the holder with approximately 39% of the total voting power of
AMIT (unless and until converted to Class A shares, in which case the percentage
of the vote controlled represented by such shares would approximate 1.3% of the
total voting power of AMIT).
As part of a settlement of certain disputes with AMIT, MAE GP granted to AMIT an
option to acquire the Class B shares owned by it. This option can be exercised
at the end of 10 years or when all loans made by AMIT to partnerships which were
affiliated with MAE GP as of November 9, 1994 (which is the date of execution of
a definitive settlement agreement), have been paid in full. In connection with
such settlement, AMIT delivered to MAE GP cash in the sum of $250,000 at closing
(which occurred April 14, 1995), as payment for the option. If and when the
option is exercised, AMIT will be required to remit to MAE GP an additional
$94,000.
Simultaneously with the grant of the option and as part of the settlement, MAE
GP also executed an irrevocable proxy in favor of AMIT, which provides that the
holder of the Class B shares is permitted to vote those shares on all matters
except those involving transactions between AMIT and MAE GP affiliated borrowers
or the election of any MAE GP affiliate as an officer or trustee of AMIT. With
respect to such matters, the trustees of AMIT are required to vote (pursuant to
the irrevocable proxy) the Class B shares (as a single block) in the same manner
as a majority of the Class A shares are voted (to be determined without
consideration of the votes of "Excess Class A Shares" (as defined in Section
6.13 of AMIT's Declaration of Trust)).
Between its acquisition of the Class B shares (in November 1992) and March 31,
1995, MAE GP declined to vote these shares. Since that date, MAE GP voted its
shares at the 1995 and 1996 annual meetings in connection with the election of
trustees and other matters. In February 1998, MAE GP was merged into IPT, and in
connection with that merger, MAE GP dividended all of the Class B shares to its
sole stockholder, Metropolitan Asset Enhancement, L.P. ("MAE"). As a result,
MAE, as the holder of the Class B shares, is now subject to the terms of the
settlement agreement, option and irrevocable proxy described in the two
preceding paragraphs. Neither MAE GP nor MAE has exerted or intends to exert
any management control over or participate in the management of AMIT. However,
subject to the terms of the proxy described below, MAE may choose to vote the
Class B shares as it deems appropriate in the future.
Liquidity Assistance L.L.C., which is an affiliate of the Managing General
Partner, MAE and Insignia (which provides property management and partnership
administration services to the Partnership), owned 96,800 Class A shares of AMIT
at March 31, 1998. These Class A shares represent approximately 2.2% of the
total voting power of AMIT.
On April 3, 1997, Insignia and AMIT entered into a non-binding agreement in
principle contemplating, among other things, a business combination of AMIT and
IPT, an entity then owned 98% by Insignia and its affiliates. On July 18, 1997,
IPT, Insignia and MAE GP entered into a definitive merger agreement pursuant to
which (subject to shareholder approval and certain other conditions, including
the receipt by AMIT of a fairness opinion from its investment bankers)
AMIT would be merged with and into IPT, with each Class A share and Class B
share being converted into 1.625 and 0.0332 common shares of IPT, respectively.
The foregoing exchange ratios are subject to adjustment to account for dividends
paid by AMIT from January 1, 1997 and dividends paid by IPT from February 1,
1997. It is anticipated that Insignia and its affiliates (including MAE) would
own approximately 57% of post-merger IPT when this transaction is consummated.
The Partnership has agreed to pay Miller Valentine Realty ("MV") property
management fees, leasing commissions, and financing fees and sales commissions
upon the refinancing or sale of the properties. The Partnership will receive
the first $3,000,000 of excess cash from operations, refinancing or sales of the
properties less unrefunded arrearages. Thereafter, the agreement provides that
MV shall receive, as incentive for providing property management, leasing and
asset management services to the Partnership, two-thirds of the next $12,000,000
of excess cash proceeds generated by the properties. Cash in excess of
$15,000,000 shall be shared equally by MV and the Partnership.
The agreement contemplates that the properties will be sold at an opportune time
but no later than 10 years after commencement of the agreements (March 2, 1992).
In addition, the agreement contains an option for MV to buy the properties five
years after the commencement date of the agreement. MV did not exercise this
option.
On March 17, 1998, Insignia entered into an agreement to merge its national
residential property management operations, and its controlling interest in IPT,
with Apartment Investment and Management Company ("AIMCO"), a publicly traded
real estate investment trust. The closing, which is anticipated to happen in
the third quarter of 1998, is subject to customary conditions, including
government approvals and the approval of Insignia's shareholders. If the
closing occurs, AIMCO will then control the Managing General Partner of the
Partnership.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
The Partnership's investment properties consist of two apartment complexes and
one commercial property. The following table sets forth the average occupancy
of the properties for the three months ended March 31, 1998 and March 31, 1997.
