FORM 10-QSB--QUARTERLY OR TRANSITIONAL REPORT UNDER SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
QUARTERLY OR TRANSITIONAL REPORT
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended September 30, 1998
[ ] TRANSITION REPORT PURSUANT TO 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
For the transition period from.........to.........
Commission file number 0-14248
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.)
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 XIV
CONSOLIDATED BALANCE SHEET
(Unaudited)
(in thousands, except unit data)
September 30, 1998
Assets
Cash and cash equivalents $ 863
Receivables and deposits 353
Restricted escrows 327
Other assets 349
Asset held for disposal 1,765
Investment properties:
Land $ 2,243
Buildings and related personal property 24,610
26,853
Less accumulated depreciation (16,935) 9,918
$ 13,575
Liabilities and Partners' Deficit
Liabilities
Accounts payable $ 40
Tenant security deposit liabilities 91
Accrued property taxes 334
Accrued interest 5,212
Due to affiliates 1,295
Other liabilities 75
Notes payable, including $7,242 in default 34,015
Partners' Deficit
General partners $ (658)
Limited partners (43,887 units
issued and outstanding) (26,829) (27,487)
$ 13,575
See Accompanying Notes to Consolidated Financial Statements
b)
ANGELES PARTNERS XIV
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(in thousands, except unit data)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
1998 1997 1998 1997
<S> <C> <C> <C> <C>
Revenues:
Rental income $ 1,185 $ 1,396 $ 3,806 $ 4,137
Other income 49 34 124 106
Write-up of investment property -- -- 44 --
Total revenues 1,234 1,430 3,974 4,243
Expenses:
Operating 503 548 1,506 1,701
General and administrative 39 21 158 199
Depreciation 315 306 936 909
Interest 799 1,177 2,900 3,495
Property taxes 80 99 293 333
Bad debt recovery, net -- (4) (7) (22)
Loss on sale of investment property -- -- 177 --
Total expenses 1,736 2,147 5,963 6,615
Net loss before
extraordinary item (502) (717) (1,989) (2,372)
Extraordinary gain on extinguishment
of debt 30 -- 8,009 --
Net (loss) income $ (472) $ (717) $ 6,020 $(2,372)
Net (loss) income allocated to
general partners (1%) $ (5) $ (7) $ 60 $ (24)
Net (loss) income allocated to
limited partners (99%) (467) (710) 5,960 (2,348)
Net (loss) income $ (472) $ (717) $ 6,020 $(2,372)
Per limited partnership unit:
Net loss before extraordinary item $(11.32) $(16.17) $(44.87) $(53.49)
Extraordinary gain on extinguishment
of debt .68 -- 180.67 --
Net (loss) income $(10.64) $(16.17) $135.80 $(53.49)
<FN>
See Accompanying Notes to Consolidated Financial Statements
</FN>
</TABLE>
c)
ANGELES PARTNERS XIV
CONSOLIDATED STATEMENTS OF CHANGES IN PARTNERS' DEFICIT
(Unaudited)
(in thousands, except unit data)
Limited
Partnership General Limited
Units Partners Partners Total
Original capital contributions 44,390 $ 1 $ 44,390 $ 44,391
Partners' deficit at
December 31, 1997 43,887 $ (718) $(32,789) $(33,507)
Net income for the nine months
ended September 30, 1998 -- 60 5,960 6,020
Partners' deficit at
September 30, 1998 43,887 $ (658) $(26,829) $(27,487)
See Accompanying Notes to Consolidated Financial Statements
d)
ANGELES PARTNERS XIV
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
Nine Months Ended
September 30,
1998 1997
Cash flows from operating activities:
Net income (loss) $ 6,020 $(2,372)
Adjustments to reconcile net income (loss) to net
cash provided by operating activities:
Write-up of investment property (44) --
Loss on sale of investment property 177 --
Extraordinary gain on extinguishment of debt (8,009) --
Depreciation 936 909
Amortization of discounts, loan costs, and
leasing commissions 55 42
Bad debt recovery, net (7) (22)
Change in accounts:
Receivables and deposits (144) (37)
Other assets 46 17
Accounts payable 37 (5)
Tenant security deposit liabilities (5) 6
Accrued property taxes 16 120
Accrued interest 1,674 2,290
Due to affiliates 95 107
Other liabilities (1) (5)
Net cash provided by operating activities 846 1,050
Cash flows from investing activities:
Property improvements and replacements (379) (261)
Net receipts from (deposits to) restricted escrows 64 (18)
Proceeds from sale of investment property, net 1,847 --
Net cash provided by (used in) investing activities 1,532 (279)
Cash flows from financing activities:
Principal payments on notes payable (374) (591)
Additions to notes payable 32 145
Repayment of notes payable (1,822) --
Net cash used in financing activities (2,164) (446)
Net increase in cash and cash equivalents 214 325
Cash and cash equivalents at beginning of period 649 318
Cash and cash equivalents at end of period $ 863 $ 643
Supplemental disclosure of cash flow information:
Cash paid for interest $ 1,127 $ 1,116
Supplemental disclosure of non-cash investing and
financing activities:
Interest on notes transferred to notes payable $ 350 $ 655
See Accompanying Notes to Consolidated Financial Statements
ANGELES PARTNERS XIV
CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)
(Unaudited)
(in thousands)
Supplemental disclosure of non-cash activities
Foreclosures/Sale
In January and April of 1998, Building 53 and Building 59, respectively, of the
Dayton Industrial Complex were foreclosed upon by the lender. In June 1998,
Building 41 of the Dayton Industrial Complex was sold to an unaffiliated third
party. The proceeds for the sale were used to pay down the mortgages secured by
the property, and the remaining balance of the non-recourse indebtedness was
forgiven. In connection with these non-cash transactions, the following
accounts were adjusted:
Building 53 Building 59 Building 41
Receivables and deposits $ (35) $ -- $ --
Other assets (9) -- --
Investment properties (660) (706) --
Accounts payable -- 30 --
Tenant security deposit liabilities 12 -- --
Property tax payable 64 26 --
Accrued interest 175 688 23
Mortgage notes payable 2,697 3,599 2,105
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") 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
$2,666,000 and $4,576,000 is in default at September 30, 1998, due to nonpayment
of interest and principal when due.
The Partnership realized net income of approximately $6,020,000 for the nine
months ended September 30, 1998. This was due to the recognition of an
extraordinary gain on the extinguishment of debt of approximately $8,009,000,
relating to the foreclosures of Buildings 53 and 59 and the sale of Building 41
in the Dayton Industrial Complex. The Partnership incurred a loss before the
extraordinary gain of approximately $1,989,000. Angeles Realty Corporation II,
(the "Managing General Partner" or "ARC II") expects the Partnership to continue
to incur such losses from operations. The Partnership generated cash from
operations of approximately $846,000 during the nine months ended September 30,
1998; however, this primarily was the result of accruing interest of
approximately $1,674,000 on its indebtedness and $95,000 for services provided
by affiliates.
In January 1998 and April 1998, Buildings 53 and 59, respectively, of the Dayton
Industrial Complex were foreclosed upon and in June 1998, Building 41 of the
Dayton Industrial Complex was sold. 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 Buildings 53 and 59 in 1996
and the buildings were 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 actions. As a result of the foreclosures, the Partnership recorded
an extraordinary gain on extinguishment of debt of approximately $2,244,000 and
$3,637,000 for Buildings 53 and 59, respectively. Also, in connection with the
foreclosure of Building 59, the Partnership recorded a $44,000 write-up of the
building from its carrying value to its estimated fair value during the second
quarter of 1998. Prior to the foreclosure of Building 53, 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. Prior to the foreclosure
of Building 59, the outstanding debt on the property was a first mortgage in the
amount of approximately $2,895,000 and a second mortgage in the amount of
approximately $704,000. Related accrued interest amounted to approximately
$688,000. As a result of the sale of Building 41, the Partnership recorded an
extraordinary gain on extinguishment of debt of approximately $2,128,000. Prior
to the sale of Building 41, the outstanding debt on the property was a first
mortgage in the amount of approximately $1,104,000 and a second mortgage in the
amount of approximately $2,823,000. Related accrued interest amounted to
approximately $23,000. Net proceeds of $1,822,000 were used to pay down this
non-recourse indebtedness and the remaining balances were forgiven.
The Dayton Industrial Complex has one remaining building at September 30, 1998.
The first mortgage on Building 55 totaling approximately $2,666,000 is
nonrecourse to the Partnership. The mortgage matured in December 1997 and is in
default due to nonpayment of interest and principal when due. The Managing
General Partner has entered into a sales agreement for Building 55 of the Dayton
Industrial Complex and anticipates selling this building to an unrelated party
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 the remaining building 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 of approximately $2,638,000 that is in default due to non-payment upon
maturity 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, 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.
