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 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 0-16116
ANGELES OPPORTUNITY PROPERTIES, LTD.
(Name of small business issuer in its charter)
California 95-4052473
(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)
(864) 239-1000
Issuer's telephone number
Securities registered under Section 12(b) of the Exchange Act:
None
Securities registered under Section 12(g) of the Exchange Act:
Units of Limited Partnership Interest
(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 is not 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. $2,475,000
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 a specified date within the past 60 days. No market exists for
the limited partnership interests 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 Opportunity Properties, Ltd. (the "Partnership" or "Registrant") is a
publicly-held limited partnership organized under the California Uniform Limited
Partnership Act pursuant to a Certificate and Agreement of Limited Partnership
(hereinafter referred to as the "Agreement") dated June 29, 1984, as amended.
The Partnership's general partner is Angeles Realty Corporation II (the "General
Partner"), a California corporation. The General Partner is a subsidiary of
Apartment Investment and Management Company ("AIMCO"). The Partnership
Agreement provides that the Partnership is to terminate on December 31, 2035
unless terminated prior to such date.
The Partnership is engaged in the business of operating and holding real
properties for investment. In 1988 and 1989, during its acquisition phase, the
Partnership acquired one apartment complex, three warehouses, and a 70% interest
in a joint venture project which ultimately acquired an apartment complex. In
1992, the Partnership acquired the remaining 30% interest of the joint venture.
The Partnership continues to own and operate the two apartment properties. See
"Item 2. Description of Properties."
The Partnership, through its public offering of Limited Partnership units, sold
12,425 units aggregating $12,425,000. The General Partner contributed capital
in the amount of $1,000 for a 1% interest in the Partnership. Since its initial
offering, the Partnership has not received, nor are the limited partners
required to make, additional capital contributions. The Partnership's 42.82%
ownership interest in a joint venture property was liquidated during 1997 upon
the sale of the sole investment property of the joint venture. The General
Partner of the Partnership 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 holding and operating the properties or through property sales
or exchanges, 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.
The Partnership has no employees. Property management and administrative
services are provided by the General Partner and by agents retained by the
General Partner.
The 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 General Partner in such market area,
could have a material effect on the rental market for the apartments at the
Partnerships properties and the rents that may be charged for such apartments.
While the 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 General
Partner and/or affiliates to engage in business which may be competitive with
the Partnership.
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 AIMCO, 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 sole shareholder of the General Partner. The 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 Partnership's investments in properties:
Date of
Property Purchase Type of Ownership Use
Lake Meadows Apartments 3/31/88 Fee ownership subject to a Apartment
Garland, Texas first and second mortgage (1) 96 units
Lakewood Apartments 11/01/89 Fee ownership subject to Apartment
Tomball, Texas a first mortgage (1) 256 units
(1) Each property is held by a limited partnership in which the Partnership
owns a 99% interest.
SCHEDULE OF PROPERTIES:
Set forth below for each of the Partnership'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)
Lake Meadows Apts. $ 2,367 $ 667 5-40 yrs S/L $ 1,775
Lakewood Apts. 6,050 1,544 5-40 yrs S/L 5,239
Total $ 8,417 $ 2,211 $ 7,014
See "Note A" 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 Partnership's properties.
Principal Principal
Balance At Stated Balance
December 31, Interest Period Maturity Due At
Property 1998 Rate Amortized Date Maturity (3)
(in thousands) (in thousands)
Lake Meadows Apts.
1st mortgage $ 1,628 7.83% (1) 10/2003 $ 1,489
2nd mortgage 54 7.83% (2) 10/2003 54
Lakewood Apartments
1st mortgage 3,750 7.33% (2) 11/2003 3,750
5,432
Unamortized discount (18)
Total $ 5,414 $ 5,293
(1) The principal balance is being amortized over 343 months with a balloon
payment due October 15, 2003.
(2) Interest only payments.
(3) See "Item 7, Financial Statements- Note C" for information with respect to
the Partnership's ability to prepay these loans and other specific loan
terms.
SCHEDULE OF RENTAL RATES AND OCCUPANCY:
Average annual rental rate and occupancy for 1998 and 1997 for each property:
Average Annual Average
Rental Rates Occupancy
Property 1998 1997 1998 1997
Lake Meadows Apartments $7,127/unit $6,852/unit 98% 97%
Lakewood Apartments 6,802/unit 6,456/unit 96% 98%
As noted under "Item 1. Description of Business", the real estate industry is
highly competitive. All of the properties are subject to competition from other
residential apartment complexes in the area. The General Partner believes that
all of the properties are adequately insured. Each property is an apartment
complex which leases its units for lease terms of one year or less. No tenant
leases 10% or more of the available rental space. All of the properties are in
good physical condition, subject to normal depreciation and deterioration as is
typical for assets of this type and age.
