FORM 10-KSB ANNUAL OR TRANSITIONAL REPORT UNDER
SECTION 13 OR 15(D)
FORM 10-KSB
(Mark One)
[X] ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES AND EXCHANGE ACT
OF 1934 [No Fee Required]
For the fiscal year ended December 31, 1998
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934 [No Fee Required]
For the transition period from to
Commission file number 0-14248
ANGELES PARTNERS XIV
California 95-3959771
(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) (Zip Code)
Issuer's telephone number (864) 239-1000
Securities registered under Section 12(b) of the Exchange Act:
None
Securities registered under Section 12(g) of the Exchange Act:
Limited Partnership Units
(Title of class)
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
Check if there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B contained in this form, and no disclosure will be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-KSB or any
amendment to this Form 10-KSB.X]
State issuer's revenues for its most recent fiscal year. $6,267,000.
State the aggregate market value of the voting partnership interests held by
non-affiliates computed by reference to the price at which the partnership
interests were sold, or the average bid and asked prices of such partnership
interests, as of December 31, 1998. No market value exists for the limited
partnership interest of the Registrant, and, therefore, no aggregate market
value can be determined.
DOCUMENTS INCORPORATED BY REFERENCE
NONE
PART I
ITEM 1. DESCRIPTION OF BUSINESS
Angeles Partners XIV (the "Partnership" or "Registrant") is a publicly-held
limited partnership organized under the California Uniform Limited Partnership
Act on June 29, 1984, as amended (the "Agreement"). The Partnership's Managing
General Partner is Angeles Realty Corporation II ("ARC II" or the "Managing
General Partner"), a California corporation and wholly-owned subsidiary of MAE
GP Corporation ("MAE GP"). Effective February 25, 1998, MAE GP was merged into
Insignia Properties Trust ("IPT") which is an affiliate of Insignia Financial
Group, Inc. ("Insignia"). Effective October 1, 1998, and February 26, 1999,
Insignia and IPT, respectively, were merged into Apartment Investment and
Management Company ("AIMCO"). Thus the Managing General Partner is now a
wholly-owned subsidiary of AIMCO. The Partnership's Non-Managing General
Partner is ARCII/AREMCO Partners, Ltd. ARC II and ARCII/AREMCO Partners, Ltd.
are herein collectively referred to as the "General Partners". The Partnership
Agreement provides that the Partnership is to terminate on December 31, 2035
unless terminated prior to such date.
The Registrant is engaged in the business of operating and holding real
properties for investment. In 1985 and 1987, during its acquisition phase,
the Registrant acquired four existing apartment properties, one office
building and one industrial complex. The Registrant continues to own and
operate two of the existing apartment properties. See "Item 2.
Description of Properties".
Commencing in February 1985, the Registrant offered pursuant to a Registration
Statement filed with the Securities and Exchange Commission, up to 80,000 Units
of Limited Partnership Interest (the "Units") at a purchase price of $1,000 per
Unit with a minimum purchase of 5 Units ($5,000). The offering terminated in
February 1987. Upon termination of the offering, the Registrant had accepted
subscriptions for 44,390 Units, for an aggregate of $44,390,000. Since its
initial offering, the Registrant has not received, nor are limited partners
required to make, additional capital contributions.
The Managing General Partner contributed capital in the amount of $1,000 for a
1% interest in the Partnership. The Partnership was formed for the purpose
of acquiring fee interests in various types of real property. The Managing
General Partner intends to maximize the operating results and, ultimately,
the net realizable value of each of the Partnership's properties in order
to achieve the best possible return for the investors. Such results may
best be achieved through property sales, refinancings, debt restructurings
or relinquishment of the assets. The Partnership intends to evaluate each
of its holdings periodically to determine the most appropriate strategy for
each of the assets.
A further description of the Partnership's business is included in "Management's
Discussion and Analysis or Plan of Operation" included in "Item 6" of this Form
10-KSB.
The Partnership has no full time employees. The Managing General Partner is
vested with full authority as to the general management and supervision of the
business and affairs of the Partnership. Limited Partners have no right to
participate in the management or conduct of such business and affairs. Property
management and administrative services are provided by affiliates of the
Managing General Partner. The Dayton Industrial Complex was managed by an
unaffiliated third party.
The real estate business in which the Partnership is engaged is highly
competitive. There are other residential properties within the market area of
the Partnership's properties. The number and quality of competitive properties,
including those which may be managed by an affiliate of the Managing General
Partner in such market area, could have a material effect on the rental market
for the apartments at the Registrant's properties and the rents that may be
charged for such apartments. While the Managing General Partner and its
affiliates are a significant factor in the United States in the apartment
industry, competition for the apartments is local. In addition, various limited
partnerships have been formed by the Managing General Partner and/or affiliates
to engage in business which may be competitive with the Registrant.
Both the income and expenses of operating the remaining properties owned by the
Partnership are subject to factors outside of the Partnership's control, such as
an oversupply of similar properties resulting from overbuilding, increases in
unemployment or population shifts, reduced availability of permanent mortgage
financing, changes in zoning laws, or changes in patterns or needs of users. In
addition, there are risks inherent in owning and operating residential
properties because such properties are susceptible to the impact of economic and
other conditions outside of the control of the Partnership.
There have been, and it is possible there may be other, Federal, state and local
legislation and regulations enacted relating to the protection of the
environment. The Partnership is unable to predict the extent, if any, to
which such new legislation or regulations might occur and the degree to
which such existing or new legislation or regulations might adversely
affect the properties owned by the Partnership.
The Partnership monitors its properties for evidence of pollutants, toxins and
other dangerous substances, including the presence of asbestos. In certain
cases environmental testing has been performed, which resulted in no material
adverse conditions or liabilities. In no case has the Partnership received
notice that it is a potentially responsible party with respect to an
environmental clean up site.
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 merged into Apartment Investment and Management Company, a publicly
traded real estate investment trust, with AIMCO being the surviving
corporation (the "Insignia Merger"). As a result, AIMCO ultimately
acquired a 100% ownership interest in Insignia Properties Trust ("IPT"),
the entity which controls the Managing General Partner. 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. DESCRIPTION OF PROPERTIES
The following table sets forth the Registrant's investments in properties:
Date of
Property Purchase Type of Ownership Use
Waterford Square 05/31/85 Fee ownership subject to a Residential Rental
Apartments first mortgage (1) 487 units
Fox Crest 06/30/85 Fee ownership subject to a Residential Rental
Apartments first mortgage 245 units
(1) Property is held by a limited partnership which the Registrant owns a 99%
interest in.
SCHEDULE OF PROPERTIES:
Set forth below for each of the Registrant's properties is the gross carrying
value, accumulated depreciation, depreciable life, method of depreciation
and Federal tax basis.
Gross
Carrying Accumulated Federal
Property Value Depreciation Rate Method Tax Basis
(in thousands) (in thousands)
Waterford Square
Apartments $ 17,346 $ 11,134 5-20 yrs (1) $ 6,162
Fox Crest Apartments 9,621 6,116 5-20 yrs (1) 3,258
$ 26,967 $ 17,250 $ 9,420
(1) Straight-line and accelerated
See "Note B" of the financial statements included in "Item 7." for a description
of the Partnership's depreciation policy.
SCHEDULE OF PROPERTY INDEBTEDNESS:
The following table sets forth certain information relating to the loans
encumbering the Registrant's properties:
Principal Principal
Balance At Balance
December 31, Interest Period Maturity Due At
Property 1998 Rate Amortized Date (6) Maturity (6)
(in thousands) (in thousands)
Waterford Square
Apartments
1st mortgage $ 11,795 7.90% 31 yrs 11/2027 $ 86
Fox Crest
Apartments
1st mortgage 6,311 8.00% 30 yrs 05/2003 5,445
Angeles Partners XIV
Working capital
loan, in default (3) 1,281 (1) (1) 11/1997 1,281
Working capital
loan, in default (3) 3,295 (1) (1) 11/1997 3,295
Note payable (2)
("Glenwood") 2,405 12.50% (4) 03/2002 2,405
Note payable (2)
("Waterford Square") 433 12.00% (4) 03/2002 433
Note payable (2)
("Foxcrest") 4,765 12.50% (5) 03/2003 4,765
Total $ 30,285 $ 17,710
(1) Interest accrues at prime plus 2%; payments are made based on excess cash
flow as defined.
(2) Payable to Angeles Mortgage Investment Trust ("AMIT"), an affiliate of the
Managing General Partner.
(3) Payable to Angeles Acceptance Pool, L.P. ("AAP").
(4) Payment of excess cash flow only, as defined, due semi-annually.
(5) No payments due until maturity.
(6) See "Item 7, Consolidated Financial Statements _ Note E" for information
with respect to the Registrant's ability to prepay these loans and more
specific details as to the terms of the loans.
RENTAL RATES AND OCCUPANCY:
Average annual rental rates and occupancy for 1998 and 1997 for each property:
Average Annual Average Annual
Rental Rates Occupancy
Property 1998 1997 1998 1997
Waterford Square Apartments $6,156/unit $6,034/unit 94% 92%
Fox Crest Apartments 7,794/unit 7,525/unit 96% 96%
As noted under "Item 1. Description of Business," the real estate industry is
highly competitive. All of the properties of the Partnership are subject to
competition from other residential apartment complexes in the area. The
Managing General Partner believes that all of the properties are adequately
insured. Each property is an apartment complex which leases its units for terms
of one year or less. No residential tenant leases 10% or more of the available
rental space. All of the buildings are in good physical condition, subject to
normal depreciation and deterioration as is typical for assets of this type and
age.
REAL ESTATE TAX AND RATES:
Real estate taxes and rates in 1998 for each property were:
1998 1998
Billing Rate
(in thousands)
Waterford Square Apartments $ 157 5.80%
Fox Crest Apartments 191* 8.01%
* Amount per 1997 billings, tax bills for 1998 not yet received.
CAPITAL IMPROVEMENTS:
Waterford Square Apartments paid approximately $314,000 in capital expenditures
for the year ended December 31, 1998. This consisted primarily of a roof
replacement project, exterior painting, carpet replacements, outdoor furniture
and gutter replacements. Based on a report received from an independent third
party consultant analyzing necessary exterior improvements and estimates made by
the Managing General Partner on interior improvements, it is estimated that the
property requires approximately $517,000 of capital improvements over the near
term. The budgeted amount for the year ended December 31, 1999 is approximately
$601,000 consisting of, but not limited to, structural improvements, roof and
flooring replacements, painting, landscaping, swimming pool repairs and
appliance replacements.
Fox Crest Apartments paid approximately $172,000 in capital expenditures for the
year ended December 31, 1998. This consisted primarily of various building
improvements, carpet replacements, and new appliances. Based on a report
received from an independent third party consultant analyzing necessary exterior
improvements and estimates made by the Managing General Partner on interior
improvements, it is estimated that the property requires approximately $515,000
of capital improvements over the near term. The budgeted amount for the year
ended December 31, 1999 is approximately $555,000 consisting of, but not limited
to interior and exterior building improvements.
The capital improvements planned for 1999 at the Partnership's properties will
be made only to the extent of cash available from operations and Partnership
reserves.
ITEM 3. 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, 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 were heard
during February 1999. No ruling on such demurrers have been received. The
Managing General Partner does not anticipate that costs associated with this
case, if any, to be material to the Partnership's overall operations.
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"). This case was settled on March 3, 1999. The
Partnership is responsible for a portion of the settlement costs. The expense
will not have a material effect on the Partnership's operations.
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 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Unit holders of the Registrant did not vote on any matter during the quarter
ended December 31, 1998.
PART II
ITEM 5. MARKET FOR THE PARTNERSHIP'S COMMON EQUITY AND RELATED SECURITY HOLDER
MATTERS
The Partnership, a publicly held limited partnership, offered and sold 44,390
limited partnership units aggregating $44,390,000. The Partnership currently
has 4,392 holders of record owning an aggregate of 43,589 Units. No public
trading market has developed for the Units, and it is not anticipated that such
a market will develop in the future. In 1998 and 1997, the number of Limited
Partnership Units decreased by 298 units and 10 units, respectively, due to
Limited Partners abandoning their Limited Partnership Units. In abandoning his
or her Limited Partnership Units, a Limited Partner relinquishes all right,
title and interest in the Partnership as of the date of abandonment. However,
the Limited Partner is allocated his or her share of income (loss) for that
year. The income (loss) per Limited Partnership Unit in the accompanying
statements of operations is calculated based on the number of units outstanding
at the beginning of the year.
There were no distributions made for the years ended December 31, 1998 and 1997.
Future cash distributions will depend on the levels of net cash generated from
operations, refinancings, property sales and the availability of cash reserves.
The Registrant'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 Registrant in the foreseeable future.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
The matters discussed in this Form 10-KSB contain certain forward-looking
statements and involve risks and uncertainties (including changing market
conditions, competitive and regulatory matters, etc.) detailed in the disclosure
contained in this Form 10-KSB 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.
This item should be read in conjunction with the financial statements and other
items contained elsewhere in this report.
RESULTS OF OPERATIONS
The Partnership realized net income of approximately $7,936,000 for the year
ended December 31, 1998 versus a net loss of approximately $3,974,000 for the
year ended December 31, 1997. The increase in net income for the year ended
December 31, 1998 resulted from the extraordinary gain on extinguishment of debt
of approximately $9,343,000. The Partnership realized a loss before
extraordinary gain of approximately $1,407,000 for the year ended December 31,
1998 compared to a loss before extraordinary gain on extinguishment of debt of
$3,974,000. The decrease in loss before extraordinary items is due to an
increase in revenues and a decrease in expenses. Revenues increased primarily
due to a gain on sale of investment which was offset by a decrease in rental
income.
