FORM 10-QSB--QUARTERLY OR TRANSITIONAL REPORT UNDER SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
QUARTERLY OR TRANSITIONAL REPORT
U.S. Securities and Exchange Commission
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended June 30, 1998
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT
For the transition period from.........to.........
Commission file number 0-16116
ANGELES OPPORTUNITY PROPERTIES, LTD.
(Exact name of small business issuer as specified in its charter)
California 95-4052473
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
One Insignia Financial Plaza
Greenville, South Carolina 29602
(Address of principal executive offices)
(864) 239-1000
(Issuer's telephone number)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes X No
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
a)
ANGELES OPPORTUNITY PROPERTIES, LTD.
CONSOLIDATED BALANCE SHEET
(Unaudited)
(in thousands, except unit data)
June 30, 1998
Assets
Cash and cash equivalents $ 703
Receivables and deposits 184
Restricted escrows 254
Other assets 150
Investment properties:
Land $ 956
Buildings and related personal property 7,386
8,342
Less accumulated depreciation (2,058) 6,284
$ 7,575
Liabilities and Partners' Capital (Deficit)
Liabilities
Accounts payable $ 20
Tenant security deposit liabilities 30
Accrued property taxes 118
Other liabilities 74
Mortgage notes payable 5,423
Partners' Capital (Deficit):
General partner's $ (98)
Limited partners' (12,425 units issued 2,008 1,910
and outstanding) $ 7,575
See Accompanying Notes to Consolidated Financial Statements
b)
ANGELES OPPORTUNITY PROPERTIES, LTD.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(in thousands, except unit data)
Three Months Ended Six Months Ended
June 30, June 30,
1998 1997 1998 1997
Revenues:
Rental income $ 581 $ 551 $ 1,153 $ 1,105
Other income 38 36 73 75
Total revenues 619 587 1,226 1,180
Expenses:
Operating 274 260 507 492
General and administrative 42 24 72 69
Depreciation 72 72 144 141
Interest 110 110 220 220
Property taxes 59 53 118 104
Total expenses 557 519 1,061 1,026
Equity in income of joint venture -- 6 -- 6
Net income $ 62 $ 74 $ 165 $ 160
Net income allocated
to general partner (1%) $ 1 $ 1 $ 2 $ 2
Net income allocated
to limited partners (99%) 61 73 163 158
Net income $ 62 $ 74 $ 165 $ 160
Net income per limited
partnership unit $ 4.91 $ 5.88 $ 13.12 $ 12.72
Distributions per limited
partnership unit $ 19.96 $ 95.61 $ 19.96 $ 95.61
See Accompanying Notes to Consolidated Financial Statements
c)
ANGELES OPPORTUNITY PROPERTIES, LTD.
CONSOLIDATED STATEMENT OF CHANGES IN PARTNERS' CAPITAL (DEFICIT)
(Unaudited)
(in thousands, except unit data)
Limited
Partnership General Limited
Units Partner Partners Total
Original capital contributions 12,425 $ 1 $ 12,425 $ 12,426
Partners' capital (deficit) at
December 31, 1997 12,425 $ (98) $ 2,093 $ 1,995
Distributions to partners -- (2) (248) (250)
Net income for the six months
ended June 30, 1998 -- 2 163 165
Partners' capital (deficit) at
June 30, 1998 12,425 $ (98) $ 2,008 $ 1,910
See Accompanying Notes to Consolidated Financial Statements
d)
ANGELES OPPORTUNITY PROPERTIES, LTD.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
Six Months Ended
June 30,
1998 1997
Cash flows from operating activities:
Net income $ 165 $ 160
Adjustments to reconcile net income to net
cash provided by operating activities:
Equity in income of joint venture -- (6)
Depreciation 144 141
Amortization of loan costs and discounts 17 15
Change in accounts:
Receivables and deposits 82 (14)
Other assets 5 (13)
Accounts payable 1 (11)
Tenant security deposit liabilities (1) (4)
Accrued property taxes (106) 19
Other liabilities 16 11
Net cash provided by operating activities 323 298
Cash flows from investing activities:
Property improvements and replacements (48) (132)
Distributions from joint venture -- 459
Net deposits to restricted escrows (7) (34)
Net cash (used in) provided by investing activities (55) 293
Cash flows from financing activities:
Payments on mortgage notes payable (12) (10)
Distributions to partners (250) (1,210)
Net cash used in financing activities (262) (1,220)
Net increase (decrease) in cash and cash equivalents 6 (629)
Cash and cash equivalents at beginning of period 697 1,836
Cash and cash equivalents at end of period $ 703 $ 1,207
Supplemental disclosure of cash flow information:
Cash paid for interest $ 204 $ 205
See Accompanying Notes to Consolidated Financial Statements
e) ANGELES OPPORTUNITY PROPERTIES, LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE A - BASIS OF PRESENTATION
The accompanying unaudited financial statements of Angeles Opportunity
Properties, Ltd. (the "Partnership") have been prepared in accordance with
generally accepted accounting principles for interim financial information and
with the instructions to Form 10-QSB and Item 310(b) of Regulation S-B.