SCHEDULE OF REAL ESTATE TAXES AND RATES:
Real estate taxes and rates in 1998 for each property were:
1998 1998
Billing Rate
(in thousands)
Lake Meadows Apartments $ 64 2.61%
Lakewood Apartments 169 2.96%
CAPITAL INVESTMENTS:
Lake Meadows Apartments
During 1998, the Partnership completed approximately $41,000 of capital
improvements at Lake Meadows Apartments, consisting primarily of building
improvements and floor covering. These improvements were funded from operating
cash flow. Based on a report received from an independent third party consultant
analyzing necessary exterior improvements and estimates made by the General
Partner on interior improvements, it is estimated that the property requires
approximately $208,000 of capital improvements over the near-term. Capital
improvements budgeted for 1999 include, but are not limited to, appliances,
building equipment and floor replacement, which are expected to cost
approximately $196,000.
Lakewood Apartments
Also during 1998, the Partnership completed approximately $82,000 of capital
improvements and replacements at Lakewood Apartments, consisting of floor
covering and building equipment, which were funded from operating cash flow.
Based on a report received from an independent third party consultant analyzing
necessary exterior improvements and estimates made by the General Partner on
interior improvements, it is estimated that the property requires approximately
$240,000 of capital improvements over the near term. Capital improvements
budgeted for 1999 include, but are not limited to, floor replacement,
landscaping, roof replacement, painting and interior building improvements,
which are expected to cost approximately $191,000.
The capital improvements planned for 1999 at the Partnership's properties will
be made only to the extent of cash available from the operations and
Partnerships 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 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 entities which were, at
the time, affiliates of Insignia ("Insignia 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. On June 25, 1998, the General Partner filed a motion seeking
dismissal of the action. In lieu of responding to the motion, the plaintiffs
have filed an amended complaint. The General Partner filed demurrers to the
amended complaint which were heard during February, 1999. No ruling on such
demurrers has been received. The General Partner does not anticipate that costs
associated with this case, if any, will be material to the Partnership's overall
operations.
In July 1998, a limited partner of the Partnership commenced an action in the
Circuit Court for Jackson County, Missouri entitled Bond Purchase LLC v. Angeles
Opportunity Properties, Ltd., et. al. The complaint claims that the Partnership
and an affiliate of the General Partner breached certain contractual and
fiduciary duties allegedly owed to the claimant and seeks damages and injunctive
relief. The General Partner does not anticipate that costs associated with this
case, if any, to be material to the Partnership's overall 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 fourth
quarter of the fiscal year covered by this report.
PART II
ITEM 5. MARKET FOR THE PARTNERSHIP'S COMMON EQUITY AND RELATED SECURITY HOLDER
MATTERS
The Partnership, a publicly-held limited partnership, sold 12,425 Limited
Partnership Units during its offering period through June 25, 1988, and
currently has 1,570 Limited Partners of record. Affiliates of the General
Partner owned 1,374 units or 11.06% at December 31, 1998. No public trading
market has developed for the Units, and it is not anticipated that such a market
will develop in the future.
Total cash distributed from operations was approximately $254,000 ($19.88 per
limited partnership unit) for the year ended December 31, 1998. Total cash
distributed during the year ended December 31, 1997, was approximately
$1,961,000 ($155.37 per limited partnership unit). This distribution consisted
of approximately $928,000 of proceeds from the refinancing of Lakewood
Apartments in 1996, approximately $498,000 from the 1997 sale of the joint
venture property, and approximately $535,000 from operations. The Partnership's
distribution policy will be reviewed on a quarterly basis. There can be no
assurance, however, that the Partnership will generate sufficient funds from
operations after required capital expenditures to permit further distributions
to its partners in 1999 or subsequent periods.
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 consolidated financial
statements and other items contained elsewhere in this report.
Results of Operations
The Partnership's net income for the year ended December 31, 1998, was
approximately $323,000 compared to net income of approximately $314,000 for the
year ended December 31, 1997. The increase in net income for the year ended
December 31, 1998, is attributable to an increase in total revenues which was
partially offset by an increase in total expense. Total revenues increased due
to an increase in rental income which was attributable to increased rental rates
at both of the Partnership's investment properties and an increase in occupancy
at Lake Meadows Apartments, which more than offset the slight decrease in
occupancy at Lakewood Apartments. Total expenses increased primarily due to an
increase in general and administrative expenses. The increase in general and
administrative expenses during 1998 is primarily attributable to an increase in
legal fees resulting from several legal actions in which the General Partner and
the Partnership were named as defendants. Included in general and administrative
expenses for the years ended December 31, 1998 and 1997, are reimbursements to
the General Partner allowed under the Partnership Agreement associated with its
management of the Partnership. 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. All other items
of expense remained relatively consistent for the comparable periods.
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.
Capital Resources and Liquidity
At December 31, 1998, the Partnership had cash and cash equivalents of
approximately $1,060,000 as compared to approximately $697,000 at December 31,
1997. The net increase in cash and cash equivalents for the year ended December
31, 1998, was $363,000 compared to a decrease of $1,139,000 for the prior year.