Rental income decreased primarily due to the loss of Buildings 53, 59, 41 and 55
of the Dayton Industrial Complex in January, April, June and December 1998 but
was slightly offset by an increase in rental income at both Fox Crest 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,
interest expenses and property taxes partially offset by a slight increase in
depreciation and general administrative expenses. In addition, the Partnership
had a write-down of an investment in 1998 as opposed to a write-up of investment
in 1997 (see discussion below). These decreases were primarily due to the
foreclosures of Building 53 and 59 and the sales of Buildings 41 and 55 of the
Dayton Industrial Complex. The decrease in operating expenses was partially
offset by increased property expenses at both residential properties and an
increase in maintenance expense at Fox Crest Apartments due to interior painting
and repairs for the year ended December 31, 1998. The decrease in interest
expense was due to foreclosure of Buildings 53 and 59 and the sale of Buildings
41 and 55, partially offset by an increase in interest expense on the defaulted
debt due to interest accruing on increased debt balances as unpaid interest is
added to principal.
General and administrative and depreciation expense increased slightly for the
comparable periods. Included in general and administrative expenses at both
December 31, 1998 and 1997 are management 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.
In January 1998 and April 1998, Buildings 53 and 59, respectively, of the Dayton
Industrial Complex were foreclosed on. In June and December 1998 Buildings 41
and 55 of the Dayton Industrial Complex were 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 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. Related to the sale of Building 55,
the Partnership recorded an extraordinary gain on extinguishment of debt of
approximately $ 1,334,000. Prior to the sale of Building 55, the outstanding
debt on the property was a second mortgage in the amount of approximately
$2,833,000 and a third mortgage in the amount of approximately $1,377,000.
As part of the ongoing business plan of the Partnership, the Managing General
Partner monitors 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 Registrant from increases in
expenses. As part of this plan, the Managing General Partner attempts to
protect the Registrant 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.
Liquidity and Capital Resources
At December 31, 1998, the Registrant held cash and cash equivalents of
approximately $883,000 as compared to approximately $649,000 at December 31,
1997. The increase in cash and cash equivalents is due to $1,215,000 of cash
provided by operating activities (however, this was primarily the result of
accruing interest of approximately $2,282,000 on its indebtedness and $42,000
for services provided by affiliates, all of which if paid would have meant no
cash would have been provided by operating activities) and $ 4,292,000 of cash
provided by investing activities, which is partially offset by $5,273,000 of
cash used in financing activities. Cash provided by investing activities
consisted of proceeds from the sale of investment properties and receipts from
restricted escrows, which was partially offset by property improvements and
replacements. Cash used in financing activities consisted of payments of
principal and repayment of loans on the mortgages encumbering the Registrant's
properties, which was partially offset by additions to the notes payable. The
Registrant invests its working capital reserves in a money market account.
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.
Recourse indebtedness of approximately $4,576,000 is in default at December 31,
1998, as a result of nonpayment of interest and principal upon its maturity in
November 1997.
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 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. The Registrant has budgeted approximately $1,156,000
in capital improvements for all of the Registrant's properties in 1999.
Budgeted capital improvements at Waterford Square Apartments consists of, but
are not limited to, structural improvements, roof and flooring replacements,
painting, landscaping, swimming pool repairs and appliance replacements.
Budgeted capital improvements at Fox Crest Apartments consist of, but are not
limited to interior and exterior building improvements. The capital
expenditures will be incurred only if cash is available from operations 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.
With respect to the Partnership as a whole the sufficiency of existing liquid
assets to meet future debt requirements is directly related to the level of
recourse and non-recourse debt at the Partnership level. The Partnership has
unsecured working capital loans to AAP in the amount of approximately
$4,576,000, plus related accrued interest that was due November 25, 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 existing first mortgage indebtedness, working capital loans and amounts due
to AMIT are thought to be in excess of the value of the properties. (Pursuant
to a series of transactions, affiliates of the Managing General Partner acquired
ownership interests in AMIT as follows: On September 17, 1998, AMIT was merged
with and into IPT, effective February 26, 1999, IPT was merged into AIMCO.
Accordingly, AIMCO is now the holder of the AMIT loans.) The two AMIT Notes in
the amount of approximately $2,838,000 plus related accrued interest originally
matured in March 1998; these notes are recourse to the Partnership only. During
1998, the lender agreed to extend the maturity date on these notes to March
2002. At the time of the granting of the extension, an additional $28,000 in
loan costs was added to the principal. These loans require monthly payments of
excess cash flow, as defined. The Partnership's other remaining note to AMIT
for approximately $4,765,000, plus accrued interest at 12.5% per annum
compounded monthly, is due March 2003 and does not require any payments until
maturity. Accrued interest as of December 31, 1998 is approximately $1,943,000.
The first mortgage loan encumbering Waterford Square Apartments, which is
guaranteed by HUD, is scheduled to mature November 2027, 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 Registrant is current in its payments on both
of these mortgages. The Managing General Partner will 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 Registrant
will risk losing such properties through foreclosure.
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 the Fox Crest Apartments and Waterford
Square Apartments will generate sufficient cash flows during 1999 to meet all
property operating expenses, property debt service requirements and to fund
capital expenditures. However, these cash flows will be insufficient to provide
debt service for the unsecured Partnership indebtedness. If the Managing
General Partner is unsuccessful in its efforts to restructure these loans, then
it may be forced to liquidate the Partnership.
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.
There were no distributions made for the years ended December 31, 1998 and 1997.
Future cash distributions will depend on the levels of net cash generated from
operations, refinancings, property sales and the availability of cash reserves.
The Registrant's distribution policy will be reviewed on a quarterly basis.
However, based on the current default under the working capital loans, it is
unlikely that a distribution will be made by the Registrant in the foreseeable
future.
Year 2000 Compliance
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 digits 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 of the 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.
Over the past two years, 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
not completed in time, the Year 2000 issue could have a material impact on the
operations of the Partnership.
The Managing Agent's plan to resolve Year 2000 issues involves four Phases:
assessment, remediation, testing, and implementation. To date, the Managing
Agent has fully completed its assessment of all the information systems that
could be significantly affected by the Year 2000, and has begun the remediation,
testing and implementation phases on both hardware and software systems.
Assessments are continuing in regards to embedded systems. The status of each
is detailed below.
Status of Progress in Becoming Year 2000 Compliant, Including Timetable for
Completion of Each Remaining Phase
Computer Hardware:
During 1997 and 1998, the Managing Agent identified all of the computer systems
at risk and formulated a plan to repair or replace each of the affected systems.
In August 1998, the mainframe system used by the Managing Agent became fully
functional. In addition to the mainframe, PC-based network servers and routers
and desktop PCs were analyzed for compliance. The Managing Agent has begun to
replace each of the non-compliant network connections and desktop PCs and, as of
December 31, 1998, had completed approximately 75% of this effort.
The total cost to the Managing Agent to replace the PC-based network servers,
routers and desktop PCs is expected to be approximately $1.5 million of which
$1.3 million has been incurred to date. The remaining network connections and
desktop PCs are expected to be upgraded to Year 2000 compliant systems by March
31, 1999.
Computer software:
The Managing Agent utilizes a combination of off-the-shelf, commercially
available software programs as well as custom-written programs that are designed
to fit specific needs. Both of these types of programs were studied, and
implementation plans written and executed with the intent of repairing or
replacing any non-compliant software programs.
During 1998, the Managing Agent began converting the existing property
management and rent collection systems to its management properties Year 2000
compliant systems. The estimated additional costs to convert such systems at
all properties, is $200,000, and the implementation and the testing process is
expected to be completed by March 31, 1999.
The final software area is the office software and server operating systems.
The Managing Agent has upgraded all non-compliant office software systems on
each PC and has upgraded 80% of the server operating systems. The remaining
server operating systems are planned to be upgraded to be Year 2000 compliant by
March 31, 1999.
Operating Equipment:
The Managing Agent has operating equipment, primarily at the property sites,
which needed to be evaluated for Year 2000 compliance. In September 1997, the
Managing Agent began taking a census and inventory of embedded systems
(including those devices that use time to control systems and machines at
specific properties, for example elevators, heating, ventilating, and air
conditioning systems, security and alarm systems, etc.).
The Managing Agent has chosen to focus its attention mainly upon security
systems, elevators, heating, ventilating and air conditioning systems, telephone
systems and switches, and sprinkler systems. While this area is the most
difficult to fully research adequately, management has not yet found any major
non-compliance issues that put the Managing Agent at risk financially or
operationally. The Managing Agent intends to have a third-party conduct an
audit of these systems and report their findings by March 31, 1999.
Any of the above operating equipment that has been found to be non-compliant to
date has been replaced or repaired. To date, these have consisted only of
security systems and phone systems. As of December 31, 1998 the Managing Agent
has evaluated approximately 86% of the operating equipment for the Year 2000
compliance.
The total cost incurred for all properties managed by the Managing Agent as of
December 31, 1998 to replace or repair the operating equipment was approximately
$400,000. The Managing Agent estimates the cost to replace or repair any
remaining operating equipment is approximately $325,000, which is expected to be
completed by April 30, 1999.
The Managing Agent continues to have "awareness campaigns" throughout the
organization designed to raise awareness and report any possible compliance
issues regarding operating equipment within our enterprise.
Nature and Level of Importance of Third Parties and Their Exposure to the Year
2000
The Managing Agent continues to conduct surveys of its banking and other vendor
relationships to assess risks regarding their Year 2000 readiness. The Managing
Agent has banking relationships with three major financial institutions, all of
which have indicated their compliance efforts will be complete before May 1999.
The Managing Agent has updated data transmission standards with two of the three
financial institutions. The Managing Agent's contingency plan in this regard is
to move accounts from any institution that cannot be certified Year 2000
compliant by June 1, 1999.
The Partnership does not rely heavily on any single vendor for goods and
services, and does not have significant suppliers and subcontractors who share
information systems (external agent). To date the Partnership is not aware of
any external agent with a Year 2000 compliance issue that would materially
impact the Partnership's results of operations, liquidity, or capital resources.
However, the Partnership has no means of ensuring that external agents will be
Year 2000 compliant.
The Managing Agent does not believe that the inability of external agents to
complete their Year 2000 remediation 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.
Costs to Address Year 2000
The total cost of the Year 2000 project to the Managing Agent is estimated at
$3.5 million and is being funded from operating cash flows. To date, the
Managing Agent has incurred approximately $2.8 million ($0.6 million expensed
and $2.2 million capitalized for new systems and equipment) related to all
phases of the Year 2000 project. Of the total remaining project costs,
approximately $0.5 million is attributable to the purchase of new software and
operating equipment, which will be capitalized. The remaining $0.2 million
relates to repair of hardware and software and will be expensed as incurred.
The Partnership's portion of these costs are not material.
Risks Associated with the Year 2000
The Managing Agent believes it has an effective program in place to resolve the
Year 2000 issue in a timely manner. As noted above, the Managing Agent has not
yet completed all necessary phases of the Year 2000 program. In the event that
the Managing Agent does not complete any additional phases, certain worst case
scenarios could occur. The worst case scenarios could include elevators,
security and heating, ventilating and air conditioning systems that read
incorrect dates and operate with incorrect schedules (e.g., elevators will
operate on Monday as if it were Sunday). Although such a change would be
annoying to residents, it is not business critical.
In addition, disruptions in the economy generally resulting from Year 2000
issues could also adversely affect the Partnership. The Partnership could be
subject to litigation for, among other things, computer system failures,
equipment shutdowns or failure to properly date business records. The amount of
potential liability and lost revenue cannot be reasonably estimated at this
time.
Contingency Plans Associated with the Year 2000
The Managing Agent has contingency plans for certain critical applications and
is working on such plans for others. These contingency plans involve, among
other actions, manual workarounds and selecting new relationships for such
activities as banking relationships and elevator operating systems.
ITEM 7. FINANCIAL STATEMENTS
ANGELES PARTNERS XIV
LIST OF FINANCIAL STATEMENTS
Report of Ernst & Young, LLP, Independent Auditors
Consolidated Balance Sheet - December 31, 1998
Consolidated Statements of Operations - Years ended December 31, 1998 and
1997
Consolidated Statements of Changes in Partners' Deficit - Years ended
December 31, 1998 and 1997
Consolidated Statements of Cash Flows - Years ended December 31, 1998 and
1997
Notes to Consolidated Financial Statements
Report of Ernst & Young LLP, Independent Auditors
The Partners
Angeles Partners XIV
We have audited the accompanying consolidated balance sheet of Angeles Partners
XIV as of December 31, 1998, and the related consolidated statements of
operations, changes in partners' deficit and cash flows for each of the two
years in the period ended December 31, 1998. These financial statements are the
responsibility of the Partnership's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by the
Partnership's management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Angeles Partners
XIV at December 31, 1998, and the consolidated results of its operations and its
cash flows for each of the two years in the period ended December 31, 1998, in
conformity with generally accepted accounting principles.
The accompanying consolidated financial statements have been prepared assuming
that Angeles Partners XIV will continue as a going concern. As more fully
described in Note A, the Partnership continues to incur recurring operating
losses and suffers from inadequate liquidity. It is in default on unsecured
indebtedness of $4,576,000, plus related accrued interest of $2,762,000, due to
non-payment upon maturity of the debt in November 1997. These conditions raise
substantial doubt about the Partnership's ability to continue as a going
concern. Management's plans in regard to these matters are also described in
Note A. The financial statements do not include any adjustments to reflect the
possible future effects on the recoverability and classification of assets or
the amounts and classification of liabilities that may result from the outcome
of this uncertainty.