Property 1998 1997
Waterford Square Apartments
Huntsville, Alabama 94% 91%
Fox Crest Apartments
Waukegan, Illinois 96% 96%
Dayton Industrial Complex
Dayton, Ohio (1) 66% 69%
1) Dayton Industrial has been adversely affected by the build-up of commercial
space in the area.
The Partnership realized net income of approximately $1,530,000 for the three
months ended March 31, 1998, versus a net loss of approximately $795,000 for the
three months ended March 31, 1997. Net income for the three months ended March
31, 1998, resulted from the extraordinary gain on extinguishment of debt of
approximately $2,244,000. The Partnership realized a loss before the
extraordinary gain of approximately $714,000. The Partnership experienced a
decrease in revenues and expenses for the three months ended March 31, 1998, due
to the loss of Building 53 of the Dayton Industrial Complex in January 1998 (see
discussion below).
Rental income decreased primarily due to the loss of Building 53 of the Dayton
Industrial Complex but was offset by an increase in rental income at both
Foxcrest Apartments and Waterford Square Apartments. Average rental rates
increased at both investment properties, while Waterford Square Apartments also
experienced an increase in average occupancy.
The decrease in expenses is mainly due to decreases in operating expenses,
general and administrative expenses, and interest expense. These decreases were
primarily due to the foreclosure of Building 53 of the Dayton Industrial
Complex. The decrease in operating expenses was offset by an increase in
salaries expense at Waterford Square Apartments. Offsetting the decrease in
interest expense due to the foreclosure of Building 53 was an increase in
interest expense on the defaulted debt due to interest accruing on increased
debt balances as unpaid interest is added to principal.
As part of the ongoing business plan of the Partnership, the Managing General
Partner continues to monitor the rental market environment of each of its
investment properties to assess the feasibility of increasing rents, maintaining
or increasing occupancy levels and protecting the Partnership from increases in
expenses. As part of this plan, the Managing General Partner attempts to
protect the Partnership from inflation-related increases in expenses by
increasing rents and maintaining a high overall occupancy level. However, due to
changing market conditions, which can result in the use of rental concessions
and rental reductions to offset softening market conditions, there is no
guarantee that the Managing General Partner will be able to sustain such a plan.
At March 31, 1998, the Partnership had cash and cash equivalents of
approximately $880,000 compared to approximately $584,000 at March 31, 1997.
Cash and cash equivalents increased approximately $231,000 and $266,000 for the
periods ended March 31, 1998 and 1997, respectively. Net cash provided by
operating activities decreased primarily due to an increase in receivables and
deposits and a smaller increase in accrued interest. The smaller increase in
receivables and deposits during the first quarter of 1997 is primarily due to a
decrease in tenant accounts receivable and the receipt of a mortgage insurance
reimbursement during that period. The increase in accrued interest is primarily
due to the accrual of default interest, along with interest accruing on
increased debt balances at Dayton Industrial Complex as accrued interest is
added to the principal on all of the 2nd mortgages secured by this property.
However, due to the foreclosure of Building 53 of the Dayton Industrial Complex,
the second mortgage balance was lower during the three months ended March 31,
1998, resulting in a smaller increase in accrued interest. Net cash used in
investing activities decreased as a result of an increase in receipts from
restricted escrows but was partially offset by an increase in property
improvements and replacements at Waterford Square Apartments and Fox Crest
Apartments. Net cash used in financing activities decreased primarily due to a
decrease in principal payments on notes payable. For the three months ended
March 31, 1997, a $100,000 principal payment was made on the third mortgage
indebtedness at the Dayton Industrial Complex. This decrease was partially
offset by fewer advances received from the lender to cover operating expenses
for Building 59 of the Dayton Industrial Complex.
The accompanying financial statements have been prepared assuming the
Partnership will continue as a going concern. The Partnership continues to
incur recurring operating losses and suffers from inadequate liquidity. Non-
recourse and recourse indebtedness of approximately $8,965,000 and $6,902,000 is
in default at March 31, 1998, due to nonpayment of interest and principal when
due.