The net increase in cash and cash equivalents is due to approximately $710,000
of cash provided by operating activities, which was partially offset by
approximately $70,000 and $277,000 of cash used in investing and financing
activities, respectively. Cash used in investing activities is comprised
primarily of capital improvements partially offset by net withdrawals from
capital improvement escrows. Cash used in financing activities consisted of
payments of principal made on the mortgages encumbering the Partnership's
investment properties and distributions to partners. The Partnership invests its
working capital reserves in money market accounts.
The sufficiency of existing liquid assets to meet future liquidity and capital
expenditure requirements is directly related to the level of capital
expenditures required at the various properties to adequately maintain the
physical assets and other operating needs of the Partnership and to comply with
Federal, state and local legal and regulatory requirements. The Partnership has
budgeted approximately $387,000 in capital improvements for all of the
Partnership's properties in 1999. Budgeted capital improvements at Lake Meadows
include, but are not limited to, floor replacement, building equipment, and
appliances. Budgeted capital improvements at Lakewood include, but are not
limited to, landscaping, roof replacement, painting, interior building
improvements, and floor replacement. The capital expenditures will be
incurred only if cash is available from operations or from partnership
reserves. To the extent that such capital improvements are completed, the
Partnership's distributable cash flow, if any, may be adversely affected at
least in the short term.
The Partnership's current assets are thought to be sufficient for any near term
needs (exclusive of capital improvements) of the Partnership. The mortgage
indebtedness of approximately $5,414,000, 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. The 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 Partnership will risk losing such properties through foreclosure.
Total cash distributed from operations was approximately $254,000 for the year
ended December 31, 1998. Total cash distributed during the year ended December
31, 1997, was approximately $1,961,000. This distribution consisted of
approximately $928,000 of proceeds from the refinancing of Lakewood Apartments
in 1996, approximately $498,000 from the 1997 sale of the joint venture
property, and approximately $535,000 from operations. The Partnership's
distribution policy will be reviewed on a quarterly basis. There can be no
assurance, however, that the Partnership will generate sufficient funds from
operations after required capital expenditures to permit further distributions
to its partners in 1999 or subsequent periods.
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 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 OPPORTUNITY PROPERTIES, LTD.
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' Capital (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 Opportunity Properties, Ltd.
We have audited the accompanying consolidated balance sheet of Angeles
Opportunity Properties, Ltd. as of December 31, 1998, and the related
consolidated statements of operations, changes in partners' capital (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
Opportunity Properties, Ltd. 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.
/S/ ERNST & YOUNG LLP
Greenville, South Carolina
March 3, 1999
ANGELES OPPORTUNITY PROPERTIES, LTD.
CONSOLIDATED BALANCE SHEET
(in thousands, except unit data)
December 31, 1998
Assets
Cash and cash equivalents $ 1,060
Receivables and deposits 254
Restricted escrows 194
Other assets 134
Investment properties (Notes C and G):
Land $ 956
Buildings and related personal property 7,461
8,417
Less accumulated depreciation (2,211) 6,206
$ 7,848
Liabilities and Partners' Capital (Deficit)
Liabilities:
Accounts payable $ 18
Tenant security deposit liabilities 27
Accrued property taxes 235
Other liabilities 90
Mortgage notes payable (Note C) 5,414
Partners' Capital (Deficit):
General partner's $ (102)
Limited partners' (12,425 units issued
and outstanding) 2,166 2,064
$ 7,848
See Accompanying Notes to Consolidated Financial Statements
ANGELES OPPORTUNITY PROPERTIES, LTD.
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except unit data)
1998 1997
Revenues:
Rental income $ 2,322 $ 2,244
Other income 153 153
Total revenues 2,475 2,397
Expenses:
Operating 1,006 996
General and administrative 173 142
Depreciation 297 287
Interest 440 440
Property taxes 236 222
Total expenses 2,152 2,087
Equity in income of joint venture (Note F) -- 4
Net income $ 323 $ 314
Net income allocated to general partner (1%) $ 3 $ 3
Net income allocated to limited partners (99%) 320 311
$ 323 $ 314
Net income per limited partnership unit $ 25.75 $ 25.03
Distributions per limited partnership unit $ 19.88 $155.37
See Accompanying Notes to Consolidated Financial Statements
ANGELES OPPORTUNITY PROPERTIES, LTD.