/S/ ERNST & YOUNG LLP
Greenville, South Carolina
March 3, 1999
ANGELES PARTNERS XIV
CONSOLIDATED BALANCE SHEET
(in thousands, except unit data)
December 31, 1998
Assets
Cash and cash equivalents $ 883
Receivables and deposits 382
Restricted escrows 354
Other assets 360
Investment properties (Notes D, E and H):
Land $ 2,243
Buildings and related personal property 24,724
26,967
Less accumulated depreciation (17,250) 9,717
$ 11,696
Liabilities and Partners' Deficit
Liabilities
Accounts payable $ 45
Tenant security deposit liabilities 88
Accrued taxes 315
Accrued interest 5,107
Due to affiliates (Note G) 1,342
Other liabilities 85
Notes payable, including $4,576 in
default (Notes D, E and H) 30,285
Partners' Deficit
General partners $ (639)
Limited partners (43,589 units
issued and outstanding) (24,932) (25,571)
$ 11,696
See Accompanying Notes to Consolidated Financial Statements
ANGELES PARTNERS XIV
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except unit data)
Years Ended December 31,
1998 1997
Revenues:
Rental income $ 5,147 $ 5,494
Other income 157 139
Gain on sale of investment properties (Note D) 963 --
Total revenues 6,267 5,633
Expenses:
Operating 1,928 2,305
General and administrative 226 214
Depreciation 1,258 1,219
Interest 3,922 4,670
Property taxes 384 486
Write (up) down of investment property (Note H) (44) 713
Total expenses 7,674 9,607
Loss before extraordinary items (1,407) (3,974)
Extraordinary item - gain on extinguishment of
debt (Note D) 9,343 --
Net income (loss) $ 7,936 $ (3,974)
Net income (loss) allocated to general partners (1%) $ 79 $ (40)
Net income (loss) allocated to limited partners (99%) 7,857 (3,934)
Net income (loss) $ 7,936 $ (3,974)
Per limited partnership unit:
Loss before extraordinary items $ (31.74) $ (89.62)
Extraordinary item - gain on extinguishment of debt 210.76 --
Net income (loss) $ 179.02 $ (89.62)
See Accompanying Notes to Consolidated Financial Statements
ANGELES PARTNERS XIV
CONSOLIDATED STATEMENTS OF CHANGES IN PARTNERS' DEFICIT
(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, 1996 43,897 $ (678) $ (28,855) $ (29,533)
Net loss for the year ended
December 31, 1997 -- (40) (3,934) (3,974)
Abandonment of limited
Partnership Units (Note I) (10) -- -- --
Partners' deficit at
December 31, 1997 43,887 (718) (32,789) (33,507)
Net income for the year ended
December 31, 1997 -- 79 7,857 7,936
Abandonment of limited
Partnership Units (Note I) (298) -- -- --
Partners' deficit at
December 31, 1998 43,589 $ (639) $ (24,932) $ (25,571)
See Accompanying Notes to Consolidated Financial Statements
ANGELES PARTNERS XIV
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
<TABLE>
<CAPTION>
Years Ended December 31,
1998 1997
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 7,936 $ (3,974)
Adjustments to reconcile net income (loss) to net
cash provided by operating activities:
Depreciation 1,258 1,219
Amortization of discounts, loan costs,
and leasing commissions 64 55
Extraordinary gain on extinguishment of debt (9,343) --
Gain on sale of investment properties (963) --
Bad debt recovery, net (7) (22)
Write (up) down of investment property (44) 713
Change in accounts:
Receivables and deposits (173) 156
Other assets 23 4
Accounts payable 42 (11)
Tenant security deposit liabilities (8) 5
Accrued taxes (3) 9
Accrued interest 2,282 2,958
Due to affiliates 142 146
Other liabilities 9 1
Net cash provided by operating activities 1,215 1,259
Cash flows from investing activities:
Property improvements and replacements (486) (343)
Proceeds from sale of investment properties 4,741 --
Net withdrawals (deposits to) restricted escrows 37 (50)
Net cash provided by (used in) investing activities 4,292 (393)
Cash flows from financing activities:
Principal payments on notes payable (603) (718)
Repayment of loans (4,698) --
Additions to notes payable 28 183
Net cash used in financing activities (5,273) (535)
Net increase in cash and cash equivalents 234 331
Cash and cash equivalents at beginning of year 649 318
Cash and cash equivalents at end of year $ 883 $ 649
Supplemental disclosure of cash flow information:
Cash paid for interest $ 1,603 $ 1,594
Supplemental disclosure of non-cash investing and
financing activities:
Interest on notes transferred to notes payable $ 1,063 $ 878
</TABLE>
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, Buildings 53 and 59, respectively, of the Dayton
Industrial Complex were foreclosed upon by the lender. In June 1998 and
December 1998, Buildings 41 and 55, respectively, of the Dayton Industrial
Complex were sold to an unaffiliated third party. The proceeds from 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:
<TABLE>
<CAPTION>
Building 53 Building 59 Building 41 Building 55
<S> <C> <C> <C> <C>
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 1,334
</TABLE>
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. Recourse indebtedness of approximately $4,576,000, plus
accrued interest of $2,762,000 is in default at December 31, 1998, as a result
of nonpayment of interest and principal upon maturity in November, 1997.
The Partnership realized net income of approximately $7,936,000 for the year
ended December 31, 1998. This was due to the recognition of an extraordinary
gain on the extinguishment of debt of approximately $9,343,000, relating to the
foreclosures of Buildings 53 and 59 and the sale of Buildings 41 and 55 in the
Dayton Industrial Complex. The Partnership incurred a loss before the
extraordinary gain of approximately $1,407,000. 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 $1,215,000 during the year ended December 31, 1998;
however, this primarily was the result of accruing interest of approximately
$2,282,000 on its indebtedness and $142,000 for services provided by affiliates.
The Partnership has two notes to Angeles Mortgage Investment Trust ("AMIT"),
which are recourse to the Partnership, in the amount of approximately $2,838,000
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 March 2002. These
notes require monthly payments of excess cash flow, as defined.
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 $2,762,000 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. The Managing General Partner believes that
it is doubtful that AAP will initiate collection proceedings on this
indebtedness since 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.
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, property debt service requirements and
to fund capital expenditures. However, these cash flows will be insufficient to
provide debt service for the unsecured Partnership indebtedness.
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 - ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
Organization: The Partnership is a California limited partnership organized in
June 1984, to acquire and operate residential and commercial real estate
properties. The Partnership's managing general partner is Angeles Realty
Corporation II ("ARC II" or "Managing General Partner") an affiliate of Insignia
Financial Group, Inc. ("Insignia") and wholly-owned subsidiary of MAE GP
Corporation ("MAE GP"). Effective February 25, 1998, MAE GP was merged into
Insignia Properties Trust ("IPT"). Effective October 1, 1998 and February 26,
1999, Insignia and IPT, respectively, were merged into Apartment Investment and
Management Company ("AIMCO"). Thus the Managing General Partner is now a
wholly-owned subsidiary of AIMCO. The Partnership's Non-Managing General
Partner is ARCII/AREMCO Partners, Ltd. ARC II and ARCII/AREMCO Partners, Ltd.
are herein collectively referred to as the "General Partners". The Partnership
commenced operations on June 29, 1984, and completed its acquisition of
apartment and commercial properties on December 20, 1985. As of December 31,
1998 the Partnership continues to operate two apartment properties, one in the
Northwest and the other is in the South. The Partnership Agreement provides
that the Partnership will terminate on December 31, 2035 unless terminated prior
to such date.
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.
Allocations and Distributions to Partners: In accordance with the Agreement,
any gain from the sale or other disposition of Partnership assets will be
allocated first to the General Partner to the extent of the amount of any
Incentive Interest (as defined below) to which the General Partner is entitled.
Any gain remaining after said allocation will be allocated to the Limited
Partners in proportion to their interests in the Partnership; provided that the
gain shall first be allocated to Partners with negative account balances, in
proportion to such balances, in an amount equal to the sum of such negative
capital account balances. The Partnership will allocate other profits and
losses 1% to the General Partner and 99% to the Limited Partners.
Except as discussed below, the Partnership will allocate distributions 1% to the
General Partner and 99% to the Limited Partners.
Upon the sale or other disposition, or refinancing of any asset of the
Partnership, the Distributable Net Proceeds shall be distributed as follows: (i)
First, to the Partners in proportion to their interests until the Limited
Partners have received proceeds equal to their Original Capital Investment; (ii)
Second, to the Partners until Limited Partners have received distributions from
all sources equal to their 6% Cumulative Distribution, (iii) Third, to the
General Partner until it has received its cumulative distributions equal to 3%
of the aggregate Disposition Prices of all properties, mortgages or other
investments sold ("Initial Incentive Interest") and (iv) Thereafter, 85% to the
Partners in proportion to their interests and 15% to the General Partner ("Final
Incentive Interest").
Cash and Cash Equivalents: Cash and cash equivalents includes cash on hand and
in banks, money market accounts, and certificates of deposit with original
maturities of less than 90 days. At certain times, the amount of cash deposited
at a bank may exceed the limit on insured deposits.
Tenant Security Deposits: The Partnership requires security deposits from
lessees for the duration of the lease and such deposits are included in
receivables and deposits. The security deposits are refunded when the tenant
vacates, provided the tenant has not damaged its space and is current on its
rental payments.
Advertising Costs: Advertising costs, of approximately $59,000 in 1998 and
approximately $64,000 in 1997, are charged to expense as they are incurred and
are included in operating expenses in the accompanying consolidated statements
of operations.
Investment Properties: Investment properties consist of two apartment complexes
and are stated at cost. Acquisition fees are capitalized as a cost of real
estate. In accordance with Financial Accounting Standards Board Statement No.
121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to Be Disposed Of," the Partnership records impairment losses on long-
lived assets used in operations when events and circumstances indicate that the
assets might be impaired and the undiscounted cash flows estimated to be
generated by those assets are less than the carrying amounts of those assets.
Costs of apartment properties that have been permanently impaired have been
written down to appraised value.
Depreciation: Depreciation is computed utilizing straight-line and accelerated
methods over the estimated useful lives of the investment properties and related
personal property. For Federal income tax purposes, depreciation is computed
utilizing the straight-line method over an estimated life of 5 to 20 years for
personal property and 15 to 40 years for real property.
Loan Costs: Loan costs of approximately $356,000, at December 31, 1998, which
are included in other assets on the accompanying balance sheet, are being
amortized on a straight-line basis over the lives of the loans. At December 31,
1998, accumulated amortization is approximately $60,000 and is also included in
other assets on the accompanying balance sheet.
Leases: The Partnership generally leases apartment units for twelve-month terms
or less. In addition, the Managing General Partner's policy is to offer rental
concessions during particularly slow months or in response to heavy competition
from other similar complexes in the area. Concessions are charged against rental
income as incurred.
Fair Value of Financial Instruments: Statement of Financial Accounting
Standards ("SFAS") No. 107, "Disclosures about Fair Value of Financial
Instruments", as amended by SFAS No. 119, "Disclosures about Derivative
Financial Instruments and Fair Value of Financial Instruments", requires
disclosure of fair value information about financial instruments, whether or not
recognized in the balance sheet, for which it is practicable to estimate fair
value. Fair value is defined in the SFAS as the amount at which the instruments
could be exchanged in a current transaction between willing parties, other than
in a forced or liquidation sale. The Partnership believes that the carrying
amount of its financial instruments (except for long term debt) approximates
their fair value due to the short term maturity of these instruments. The fair
value of the Partnership's first mortgages, after discounting the scheduled loan
payments to maturity, approximates its carrying balance. The Managing General
Partner believes that it is not appropriate to use the Partnership's incremental
borrowing rate for debt to affiliates or debt that is in default as there is no
market in which the Partnership could obtain similar financing.
Segment Reporting: In June 1997, the Financial Accounting Standards Board
issued Statement of Financial Standards No. 131, Disclosure about Segments of an
Enterprise and Related Information ("Statement 131"), which is effective for
years beginning after December 15, 1997. Statement 131 established standards
for the way that public business enterprises report information about operating
segments in annual financial statements and requires that those enterprises
report selected information about operating segments in interim financial
reports. It also establishes standards for related disclosures about products
and services, geographic areas, and major customers. (See "Note J" for
disclosure about the Registrant's segments)
Use of Estimates: The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
Reclassification: Certain reclassifications have been made to the 1997 balances
to conform to the 1998 presentation.
NOTE C - 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
merged into Apartment Investment and Management Company, a publicly traded real
estate investment trust, with AIMCO being the surviving corporation (the
"Insignia Merger"). As a result, AIMCO ultimately acquired a 100% ownership
interest in Insignia Properties Trust ("IPT"), the entity which controls the
Managing General Partner. The Managing General Partner does not believe that
this transaction will have a material effect on the affairs and operations of
the Partnership.
NOTE D - FORECLOSURE AND SALE OF INVESTMENT PROPERTIES
In January 1998 and April 1998, Buildings 53 and 59, respectively, of the Dayton
Industrial Complex were foreclosed upon and in June and December 1998, Buildings
41 and 55 of the Dayton Industrial Complex were 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.
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. 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 debt. 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.
On December 31, 1998, the Partnership sold Building 55 of the Dayton Industrial
Complex to an unaffiliated party for net sales proceeds of approximately
$2,894,000 after payment of closing costs. The partnership realized a gain of
approximately $1,140,000 on the sale and a related $1,334,000 extraordinary gain
on the early extinguishment of debt during the second quarter of 1998. The
extraordinary gain was the result of forgiveness of debt. Prior to the sale of
Building 55, the outstanding debt of the property was a second mortgage in the
amount of approximately $2,833,000 and a third mortgage in the amount of
approximately $1,377,000. Net proceeds of $2,876,000 were used to pay down this
non-recourse indebtedness and the remaining balances were forgiven.