The Partnership has two notes to Angeles Mortgage Investment Trust ("AMIT"),
which are recourse to the Partnership only, in the amount of approximately
$2,326,000 plus related accrued interest that originally matured in March 1998.
The Managing General Partner negotiated with AMIT to extend this indebtedness
and in the second quarter of 1998 executed an extension through November 2027.
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 and nine month periods ended September 30, 1998,
are not necessarily indicative of the results that may be expected for the
fiscal year ending December 31, 1998. For further information, refer to the
consolidated financial statements and footnotes thereto included in the
Partnership's annual report on Form 10-KSB for the fiscal year ended December
31, 1997.
Effective October 1, 1996, the Dayton Industrial Complex buildings were
classified as an investment property "held for disposal". Accordingly, the
remaining building has been recorded at the lower of its carrying amount or fair
value, less costs to sell, and no additional depreciation expense will be
recorded during the period the asset is held for disposal.
Certain reclassifications have been made to the 1997 information to conform to
the 1998 presentation.
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include all of the accounts of the
Partnership and its 99% limited partnership interest in Waterford Square
Apartments, Ltd. The Partnership may remove the General Partner in Waterford
Square Apartments, Ltd.; therefore, this partnership is controlled and
consolidated by the Partnership. All significant interpartnership balances have
been eliminated.
NOTE C - TRANSACTIONS WITH AFFILIATED PARTIES
The Partnership has no employees and is dependent on the Managing General
Partner and its affiliates for the management and administration of all
Partnership activities. The Partnership's partnership agreement provides for
payments to affiliates for services and as reimbursement 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 nine months ended September 30, 1998 and 1997:
1998 1997
(in thousands)
Property management fees (included in operating
expenses) $ 197 $ 186
Reimbursement for services of affiliates,
including approximately $23,000 and $5,000
of construction oversight reimbursements in
1998 and 1997, respectively; (included in
investment property, operating, and
general and administrative expenses) 123 112
Due to affiliate 1,295 1,200
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 which now controls the
working capital loan previously provided by Angeles Capital Investment, Inc.
("ACII"), was organized. 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
General Partner and Angeles, AAD resigned as general partner of AAP and
simultaneously received a .5% 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 September 30, 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 $364,000 for both the nine months ended September 30,
1998 and 1997. Accrued interest payable was approximately $2,638,000 at
September 30, 1998.
As discussed in Note A, AMIT, provides financing (the "AMIT Loans") to the
Partnership. The principal balances on the AMIT Loans totals approximately
$7,090,000 at September 30, 1998, accrues interest at rates of 12% to 12.5% per
annum and are recourse to the Partnership. Two of the three notes totaling
$2,326,000 originally matured in March 1998. The Managing General Partner
negotiated with AMIT to extend this indebtedness and in the second quarter of
1998, executed an extension through November 2027. The remaining note with a
principal balance of approximately $4,764,000 matures in March 2003. Total
interest expense on the AMIT Loans was approximately $846,000 and $759,000 for
the nine months ended September 30, 1998 and 1997, respectively. Accrued
interest was approximately $2,432,000 at September 30, 1998. Pursuant to a
series of transactions, affiliates of the Managing General Partner acquired
ownership interests in AMIT. On September 17, 1998, AMIT was merged with and
into Insignia Properties Trust ("IPT"), the entity which controls the Managing
General Partner. As a result, IPT became the holder of the AMIT Loans.
NOTE D - SALE OF INVESTMENT PROPERTY
The Partnership sold Building 41 of the Dayton Industrial Complex on June 12,
1998, to an unaffiliated party for net sales proceeds of approximately
$1,847,000, of which approximately $1,822,000 was used to pay down the
property's non-recourse indebtedness. The Partnership realized a loss of
approximately $177,000 on the sale and a related $2,128,000 extraordinary gain
on the early extinguishment of debt during the second quarter of 1998. The
extraordinary gain was the result of forgiveness of the remaining balances in
the non-recourse debt.