CONSOLIDATED STATEMENTS OF CHANGES IN PARTNERS' CAPITAL (DEFICIT)
(in thousands, except unit data)
Limited
Partnership General Limited
Units Partner Partners Total
Original capital contributions 12,425 $ 1 $12,425 $12,426
Partners' (deficit) capital
at December 31, 1996 12,425 $ (70) $ 3,712 $ 3,642
Net income for the year
ended December 31, 1997 -- 3 311 314
Distributions to partners -- (31) (1,930) (1,961)
Partners' (deficit) capital at
December 31, 1997 12,425 (98) 2,093 1,995
Net income for the year
ended December 31, 1998 -- 3 320 323
Distribution to partners -- (7) (247) (254)
Partners' (deficit) capital at
December 31, 1998 12,425 $ (102) $ 2,166 $ 2,064
See Accompanying Notes to Consolidated Financial Statements
ANGELES OPPORTUNITY PROPERTIES, LTD.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
Years Ended December 31,
1998 1997
Cash flows from operating activities:
Net income $ 323 $ 314
Adjustments to reconcile net income to
net cash provided by operating activities:
Equity in income of joint venture -- (4)
Depreciation 297 287
Amortization of discounts and loan costs 32 30
Change in accounts:
Receivables and deposits 12 (129)
Other assets 8 3
Accounts payable (1) (14)
Tenant security deposit liabilities (4) (6)
Accrued property taxes 11 137
Other liabilities 32 3
Net cash provided by operating activities 710 621
Cash flows from investing activities:
Property improvements and replacements (123) (222)
Distributions from joint venture -- 498
Net withdrawals from (deposits to) restricted escrows 53 (47)
Net cash (used in) provided by investing activities (70) 229
Cash flows from financing activities:
Payments on mortgage notes payable (23) (21)
Distributions to partners (254) (1,961)
Loan costs paid -- (7)
Net cash used in financing activities (277) (1,989)
Net increase (decrease) in cash and cash equivalents 363 (1,139)
Cash and cash equivalents at beginning of period 697 1,836
Cash and cash equivalents at end of period $ 1,060 $ 697
Supplemental disclosure of cash flow information:
Cash paid for interest $ 408 $ 409
See Accompanying Notes to Consolidated Financial Statements
ANGELES OPPORTUNITY PROPERTIES, LTD.
Notes to Consolidated Financial Statements
December 31, 1998
NOTE A - ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
Organization: Angeles Opportunity Properties, Ltd. ("Partnership") is a
California limited partnership organized in June 1984 to operate and hold
residential and commercial real estate properties. The Partnership's general
partner is Angeles Realty Corporation II ("ARC II" or the "General Partner"),
which is a subsidiary of Apartment Investment and Management Company ("AIMCO")
(see "Note B"). The directors and officers of the General Partner also serve as
executive officers of AIMCO. The Partnership Agreement provides that the
Partnership will terminate on December 31, 2035, unless terminated prior to such
date. As of December 31, 1998, the Partnership operates two residential
properties located in Texas.
Principles of Consolidation: The consolidated financial statements of the
Partnership include its 99% limited partnership interests in New Lake Meadows LP
and Lakewood AOPL Ltd. The Partnership may remove the General Partner of each
of these 99% owned partnerships; therefore, the partnerships are controlled and
consolidated by the Partnership. All significant interpartnership balances have
been eliminated.
Joint Venture: The Partnership accounted for its 42.82% investment in a
property owned jointly with an affiliate of Angeles Mortgage Investment Trust
("AMIT") using the equity method of accounting (See "Note F").
Allocations to Partners: Allocations of Profits, Gains and Losses - In
accordance with the Partnership Agreement ("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.
Distributions - 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
applicable to the property; (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 in an amount equal to 3% of the aggregate disposition
prices of all real properties, mortgages or other investments sold (Initial
Incentive Interest); (iv) Fourth, to the Partners until the Limited Partners
have received distributions equal to their 4% (not compounded) Cumulative
Distribution, with certain Limited Partners receiving priority distributions
ranging from 2% to 6% per annum (not compounded); and (v) Fifth, thereafter, 76%
to the Partners in proportion to their interests and 24% to the General Partner
(Final Incentive Interest).
Depreciation: Depreciation is provided by the straight-line method over the
estimated lives of the investment properties and related personal property. For
Federal income tax purposes, the accelerated cost recovery method is used (1)
for real property over 18 years for additions after March 15, 1984, and before
May 9, 1985, and 19 years for additions after May 8, 1985, and before January 1,
1987, and (2) for personal property over 5 years for additions prior to January
1, 1987. As a result of the Tax Reform Act of 1986, for additions after
December 31, 1986, the alternative depreciation system is used for depreciation
of (1) real property additions over 40 years, and (2) personal property
additions over 6-20 years.
Cash and Cash Equivalents: Includes cash on hand and in banks, demand deposits,
money market funds, and certificates of deposit with original maturities less
than 90 days. At certain times, the amount of cash deposited at a bank may
exceed the limit on insured deposits.
Investment Properties: Investment properties consist of two apartment
complexes, which are stated at cost. Acquisition fees are capitalized as a cost
of real estate. In accordance with "Statement of Financial Accounting Standards
("SFAS") 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.