NOTE E - NOTES PAYABLE
The principle terms of notes payable are as follows:
Monthly Principal Principal
Payment Stated Balance Balance At
Including Interest Maturity Due At December 31,
Property Interest Rate Date Maturity 1998
(in thousands) (in thousands)
Waterford Square
Apartments
1st mortgage $ 87 7.90% 11/2027 $ 86 $ 11,795
Fox Crest
Apartments
1st mortgage 56 8.0% 05/2003 5,445 6,311
Angeles Partners XIV
Working capital
loan, in default (3) (1) (1) 11/1997 1,281 1,281
Working capital
loan, in default (3) (1) (1) 11/1997 3,295 3,295
Note payable (2)
("Glenwood") (4) 12.50% 03/2002 2,405 2,405
Note payable (2)
("Waterford Square") (4) 12.00% 03/2002 433 433
Note payable (2)
("Foxcrest") (5) 12.50% 03/2003 4,765 4,765
Totals $17,710 $30,285
(1) Interest accrues at prime plus 2%; payments are based on excess cash flow
as defined.
(2) Payable to AMIT, an affiliate of the Managing General Partner.
(3) Payable to AAP.
(4) Payments of excess cash flow only, as defined, due semi-annually.
(5) No payments due until maturity.
In June 1996, the Waterford Square note and the Glenwood note, both held by
AMIT, were restructured, adding previously accrued delinquent interest and late
charges of approximately $874,000 to the original note amount. The $459,000 and
$1,915,000 notes provide semi-annual payments of excess cash flow, as defined,
and matured in March 1998. The notes provided for the accrual of interest on the
unpaid balance at 12.0% (Waterford Square note) and 12.5% (Glenwood note). In
July 1998, the lender agreed to extend the maturity date on these notes to March
2002. At the time of the granting of the extension, an additional $28,000 in
loan costs was added to the principal.
Mortgage notes payable totaling approximately $18,106,000 are nonrecourse and
are secured by pledge of certain of the Partnership's investment properties and
by pledge of revenues from the respective investment properties. Certain of the
notes include prepayment penalties if repaid prior to maturity. Further the
properties may not be sold subject to existing indebtedness.
Scheduled principal payments of notes payable subsequent to December 31, 1998,
are as follows (in thousands):
1999 $ 4,860
2000 308
2001 333
2002 3,199
2003 10,440
Thereafter 11,145
$ 30,285
NOTE F - INCOME TAXES
Taxable income or loss of the Partnership is reported in the income tax returns
of its partners. Accordingly, no provision for income taxes is made in the
financial statements of the Partnership.
The following is a reconciliation of reported net income (loss) and Federal
taxable income (loss) (in thousands except per unit data):
1998 1997
Net income (loss) as reported $ 7,936 $ (3,974)
Add (deduct):
Depreciation differences (38) (326)
Unearned income (1) 107
Discounts on notes payable -- 47
Book-tax difference on
sale/foreclosures (2,472) --
Write (up) down of investment properties (44) 713
Other 48 (1)
Federal taxable income (loss) 5,429 $ (3,434)
Federal taxable income (loss) per limited
partnership unit $ 81.42 $ (77.47)
The following is a reconciliation between the Partnership's reported amounts and
Federal tax basis of net assets and liabilities (in thousands):
Net liabilities as reported $ (25,571)
Land and buildings (74)
Accumulated depreciation (223)
Syndication and distribution costs 6,047
Difference in investment in lower tier (5,389)
Other 60
Net liabilities - Federal tax basis $ (25,150)
NOTE G - 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 certain payments
to affiliates for services and as reimbursement of certain expenses incurred by
affiliates on behalf of the Partnership. The following payments were made to
the Managing General Partner and affiliates during the year ended December 31,
1998 and 1997.
1998 1997
(in thousands)
Property management fees (included in operating
expenses) $ 264 $ 251
Reimbursement for services of affiliates,
including approximately $23,000 and $6,000
of construction oversight reimbursements in
1998 and 1997, respectively; (included in
investment property, operating, and
general and administrative expenses) 164 153
Due to affiliate 1,342 1,200
During the years ended December 31, 1998 and 1997, affiliates of the Managing
General Partner were entitled to receive 5% of gross receipts from all of the
Registrant's residential properties as compensation for providing property
management services. The Registrant paid to such affiliates $264,000 and
$251,000 for the years ended December 31, 1998 and 1997, respectively. Property
management services for the Dayton Industrial Complex were performed by an
unaffiliated third party.
Affiliates of the Managing General Partner received reimbursement of accountable
administrative expenses amounting to approximately $164,000 and $153,000 for the
years ended December 31, 1998 and 1997, respectively.
For the period from January 1, 1997, to August 31, 1997, the Partnership insured
its properties under a master policy through an agency affiliated with the
Managing General Partner with an insurer unaffiliated with the Managing General
Partner. An affiliate of the Managing General Partner acquired, in the
acquisition of a business, certain financial obligations from an insurance
agency which was later acquired by the agent who placed the 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 was 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 December 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 $489,000 and $485,000 for year ended December 31, 1998
and 1997, respectively. Accrued interest payable was approximately $2,762,000
at December 31, 1998.
AMIT provides financing (the "AMIT Loans") to the Partnership. The principal
balances on the AMIT Loans totals approximately $7,603,000 at December 31, 1998,
accrues interest at rates of 12% to 12.5% per annum and are recourse to the
Partnership. Two of the three notes totaling $2,838,000 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
March 2002. The remaining note with a principal balance of approximately
$4,765,000 matures in March 2003. Total interest expense on the AMIT Loans was
approximately $1,124,000 and $1,025,000 for the years ended December 31, 1998
and 1997, respectively. Accrued interest was approximately $2,225,000 at
December 31, 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 IPT, the Managing General Partner.
Effective February 26, 1999, IPT was merged into AIMCO. AIMCO is now the holder
of the AMIT Loans.
NOTE H - INVESTMENT PROPERTIES AND ACCUMULATED DEPRECIATION
<TABLE>
<CAPTION>
Initial Cost
To Partnership
(in thousands)
Cost
Buildings Capitalized
and Related (Removed)
Personal Subsequent to
Description Encumbrances Land Property Acquisition
<S> <C> <C> <C> <C>
Waterford Square Apartments $ 11,795 $ 1,382 $ 13,479 $ 2,485
Fox Crest Apartments 6,311 861 8,198 562
Angeles Partners XIV 12,179 -- -- --
Totals $ 30,285 $ 2,243 $ 21,677 $ 3,047
</TABLE>
<TABLE>
<CAPTION>
Gross Amount At Which Carried
At December 31, 1998
(in thousands)
Buildings
And Related
Personal Accumulated Date Depreciable
Description Land Property Total Depreciation Acquired Life-Years
<S> <C> <C> <C> <C> <C> <C>
Waterford Square Apartments $ 1,382 $ 15,964 $ 17,346 $ 11,134 05/31/85 5-20 yrs
Fox Crest Apartments 861 8,760 9,621 6,116 06/30/85 5-20 yrs
Totals $ 2,243 $ 24,724 $ 26,967 $ 17,250
</TABLE>
The depreciable lives included above are for the buildings and components. The
depreciable lives for related personal property are for 3 to 7 years.
As mentioned previously, the Partnership disposed of all of the remaining Dayton
Buildings, either to foreclosure or sales, during 1998. The Partnership
accounted for these buildings as "held for disposal" effective October 1, 1996,
in accordance with Statement of Financial Accounting Standards No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
Be Disposed Of" and has recorded write-ups and write-downs of approximately
$44,000 and $(713,000) for the years ended December 1998 and 1997, respectively,
on the buildings from their carrying value to their estimated fair value less
costs to dispose. The Partnership recognized rental revenues and operating
expenses of approximately $544,000 and $970,557, respectively, for Dayton
Industrial Complex for the year ended December 31, 1998, compared to rental
revenues and operating expenses of approximately $1,044,000 and $2,230,000,
respectively, for the year ended December 31, 1997.
Reconciliation of "Investment Properties and Accumulated Depreciation":
Years Ended December 31,
1998 1997
(in thousands)
Investment Properties
Balance at beginning of year $ 40,284 $ 40,654
Property improvements 486 343
Dispositions (13,847) --
Write up (down) 44 (713)
Balance at end of Year $ 26,967 $ 40,284
Accumulated Depreciation
Balance at beginning of year $ 24,760 $ 23,541
Additions charged to expense 1,258 1,219
Dispositions (8,768) --
Balance at end of Year $ 17,250 $ 24,760
The aggregate cost of the investment properties for Federal income tax purposes
at December 31, 1998 and 1997, is approximately $26,893,000 and $43,017,000.
The accumulated depreciation taken for Federal income tax purposes at
December 31, 1998 and 1997, is approximately $17,473,000 and $25,405,000,
respectively.
NOTE I - ABANDONMENT OF LIMITED PARTNERSHIP UNITS
In 1998 and 1997, the number of Limited Partnership Units decreased by 298 units
and 10 units, respectively, due to Limited Partners abandoning their Limited
Partnership Units. In abandoning his or her Limited Partnership Units, a Limited
Partner relinquishes all right, title and interest in the Partnership as of the
date of abandonment. However, the Limited Partner is allocated his or her share
of income (loss) for that year. The income (loss) per Limited Partnership Unit
in the accompanying statements of operations is calculated based on the number
of units outstanding at the beginning of the year.
NOTE J _ SEGMENT REPORTING
Description of the types of products and services from which reportable segment
derives its revenues:
As defined by SFAS No. 131," Disclosures about Segments of an Enterprise and
Related Information", the Partnership has one reportable segment: residential
properties. The Partnership's residential property segment consists of two
apartment complexes located in Waukegan, Illinois and Huntsville, Alabama. The
Partnership rents apartment units to people for terms that are typically less
than twelve months.
Measurement of segment profit or loss:
The Partnership evaluates performance based on net income. The accounting
policies of the reportable segment are the same as those described in the
summary of significant accounting policies.
Factors management used to identify the enterprise'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 years 1998 and 1997 is shown in the tables below.
The "Other" column includes partnership administration related items and
other income and expense not allocated to the reportable segment.
1998 RESIDENTIAL OTHER TOTALS
Rental income $ 4,605 $ 542 $ 5,147
Other income 143 14 157
Interest expense 1,526 2,396 3,922
Depreciation 1,258 -- 1,258
General and administrative expense -- 226 226
Gain on sale of investment
properties -- 963 963
Extraordinary item - gain on
extinguishment of debt -- 9,343 9,343
Segment profit (loss) (157) 8,093 7,936
Total assets 11,321 375 11,696
Capital expenditures for
investment properties 486 -- 486
1997
Rental income 4,427 1,067 5,494
Other income 130 9 139
Interest expense 1,556 3,114 4,670
Depreciation 1,219 -- 1,219
General and administrative expense -- 214 214
Segment profit (loss) (361) (3,613) (3,974)
Total assets 11,616 5,670 17,286
Capital expenditures for
investment properties 274 69 343
NOTE K _ 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, 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 were heard
during February 1999. No ruling on such demurrers has been received. The
Managing General Partner does not anticipate that costs associated with this
case, if any, to be material to the Partnership's overall operations.
On July 30, 1998, certain entities claiming to own limited partnership interests
in certain limited partnerships whose general partners were, at the time,
affiliates of Insignia filed a complaint entitled EVEREST PROPERTIES, LLC. V.
INSIGNIA FINANCIAL GROUP, INC., ET AL. in the Superior Court of the State of
California, county of Los Angeles. The action involves 44 real estate limited
partnership (including the Partnership) in which the plaintiffs allegedly own
interests and which Insignia Affiliates allegedly manage or control (the
"Subject Partnerships"). This case was settled on March 3, 1999. The
Partnership is responsible for a portion of the settlement costs. The expense
will not have a material effect on the Partnership's operations.
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 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANT ON ACCOUNTING AND
FINANCIAL DISCLOSURES
There were no disagreements with Ernst & Young LLP regarding the 1998 or 1997
audits of the Partnership's financial statements.
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
Angeles Realty Corporation II ("ARC II" or the "Managing General Partner") was a
wholly-owned subsidiary of MAE GP Corporation ("MAE GP"). Effective February
25, 1998, MAE GP was merged into Insignia Properties Trust ("IPT"). Effective
February 26, 1999, IPT was merged into Apartment Investment and Management
Company ("AIMCO"). Thus, the Managing General Partner is now a wholly-owned
subsidiary of AIMCO.
The names and ages of, as well as the positions and offices held by, the present
executive officers and director of ARC II are set forth below. There are no
family relationships between or among any officers or directors.
Name Age Position
Patrick J. Foye 41 Executive Vice President and Director
Timothy R. Garrick 42 Vice President - Accounting and Director
Patrick J. Foye has been Executive Vice President and Director of the Managing
General Partner since October 1, 1998. Mr. Foye has served as Executive Vice
President of AIMCO since May 1998. Prior to joining AIMCO, Mr. Foye was a
partner in the law firm of Skadden, Arps, Slate, Meagher & Flom LLP from 1989 to
1998 and was Managing Partner of the firm's Brussels, Budapest and Moscow
offices from 1992 through 1994. Mr. Foye is also Deputy Chairman of the Long
Island Power Authority and serves as a member of the New York State
Privatization Council. He received a B.A. from Fordham College and a J.D. from
Fordham University Law School.
Timothy R. Garrick has served as Vice President-Accounting of AIMCO and Vice
President-Accounting and Director of the Managing General Partner since October
1, 1998. Prior to that date, Mr. Garrick served as Vice President-Accounting
Services of Insignia Financial Group since June of 1997. From 1992 until June
of 1997, Mr. Garrick served as Vice President of Partnership Accounting and from
1990 to 1992 as an Asset Manager for Insignia Financial Group. From 1984 to
1990, Mr. Garrick served in various capacities with U.S. Shelter Corporation.
From 1979 to 1984, Mr. Garrick worked on the audit staff of Ernst & Whinney.
Mr. Garrick received his B.S. Degree from the University of South Carolina and
is a Certified Public Accountant.
ITEM 10. EXECUTIVE COMPENSATION
No compensation or remuneration was paid by the Partnership to any officer or
director of ARC II. The Partnership has no plan, nor does the Partnership
presently propose a plan, which will result in any remuneration being paid to
any officer or director upon termination of employment. However, certain fees
and other payments have been made to the Partnership's Managing General Partner
and its affiliates, as described in "Item 12.".