The Partnership incurred net income of approximately $1,530,000 for the quarter
ended March 31, 1998. This was due to the recognition of an extraordinary gain
on the extinguishment of debt related to the transfer of property in foreclosure
of approximately $2,244,000, relating to the foreclosure of Building 53 in the
Dayton Industrial Complex. The Partnership realized a loss before the
extraordinary gain of approximately $714,000. The Managing General Partner
expects the Partnership to continue to incur such losses. The Partnership
generated cash from operations of approximately $292,000 during the quarter
ended March 31, 1998; however, this primarily was the result of accruing
interest of approximately $694,000 on its indebtedness and $35,000 for services
provided by affiliates.
In January 1998, Building 53 of the Dayton Industrial Complex was foreclosed on.
Historically, the Dayton Industrial Complex has not been able to retain tenants
and has never generated any operating cash. Effective October 1, 1996, the
Partnership determined that, based on economic conditions at the time as well as
projected future operational cash flows, the decline in value of the property
was other than temporary and recovery of the carrying value was not likely.
Accordingly, the Dayton Industrial Complex's carrying value was reduced to an
amount equal to its estimated fair value. The Partnership ceased making debt
service payments on Building 53 in 1996 and the building was placed in
receivership in 1997. In the Managing General Partner's opinion, it was not in
the Partnership's best interest to contest the foreclosure action. As a result
of the foreclosure, the Partnership recorded an extraordinary gain on
extinguishment of debt of approximately $2,244,000. Prior to the foreclosure,
the outstanding debt on the property was a first mortgage in the amount of
approximately $1,043,000 and a second mortgage in the amount of approximately
$1,669,000. Related accrued interest amounted to approximately $175,000.
The Dayton Industrial Complex has three remaining buildings at March 31, 1998.
The Partnership is in default on Building 59's non-recourse first mortgage in
the amount of $2,895,000 due to nonpayment of interest and principal when due.
The first mortgage on Building 55 and the second mortgages on Buildings 41 and
59, which total approximately $6,069,000 and are all nonrecourse to the
Partnership, matured in December 1997 and are in default due to nonpayment of
interest and principal when due. The lender on Building 59 of the Dayton
Industrial Complex initiated foreclosure proceedings on December 27, 1996 and
this building was lost to foreclosure on April 3, 1998. The Managing General
Partner has entered into sales agreements for Buildings 41 and 55 of the Dayton
Industrial Complex and anticipates selling these buildings to unrelated parties
in 1998. The Dayton Industrial Complex has not generated any operating cash for
the Partnership since it was purchased nor has the Partnership expended any cash
to support the property. The Managing General Partner will not use any
Partnership funds on these buildings in 1998.
The Partnership has unsecured working capital loans to Angeles Acceptance Pool,
L.P. ("AAP") in the amount of approximately $4,576,000 plus related accrued
interest that was due in November 1997. This indebtedness is recourse to the
Partnership. The Partnership does not have the means with which to satisfy this
obligation. The Managing General Partner does not plan to enter into
negotiations with AAP on this indebtedness at this time. The Managing General
Partner believes that the possibility that AAP will initiate collection
proceedings on this indebtedness is remote, as the estimated value of the
Partnership's investment properties and other assets are significantly less than
the existing first mortgages and other secured Partnership indebtedness. If AAP
initiates proceedings, then the Managing General Partner will enter into
negotiations to restructure this indebtedness.
The Partnership has two recourse notes to Angeles Mortgage Investment ("AMIT")
in the amount of approximately $2,326,000 plus related accrued interest that
matured in March 1998. The Managing General Partner is currently in
negotiations with AMIT to extend this indebtedness, but there is no guarantee as
to the outcome of these negotiations.
No other sources of additional financing have been identified by the
Partnership, nor does the Managing General Partner have any other plans to
remedy the liquidity problems the Partnership is currently experiencing. The
Managing General Partner anticipates that Fox Crest Apartments and Waterford
Square Apartments will generate sufficient cash flows for the next twelve months
to meet all property operating expenses, debt service requirements and to fund
capital expenditures.
As a result of the above, there is substantial doubt about the Partnership's
ability to continue as a going concern. The financial statements do not include
any adjustments to reflect the possible future effects on the recoverability and
classification of assets or amounts and classifications of liabilities that may
result from these uncertainties.
Year 2000
The Partnership is dependent upon the Managing General Partner and Insignia for
management and administrative services. Insignia has completed an assessment
and will have to modify or replace portions of its software so that its computer
systems will function properly with respect to dates in the year 2000 and
thereafter (the "Year 2000 Issue"). The project is estimated to be completed
not later than December 31, 1998, which is prior to any anticipated impact on
its operating systems. The Managing General Partner believes that with
modifications to existing software and conversions to new software, the Year
2000 Issue will not pose significant operational problems for its computer
systems. However, if such modifications and conversions are not made, or are not
completed timely, the Year 2000 Issue could have a material impact on the
operations of the Partnership.