NOTE E - TRANSFER OF CONTROL; SUBSEQUENT EVENT
On October 1, 1998, Insignia Financial Group, Inc. completed its merger with and
into Apartment Investment and Management Company ("AIMCO"), a publicly traded
real estate investment trust, with AIMCO being the surviving corporation (the
"Insignia Merger"). As a result of the Insignia Merger, AIMCO acquired control
of the Managing General Partner. In addition, AIMCO also acquired approximately
51% of the outstanding common shares of beneficial interest of IPT, the entity
which controls the Managing General Partner. Also, effective October 1, 1998 IPT
and AIMCO entered into an Agreement and plan of Merger pursuant to which IPT is
to be merged with and into AIMCO or a subsidiary of AIMCO (the "IPT Merger").
The IPT Merger requires the approval of the holders of a majority of the
outstanding IPT Shares. AIMCO has agreed to vote all of the IPT Shares owned by
it in favor of the IPT Merger and has granted an irrevocable limited proxy to
unaffiliated representatives of IPT to vote the IPT Shares acquired by AIMCO and
its subsidiaries in favor of the IPT Merger. As a result of AIMCO's ownership
and its agreement, the vote of no other holder of IPT is required to approve the
merger. The Managing General Partner does not believe that this transaction will
have a material effect on the affairs and operations of the Partnership.
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 nine months ended September 30, 1998 and September 30,
1997.
Property 1998 1997
Waterford Square Apartments
Huntsville, Alabama 93% 91%
Fox Crest Apartments
Waukegan, Illinois 96% 96%
Dayton Industrial Complex
Building 55
Dayton, Ohio (1) 100% 100%
1) For both 1997 and 1998, the average occupancy rates for Buildings 41, 53 and
59 have been removed from the occupancy calculation for the Dayton Industrial
Complex since these buildings have been either sold or foreclosed upon during
1998, as discussed below. The property is currently under contract to sell.
The sale is expected to close, if at all, prior to the end of 1998.
The Partnership realized net income of approximately $6,020,000 for the nine
months ended September 30, 1998, versus a net loss of approximately $2,372,000
for the nine months ended September 30, 1997. For the three months ended
September 30, 1998 and 1997, the Partnership realized net losses of
approximately $472,000 and $717,000, respectively. The increase in net income
for the nine months ended September 30, 1998, resulted from the extraordinary
gain on extinguishment of debt of approximately $8,009,000. The Partnership
realized a loss before the extraordinary gain of approximately $1,989,000. The
Partnership experienced a decrease in revenues and expenses for the three and
nine months ended September 30, 1998 due to the loss of Buildings 53, 59, and 41
of the Dayton Industrial Complex in January, April, and June 1998, respectively
(see discussion below).
Rental income decreased primarily due to the loss of Buildings 53, 59, and 41 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 apartment 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, interest expense, and property taxes. These
decreases were primarily due to the foreclosures of Buildings 53 and 59 and the
sale of Building 41 of the Dayton Industrial Complex. The decrease in operating
expenses was partially offset by an increase in maintenance expense at Waterford
Square Apartments due to an exterior painting project during the nine months
ended September 30, 1998. Offsetting the decrease in interest expense due to the
foreclosure of Buildings 53 and 59 and the sale of Building 41 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.
Included in operating expense for the nine months ended September 30, 1998 is
approximately $85,000 of major repairs and maintenance consisting primarily of
exterior painting and gutter repairs. Included in operating expense for the
nine months ended September 30, 1997 is approximately $28,000 of major repairs
and maintenance consisting primarily of parking lot repairs.
In January 1998 and April 1998, Buildings 53 and 59, respectively, of the Dayton
Industrial Complex were foreclosed on and in June 1998, Building 41 of the
Dayton Industrial Complex was sold. 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 Buildings 53 and 59 in 1996
and the buildings were 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 actions. As a result of the foreclosures, the Partnership recorded
an extraordinary gain on extinguishment of debt of approximately $2,244,000 and
$3,637,000 for Buildings 53 and 59, respectively. Also, in connection with the
foreclosure of Building 59, the Partnership recorded a $44,000 write-up of the
building from its carrying value to its estimated fair value during the second
quarter of 1998. Prior to the foreclosure of Building 53, 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. Prior to the foreclosure
of Building 59, the outstanding debt on the property was a first mortgage in the
amount of approximately $2,895,000 and a second mortgage in the amount of
approximately $704,000. Related accrued interest amounted to approximately
$688,000. As a result of the sale of Building 41, the Partnership recorded an
extraordinary gain on extinguishment of debt of approximately $2,128,000. Prior
to the sale of Building 41, the outstanding debt on the property was a first
mortgage in the amount of approximately $1,104,000 and a second mortgage in the
amount of approximately $2,823,000. Related accrued interest amounted to
approximately $23,000.