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
As of December 31, 1998, no person or entity owned of record more than 5% of the
Limited Partnership Units of the Partnership nor was any person or entity known
by the Partnership to own of record and beneficially, or beneficially only, more
than 5% of such securities.
On October 1, 1998, Insignia Financial Group, Inc. merged into AIMCO, a real
estate investment trust, whose Class A Common Shares are listed on the New
York Stock Exchange. As a result of such merger, AIMCO and AIMCO
Properties, L.P., a Delaware limited partnership and the operating
partnership of AIMCO ("AIMCO OP") acquired indirect control of the Managing
General Partner. AIMCO is presently considering whether it will engage in
an exchange offer for limited partnership interests in the Partnership.
There is a substantial likelihood that, within a short period of time,
AIMCO OP will offer to acquire limited partnership interests in the
Partnership for cash or preferred units or common units of limited
partnerships interests in AIMCO OP. While such an exchange offer is
possible, no definite plans exist as to when or whether to commence such an
exchange offer, or as to the terms of any such exchange offer, and it is
possible that none will occur.
A registration statement relating to these securities has been filed with the
Securities and Exchange Commission but has not yet become effective. These
securities may not be sold nor may offers to buy be accepted prior to the time
the registration statement becomes effective. This Form 10-KSB shall not
constitute an offer to sell or the solicitation of an offer to buy nor shall
there be any sale of these securities in any state in which such offer,
solicitation or sale would be unlawful prior to the registration or
qualification under the securities laws of any such state.
The Partnership knows of no contractual arrangements, the operation or the terms
of which may at a subsequent date result in a change in control of the
Partnership, except as follows: Article 12.1 of the Agreement, which provides
that upon a vote of the Limited Partners holding more than 50% of the then
outstanding Limited Partnership Units the Managing General Partner may be
expelled from the Partnership upon 90 days written notice. In the event that a
successor general partner has been elected by Limited Partners holding more than
50% of the then outstanding Limited Partnership Units and if said Limited
Partners elect to continue the business of the Partnership, the Partnership is
required to pay in cash to the expelled Managing General Partner an amount equal
to the accrued and unpaid management fee described in Article 10 of the
Agreement and to purchase the Managing General Partner's interest in the
Partnership on the effective date of the expulsion, which shall be an amount
equal to the difference between (i) the balance of the Managing General
Partner's capital account and (ii) the fair market value of the share of
Distributable Net Proceeds to which the Managing General Partner would be
entitled. Such determination of the fair market value of the share of
Distributable Net Proceeds is defined in Article 12.2(b) of the Agreement.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
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 certain payments
to affiliates for services and as reimbursement of certain expenses incurred by
affiliates on behalf of the Partnership. The following payments were made to
the Managing General Partner and affiliates during the year ended December 31,
1998 and 1997.
1998 1997
(in thousands)
Property management fees (included in operating
expenses) $ 264 $ 251
Reimbursement for services of affiliates,
including approximately $23,000 and $6,000
of construction oversight reimbursements in
1998 and 1997, respectively; (included in
investment property, operating, and
general and administrative expenses) 164 153
Due to affiliate 1,342 1,200
During the years ended December 31, 1998 and 1997, affiliates of the Managing
General Partner were entitled to receive 5% of gross receipts from all of the
Registrant's residential properties as compensation for providing property
management services. The Registrant paid to such affiliates $264,000 and
$251,000 for the years ended December 31, 1998 and 1997, respectively. Property
management services for the Dayton Industrial Complex were performed by an
unaffiliated third party.
Affiliates of the Managing General Partner received reimbursement of accountable
administrative expenses amounting to approximately $164,000 and $153,000 for the
years ended December 31, 1998 and 1997, respectively.
For the period from January 1, 1997, to August 31, 1997, the Partnership insured
its properties under a master policy through an agency affiliated with the
Managing General Partner with an insurer unaffiliated with the Managing General
Partner. An affiliate of the Managing General Partner acquired, in the
acquisition of a business, certain financial obligations from an insurance
agency which was later acquired by the agent who placed the 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 was 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 December 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 $489,000 and $485,000 for year ended December 31, 1998
and 1997, respectively. Accrued interest payable was approximately $2,762,000
at December 31, 1998.
AMIT provides financing (the "AMIT Loans") to the Partnership. The principal
balances on the AMIT Loans totals approximately $7,603,000 at December 31, 1998,
accrues interest at rates of 12% to 12.5% per annum and are recourse to the
Partnership. Two of the three notes totaling $2,838,000 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
March 2002. The remaining note with a principal balance of approximately
$4,765,000 matures in March 2003. Total interest expense on the AMIT Loans was
approximately $1,124,000 and $1,025,000 for the years ended December 31, 1998
and 1997, respectively. Accrued interest was approximately $2,225,000 at
December 31, 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 IPT, the Managing General Partner.
Effective February 26, 1999, IPT was merged into AIMCO. AIMCO is now the holder
of the AMIT Loans.
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits required by Item 601 of Regulation S-B: Refer to Exhibit Index in
this report.
(b) Current Report on form 8-K dated October 1, 1998 filed on October 16, 1998,
disclosing change in control of Registrant from Insignia Financial Group,
Inc. to AIMCO.
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the Registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
Angeles Partners XIV
(A California Limited Partnership)
(Registrant)
By: Angeles Realty Corporation II
Managing General Partner
By: /s/ Patrick J. Foye
Patrick J. Foye
Executive Vice President
By: /s/ Timothy R. Garrick
Timothy R. Garrick
Vice President - Accounting
Date: March 30, 1999
In accordance with the Exchange Act, this Report has been signed below by the
following persons on behalf of the Registrant and in the capacities and on the
date indicated.
/s/ Patrick J. Foye Executive Vice President Date: March 30, 1999
Patrick J. Foye and Director
/s/ Timothy R. Garrick Vice President - Accounting Date: March 30, 1999
Timothy R. Garrick and Director
EXHIBIT INDEX
Exhibit
3.1 Amended Certificate and Agreement of the Limited Partnership
filed in Form S-11 dated December 24, 1984 incorporated herein by
reference.
10.1 Agreement of Purchase and Sale of Real Property with Exhibits -
Waterford Square Apartments filed in Form 8K dated May 31, 1985
incorporated herein by reference.
10.2 Agreement of Purchase and Sale of Real Property with Exhibits -
Fox Crest Apartments filed in form 8K dated June 30, 1985
incorporated herein by reference.
10.3 Agreement of Purchase and Sale of Real Property with Exhibits -
Dayton Industrial Complex filed in form 8K dated December 20,
1985 incorporated herein by reference.
10.4 Agreement of Purchase and Sale of Real Property with Exhibits -
Camelot Village Apartments filed in Form 8K dated March 31, 1987
incorporated herein by reference.
10.5 Agreement of Purchase and Sale of Real Property with Exhibits -
Glenwood Plaza Shopping Center filed in form 8K dated March 31,
1987 incorporated herein by reference.
10.6 Glenwood Plaza Shopping Center financing disclosed in notes to
financial statements filed in Form 10Q dated June 30, 1988
incorporated herein by reference.
10.7 Promissory note - Waterford Square Apartments financing disclosed
in notes to financial statements filed in Form 10K dated December
31, 1989 incorporated herein by reference.
10.8 Promissory note - Fox Crest Apartments financing disclosed in
notes to financial statements filed in Form 10K dated December
31, 1989 incorporated herein by reference.
10.9 Sale agreement - Cascades Apartments filed in Form 8-K, Exhibit
I, dated August 28, 1991 incorporated herein by reference.
10.10 Stock Purchase Agreement dated November 24, 1992 showing the
purchase of 100% of the outstanding stock of Angeles Realty
Corporation II by IAP GP Corporation, a subsidiary of MAE GP
Corporation, filed in Form 8-K dated December 31, 1992, which is
incorporated herein by reference.
10.11 Agreement of Purchase and Sale of Real Property with Exhibits
Camelot Village Apartments and Glenwood Plaza Shopping Center
filed in Form 8-K dated July 15, 1993 incorporated herein by
reference.
10.12 Agreement of Purchase and Sale of Real Property with Exhibits
Building 54 of the Dayton Industrial Complex Shopping Center
filed in Form 8-K dated December 28, 1994 incorporated herein by
reference.
10.13 Agreement of Purchase and Sale of Real Property with Exhibits -
Building 47 of the Dayton Industrial Complex Shopping Center
filed in Form 8-K dated August 31, 1995 incorporated herein by
reference.
10.14 Purchase Agreement - Building 45 of the Dayton Industrial Complex
- between the Partnership and Miller-Valentine Partners, dated
December 31, 1995.
10.15 Amendment to and Assignment of Purchase Agreement - Building 45
of the Dayton Industrial Complex - between the Partnership,
Miller-Valentine Partners and Mid-States Development Company,
dated April 8, 1996.
10.16 Assignment of Permits, Etc. - Building 45 of the Dayton
Industrial Complex - between the Partnership and Mid-States
Development Company, dated April 8, 1996.
10.17 Assignment and Assumption of Leases and Security Deposits -
Building 45 of the Dayton Industrial Complex - between the
Partnership and Mid-States Development Company, dated April 8,
1996.
10.18 Assignment of Warranties - Building 45 of the Dayton Industrial
Complex - between the Partnership and Mid-States Development
Company, dated April 8, 1996.
10.19 Bill of Sale and Assignment - Building 45 of the Dayton
Industrial Complex - between the Partnership and Mid-States
Development Company, dated April 8, 1996.
10.20 Limited Warranty Deed - Building 45 of the Dayton Industrial
Complex - between the Partnership and Mid-States Development
Company, dated April 8, 1996.
10.21 Purchase Agreement - Building 52 of the Dayton Industrial Complex
- between the Partnership and Miller-Valentine Partner, dated
December 31, 1995.
10.22 Assignment of Purchase Agreement - Building 52 of the Dayton
Industrial Complex - between the Partnership, Miller-Valentine
Partners and Mid-States Development Company, dated April 8, 1996.
10.23 Assignment of Permits, Etc. - Building 52 of the Dayton
Industrial Complex - between the Partnership, Miller-Valentine
Partners and Mid-States Development Company, dated April 8, 1996.
10.24 Assignment of Assumption of Leases and Security Deposits -
Building 52 of the Dayton Industrial Complex - between the
Partnership, Miller-Valentine Partners and Mid-States Development
Company, dated April 8, 1996.
10.25 Assignment of Warranties - Building 52 of the Dayton Industrial
Complex - between the Partnership, Miller-Valentine Partners and
Mid-States Development Company, dated April 8, 1996.
10.26 Bill of Sale and Assignment - Building 52 of the Dayton
Industrial Complex - between the Partnership, Miller-Valentine
Partners and Mid-States Development Company, dated April 8, 1996.
10.27 Limited Warranty Deed - Building 52 of the Dayton Industrial
Complex - between the Partnership, Miller-Valentine Partners and
Mid-States Development Company, dated April 8, 1996.
10.28 Purchase Agreement - between Angeles Partners XIV and ABMD, LTD.,
dated July 30, 1996.
10.29 Assignment of Service Agreements - by Angeles Partners XIV to
ABMD, LTD.
10.30 Assignment of Licenses and Permits - by Angeles Partners XIV to
ABMD, LTD.
10.31 Assignment of Warranties and Guarantees - by Angeles Partners XIV
to ABMD, LTD.
10.32 Bill of Sale and Assignment - by Angeles Partners XIV to ABMD,
LTD.
10.33 Limited Warranty Deed - by Angeles Partners XIV to ABMD, LTD.
10.34 Assignment and Assumption of Leases and Subleases - by Angeles
Partners XIV to ABMD, LTD.
10.35 Mortgage Note between Washington Capital Associates, Inc. and
Waterford Square Apartments, a California general partnership,
dated October 28, 1996.
10.36 Rider to Mortgage Note by Waterford Square Apartments, a
California general partnership, to the order of Washington
Capital Associates, Inc. dated as of October 28, 1996.
10.37 Assignment of Warranties - Building 41 of the Dayton Industrial
Complex - between the Partnership and Mid-States Development
Company, dated June 12, 1998.
10.38 Assignment of Permits - Building 41 of the Dayton Industrial
Complex - between the Partnership and Mid-States Development
Company, dated June 12, 1998.
10.39 Purchase Agreement - Building 41 of the Dayton Industrial Complex
- between the Partnership and Mid-States Development Company,
dated June 12, 1998.
10.40 Closing Statement - Building 41 of the Dayton Industrial Complex
- between the Partnership and Mid-States Development Company,
dated June 12, 1998.
10.41 Journal Entry Confirming Sale, Ordering Deed and Distributing
Sale Proceeds - between The Traveler's Insurance Company and the
Partnership, dated June 12, 1998.
10.42 Agreement of Purchase and Sale - Building 55 of the Dayton
Industrial Complex - between Angeles Partners XIV and Shopsmith
Inc., dated December 31, 1998 filed in 10-KSB for the year ended
December 31, 1998.
16.1 Letter from the Registrant's former independent accountant
regarding its concurrence with the statements made by the
Registrant, is incorporated by reference to the exhibit filed
with Form 8-K dated September 1, 1993.
27 Financial Data Schedule.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from Angeles
Partners XIV 1998 Year-End 10-KSB and is qualified in its entirety by reference
to such 10-KSB filing.
</LEGEND>
<CIK> 0000759859
<NAME> ANGELES PARTNERS XIV
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> DEC-31-1998
<CASH> 883
<SECURITIES> 0
<RECEIVABLES> 382
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0<F1>
<PP&E> 26,967
<DEPRECIATION> (17,250)
<TOTAL-ASSETS> 11,696
<CURRENT-LIABILITIES> 0<F1>
<BONDS> 30,285
0
0
<COMMON> 0
<OTHER-SE> (25,571)
<TOTAL-LIABILITY-AND-EQUITY> 11,696
<SALES> 0
<TOTAL-REVENUES> 6,267
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 7,674
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,922
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 7,936
<EPS-PRIMARY> 179.02<F2>
<EPS-DILUTED> 0
<FN>
<F1>Registrant had an unclassified balance sheet.