Accordingly, they do not include all of the information and footnotes required
by generally accepted accounting principles for complete financial statements.
In the opinion of Angeles Realty Corporation II (the "General Partner"), all
adjustments (consisting of normal recurring accruals) considered necessary for a
fair presentation have been included. Operating results for the three and six
month periods ended June 30, 1998, are not necessarily indicative of the results
that may be expected for the fiscal year ending December 31, 1998. For further
information, refer to the financial statements and footnotes thereto included in
the Partnership's annual report on Form 10-KSB for the fiscal year ended
December 31, 1997.
Certain reclassifications have been made to the 1997 information to conform to
the 1998 presentation.
NOTE B - TRANSACTIONS WITH AFFILIATED PARTIES
The Partnership has no employees and is dependent on the General Partner and its
affiliates for the management and administration of all partnership activities.
Effective February 25, 1998, the General Partner became wholly-owned by Insignia
Properties Trust ("IPT"), an affiliate of Insignia Financial Group, Inc.
("Insignia"). On February 25, 1998, the former owner of the Managing General
Partner, MAE GP Corporation ("MAE GP"), an affiliate of Insignia, was merged
into IPT. 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 transactions with the General Partner
and its affiliates were incurred during the six months ended June 30, 1998 and
1997 (in thousands):
1998 1997
Property management fees (included in
operating expenses) $60 $57
Reimbursement for services of affiliates, (included
in general and administrative expenses) 34 34
For the period of January 1, 1997 to August 31, 1997, the Partnership insured
its properties under a master policy through an agency affiliated with the
General Partner with an insurer unaffiliated with the General Partner. An
affiliate of the 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 General Partner which received payment on
these obligations from the agent. The amount of the Partnership's insurance
premiums accruing to the benefit of the affiliate of the General Partner by
virtue of the agent's obligations was not significant.
On March 17, 1998, Insignia entered into an agreement to merge its national
residential property management operations, and its controlling interest in IPT,
with Apartment Investment and Management Company ("AIMCO"), a publicly traded
real estate investment trust. The closing, which is anticipated to happen in
September or October of 1998, is subject to customary conditions, including
government approvals and the approval of Insignia's shareholders. If the
closing occurs, AIMCO will then control the General Partner of the Partnership.
NOTE C - INVESTMENT IN JOINT VENTURE
The Partnership had a 42.82% interest in a property (the "Joint Venture") owned
jointly by the Partnership and an affiliate of Angeles Mortgage Investment Trust
("AMIT"), a real estate investment trust. On June 24, 1997, the Joint Venture
sold its sole investment property to an unaffiliated third party for
approximately $1,175,000. Upon the sale of the Joint Venture property, the
proceeds were distributed to the owners. The Partnership's remaining equity in
the Joint Venture was received in November 1997.