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 September 30, 1998, the Partnership had cash and cash equivalents of
approximately $863,000 compared to approximately $643,000 at September 30, 1997.
Cash and cash equivalents increased approximately $214,000 and $325,000 for the
periods ended September 30, 1998 and 1997, respectively. Net cash provided by
operating activities decreased primarily due to an increase in receivables and
deposits and lesser increases in accrued interest and accrued property taxes.
The increase in receivables and deposits is primarily due to an increase in
escrow accounts due to the timing of payments. The change 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 foreclosures of Buildings 53 and 55 and the sale of Building
41 of the Dayton Industrial Complex, the second mortgage balance decreased
during the nine months ended September 30, 1998, resulting in a smaller increase
in accrued interest. Also, as a result of the sale and foreclosure of the
building, accrued property taxes decreased. Net cash provided by investing
activities increased primarily as a result of proceeds received from the sale of
Building 41 of the Dayton Industrial Complex, along with increased receipts from
restricted escrows. This 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 increased due to the repayment
of mortgage indebtedness which occurred as a result of the sale of Building 41
of the Dayton Industrial Complex. Also contributing to the increase in cash
used in financing activities was a decrease in additions to notes payable as a
result of fewer advances received from the lender to cover operating expenses
for Building 59 of the Dayton Industrial Complex. These changes were partially
offset by a decrease in principal payments on notes payable. For the nine months
ended September 30, 1997, $372,000 in principal payments were made on the third
mortgage indebtedness at the Dayton Industrial Complex versus $150,000 in
principal payments for the nine months ended September 30, 1998.
The Partnership continues to incur recurring operating losses and suffers from
inadequate liquidity. Non-recourse and recourse indebtedness of approximately
$2,666,000 and $4,576,000 is in default at September 30, 1998, due to
non-payment of interest and principal when due.
The Partnership's remaining Dayton Industrial Complex Building 55 is currently
under contract for sale. This sale is expected to close, if at all, prior to
the end of 1998. The anticipated sale price, however, is expected to be less
than the existing debt on the property. As a result, the first mortgage lender
has agreed to accept the net proceeds from the sale, after closing costs, in
full satisfaction of the loan. This will result in cancellation of indebtedness
income being recognized by the Partnership.
With respect to the Partnership's two apartment complexes, 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 various properties to adequately maintain the physical assets and other
operating needs of the Partnership and to comply with federal, state and local
legal and regulatory requirements. Such assets are currently thought to be
sufficient for any near-term need of the Partnership. However, as discussed in
Item 1, Note A, the existing first mortgage indebtedness, working capital loans
and amounts due to AMIT are thought to be in excess of the value of the
properties. The first mortgage loan encumbering Waterford Square Apartments,
which is guaranteed by HUD, is scheduled to mature in November 2007, at which
time a balloon payment of $86,000 is due. Likewise, the first mortgage loan
encumbering Fox Crest Apartments is scheduled to mature in May 2003, at which
time a balloon payment of $5,445,000 is due. The Partnership is current in its
payments on both of these mortgages. In addition, the Partnership's working
capital loans, which had a balance of principal and accrued interest at its
maturity, November 1997, of 7,214,000 is currently in default. These working
capital loans are recourse to the Partnership. To date, the lender has not
instituted collection proceedings. If the Partnership is unable to refinance
its indebtedness or sell its properties for a sufficient amount, the Partnership
will risk losing such properties through foreclosure. Future cash distributions
will depend on the levels of net cash generated from operations, refinancings,
property sales and the availability of cash reserves. The Partnership's
distribution policy will be reviewed on a quarterly basis. However, based on
the current default under the working capital loans and the pending maturities
of the first mortgage loans, it is unlikely that a distribution will be made by
the Partnership in the foreseeable future.