<F2>Multiplier is 1.
</FN>
</TABLE>
EXHIBIT 10.42
PURCHASE AGREEMENT
THIS PURCHASE AGREEMENT (this "Agreement") is made as of December 31, 1998
(the "date of this Agreement") by and between ANGELES PARTNERS XIV, a California
limited partnership ("Seller"), whose address is One Insignia Financial Plaza,
P.O. Box 1089, Greenville, South Carolina 29602, and SHOPSMITH, INC., an Ohio
corporation ("Purchaser"), whose address is 6530 Poe Avenue, Dayton, Ohio 45414.
SECTION 1. DESCRIPTION OF PROPERTY; AGREEMENT OF PURCHASE AND SALE.
1.1 Purchase and Sale; Property. Seller agrees to sell and convey to
Purchaser, and Purchaser agrees to purchase and pay for, upon the terms and
conditions contained in this Agreement, the following:
1.1.1 The parcel(s) of land located at 6530 Poe Avenue, Dayton, Ohio,
as more fully described in Exhibit A (the "Land");
1.1.2 The two story building containing approximately 115,000 square
feet and all other buildings, structures, landscaping and other improvements on
the land (the "Improvements," the Land and the Improvements being collectively
referred to as the "Premises");
1.1.3 All fixtures, equipment, machinery, heating, ventilating and
air conditioning equipment and systems, plumbing and electrical equipment and
systems, furnishings, furniture, alarm systems, sprinkler systems and all other
personal property that is owned by Seller and attached to, appurtenant to or
located on or used in connection with the operation, management or maintenance
of the Premises (all of the foregoing being collectively referred to as the
"Personal Property").
1.1.4 All right, title and interest of Seller in and to easements,
rights-of-way, air rights, riparian rights, rights of ingress or egress, and all
other rights, privileges and appurtenances owned by Seller and in any way
related to, or used in connection with, the Premises and/or the Personal
Property, including, but not limited to, the Access Easement and the Parking
Easement (as hereinafter defined) set forth in Section 12 hereof.
1.1.5 All right, title and interest of Seller in and to any tenant
leases, including the Agreement of Lease dated August 18, 1987, as amended by a
First Amendment to Lease dated September 28, 1990, as further amended by a
Revised Amendment No. 2 to Lease dated April 4, 1994, each between Seller and
Purchaser (such lease, as amended, the "Lease"), security deposits, rents and
profits affecting the Premises. Notwithstanding the foregoing, at Purchaser's
option, the Lease may be terminated rather than assigned to Purchaser at the
Closing (as hereinafter defined).
The term "Property," as used in this Agreement, shall mean all property,
whether real or personal, set out in this Section 1.1.
SECTION 2. PURCHASE PRICE.
2.1 Purchase Price. The total purchase price for the Property shall be
Two Million Nine Hundred Thousand and No/100 Dollars ($2,900,000.00) (the
"Purchase Price"), payable as follows:
2.1.1 The sum of $1,000.00 shall be paid as an earnest money deposit
(the "Deposit") to Chicago Title Insurance Company, a Missouri corporation (the
"Escrow Agent") on or before ______________, 1998. The Deposit shall be held by
the Escrow Agent in accordance with the terms set forth in this Agreement and
either (1) paid to Purchaser, with interest, or credited to the Purchase Price
at the Closing;(2) paid to Seller, with interest, if this Agreement is
terminated by Seller due to Purchaser's default pursuant to Section 13.1; or (3)
returned to Purchaser, with interest, if this Agreement is terminated by
Purchaser pursuant to the exercise of any right of termination provided to
Purchaser in this Agreement (including, but not limited to, Seller's default or
the failure of any condition). This Section 2.1.1 shall survive the termination
of this Agreement. If requested by the Escrow Agent, Seller, Purchaser and the
Escrow Agent shall enter into an escrow agreement consistent with the terms of
this Agreement containing such additional escrow terms as the Escrow Agent may
reasonably require.
2.1.2 The balance of the Purchase Price shall be paid in full at the
time of Closing by certified or cashier's check or by wire transfer of
immediately available Federal Reserve System funds.
2.2 Adjustments. The portion of the Purchase Price payable at the Closing
shall be subject to prorations and adjustments as provided in this Agreement.
SECTION 3. INSPECTIONS.
3.1 Inspection Period. Purchaser shall have a period of sixty (60) days
after the date of this Agreement (the "Inspection Period"), in which to inspect
the Property for all purposes whatsoever, including, without limitation, the
determination of the character, size (including quantity of acreage), condition
(whether environmental or otherwise), accessibility, state of repair, zoning and
suitability of the Property for the purpose it is being acquired. If the
Property is not satisfactory to Purchaser, in Purchaser's sole discretion,
Purchaser may elect not to purchase the Property by sending written notice of
termination to Seller and the Escrow Agent, postmarked not later than the last
day of the Inspection Period. Upon receipt of that notice, the Escrow Agent
shall return the Deposit and any interest thereon to Purchaser. In that event,
this Agreement shall terminate and neither party shall have any further rights
or obligations under this Agreement other than those rights and/or obligations
that are expressly stated to survive expiration or termination of this
Agreement.
3.2 Entry for Inspections. Immediately upon the execution of this
Agreement and thereafter continuously through the date of the Closing, Seller
shall disclose to Purchaser the service contractors employed or hired by Seller
who have been engaged to operate or maintain the Property. During that time,
Purchaser may, at Purchaser's sole risk and expense, undertake a complete
physical inspection of the Property as Purchaser deems appropriate. Purchaser
agrees to indemnify and save Seller harmless against all liabilities, claims,
damages, penalties, costs and expenses (including, but not limited to,
reasonable attorneys' fees and expenses) incurred by or asserted against Seller
in connection with or arising out of the entry upon the Premises by Purchaser or
Purchaser's employees, agents or contractors. This obligation shall survive the
expiration or termination of this Agreement.
SECTION 4. TITLE AND SURVEY.
4.1 Title. Promptly after the date of this Agreement, Purchaser shall
obtain a commitment for an Owner's Policy of Title Insurance (the "Commitment")
issued by a title agency selected by Purchaser (the "Title Company") and dated
as of a current date, pursuant to which the Title Company shall commit to issue
to Purchaser an ALTA (Form B-1970 & 1984, if available) Owner's Policy of title
insurance, in the amount of the Purchase Price, insuring in Purchaser marketable
fee simple title to the Premises, subject only to the following "Permitted
Exceptions":
(a) All legal highways;
(b) Zoning, building and other laws, ordinances, codes and regulations;
(c) Matters disclosed by the Survey pursuant to Section 4.2;
(d) Easements, rights-of-way, conditions, covenants and restrictions of
record, to the extent that those easements, rights-of-way,
conditions, covenants and restrictions do not interfere with,
obstruct, or otherwise impair Purchaser's proposed use of the
Premises; and
(e) Real estate taxes that are a lien upon the Premises, but not yet due
and payable.
The Commitment shall also insure Purchaser's interests under the Access Easement
and the Parking Easement, subject only to the Permitted Exceptions.
Any mortgage or other monetary liens on the Property ("Monetary Liens") are to
be discharged and paid by Seller at the time of Closing. At the Closing, and as
a condition to Purchaser's obligations under this Agreement, the Title Company
shall deliver to Purchaser the policy of title insurance in accordance with the
Commitment (the "Title Policy"). Seller shall provide an affidavit and such
other instruments and assurances as may be required by the Title Company to
delete the "standard" or "general" exceptions from the Title Policy.
4.2 Survey. Promptly after the date of this Agreement, Purchaser shall
obtain an as-built survey and metes and bounds description of the Premises, the
Access Easement and the Parking Easement prepared by a registered land surveyor
or engineer, duly licensed in the State of Ohio, showing the acreage of the
Premises, the Access Easement and the Parking Easement to the nearest 1/1,000th
of an acre, and containing the certifications and the minimum standard detail
requirements for land surveys most recently adopted by the ALTA/ACSM and the
specifications set forth as item numbers 1 through 4 and 6 through 11 of
ALTA/ACSM's Table A (the "Survey").
4.3 Defects and Cure. Purchaser shall notify Seller of Purchaser's
disapproval of any matter contained in the Commitment or the Survey on or before
the later of (a) the last day of the Inspection Period or (b) 15 days after
Purchaser's receipt of both the Commitment and the Survey and copies of the
documents referred to in the Commitment as exceptions or exclusions from
coverage. Except for real estate taxes that are to be prorated at Closing,
Monetary Liens and the 30 Foot Ingress/Egress Easement (as defined in Section
12.3), Purchaser's failure to notify Seller of disapproval of any matter within
the foregoing time period shall be deemed approval of that matter. If the
Survey discloses conditions that are not in conformity with the criteria set
forth above or that might otherwise adversely affect Purchaser's proposed use of
the Premises, or if the Commitment discloses matters other than the Permitted
Exceptions and Monetary Liens (collectively, "Defects"), those Defects shall, as
a condition to Purchaser's obligations under this Agreement, be cured or removed
at or before the Closing. If Seller fails to cure and remove all Defects within
the period allowed for cure, this Agreement may be terminated, at Purchaser's
election, by written notice. Purchaser may, at its sole election, proceed to
close this transaction notwithstanding any Defects, in which event the Defects
shall be deemed additional Permitted Exceptions. If Purchaser elects to
terminate this Agreement, the Deposit and any interest thereon shall be refunded
to Purchaser, and neither party shall have any further rights and/or obligations
that are expressly stated to survive expiration or termination of this
Agreement.
SECTION 5. CONDITIONS TO CLOSING.
5.1 Purchaser's Conditions. The obligation of Purchaser to close the
transaction contemplated by this Agreement is subject to the following
conditions, which, together with any other conditions set forth in this
Agreement, are for Purchaser's benefit and which may be waived by Purchaser at
its sole option:
5.1.1 The representations and warranties of Seller contained in
Section 6 of this Agreement shall be true on the date of Closing in all material
respects as though those representations and warranties were made on that date.
5.1.2 Seller shall not have breached any material affirmative
covenant contained in this Agreement to be performed by Seller on or before the
date of Closing.
5.1.3 The conditions set forth in Sections 3 and 4 shall have been
satisfied; and, in the event Purchaser has delivered a notice of Defects
pursuant to Section 4, Seller has remedied the Defects in the manner and within
the time period provided in this Agreement, or Purchaser has waived same in
writing.
5.1.4 Seller shall have timely delivered to Purchaser in satisfactory
form the documents and all other items referred to in Section 7 below.
5.1.5 At Closing, the Title Company shall have delivered or
irrevocably committed itself in writing to deliver the Title Policy described in
Section 4.1.
5.1.6 Purchaser shall have obtained financing for the acquisition of
the Property from a lender, whether, public or institutional (including, without
limitation, low cost financing from the State of Ohio), in an amount and upon
such terms and conditions as shall be satisfactory to Purchaser, in Purchaser's
sole discretion.
5.1.7 Purchaser shall have obtained all building, zoning and
environmental permits and approvals necessary for Purchaser's continued use of
the Premises as presently operated (including a conditional use permit relating
to Purchaser's retail activities on the Premises) and for any modification of or
repairs to the Premises for Purchaser's intended use. Seller shall cooperate
with Purchaser in its efforts to obtain such permit, including executing the
applications to be submitted therefor.
5.1.8 Seller shall have completed patching and repairing of the
asphalt covered area of the Premises, together with restriping the same, no
later than the Closing. Seller shall present to Purchaser a plan acceptable to
Purchaser for the completion of the foregoing no later than ten (10) days after
the date of this Agreement. If such work shall not be completed and fully paid
for by the date of the Closing, Purchaser, at its option and in lieu of
exercising its right to terminate this Agreement, may elect to have an amount
equal to the cost of completing such work, as determined by Purchaser, withheld
from the Purchase Price and deposited with the Escrow Agent to be applied to the
cost of completing such work in accordance with the plan acceptable to
Purchaser.
5.1.9 The Access Easement, the Parking Easement and the related
subordination agreements described in Section 12 of this Agreement shall have
been obtained.
If any of these conditions is not satisfied or waived, Purchaser shall have
the right to terminate this Agreement by notice to Seller no later than the date
of Closing or such earlier time as may be provided above. In the event that the
applications for the conditional use permit referred to in Section 5.1.7 of this
Agreement shall be pending as of the date of Closing, Purchaser shall have the
right to extend the period for satisfaction of such conditions for a period of
up to sixty (60) days. In the event of termination of this Agreement, the
Escrow Agent shall immediately refund the Deposit and all accrued interest
thereon to Purchaser, this Agreement shall terminate, and neither party shall
have any further rights or obligations under this Agreement other than those
rights and/or obligations which are expressly stated to survive expiration or
termination of this Agreement.
SECTION 6. REPRESENTATIONS, WARRANTIES AND COVENANTS OF SELLER.
6.1 Seller's Representations, Warranties and Covenants. Seller
represents, warrants and covenants to Purchaser as to the following matters, and
shall be deemed to remake all of the following representations, warranties and
covenants as of the date of Closing.
6.1.1 The execution and delivery of this Agreement by Seller, the
execution and delivery of every other document and instrument delivered pursuant
to this Agreement by or on behalf of Seller, and the consummation of the
transactions contemplated by this Agreement, have been duly authorized and
validly executed and delivered by Seller, and, to Seller's best knowledge, will
not (a) constitute or result in the breach of or default under any oral or
written agreement to which Seller is a party or which affect the Property; (b)
constitute or result in a violation of any order, decree or injunction with
respect to which Seller and/or the Property is bound; (c) cause or entitle any
party to have a right to accelerate or declare a default under any oral or
written agreement to which Seller is a party or which affects the Property;
and/or (d) violate any provision of any municipal, state or federal law,
statutory or otherwise, to which Seller or the Property may be subject.