In November 1992, MAE GP acquired 1,675,113 Class B Common Shares of AMIT. The
terms of the Class B Shares provide that they are convertible, in whole or in
part, into Class A Common Shares on the basis of one Class A Share for every 49
Class B Shares (however, in connection with the settlement agreement described
in the following paragraph, MAE GP has agreed not to convert the Class B Shares
so long as AMIT's option is outstanding). These Class B Shares entitle the
holder to receive 1% of the distributions of net cash distributed by AMIT
(however, in connection with the settlement agreement described in the following
paragraph, MAE GP agreed to waive its right to receive dividends and
distributions so long as AMIT's option is outstanding). The holder of the Class
B Shares is also entitled to vote on the same basis as the holders of Class A
Shares, providing the holder with approximately 39% of the total voting power of
AMIT (unless and until converted to Class A Shares, in which case the percentage
of the vote controlled represented by such shares would approximate 1.3% of the
total voting power of AMIT).
As part of a settlement of certain disputes with AMIT, MAE GP granted to AMIT an
option to acquire the Class B shares owned by it. This option can be exercised
at the end of 10 years or when all loans made by AMIT to partnerships which were
affiliated with MAE GP as of November 9, 1994 (which is the date of execution of
a definitive Settlement Agreement) have been paid in full. In connection with
such settlement, AMIT delivered to MAE GP cash in the sum of $250,000 at closing
(which occurred April 14, 1995) as payment for the option. If and when the
option is exercised, AMIT will be required to remit to MAE GP an additional
$94,000.
Simultaneously with the execution of the option and as part of the settlement,
MAE GP executed an irrevocable proxy in favor of AMIT, which provides that the
holder of the Class B Shares is permitted to vote those shares on all matters
except those involving transactions between AMIT and MAE GP affiliated borrowers
or the election of any MAE GP affiliate as an officer or trustee of AMIT. With
respect to such matters, the trustees of AMIT are required to vote (pursuant to
the irrevocable proxy) the Class B shares (as a single block) in the same manner
as a majority of the Class A Shares are voted (to be determined without
consideration of the votes of "Excess Class A Shares" (as defined in Section
6.13 of AMIT's Declaration of Trust)).
Between its acquisition of the Class B shares (in November 1992) and March 31,
1995, MAE GP declined to vote these shares. Since that date, MAE GP voted its
shares at the 1995 and 1996 annual meetings in connection with the election of
trustees and other matters. In February 1998, MAE GP was merged into IPT, and
in connection with that merger, MAE GP dividended all of the Class B Shares to
its sole stockholder, Metropolitan Asset Enhancement, L.P. ("MAE"). As a
result, MAE, as the holder of the Class B shares, is now subject to the terms of
the settlement agreement, option and irrevocable proxy described in the two
preceding paragraphs. Neither MAE GP nor MAE has exerted or has any current
intention to exert any management control over or participate in the management
of AMIT. However, subject to the terms of the proxy described below, MAE may
choose to vote the Class B shares or otherwise exercise its rights as a
shareholder of AMIT as it deems appropriate in the future.
Liquidity Assistance L.L.C., which is an affiliate of the General Partner, MAE
and Insignia (which provides property management and partnership administration
services to the Partnership), owned 96,800 Class A shares of AMIT at June 30,
1998. These Class A shares represent approximately 2.2% of the total voting
power of AMIT.
On April 3, 1997, Insignia and AMIT entered into a non-binding agreement in
principle contemplating, among other things, a business combination of AMIT and
IPT, which was then owned 98% by Insignia and its affiliates. On July 18, 1997,
IPT, Insignia and MAE GP entered into a definitive merger agreement pursuant to
which (subject to shareholder approval and certain other conditions, including
the receipt by AMIT of a fairness opinion from its investment bankers) AMIT
would be merged with and into IPT, with each Class A Share and Class B Share
being converted into 1.625 and 0.0332 Common Shares of IPT, respectively. The
foregoing exchange ratios are subject to adjustment to account for dividends
paid by AMIT from January 1, 1997 and dividends paid by IPT from February 1,
1997. It is anticipated that Insignia and its affiliates (including MAE) would
own approximately 57% of post-merger IPT if this transaction is consummated.
For the six month period ended June 30, 1997, the Joint Venture had total
revenues, total expenses, gain on sale and net income of approximately $34,000,
$31,000, $11,000 and $14,000, respectively. The Partnership's equity interest
in the net income of the Joint Venture was approximately $6,000.