Transfer of Control - Subsequent Event
On October 1, 1998, Insignia Financial Group, Inc. completed its merger with and
into Apartment Investment and Management Company ("AIMCO"), a publicly traded
real estate investment trust, with AIMCO being the surviving corporation (the
"Insignia Merger"). As a result of the Insignia Merger, AIMCO acquired control
of the Managing General Partner. In addition, AIMCO also acquired approximately
51% of the outstanding common shares of beneficial interest of Insignia
Properties Trust ("IPT"), the entity which controls the Managing General
Partner. Also, effective October 1, 1998 IPT and AIMCO entered into an
Agreement and plan of Merger pursuant to which IPT is to be merged with and into
AIMCO or a subsidiary of AIMCO (the "IPT Merger"). The IPT Merger requires the
approval of the holders of a majority of the outstanding IPT Shares. AIMCO has
agreed to vote all of the IPT Shares owned by it in favor of the IPT Merger and
has granted an irrevocable limited proxy to unaffiliated representatives of IPT
to vote the IPT Shares acquired by AIMCO and its subsidiaries in favor of the
IPT Merger. As a result of AIMCO's ownership and its agreement, the vote of no
other holder of IPT is required to approve the merger.
The Managing General Partner does not believe that this transaction will have a
material effect on the affairs and operations of the Partnership.
Year 2000
General Description of the Year 2000 Issue and the Nature and Effects of the
Year 2000 on Information Technology (IT) and Non-IT Systems
The Year 2000 Issue is the result of computer programs being written using two
digits rather than four to define the applicable year. The Partnership is
dependent upon the Managing General Partner and its affiliates for management
and administrative services ("Managing Agent"). Any computer programs or
hardware that have date-sensitive software or embedded chips may recognize a
date using "00" as the year 1900 rather than the year 2000. This could result
in a system failure or miscalculations causing disruptions of operations,
including, among other things, a temporary inability to process transactions,
send invoices, or engage in similar normal business activities.
The Managing Agent has determined that it will be required to modify or replace
significant portions of its software and certain hardware so that those systems
will properly utilize dates beyond December 31, 1999. The Managing Agent
presently believes that with modifications or replacements of existing software
and certain hardware, the Year 2000 Issue can be mitigated. However, if such
modifications and replacements are not made, or are not completed timely, the
Year 2000 Issue could have a material impact on the operations of the Managing
Agent and the Partnership.
Status of Progress in Becoming Year 2000 Compliant
The Managing Agent's plan to resolve the Year 2000 Issue involves the following
four phases: assessment, remediation, testing and implementation. To date, the
Managing Agent has fully completed its assessment of all information systems
that could be significantly affected by the Year 2000, and has begun the
remediation, testing and implementation phase on both hardware and software
systems. Assessments are continuing in regards to embedded systems in operating
equipment. The Managing Agent anticipates having all phases complete by June 1,
1999.
In addition to the areas the Partnership is relying on the Managing Agent to
verify compliance with, the Partnership has certain operating equipment,
primarily at the property sites, which needed to be evaluated for Year 2000
compliance. The focus of the Managing General Partner was to the security
systems, elevators, heating-ventilation-air-conditioning systems, telephone
systems and switches, and sprinkler systems. The Managing General Partner is
currently engaged in the identification of all non-compliant operational
systems, and is in the process of estimating the costs associated with any
potential modifications or replacements needed to such systems in order for them
to be Year 2000 compliant. It is not expected that such costs would have a
material adverse affect upon the operations of the Partnership.
Risk Associated with the Year 2000
The Managing General Partner believes that the Managing Agent has an effective
program in place to resolve the Year 2000 issue in a timely manner and has
appropriate contingency plans in place for critical applications that could
affect the Partnership's operations. To date, the Managing General Partner is
not aware of any external agent with a Year 2000 issue that would materially
impact the Partnership's results of operations, liquidity or capital resources.
However, the Managing General Partner has no means of ensuring that external
agents will be Year 2000 compliant. The Managing General Partner does not
believe that the inability of external agents to complete their Year 2000
resolution process in a timely manner will have a material impact on the
financial position or results of operations of the Partnership. However, the
effect of non-compliance by external agents is not readily determinable.
Other
Certain items discussed in this quarterly report may constitute forward-looking
statements within the meaning of the Private Securities Litigation Reform Act of
1995 and as such may involve known and unknown risks, uncertainties and other
factors which may cause the actual results, performance or achievements of the
Partnership to be materially different from any future results, performance or
achievements expressed or implied by such forward-looking statements. Such
forward-looking statements speak only as of the date of this quarterly report.