6.1.2 To Seller's best knowledge, the Property is in compliance with
all applicable federal, state and local statutes, laws, ordinances, orders,
requirements, rules and regulations (including, but not limited to, building,
zoning and environmental laws and the Americans With Disabilities Act).
6.1.3 To Seller's best knowledge, all required building permits,
occupancy permits or other required approvals or consents of governmental
authorities or public or private utilities having jurisdiction have been
obtained with respect to the Property.
6.1.4 To Seller's best knowledge, Seller has received no written
notice of violation of any applicable federal, state or local statute, law,
ordinance, order, requirement, rule or regulation, or of any covenant,
condition, restriction or easement affecting the Property.
6.1.5 To Seller's best knowledge, the Property is in compliance with
all covenants, conditions, restrictions, easements and similar matters affecting
the Property.
6.1.6 With respect to environmental matters:
(i) To Seller's best knowledge, no toxic, hazardous, explosive or
otherwise dangerous materials, substances, pollutants or wastes, as those terms
are used in the Clean Air Act, the Clean Water Act, Resource Conservation and
Recovery Act of 1976, the Hazardous Materials Transportation Act, the
Comprehensive Environmental Response, Compensation and Liability Act of 1980
("CERCLA"), the Emergency Planning and Community Right-to-Know Act or in any
other federal, state or local law environmental law (collectively "Environmental
Laws"), petroleum products, polychlorinated biphenyls, or radioactive materials
(all of the above being collectively referred to herein as "Hazardous
Materials") have been or are stored, treated, disposed of, managed, generated,
manufactured, produced, released, emitted or discharged on, in or under the
Property, other than such of the foregoing as are used by Purchaser in
connection with its operations on the Premises.
(ii) To Seller's best knowledge, Seller is in compliance with all
Environmental Laws and has obtained all environmental licenses, permits,
approvals, registrations and authorizations (federal, state and local) material
to the Premises (other than such of the foregoing as are required to be obtained
by Purchaser in connection with the operation of its business on the Premises).
All such licenses, permits, approvals, registrations and authorizations remain
in full force and effect as of the Closing and may be effectively transferred or
assigned to Purchaser on or after the Closing.
(iii) To Seller's best knowledge, no governmental or private action,
suit or proceeding to enforce or impose liability under any Environmental Laws
has been instigated or, to the knowledge of Seller, threatened against Seller
and no lien has been created under the Environmental Laws.
(iv) To Seller's best knowledge, none of the Premises consists of
"wetlands" under applicable federal or state law.
(v) To Seller's best knowledge, there are no underground storage
tanks on the Premises (other than three(3) underground fuel oil storage tanks)
and no underground storage tanks have been removed from the Premises.
6.1.7 To Seller's best knowledge, there are no encroachments onto
the Land of any improvement on any adjoining property, and there are no
encroachments onto any adjoining property of any improvements on the Land, other
than as shown on the Survey of the Premises prepared by Shaw Weiss & DeNaples,
dated September 22, 1997, updated January 8, 1998, if any.
6.1.8 To Seller's best knowledge, there is no pending or threatened
litigation, arbitration, administrative action or examination, claim, or demand
whatsoever relating to the Property. No attachments, execution proceedings,
liens, assignments or insolvency proceedings are pending or, to Seller's best
knowledge, threatened against Seller or the Property, nor are any of the
foregoing contemplated by Seller. Seller is not contemplating the institution
of insolvency proceedings.
6.1.9 Except for a possible taking of a small portion of the front
of the Land not to exceed 20 feet in width in connection with the addition of an
interchange at Wyse Road located to the south of the Premises, Seller has no
knowledge of any pending or contemplated eminent domain, condemnation, or other
governmental or quasi-governmental taking of any part or all of the Property.
6.1.10 To Seller's best knowledge, there are no public improvements
that have been ordered to be made and/or that have not been previously assessed,
and there are no special, general or other assessments pending, threatened
against, or affecting the Property.
6.1.11 To Seller's best knowledge, there are no leases, management
contracts, service contracts or other agreements, either oral or written,
pertaining to the Property that will survive the Closing or to which Purchaser
or the Property will be bound except those to which Purchaser is already a party
thereto.
6.1.12 Seller has paid or will pay in full all bills and invoices for
labor and material of any kind arising from the ownership, operation,
management, repair, maintenance or leasing of the Property (including, without
limitation, all bills and invoices relating to the work to be performed by
Seller pursuant to Section 5.1.8), and there are no actual or potential claims
for mechanic's liens, brokerage commissions or other claims outstanding or
available to any party in connection with the ownership, operation, management,
repair, maintenance or leasing of the Property.
6.1.13 Between the date of this Agreement and the date of Closing,
Seller will keep the Property insured in accordance with its obligations under
Article IX of the Lease.
6.1.14 Between the date of this Agreement and the date of Closing, no
part of the Property will be sold, encumbered or transferred in favor of or to
any party whatsoever except for the Easements. There are no purchase contracts,
options or any other agreements of any kind, oral or written, by which any
person or entity other than Seller will have acquired or will have any basis to
assert any right, title or interest in, or right to possession, use, enjoyment
or proceeds of, any part or all of the Property, except for the Access Easement,
if and to the extent such easement shall encumber the Premises.
6.1.15 Seller is not a foreign person within the meaning of Section
1445 of the Internal Revenue Code of 1990, as amended.
6.1.16 To Seller's best knowledge, the continued compliance with all
legal requirements relating to the Property is not dependent upon facilities
located at any other property; and the compliance by any other property with any
legal requirements applicable to the other property is not dependent upon the
Property.
6.1.17 The Premises are assessed separately from all other adjacent
property for purposes of real property taxes.
6.1.18 Adequate supplies of all public utilities, including, but not
limited to, water, sanitary sewer, gas, electricity, telephone, storm sewer and
drainage facilities and other utilities required by law or by the normal use and
operation of the Premises (a) are installed to the property lines of the
Premises, (b) are connected pursuant to valid permits, (c) are adequate to
service the Premises, (d) are adequate to permit full compliance with all
requirements of law and normal usage of the Premises by the occupants and their
licensees and invitees, and (e) either enter the Premises through adjoining
public streets, or if they pass through adjoining private land, do so in
accordance with valid public easements or private easements that inure to the
benefit of Seller and its successors in title to the Premises.
6.1.19 To Seller's best knowledge, Seller has not received and has no
actual knowledge of any notice or request, formal or informal, from any
insurance company or board of fire underwriters (a) identifying any defects in
the Property that would adversely affect the insurability of the Property or
(b) requesting the performance of any work or alteration with respect to the
Property.
6.1.20 To Seller's best knowledge, no fact or condition exists that
would result in the termination or impairment of access to the Premises from
adjoining public or private streets or ways or that could result in
discontinuation of necessary sewer, water, electric, gas, telephone or other
utilities or services. All sewage, sanitation, plumbing, water retention,
refuse disposal, and similar facilities servicing the Premises are in full
compliance with governmental and environmental protection authorities' laws,
rules and regulations.
6.1.21 To Seller's best knowledge, the Improvements are structurally
sound, and the roof, plumbing systems, heating systems, ventilating and air-
conditioning systems and electrical systems are operable, and, with regular
maintenance, repair or replacement, as may be required because of deterioration
from use or age, are adequate to serve the needs of the Improvements.
6.2 Survival. All of the representations, warranties and covenants made
by Seller in Section 6.1 and elsewhere in this Agreement shall survive Closing
for a period of one (1) year.
SECTION 7. CLOSING AND TRANSFER OF TITLE.
7.1 Closing. The parties agree to close this purchase and sale (the
"Closing") no later than thirty (30) days after the last day of the Inspection
Period, at 10:00 a.m., in the offices of the Title Company, or such earlier date
to which Seller and Purchaser may agree.
7.2 Seller's Documents; Other Deliveries. At Closing, Seller shall
execute and/or deliver to Purchaser the following.
7.2.1 A limited warranty deed to the Premises conveying marketable,
fee simple title to the Premises to Purchaser free, clear, and unencumbered,
subject, however, to the Permitted Exceptions. The conveyance made by the
limited warranty covenants contained in such deed shall include the items set
forth in paragraphs A through D of the Deed from Mid-States Development Company,
an Ohio general partnership, to Seller dated December 1, 1985 and recorded at
Microfiche No. 85-0701D11 of the Montgomery County, Ohio Deed Records.
7.2.2 A Bill of Sale with full warranties of title, conveying the
Personal Property to Purchaser.
7.2.3 An assignment of any warranties, guarantees, licenses and
permits with respect to the Property.
7.2.4 All other documents and instruments referred to in Section 5.
7.2.5 All of the Personal Property.
7.2.6 All blueprints, construction plans, specifications and plats
in Seller's possession for all of the Improvements and Personal Property.
7.2.7 An owner's affidavit as to mechanics' liens, persons in
possession of the Premises, unrecorded agreements, and such other matters
required by the Title Company as a condition to its deletion of the
standard exceptions relating to such matters from the Title Policy.
7.2.8 An owner's affidavit, in form and substance satisfactory to
Purchaser, signed under penalty of perjury and containing Seller's U.S.
taxpayer identification number, to the effect that Seller is not a foreign
person within the meaning of Section 1445(f) of the Internal Revenue Code.
7.2.9 A certificate in affidavit form, satisfactory to Purchaser,
executed by an officer of Seller, and dated as of the date of Closing, which
provides that all Seller's representations, warranties and covenants set forth
in this Agreement are, as of the date of Closing, true and correct with the same
force and effect as if each warranty, representation and covenant were made
again at Closing.
7.2.10 All consents that may be required from any third person or
entity in connection with the sale of the Property.
7.2.11 Certified copies of the resolutions of Seller or Seller's
partners' board of directors (if Seller or any of its partners are a
corporation) or its partners (if Seller or any of its partners are a
partnership) evidencing authorization of the officer(s) or partner(s) acting for
Seller and/or Seller's partners and authorization and approval of this Agreement
and the transactions contemplated by this Agreement, in form and substance
satisfactory to Purchaser's counsel and the Title Company.
7.2.12 A fully executed Access Easement and Parking Easement,
together with related subordination agreements in accordance with Section 12
hereof.
7.2.13 An assignment to Purchaser of Seller's right, title and
interest under the Lease, or, at Purchaser's option, a termination of the Lease.
7.2.14 A termination of the Stock Option Agreement pursuant to
Section 19 hereof.
7.2.15 Such other documents or instruments as may be reasonably
required by Purchaser, required by other provisions of this Agreement, or
reasonably necessary to effectuate Closing, including, but not limited to, a
closing statement. All of the documents and instruments to be delivered by
Seller shall be in the form and substance reasonably satisfactory to counsel for
Purchaser.
7.3 Purchaser's Documents. At Closing, Purchaser shall execute
and/or deliver to Seller the following documents:
7.3.1 A certified copy of the resolution of Purchaser's board of
directors evidencing authorization of the officer(s) acting for Purchaser and
authorization and approval of this Agreement and the transactions contemplated
by this Agreement.
7.3.2 A termination of the Stock Option Agreement pursuant to
Section 19 hereof.
7.3.3 Such other documents and instruments as Seller or the Title
Company shall reasonably request in order to consummate this transaction, or
reasonably necessary to effectuate Closing, including, but not limited to, a
closing statement.
SECTION 8.POSSESSION.
Purchaser is in possession of the Property and will continue to be at
Closing. Between the date of this Agreement and Closing, Seller shall continue
to operate the Property in accordance with its present standards and shall
maintain the Property in its present condition and repair, ordinary wear and
tear expected, in accordance with the Lease.
SECTION 9. PRORATIONS AND EXPENSES.
9.1 Proration of Real Estate Taxes. Pursuant to Section 3 of the Lease,
Purchaser is responsible for payment of real estate taxes over and above the
real estate taxes paid by Seller during the first year of the term of the Lease.
The real estate taxes which are a lien for the year in which the Closing occurs
shall be prorated as of the date of the Closing in accordance with the customary
method of tax proration in Montgomery County, Ohio; provided that only that
portion of such taxes as Seller is obligated to pay pursuant to the terms of
Section 3 of the Lease shall be the subject of such proration.
9.2 Utility Expenses; Miscellaneous Expenses. Purchaser shall continue to
be responsible for all charges for consumption of utilities as provided in the
Lease. The parties will prorate, as of the date of Closing, any miscellaneous
income (including rent under the Lease) and expenses related to the Property.
9.3 Estimates. All items that are not subject to an exact determination
shall be estimated by the parties. When any item so estimated is capable of
exact determination after Closing, the party in possession of the facts
necessary to make the determination and the parties shall adjust the prior
estimate within 10 days after both parties have received the reports. Either
party will be entitled, at its own expense, to audit the records supporting the
determination made. All prorations shall be made as of 11:59 p.m. on the day
prior to the date of Closing.
SECTION 10. CONDEMNATION OR CASUALTY.