No adjustments for impairment of value were recorded in either of the years
ended December 31, 1998 or 1997.
Loan Costs: Loan costs of approximately $217,000 are included in other assets
in the accompanying consolidated balance sheet and are being amortized on a
straight-line basis over the lives of the loans. At December 31, 1998,
accumulated amortization is approximately $85,000.
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.
Leases: The Partnership generally leases apartment units for twelve-month terms
or less. The Partnership recognizes income as earned on its leases. In
addition, the 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.
Restricted Escrows:
Reserve Account - In 1993, a general reserve account was established in
conjunction with the refinancing of the Lake Meadows Apartments mortgage note
payable. These funds were earmarked for necessary repairs and replacements of
existing improvements, debt service, out-of-pocket expenses incurred for
ordinary and necessary administrative tasks, and payment of real property taxes
and insurance premiums. The Partnership was required to deposit net operating
income (as defined in the mortgage note) from the financed property to the
reserve account until the reserve account equaled $400 per apartment unit or
$38,400. At December 31, 1998, this reserve totaled approximately $44,000 which
includes interest earned on these funds.
Replacement Reserves - The Partnership maintains a replacement reserve with
the holder of the mortgage note payable on Lakewood Apartments. These funds are
available for the maintenance of the property. The balance at December 31, 1998
was approximately $150,000.
Segment Reporting: In June 1997, the Financial Accounting Standards Board
issued Statement of Financial Accounting Standards ("SFAS") No. 131, "Disclosure
about Segments of an Enterprise and Related Information" ("SFAS No. 131"), which
is effective for years beginning after December 15, 1997. SFAS No. 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 I" for required disclosures).
Advertising Costs: Advertising costs of approximately $53,000 in 1998 and
$51,000 in 1997 are charged to expense as incurred and are included in operating
expenses.
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.
Fair Value of Financial Instruments: 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 long term debt, after
discounting the scheduled loan payments to maturity, approximates its carrying
balance.
Reclassification: Certain reclassifications have been made to the 1997 balances
to conform to the 1998 presentation.
NOTE B - TRANSFER OF CONTROL
Pursuant to a series of transactions which closed on October 1, 1998 and
February 26, 1999, Insignia Financial Group, Inc. and Insignia Properties Trust
merged into AIMCO, 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 sole shareholder of the General Partner. The General Partner does
not believe that this transaction will have a material effect on the affairs and
operations of the Partnership.
NOTE C - MORTGAGE NOTES PAYABLE
The principle terms of mortgage notes payable are as follows:
Principal Monthly Principal
Balance At Payment Stated Balance
December 31, Including Interest Maturity Due At
Property 1998 Interest Rate Date Maturity
(in thousands) (in thousands)
Lake Meadows Apts.
1st mortgage $1,628 $ 13 7.83% 10/2003 $1,489
2nd mortgage (a) 54 (b) 7.83% 10/2003 54
Lakewood Apartments
1st mortgage (a) 3,750 23 7.33% 11/2003 3,750
5,432
Unamortized discount (18)
Totals $5,414 $ 36 $5,293
(a) Interest only payments.
(b) Monthly payment is less than $1,000.
The Partnership exercised an interest rate buy-down option for Lake Meadows when
the debt was refinanced in 1993, reducing the stated rate from 8.13% to 7.83%.
The fee for the interest rate reduction amounted to $35,000 and is being
amortized as a loan discount on the interest method over the life of the loan.
The discount fee is reflected as a reduction of the mortgage notes payable and
increases the effective rate of the debt to 8.13%.
In 1996, the Partnership refinanced the mortgage encumbering Lakewood
Apartments. The new mortgage indebtedness of $3,750,000 carries an interest
rate of 7.33% and has interest only payments until maturity at November, 2003.
Capitalized loan costs incurred for the refinancing were approximately $120,000
during the year ended December 31, 1996. In 1997, approximately $7,000 of
additional loan costs were paid in connection with the Lakewood refinancing.
These amounts are being amortized over the life of the loan.
The mortgage notes payable are nonrecourse and are secured by pledge of the
Partnership's rental properties and by pledge of revenues from the respective
rental 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 mortgage notes payable subsequent to December
31, 1998, are as follows (in thousands):
1999 $ 25
2000 27
2001 30
2002 32
2003 5,318
$5,432
NOTE D - 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 and Federal taxable income (in thousands, except unit data):
1998 1997
Net income as reported $ 323 $ 314
Add (deduct):
Depreciation differences 56 51
Unearned income 65 41
Miscellaneous 23 (4)
Income from Rolling Green -- (47)
Federal taxable income $ 467 $ 355
Federal taxable income per
limited partnership unit $37.18 $28.28
The following is a reconciliation between the Partnership's reported amounts and
Federal tax basis of net assets and liabilities (in thousands):
Net assets as reported $ 2,064
Land and buildings 199
Accumulated depreciation 609
Syndication and distribution costs 1,838
Other 92
Net assets - Federal tax basis $ 4,802
NOTE E - 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.