The Partnership expressly disclaims any obligation or undertaking to release
publicly any updates or revisions to any forward-looking statements contained
herein to reflect any change in the Partnership's expectations with regard
thereto or any change in events, conditions or circumstances on which any such
statement is based.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDING
In March 1998, several putative unit holders of limited partnership units of the
Partnership commenced an action entitled ROSALIE NUANES, ET AL. V. INSIGNIA
FINANCIAL GROUP, INC., ET AL. in the Superior Court of the State of California
for the County of San Mateo. The plaintiffs named as defendants, among others,
the Partnership, the Managing General Partner and several of their affiliated
partnerships and corporate entities. The complaint purports to assert claims on
behalf of a class of limited partners and derivatively on behalf of a number of
limited partnerships (including the Partnership) which are named as nominal
defendants, challenging the acquisition by Insignia Financial Group, Inc.,
("Insignia") and entities which were, at the time, affiliates of Insignia
("Insignia Affiliates") of interests in certain general partner entities, past
tender offers by Insignia Affiliates to acquire limited partnership units, the
management of partnerships by Insignia Affiliates as well as a recently
announced agreement between Insignia and Apartment Investment and Management
Company. The complaint seeks monetary damages and equitable relief, including
judicial dissolution of the Partnership. On June 25, 1998, the Managing General
Partner filed a motion seeking dismissal of the action. In lieu of responding
to the motion, plaintiffs have recently filed an amended complaint. The Managing
General Partner has filed demurrers to the amended complaint which are scheduled
to be heard on January 8, 1999. The Managing General Partner believes the claims
to be without merit and intends to defend the action vigorously.
On July 30, 1998, certain entities claiming to own limited partnership interests
in certain limited partnerships whose general partners were, at the time,
affiliates of Insignia filed a complaint entitled EVEREST PROPERTIES, LLC. V.
INSIGNIA FINANCIAL GROUP, INC., ET AL. in the Superior Court of the State of
California, County of Los Angeles. The action involves 44 real estate limited
partnerships (including the Partnership) in which the plaintiffs allegedly own
interests and which Insignia Affiliates allegedly manage or control (the
"Subject Partnerships"). The complaint names as defendants Insignia, several
Insignia Affiliates alleged to be managing partners of the defendant limited
partnerships, the Partnership and the Managing General Partner. Plaintiffs
allege that they have requested from, but have been denied by each of the
Subject Partnerships, lists of their respective limited partners for the purpose
of making tender offers to purchase up to 4.9% of the limited partner units of
each of the Subject Partnerships. The complaint also alleges that certain of
the defendants made tender offers to purchase limited partner units in many of
the Subject Partnerships, with the alleged result that plaintiffs have been
deprived of the benefits they would have realized from ownership of the
additional units. The plaintiffs assert eleven causes of action, including
breach of contract, unfair business practices, and violations of the partnership
statutes of the states in which the Subject Partnerships are organized.
Plaintiffs seek compensatory, punitive and treble damages. The Managing General
Partner filed an answer to the complaint on September 15, 1998. The Partnership
believes the claims to be without merit and intends to defend the action
vigorously.
The Partnership is unaware of any other pending or outstanding litigation that
is not of a routine nature. The Managing General Partner 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.
b) Reports on Form 8-K:
No reports on form 8-K were filed during the nine months ended
September 30, 1998.
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
ANGELES PARTNERS XIV
By: Angeles Realty Corporation II
Its Managing General Partner
By: /s/Patrick Foye
Patrick Foye
Executive Vice President
By: /s/ Timothy R. Garrick
Timothy R. Garrick
Vice President - Accounting
(Duly Authorized Officer)
Date: November 13, 1998
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from
Angeles Partners XIV 1998 Third 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> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> SEP-30-1998
<CASH> 863
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0<F1>
<PP&E> 26,853
<DEPRECIATION> 16,935
<TOTAL-ASSETS> 13,575
<CURRENT-LIABILITIES> 0<F1>
<BONDS> 34,015
0
0
<COMMON> 0
<OTHER-SE> (27,487)
<TOTAL-LIABILITY-AND-EQUITY> 13,575
<SALES> 0
<TOTAL-REVENUES> 3,974
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 5,963
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,900
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 6,020
<EPS-PRIMARY> 135.80<F2>
<EPS-DILUTED> 0
<FN>
<F1>Registrant has an unclassified balance sheet.
<F2>Multiplier is 1.
</FN>
</TABLE>