NOTE D - DISTRIBUTIONS
The Partnership distributed cash from operations of approximately $248,000 and
$2,000 to the limited partners and General Partner, respectively during the six
months ended June 30, 1998. During the six months ended June 30, 1997, the
Partnership distributed approximately $1,188,000 to the limited partners and
approximately $22,000 to the General Partner from cash generated by the
refinancing of Lakewood Apartments.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS
The Partnership's investment properties consist of two apartment complexes. The
following table sets forth the average occupancy of the properties for the six
months ended June 30, 1998 and 1997:
Average
Occupancy
Property 1998 1997
Lake Meadows Apartments
Garland, Texas 98% 96%
Lakewood Apartments
Tomball, Texas 96% 98%
The Partnership's net income for the three and six month periods ended June 30,
1998, was approximately $62,000 and $165,000 compared to net income of
approximately $74,000 and $160,000 for the three and six month periods ended
June 30, 1997. The increase in net income for the six month period ended June
30, 1998 is attributable to an increase in rental income partially offset by
increases in operating and property tax expenses. Rental income increased as a
result of increased rental rates at both investment properties and an increase
in occupancy at Lake Meadows Apartments. The increase in operating expense is
primarily the result of increased maintenance costs at Lakewood Apartments.
Property tax expense increased due to an increase in the assessed value by the
taxing authority for Lakewood Apartments.
Included in operating expense for the six months ended June 30, 1998 is
approximately $21,000 of major repairs and maintenance comprised primarily of
exterior building repairs and landscaping. For the six months ended June 30,
1997, approximately $35,000 of major repairs and maintenance, comprised
primarily of parking lot repairs and major landscaping, were included in
operating expense.
As part of the ongoing business plan of the Partnership, the 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 Partnership from increases in expenses. As part of
this plan, the General Partner attempts to protect the Partnership from the
burden of inflation-related increases in expenses by increasing rents and
maintaining a high overall occupancy level. However, due to changing market
conditions, which can result in the use of rental concessions and rental
reductions to offset softening market conditions, there is no guarantee that the
General Partner will be able to sustain such a plan.
At June 30, 1998, the Partnership had cash and cash equivalents of approximately
$703,000 compared to approximately $1,207,000 at June 30, 1997. The net
increase in cash and cash equivalents for the six months ended June 30, 1998 was
approximately $6,000. The net decrease in cash and cash equivalents was
approximately $629,000 for the six months ended June 30, 1997. Net cash
provided by operating activities increased primarily due to a reduction in
receivables and deposits and a decrease in cash used for accounts payable due to
the timing of payments. This increase in cash provided was partially offset by
an increase in cash used for payment of accrued property taxes. Net cash
provided by investing activities decreased due to distributions from the joint
venture being included in the 1997 investing activities, partially offset by a
decrease in property improvements and replacements due to a parking lot project
at Lakewood Apartments being included in 1997 additions. Net cash used in
financing activities decreased primarily due to the decrease in distributions to
partners during the six months ended June 30, 1998.
The sufficiency of existing liquid assets to meet future liquidity and capital
expenditure requirements is directly related to the level of capital
expenditures required at the various properties to adequately maintain the
physical assets and other operating needs of the Partnership. Such assets are
currently thought to be sufficient for any near-term needs of the Partnership.
The mortgage indebtedness of approximately $5,423,000, net of discount, is
interest only or is being amortized over 343 months with balloon payments due at
the maturity dates of October and November 2003, at which time the properties
will either be refinanced or sold. The Partnership distributed cash from
operations of approximately $248,000 and $2,000 to the limited partners and
General Partner, respectively during the six months ended June 30, 1998. During
the six months ended June 30, 1997, the Partnership distributed approximately
$1,188,000 to the limited partners and approximately $22,000 to the General
Partner from cash generated by the refinancing of Lakewood Apartments. Future
cash distributions will depend on the levels of net cash generated from
operations, refinancings, property sales, and the availability of cash reserves.