The Partnership Agreement provides for payments to affiliates for services and
as reimbursement of certain expenses incurred by affiliates on behalf of the
Partnership. The following transactions with the General Partner and its
affiliates were incurred in 1998 and 1997:
1998 1997
(in thousands)
Property management fees (included in operating expenses) $121 $117
Reimbursement for services of affiliates,
including approximately $1,000 and $11,000 of
construction services reimbursements in 1998
and 1997, respectively, (included in general and
administrative and operating expense and
investment properties) 75 94
In addition, during 1997, the Partnership paid approximately $5,500 to
affiliates of the General Partner for reimbursement of services related to the
Lakewood loan refinancing (see "Note C"). These charges have been capitalized
as loan costs, and will be amortized over the life of the loan.
During the years ended December 31, 1998 and 1997, affiliates of the General
Partner were entitled to receive 5% of gross receipts from all of the
Partnership's properties as compensation for providing property management
services. The Partnership paid to such affiliates approximately $121,000 and
$117,000 for the years ended December 31, 1998 and 1997 respectively.
An affiliate of the General Partner received reimbursements of accountable
administrative expenses amounting to approximately $75,000 and $94,000 for the
years ended December 31, 1998 and 1997, respectively.
On August 12, 1998, an affiliate of the General Partner (the "Purchaser")
commenced a tender offer for limited partnership interests in the Partnership.
The Purchaser offered to purchase up to 5,000 of the outstanding Units of
limited partnership interest in the Partnership at $325.00 per Unit, net to the
seller in cash. As a result of the tender offer, the Purchaser acquired 969 of
the outstanding limited partner units of the Partnership.
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.
NOTE F - 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"). On June 24, 1997, the Joint Venture sold its sole investment property
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 (approximately $4,000) was received in November 1997.
NOTE G - REAL ESTATE AND ACCUMULATED DEPRECIATION
Initial Cost
To Partnership
(in thousands)
Buildings Cost
and Related Capitalized
Personal Subsequent to
Description Encumbrances Land Property Acquisition
(in thousands) (in thousands)
Lake Meadows $1,664(1) $ 473 $1,584 $ 310
Lakewood 3,750 483 3,491 2,076
Totals $5,414 $ 956 $5,075 $2,386
(1) Net of an $18,000 unamortized discount
<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
(in thousands)
<S> <C> <C> <C> <C> <C> <C>
Lake Meadows $ 473 $1,894 $2,367 $ 667 3/31/88 5-40
Lakewood 483 5,567 6,050 1,544 11/01/89 5-40
Totals $ 956 $7,461 $8,417 $2,211
</TABLE>
The depreciable lives for buildings and building components are for 10 to 40
years. The depreciable lives for related personal property are for 5 to 7 years.
Reconciliation of "Real Estate and Accumulated Depreciation":
Years Ended December 31,
1998 1997
(in thousands)
Real Estate
Balance at beginning of year $8,294 $8,072
Property improvements 123 222
Balance at end of year $8,417 $8,294
Accumulated Depreciation
Balance at beginning of year $1,914 $1,627
Additions charged to expense 297 287
Balance at end of year $2,211 $1,914
The aggregate cost of the real estate for Federal income tax purposes at
December 31, 1998 and 1997 is approximately $8,616,000 and $8,496,000,
respectively. Accumulated depreciation for Federal income tax purposes at
December 31, 1998 and 1997 is approximately $1,602,000 and $1,362,000,
respectively.
NOTE H - DISTRIBUTIONS
Total cash distributed from operations was approximately $254,000 for the year
ended December 31, 1998. Total cash distributed during the year ended December
31, 1997, was approximately $1,961,000. This distribution consisted of
approximately $928,000 of proceeds from the refinancing of Lakewood Apartments
in 1996, approximately $498,000 from the 1997 sale of the joint venture
property, and approximately $535,000 from operations.
NOTE I - SEGMENT INFORMATION
Description of the types of products and services from which the 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 in the state of Texas. The
Partnership rents apartment units to people for terms that are typically twelve
months or less.
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 is
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 income
and expense not allocated to the reportable segment.
1998 Residential Other Totals
(in thousands)
Rental income $ 2,322 $ -- $ 2,322
Other income 126 27 153
Interest expense 440 -- 440
Depreciation 297 -- 297
General and administrative expense -- 173 173
Segment profit (loss) 469 (146) 323
Total assets 7,112 736 7,848
Capital expenditures for investment
properties 123 -- 123
1997 Residential Other Totals
(in thousands)
Rental income $ 2,244 $ -- $ 2,244
Other income 96 57 153
Interest expense 440 -- 440
Depreciation 287 -- 287
General and administrative expense -- 142 142
Equity in income of Joint Venture -- 4 4
Segment profit (loss) 395 (81) 314
Total assets 7,089 670 7,759
Capital expenditures for investment
properties 222 -- 222
NOTE J - 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 entities which were, at
the time, affiliates of Insignia ("Insignia 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. On June 25, 1998, the General Partner filed a motion seeking
dismissal of the action. In lieu of responding to the motion, the plaintiffs
have filed an amended complaint. The General Partner filed demurrers to the
amended complaint which were heard during February, 1999. No ruling on such
demurrers has been received. The General Partner does not anticipate that costs
associated with this case, if any, will be material to the Partnership's overall
operations.