Other
Certain items discussed in this quarterly report may constitute forward-looking
statements within the meaning of the Private Securities Litigation Reform Act of
1995 (the "Reform Act") and as such may involve known and unknown risks,
uncertainties and other factors which may cause the actual results, performance
or achievements of the Partnership to be materially different from any future
results, performance or achievements expressed or implied by such forward-
looking statements. Such forward-looking statements speak only as of the date of
this quarterly report. The Partnership expressly disclaims any obligation or
undertaking to release publicly any updates or revisions to any forward-looking
statements contained herein to reflect any change in the Partnership's
expectations with regard thereto or any change in events, conditions or
circumstances on which any such statement is based.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDING
In March 1998, several putative unit holders of limited partnership units of the
Partnership commenced an action entitled ROSALIE NUANES, ET AL. V. INSIGNIA
FINANCIAL GROUP, INC., ET AL. in the Superior Court of the State of California
for the County of San Mateo. The plaintiffs named as defendants, among others,
the Partnership, the Managing General Partner and several of their affiliated
partnerships and corporate entities. The complaint purports to assert claims on
behalf of a class of limited partners and derivatively on behalf of a number of
limited partnerships (including the Partnership) which are named as nominal
defendants, challenging the acquisition by Insignia Financial Group, Inc.,
("Insignia") and its affiliates of interests in certain general partner
entities, past tender offers by Insignia affiliates to acquire limited
partnership units, the management of partnerships by Insignia affiliates as well
as a recently announced agreement between Insignia and Apartment Investment and
Management Company. The complaint seeks monetary damages and equitable relief,
including judicial dissolution of the Partnership. The Managing General Partner
was only recently served with the complaint which it believes to be without
merit, and intends to vigorously defend the action.
The Partnership is unaware of any other pending or outstanding litigation that
is not of a routine nature. The Managing General Partner believes that all such
pending or outstanding litigation will be resolved without a material adverse
effect upon the business, financial condition, or operations of the Partnership.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a) Exhibits: Exhibit 27, Financial Data Schedule.
Exhibit 10.37, Decree of Confirmation, Distribution, and
Discharge between The Prudential Insurance Company of
America and Mid-States Development dated February 12, 1998.
b) Reports on Form 8-K:
No reports on form 8-K were filed during the three months
ended March 31, 1998.
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
ANGELES PARTNERS XIV
By: Angeles Realty Corporation II
Managing General Partner
By: /s/Carroll D. Vinson
Carroll D. Vinson
President/Director
By: /s/Robert D. Long, Jr.
Robert D. Long, Jr.
Vice President/CAO
Date: May 14, 1998
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from
Angeles Partners XIV 1998 First Quarter 10-QSB and is qualified in its
entirety by reference to such 10-QSB filing.
</LEGEND>
<CIK> 0000759859
<NAME> ANGELES PARTNERS XIV
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> MAR-31-1998
<CASH> 880
<SECURITIES> 0
<RECEIVABLES> 375
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0<F1>
<PP&E> 38,553
<DEPRECIATION> (23,918)
<TOTAL-ASSETS> 16,582
<CURRENT-LIABILITIES> 0<F1>
<BONDS> 41,635
0
0
<COMMON> 0
<OTHER-SE> (31,977)
<TOTAL-LIABILITY-AND-EQUITY> 16,582
<SALES> 0
<TOTAL-REVENUES> 1,361
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 2,075
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,110
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> (714)
<DISCONTINUED> 0
<EXTRAORDINARY> 2,244
<CHANGES> 0
<NET-INCOME> 1,530
<EPS-PRIMARY> 34.52<F2>
<EPS-DILUTED> 0
<FN>
<F1>Registrant has an unclassified balance sheet.
<F2>Multiplier is 1.
</FN>
</TABLE>
COURT OF COMMON PLEAS
MONTGOMERY COUNTY, OHIO
THE PRUDENTIAL INSURANCE :
COMPANY OF AMERICA, : Case No. 97-6822
:
Plaintiff, : (Judge David A. Gowdown)
: (Magistrate Nadine L. Ballard)
v. :
:
MID-STATES DEVELOPMENT COMPANY,:
et al., : DECREE OF CONFIRMATION,
: DISTRIBUTION AND DISCHARGE
:
:
Defendants. :
By agreement of the parties, and on the producing of the return of the
Sheriff of the sale made under the former order of this Court, and on the
careful examination of the proceedings of the said Sheriff, being fully
satisfied that the same have been in all respects in conformity to law and the
orders of this Court, it is ordered that said proceedings and sale be, and they
hereby are, approved and confirmed.