10.1 Condemnation. If between the date of this Agreement and the date of
Closing all or any portion of the Property is taken or is made subject to
condemnation, eminent domain or other governmental or quasi-governmental
acquisition proceedings, then the following provisions shall apply. In the
event Seller receives a written notice from any governmental or quasi-
governmental authority with powers of eminent domain to the effect that a
condemnation as to any portion or all of the Property is pending or
contemplated, Seller shall notify Purchaser promptly after receipt of the
notice. If the proposed or pending condemnation is one that could reasonably be
expected to render any portion of the Premises untenantable, then Purchaser may,
upon receipt of notice of the event, cancel this Agreement at any time prior to
Closing, in which event the Deposit and any interest thereon shall be returned
to Purchaser, this Agreement shall terminate, and neither party shall have any
further rights or obligations under this Agreement other than those rights
and/or obligations which are expressly stated to survive expiration or
termination of this Agreement. In the event that Purchaser shall not elect to
terminate, then this Agreement shall remain in full force and effect, and Seller
shall be entitled to all monies received or collected prior to the Closing by
reason of the condemnation, except to the extent Purchaser shall be entitled to
such proceeds pursuant to Article XI of the Lease. In that event, this
transaction shall close in accordance with the terms and conditions of this
Agreement except that there will be an abatement of the Purchase Price equal to
the amount of the gross proceeds received by Seller. If, however, Seller has
not received any proceeds by reason of such condemnation prior to the Closing
and Purchaser does not elect to terminate Purchaser's obligations under this
Agreement, then the Closing shall take place without abatement of the Purchase
Price, and Seller shall assign and transfer to Purchaser at Closing by written
instrument all of Seller's right, title and interest in any condemnation awards.
10.2 Casualty. In the event of substantial loss or damage to the Property
prior to the Closing by fire or other casualty, Purchaser may, at any time after
receipt of notice or knowledge of that event, cancel this Agreement, in which
event the Deposit and any interest thereon shall be immediately refunded, this
Agreement shall terminate and neither party shall have any further rights or
obligations under this Agreement other than those rights and/or obligations
which are expressly stated to survive expiration or termination of this
Agreement. In the event that Purchaser shall not elect to terminate, or if the
loss or damage is not "substantial," then this Agreement shall remain in full
force and effect and Purchaser shall proceed to close and take the Property as
damaged, in which event Purchaser shall be entitled to receive the insurance
proceeds plus the amount of any deductible, co-insurance or self-insurance
carried by Seller, so that Purchaser shall receive, in effect, the full
replacement cost of the loss or damage, as the cost is determined in the
settlement with the insurer. Seller and Purchaser shall each be entitled to
participate in the settlement. As used in this Section 10.2, the term
"substantial loss or damage" means any loss or damage resulting to the Property
which the parties reasonably estimate will require more than 30 days to repair
or restore.
SECTION 11. [Intentionally omitted]
SECTION 12. EASEMENTS FOR ACCESS AND PARKING
12.1 Access Easement. There currently exists a driveway to the north of
the Premises running easterly off of Poe Avenue and providing access from Poe
Avenue to the Premises and being 100 feet in width (the "Driveway"). The
Driveway is located partially on the Premises and partially on the property to
the north of the Premises (the "Adjacent Property"). Purchaser's obligations
under this Agreement shall be conditioned upon the execution and delivery of an
Easement Agreement with respect to the joint use of the Driveway by Purchaser
and the owner of the Adjacent Property (the "Adjacent Owner") in the form of
Exhibit B hereto, with such changes thereto as shall be acceptable to Purchaser
in its sole and absolute discretion (such easement, the "Access Easement").
Seller shall use its best efforts to obtain the Adjacent Owner's agreement to
execute and deliver the Access Easement at Closing. No changes shall be made to
the form of the agreement attached as Exhibit B hereto without Purchaser's prior
written consent. Seller shall also use its best efforts to obtain subordination
agreements from the holders of any mortgages or leases affecting the Adjacent
Property. The forms of such subordination agreements are attached to this
Agreement as Exhibits C-1 and C-2 and shall not be changed without Purchaser's
prior written consent. If Seller is unable to obtain the Access Easement or
subordination agreements and if Seller has used its best efforts to do so,
Purchaser's sole remedy shall be to terminate this Agreement.
12.2 Parking Easement. Purchaser's obligations under this Agreement shall
be conditioned upon the execution and delivery of an Easement Agreement for
parking purposes between Purchaser and the owner of the property located to the
east of the Premises (the "East Adjacent Owner") in the form of Exhibit C
hereto, with such changes thereto as shall be acceptable to Purchaser in its
sole and absolute discretion (such easement, the "Parking Easement"). Seller
shall use its best efforts to obtain the East Adjacent Owner's agreement to
execute and deliver the Parking Easement at Closing. No changes shall be made
to the form of the agreement attached as Exhibit C hereto without Purchaser's
prior written consent. Seller shall also use its best efforts to obtain
subordination agreements from the holders of any mortgages or leases affecting
the property to the east of the Premises which will be encumbered by the Parking
Easement. The forms of such subordination agreements are attached to this
Agreement as Exhibits C-1 and C-2 and shall not be changed without Purchaser's
prior written consent. If Seller is unable to obtain the Parking Easement or
subordination agreements and if Seller has used its best efforts to do so,
Purchaser's sole remedy shall be to terminate this Agreement.
As an alternative to the execution and delivery of the Parking Easement at
closing, Seller may cause the East Adjacent Owner to convey the Easement Parcel
(as defined in the Parking Easement) to Purchaser and take such other actions in
connection therewith including the release of any mortgages and leases affecting
the Easement Parcel, all in accordance with paragraph 4 of the Parking Easement.
If Seller is unable to cause the East Adjacent Owner to so convey the Easement
Parcel to Purchaser by Closing, Purchaser's sole remedy shall be to terminate
this Agreement.
12.3 30-Foot Ingress/Egress Easement. Purchaser's obligations under this
Agreement shall be conditioned upon the termination, release and abandonment of
that certain 30-foot ingress and egress easement set forth in a deed dated
August 23, 1978 and recorded at Microfiche No. 78-471A03, Montgomery County,
Ohio Deed Records (the "30 Foot Easement"), which easement benefits the Premises
and other real property. Seller shall use its best efforts to obtain an
instrument signed by all parties benefitted by such 30 Foot Easement (including
any lessees and mortgagees) terminating, releasing and abandoning the same. If
Seller is unable to obtain such an instrument and if Seller has used its best
efforts to do so, Purchaser's sole remedy shall be to terminate this Agreement.
SECTION 13. DEFAULT.
13.1 Purchaser's Default. In the event that Seller is ready, willing and
able to convey the Property in accordance with this Agreement, and Purchaser is
obligated under the terms of this Agreement to consummate the transaction
evidenced by this Agreement but fails to consummate this Agreement and take
title, the parties recognize and agree that the damages Seller will sustain will
be substantial, but difficult if not impossible to ascertain. Therefore, the
parties agree that, in the event of Purchaser's default, Seller shall be
entitled to receive and retain the Deposit and any interest thereon as
liquidated damages for Purchaser's failure to close. Seller's right to receive
and retain the Deposit and any interest thereon shall constitute the waiver by
Seller of all other rights and remedies against Purchaser except for those
rights and/or obligations that are expressly stated to survive the termination
of this Agreement.
13.2 Seller's Default. If Closing is not concluded through no fault of
Purchaser, Purchaser, at its option, may (a) elect to enforce the terms of this
Agreement by action for specific performance, and/or exercise any other right or
remedy available to it at law or in equity or (b) terminate this Agreement by
notice to Seller. In either of the foregoing events, Purchaser shall be
entitled to an immediate refund of the Deposit and any interest thereon after
notice to Seller and to the Escrow Agent. In the event of a successful specific
performance action by Purchaser, the full Purchase Price shall be paid to Seller
at the time of Closing. Upon any termination under (b) above, the parties shall
have no further rights and obligations under this Agreement other than those
rights and/or obligations that are expressly stated to survive expiration or
termination of this Agreement.
Copies of all notices with regard to any termination and/or request for the
delivery of the Deposit in connection with a failure to close pursuant to this
Section 13 shall be sent to the Escrow Agent and the Escrow Agent shall act in
accordance with this Agreement (or, if applicable, any separate Escrow
Agreement).
SECTION 14. BROKER.
Each party represents and warrants to the other that it has dealt with no
agent or broker who has in any way participated in the sale of the Property,
except that Seller represents that it has dealt with Miller-Valentine Realty,
Inc., an Ohio corporation ("MV Realty"). Seller agrees to pay the brokerage
commission due to MV Realty. Any other fees or commissions that may be claimed
shall be the sole responsibility of the party breaching the preceding warranty.
Each party agrees to indemnify and hold the other harmless against any and all
claims, judgments, costs of suit, attorneys' fees and other reasonable expenses
that the other may incur by reason of any action or claim made against the other
by any agent, advisor or intermediary appointed by or instructed by Seller or
Purchaser, as the case may be, arising out of this Agreement or the sale of the
Property to Purchaser.
SECTION 15. ASSIGNMENT.
This Agreement shall be binding upon and shall inure to the benefit of the
parties and their respective heirs, personal representatives, successors and
assigns.
SECTION 16. NOTICES.
All notices permitted or required under this Agreement shall be in writing,
and shall be deemed properly delivered when deposited in the United States mail,
postage prepaid, certified or registered mail, return receipt requested,
addressed to the parties at their respective addresses set forth below or as
they may otherwise specify by written notice delivered in accordance with this
Section:
As to Purchaser: Shopsmith, Inc.
6530 Poe Avenue
Dayton, Ohio 45414
Attention: John R. Folkerth
As to Seller: Angeles Partners XIV
One Insignia Financial Plaza
P.O. Box 1089
Greenville, South Carolina 29602
Attention: Ken Cobler
SECTION 17. EXPENSES.
Seller shall pay for any transfer tax, conveyance fee or similar charge in
connection with the sale of the Premises. All costs of the Survey and Legal
Descriptions to be prepared in accordance with Section 4.2 and all costs
incurred in connection with the release of the 30-Foot Easement pursuant to
Section 12.3 shall be paid by MV Realty pursuant to a separate agreement between
Purchaser and MV Realty executed simultaneously with this Agreement. Purchaser
shall pay all costs, fees and premiums of the Commitment and the Title Policy
and the recording charges for the deed and any mortgage Purchaser may place upon
the Premises. Any other miscellaneous closing expenses properly allocable to
both parties (including, but not limited to, escrow fees) shall be divided
equally between Purchaser and Seller. Each party shall pay for its own legal
and accounting fees and incidental expenses.
SECTION 18. COOPERATION.
From time to time at the request of Purchaser, and without further
consideration, Seller shall execute and deliver, and/or join with Purchaser in
executing and delivering, such applications for licenses, variances, zoning
changes, approvals, permits and consents from governmental bodies, utility
companies, financial institutions and other entities and shall supply such
information, arrange such meetings, and execute such forms and take such action
as Purchaser may reasonably request in order to proceed with and fully implement
Purchaser's use of the Property or to effectuate the transactions contemplated
by this Agreement; provided, however, that Seller shall not be required to incur
any expenses in connection with these matters, nor shall any permanent changes
be made to the status of the Premises (zoning or otherwise) prior to the Closing
without Seller's consent (which shall not be unreasonably withheld). Seller
shall not file an objection to or oppose Purchaser's intended use of the
Property.
SECTION 19. STOCK OPTION AGREEMENT.
Pursuant to a certain Stock Option Agreement dated as of March 29, 1994
between Purchaser and Seller (the "Stock Option Agreement"), Purchaser granted
to Seller an option to purchase Common Shares of Purchaser on and subject to the
terms and conditions set forth in the Stock Option Agreement. Seller agrees
that the Stock Option Agreement and all of Seller's rights and interests
thereunder shall terminate effective as of the date of the Closing, without
payment of any sum whatsoever. At the Closing, Seller and Purchaser shall enter
into an agreement evidencing such termination.
SECTION 20. MISCELLANEOUS.
20.1 Gender. Words of any gender used in this Agreement shall be held and
construed to include any other gender, any words in the singular number shall be
held to include the plural, and vice versa, unless the context requires
otherwise.
20.2 Attorneys' Fees. If either party commences an action against the
other to enforce any of the terms of this Agreement or because of the breach by
either party of any of the terms of this Agreement, the losing or defaulting
party shall pay to the prevailing party its reasonable attorneys' fees, costs
and expenses incurred in connection with the prosecution or defense of such
action. The term "prevailing party" means the party obtaining substantially the
relief sought, whether by compromise, settlement or judgment.
20.3 Captions. The captions in this Agreement are inserted only for the
purpose of convenient reference and in no way define, limit, or prescribe the
scope or intent of this Agreement or any part of this Agreement.
20.4 Construction. No provisions of this Agreement shall be construed by
any court or other judicial authority against any part by reason of that party's
being deemed to have drafter or structured the provisions.
20.5 Entire Agreement. This Agreement constitutes the entire contract
between the parties and supersedes all prior understandings, if any, there being
no other oral or written promises, conditions, representations, understandings
or terms of any kind as conditions or inducements to the execution of this
Agreement and none have been relied upon by either party. Any subsequent
conditions, representations, warranties or agreements shall not be valid and
binding upon the parties unless in writing and signed by both parties.
20.6 Recording. The parties agree that this Agreement shall not be
recorded.
20.7 Time of Essence. TIME IS OF THE ESSENCE UNDER THIS AGREEMENT.
20.8 Original Document. This Agreement shall be executed by the parties
in counterparts, each of which shall be deemed an original, but all of such
counterparts taken together shall constitute one and the same Agreement. The
phrase "date of this Agreement" and similar phrases as used herein shall mean
the date on which the last of Seller or Purchaser shall sign this Agreement as
indicated below.
20.9 Governing Law. This Agreement shall be construed, and the rights and
obligations of Seller and Purchaser shall be determined, in accordance with the
laws of the State of Ohio.
WITNESS the execution hereof as of the day and year indicated below.
PURCHASER:
SHOPSMITH, INC.,
an Ohio corporation
By:
Name:
Title:
Date:
SELLER:
ANGELES PARTNERS XIV,
a California limited partnership
By: Angeles Realty Corporation II, a
corporation, as general partner
By:
Name:
Title:
Date:
EXHIBIT A
Situate in the City of Vandalia, County of Montgomery and State of Ohio, and
being Lot Seven (7) of 70/75 Corporate Center, as recorded in Plat Book 107,
Page 60 of the Plat Records of Montgomery County, Ohio.