In July 1998, a limited partner of the Partnership commenced an action in the
Circuit Court for Jackson County, Missouri entitled Bond Purchase LLC v. Angeles
Opportunity Properties, Ltd., et. al. The complaint claims that the Partnership
and an affiliate of the General Partner breached certain contractual and
fiduciary duties allegedly owed to the claimant and seeks damages and injunctive
relief. The General Partner does not anticipate that costs associated with this
case, if any, to be material to the Partnership's overall operations.
The Partnership is unaware of any other pending or outstanding litigation that
is not of a routine nature arising on the ordinary course of business.
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANT ON ACCOUNTING AND FINANCIAL
DISCLOSURES
None.
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE
WITH SECTION 16(A) OF THE EXCHANGE ACT
The names of the directors and executive officers of Angeles Realty Corporation
II ("ARC II"), the Partnership's General Partner, their ages and the nature of
all positions with ARC II presently held by them are as follows:
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 General
Partner since October 1, 1998. Mr. Foye has served as Executive Vice President
of Apartment Investment and Management Company ("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 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 direct form of compensation or remuneration was paid by the Partnership to
any officer or director of the General Partner. 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, reimbursements and other payments have been made to the
Partnership's General Partner and its affiliates, as described in "Item 12"
below.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Except as noted below, no person or entity was known by the Registrant to be the
beneficial owner of more than 5% of the Limited Partnership Units of the
Registrant as of December 31, 1998.
Entity Number of Units Percentage
Insignia Properties LP 405 3.26%
Cooper River Properties, LLC 969 7.80%
Insignia Properties LP and Cooper River Properties LLC are indirectly ultimately
owned by AIMCO. Their business address is 55 Beattie Place, Greenville, SC
29601.
No director or officer of the General Partner owns any Units.
The Partnership knows of no contractual arrangements, the operation of 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 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 General Partner an amount equal to the accrued
and unpaid management fee described in Article 10 of the Agreement and to
purchase the 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 General Partner's capital account and (ii) the fair market
value of the share of Distributable Net Proceeds to which the 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.
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 General Partner. AIMCO and its affiliates
currently own 11.06% of the limited partnership interests in the Partnership.
AIMCO is presently considering whether it will engage in an exchange offer for
additional 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 partnership 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.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
No transactions have occurred between the Partnership and any officer or
director of ARC II.
The Partnership has no employees and is dependent on the General Partner and its
affiliates for the management and administration of all Partnership activities.
The Partnership Agreement provides for payments to affiliates for services and
as reimbursement of certain expenses incurred by affiliates on behalf of the
Partnership. The following transactions with the General Partner and its
affiliates were incurred in 1998 and 1997:
1998 1997
(in thousands)
Property management fees $121 $117
Reimbursement for services of affiliates 75 94
In addition, during 1997, the Partnership paid approximately $5,500 to
affiliates of the General Partner for reimbursement of services related to the
Lakewood loan refinancing (see "Note C"). These charges have been capitalized
as loan costs, and will be amortized over the life of the loan.
During the years ended December 31, 1998 and 1997, affiliates of the General
Partner were entitled to receive 5% of gross receipts from all of the
Partnership's properties as compensation for providing property management
services. The Partnership paid to such affiliates approximately $121,000 and
$117,000 for the years ended December 31, 1998 and 1997 respectively.
An affiliate of the General Partner received reimbursements of accountable
administrative expenses amounting to approximately $75,000 and $94,000 for the
years ended December 31, 1998 and 1997, respectively.
On August 12, 1998, an affiliate of the General Partner (the "Purchaser")
commenced a tender offer for limited partnership interests in the Partnership.
The Purchaser offered to purchase up to 5,000 of the outstanding Units of
limited partnership interest in the Partnership at $325.00 per Unit, net to the
seller in cash. As a result of the tender offer, the Purchaser acquired 969 of
the outstanding limited partner units of the Partnership.
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.
ITEM 13. 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 filed during the fourth quarter of 1998:
Current Report on Form 8-K dated October 1, 1998 and 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 has
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
ANGELES OPPORTUNITY PROPERTIES, LTD.
(A California Limited Partnership)
By: Angeles Realty Corporation II
Its 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 29, 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 on the date
indicated.