It is further ordered, after considering the final report and interim
reports of the Receiver, the final report and interim reports are hereby
approved, including the fees and expenses paid to the Receiver, no objections
having been filed. The Receiver is hereby ordered to pay the balance on hand,
amounting to $13,717.43, to the Plaintiff, The Prudential Insurance Company of
America, for application on the mortgage indebtedness, this disposition being
made with the approval of the owner of the property, The Prudential Insurance
Company of America. Upon said payment being made, the Receiver is discharged
and its bond is canceled. The Clerk is ordered to return the amount of the cash
bond to the Plaintiff, who posted it.
It is further ordered and decreed that said Sheriff convey to the
purchaser, The Prudential Insurance Company of America, by deed, according to
law, the real estate sold, free and clear of the liens and claims of all parties
hereto, which shall include conveyance of the personal property which was
included in the sale, and the purchaser is hereby subrogated to all the rights
of the parties to this suit in said real estate for the protection of its title.
A writ of possession against the parties in possession is awarded to put said
purchaser in possession of said real estate. The legal description of the real
estate is appended hereto as Exhibit A.
And the Court coming now to distribute the proceeds of said sale, amounting
to $735,000.00, it is ordered that the sheriff pay out of said money:
FIRST: To the Clerk of this Court, the costs of this action,
taxed at $2,302.82.
SECOND: To the Treasurer of Montgomery County, Ohio, payment of taxes
will continue to be made pursuant to the Agreement To Pay
Delinquent Taxes In Installments, dated October 13, 1997.
THIRD: To the Sheriff of Montgomery County, Ohio the sum of $25.00 for
preparation of the deed of conveyance.
FOUR: To the Plaintiff, The Prudential Insurance Company of America,
the sum of $732,672.18.
And the Clerk of this Court is hereby authorized and directed to record a
certified copy of this Decree or a Certificate of Release in order to cancel the
following mortgages and liens of record, insofar as they affect the real estate
in this action:
Mortgage Deed from Mid-States Development Company to The First National
Bank-Dayton, Ohio, recorded in Microfiche 79-974A01;
Conditional Assignment of Rentals from Mid-States Development Company to
The First National Bank-Dayton, Ohio, recorded in Microfiche 79-973E10;
Assignment from The First National Bank-Dayton, Ohio to The Prudential
Insurance Company of America, recorded in Microfiche 80-282B08;
Mortgage from Angeles Partners XIV, a California Limited Partnership, to
Mid-States Development Company, recorded in Microfiche 85-1842-B10;
Amendment to mortgage from Angeles Partners XIV, a California Limited
Partnership, to Mid-States Development Company, recorded in Microfiche 92-
651B08;
Financing Statement from Angeles Partners XIV to Mid-States Development
Company recorded in Microfiche 85-12670;
Mortgage from Angeles Partners XIV, a California limited partnership, to
Miller-Valentine Realty, Inc., recorded in Microfiche 92-650 D02; and
Financing Statement from Angeles Partners XIV, a California limited
partnership, to Miller-Valentine Realty, Inc., bearing a Financing
Statement Number of 92-1919.
/s/Judge Gowdown
Judge Gowdown
DINSMORE & SHOHL LLP
By: /s/Thomas J. Sherman /s/C. Robert Swaninger
Thomas J. Sherman (0013287) C. Robert Swaninger, Assistant
Attorneys for Plaintiff Prosecuting Attorney, Attorney for
Defendant, Montgomery County
Treasurer
P.O. Box 972
Dayton, Ohio 45422
/s/Edward H. Siddens
Edward H. Siddens, Attorney for Defendants,
Mid-States Development Company,
Daniel L. Valentine, Miller Valentine
Realty, Inc. and Angeles Partners XIV
400 National City Center Miller-Valentine Realty, Inc.,
6 North Main Street the Receiver
Dayton, Ohio 45402 By: /s/Robert Gally
Robert Gally
Title: President
EXHIBIT A
Situated in the Township of Butler, County of Montgomery and State of Ohio, and
being Lot Nine (9) of 70/75 Corporate Center as recorded in Plat Book 107, Pages
60 and 60A of the Plat Records of Montgomery County, Ohio.