Year 2000
The Partnership is dependent upon the General Partner and Insignia for
management and administrative services. Insignia has completed an assessment
and will have to modify or replace portions of its software so that its computer
systems will function properly with respect to dates in the year 2000 and
thereafter (the "Year 2000 Issue"). The project is estimated to be completed no
later than December 31, 1998, which is prior to any anticipated impact on its
operating systems. The General Partner believes that with modifications to
existing software and conversions to new software, the Year 2000 Issue will not
pose significant operational problems for its computer systems. However, if such
modifications and conversions are not made, or are not completed timely, the
Year 2000 Issue could have a material impact on the operations of the
Partnership.
Other
Certain items discussed in this quarterly report may constitute forward-looking
statements within the meaning of the Private Securities Litigation Reform Act of
1995 (the "Reform Act") and as such may involve known and unknown risks,
uncertainties and other factors which may cause the actual results, performance
or achievements of the Partnership to be materially different from any future
results, performance or achievements expressed or implied by such forward-
looking statements. Such forward-looking statements speak only as of the date of
this quarterly report. The Partnership expressly disclaims any obligation or
undertaking to release publicly any updates or revisions to any forward-looking
statements contained herein to reflect any change in the Partnership's
expectations with regard thereto or any change in events, conditions or
circumstances on which any such statement is based.
PART II - OTHER INFORMATION
ITEM 1. LEGAL 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 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 and its affiliates of
interests in certain general partner entities, past tender offers by Insignia
affiliates as well as a recently announced agreement between Insignia and AIMCO.
The complaint seeks monetary damages and equitable relief, including judicial
dissolution of the Partnership. The General Partner believes the action to be
without merit, and intends to vigorously defend it. On June 24, 1998, the
General Partner filed a motion seeking dismissal of the action.
In January 1998, the Partnership and its General Partner were named as
defendants in a lawsuit brought by a limited partner of the Partnership alleging
that the General Partner has failed to perform its contractual obligations under
the Partnership Agreement. The General Partner believes that there is no merit
to the suit and intends to vigorously defend it.
In May 1998, the Partnership and its General Partner were named as respondents
in a Petition in Los Angeles Superior Court. The Petition, brought by a limited
partner of the Partnership, seeks performance by the General Partner of certain
alleged contractual obligations under the Partnership Agreement and compliance
with certain alleged statutory requirements. In July 1998, the parties reached
an agreement with the plaintiff that this action would be dismissed with
prejudice, with each side to bear its own costs.
The Partnership is unaware of any other pending or outstanding litigation that
is not of a routine nature. The General Partner of the Partnership believes
that all such other pending or outstanding litigation will be resolved without a
material adverse effect upon the business, financial condition, or operations of
the Partnership.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a) Exhibits -
Exhibit 27, Financial Data Schedule, is filed as an exhibit to this
report.
b) Reports on Form 8-K:
None filed during the quarter ended June 30, 1998.
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
ANGELES OPPORTUNITY PROPERTIES, LTD.
By: Angeles Realty Corporation II
Its General Partner
By: /s/Carroll D. Vinson
Carroll D. Vinson
President and Director
By: /s/Robert D. Long, Jr.
Robert D. Long, Jr.
Vice President/CAO
Date: August 6, 1998
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from
Angeles Opportunity Properties, Ltd. 1998 Second Quarter 10-QSB
and is qualified in its entirety by reference to such 10-QSB filing.
</LEGEND>
<CIK> 0000789282
<NAME> ANGELES OPPORTUNITY PROPERTIES, LTD.
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> JUN-30-1998
<CASH> 703
<SECURITIES> 0
<RECEIVABLES> 184
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0<F1>
<PP&E> 8,342
<DEPRECIATION> (2,058)
<TOTAL-ASSETS> 7,575
<CURRENT-LIABILITIES> 0<F1>
<BONDS> 5,423
0
0
<COMMON> 0
<OTHER-SE> 1,910
<TOTAL-LIABILITY-AND-EQUITY> 7,575
<SALES> 0
<TOTAL-REVENUES> 1,226
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 1,061
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 220
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 165
<EPS-PRIMARY> 13.12<F2>
<EPS-DILUTED> 0
<FN>
<F1>Registrant has an unclassified balance sheet.
<F2>Multiplier is 1.
</FN>
</TABLE>