/s/ Patrick J. Foye Executive Vice President Date: March 29, 1999
Patrick J. Foye and Director
/s/ Timothy R. Garrick Vice President - Accounting Date: March 29, 1999
Timothy R. Garrick and Director
ANGELES OPPORTUNITY PROPERTIES, LTD.
EXHIBIT INDEX
Exhibit Number Description of Exhibit
2.1 Agreement and Plan of Merger, dated as of October 1, 1998, by
and between AIMCO and IPT, filed in Form 8-K on October 16,
1998.
3.1 Amended Certificate and Agreement of the Limited Partnership
filed in the Partnership's prospectus dated July 7, 1986 which
is incorporated herein by reference.
10.1 Purchase and Sale Agreement with Exhibits - Lake Meadows
Apartments filed in Form 8K dated March 31, 1988, and is
incorporated herein by reference.
10.2 Purchase and Sale Agreement with Exhibits - Oquendo Warehouses
filed in form 8K dated April 26, 1988, and is incorporated
herein by reference.
10.3 Joint Venture Agreement - Lakewood Project Joint Venture filed
in From 10K dated December 31, 1990, and is incorporated herein
by reference.
10.4 General Partnership Agreement - AOPL-AMIT Rolling Greens Joint
Venture dated December 28, 1989, filed in Form 10K dated
December 31, 1990, and is incorporated herein by reference.
10.5 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 8K dated December 31, 1992, which is
incorporated herein by reference.
10.6 Contracts related to the refinancing of debt.
(a) First Deeds of Trust and Security Agreements dated September
30, 1993 between New Lake Meadows, L.P. and Lexington
Mortgage Company, a Virginia Corporation, securing Lake
Meadows Apartments.
(b) Second Deeds of Trust and Security Agreements dated
September 30, 1993 between New Lake Meadows, L.P. and
Lexington Mortgage Company, a Virginia Corporation, securing
Lake Meadows Apartments.
(c) First Assignments of Leases and Rents dated September 30,
1993 between New Lake Meadows, L.P. and Lexington Mortgage
Company, a Virginia Corporation, securing Lake Meadows
Apartments.
(d) Second Assignments of Leases and Rents dated September 30,
1993 between New Lake Meadows, L.P. and Lexington Mortgage
Company, a Virginia Corporation, securing Lake Meadows
Apartments.
(e) First Deeds of Trust Notes dated September 30, 1993 between
New Lake Meadows, L.P. and Lexington Mortgage Company,
relating to Lake Meadows Apartments.
(f) Second Deeds of Trust Notes dated September 30, 1993 between
New Lake Meadows, L.P. and Lexington Mortgage Company,
relating to Lake Meadows Apartments.
10.7 Commercial Contract to Buy Real Estate between Angeles
Opportunity Properties, Ltd. and Paul Willet, Mark Nagle and Kim
Nagle dated August 1, 1994, documenting the sale of Oquendo
Warehouse located at 3550 West Quail Avenue.
10.8 Contract of Sale between Angeles Opportunity Properties, Ltd.
and Roberts Ranch Venture L.P. dated March 30, 1995, documenting
the sale of Oquendo Warehouse located at 3655 West Quail and
3600 West Oquendo.
10.9 Multifamily Note dated November 1, 1996, between Lakewood AOPL
and Lehman Brothers Holdings Inc., a Delaware Corporation,
securing Lakewood Apartments.
27 Financial Data Schedule
99.1 Partnership prospectus filed in registration statement dated
June 26, 1987, which is incorporated herein by reference.
99.2 Agreement of Limited Partnership for AOP GP Limited Partnership,
L.P. and Angeles Opportunity Properties, Ltd. entered into on
September 9, 1993.
99.3 Agreement of Limited Partnership for New Lake Meadows, L.P.
between AOP GP Limited Partnership, L.P. and Angeles Opportunity
Properties, Ltd. entered into on September 9, 1993.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from Angeles
Opportunity Properties, Ltd. 1998 Year-End 10-KSB and is qualified in its
entirety by reference to such 10-KSB filing.
</LEGEND>
<CIK> 0000789282
<NAME> ANGELES OPPORTUNITY PROPERTIES, LTD.
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> DEC-31-1998
<CASH> 1,060
<SECURITIES> 0
<RECEIVABLES> 254
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0<F1>
<PP&E> 8,417
<DEPRECIATION> (2,211)
<TOTAL-ASSETS> 7,848
<CURRENT-LIABILITIES> 0<F1>
<BONDS> 5,414
0
0
<COMMON> 0
<OTHER-SE> 2,064
<TOTAL-LIABILITY-AND-EQUITY> 7,848
<SALES> 0
<TOTAL-REVENUES> 2,475
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 2,152
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 440
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 323
<EPS-PRIMARY> 25.75<F2>
<EPS-DILUTED> 0
<FN>
<F1>Registrant has an unclassified balance sheet.
<F2>Multiplier is 1.
</FN>
</TABLE>
