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, 2000
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
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 (I.R.S. Employer
incorporation or organization) Identification No.)
55 Beattie Place, PO Box 1089
Greenville, South Carolina 29602
(Address of principal executive offices)
(864) 239-1000
(Issuer's telephone number)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the 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___
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
a)
ANGELES OPPORTUNITY PROPERTIES, LTD.
CONSOLIDATED BALANCE SHEET
(Unaudited)
(in thousands, except unit data)
June 30, 2000
<TABLE>
<CAPTION>
Assets
<S> <C>
Cash and cash equivalents $ 112
Receivables and deposits 227
Restricted escrows 83
Other assets 115
Investment properties:
Land $ 1,018
Buildings and related personal property 7,951
8,969
Less accumulated depreciation (2,704) 6,265
$ 6,802
Liabilities and Partners' (Deficit) Capital
Liabilities
Accounts payable $ 27
Tenant security deposit liabilities 28
Accrued property taxes 124
Other liabilities 109
Mortgage notes payable 5,384
Partners' (Deficit) Capital:
General partner $ (121)
Limited partners (12,425 units issued and
outstanding) 1,251 1,130
$ 6,802
</TABLE>
See Accompanying Notes to Consolidated Financial Statements
<PAGE>
b)
ANGELES OPPORTUNITY PROPERTIES, LTD.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(in thousands, except unit data)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
2000 1999 2000 1999
Revenues:
<S> <C> <C> <C> <C>
Rental income $ 586 $ 586 $ 1,153 $ 1,173
Other income 38 30 61 65
Total revenues 624 616 1,214 1,238
Expenses:
Operating 259 230 492 464
General and administrative 58 42 86 81
Depreciation 86 73 171 150
Interest 110 110 214 220
Property taxes 54 61 117 114
Total expenses 567 516 1,080 1,029
Net income $ 57 $ 100 $ 134 $ 209
Net income allocated to general
partner (1%) $ 1 $ 1 $ 1 $ 2
Net income allocated to limited
partners (99%) 56 99 133 207
$ 57 $ 100 $ 134 $ 209
Net income per limited
partnership unit $ 4.51 $ 7.97 $ 10.70 $ 16.66
Distributions per limited
partnership unit $ 45.23 $ -- $ 71.55 $ --
</TABLE>
See Accompanying Notes to Consolidated Financial Statements
<PAGE>
c)
ANGELES OPPORTUNITY PROPERTIES, LTD.
CONSOLIDATED STATEMENT OF CHANGES IN PARTNERS' (DEFICIT) CAPITAL
(Unaudited)
(in thousands, except unit data)
<TABLE>
<CAPTION>
Limited
Partnership General Limited
Units Partner Partners Total
<S> <C> <C> <C> <C>
Original capital contributions 12,425 $ 1 $12,425 $12,426
Partners' (deficit) capital at
December 31, 1999 12,425 $ (104) $ 2,007 $ 1,903
Distributions to partners -- (18) (889) (907)
Net income for the six months
ended June 30, 2000 -- 1 133 134
Partners' (deficit) capital
at June 30, 2000 12,425 $ (121) $ 1,251 $ 1,130
</TABLE>
See Accompanying Notes to Consolidated Financial Statements
<PAGE>
d)
ANGELES OPPORTUNITY PROPERTIES, LTD.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
<TABLE>
<CAPTION>
Six Months Ended
June 30,
2000 1999
Cash flows from operating activities:
<S> <C> <C>
Net income $ 134 $ 209
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 171 150
Amortization of loan costs and discount 17 17
Change in accounts:
Receivables and deposits 146 (3)
Other assets (6) (22)
Accounts payable 5 1
Tenant security deposit liabilities 1 1
Accrued property taxes (121) (119)
Other liabilities (98) (9)
Net cash provided by operating activities 249 225
Cash flows from investing activities:
Property improvements and replacements (55) (122)
Net (deposits to) withdrawals from restricted escrows (47) 33
Net cash used in investing activities (102) (89)
Cash flows from financing activities:
Payments on mortgage notes payable (13) (12)
Distributions to partners (907) --
Net cash used in financing activities (920) (12)
Net (decrease) increase in cash and cash equivalents (773) 124
Cash and cash equivalents at beginning of period 885 1,060
Cash and cash equivalents at end of period $ 112 $ 1,184
Supplemental disclosure of cash flow information:
Cash paid for interest $ 202 $ 203
</TABLE>
See Accompanying Notes to Consolidated Financial Statements
<PAGE>
e)
ANGELES OPPORTUNITY PROPERTIES, LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note A - Basis of Presentation
The accompanying unaudited consolidated financial statements of Angeles
Opportunity Properties, Ltd. (the "Partnership" or the "Registrant") 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, 2000 are not
necessarily indicative of the results that may be expected for the fiscal year
ending December 31, 2000. For further information, refer to the consolidated
financial statements and footnotes thereto included in the Partnership's Annual
Report on Form 10-KSB for the fiscal year ended December 31, 1999.
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 general
partner of these consolidated partnerships is the General Partner. The
Partnership may remove the general partner of both of these 99% owned
partnerships; therefore, the partnerships are controlled and consolidated by the
Partnership. All significant interpartnership balances have been eliminated.
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 Apartment Investment and Management Company ("AIMCO"), a publicly
traded real estate investment trust, with AIMCO being the surviving corporation
(the "Insignia Merger"). As a result, AIMCO acquired 100% ownership interest in
the General Partner. The General Partner does not believe that this transaction
has had or will have a material effect on the affairs and operations of the
Partnership.
Note C - 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 certain payments to affiliates for
services and 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, 2000 and 1999:
2000 1999
(in thousands)
Property management fees (included in
operating expenses) $ 61 $ 62
Reimbursement for services of affiliates
(included in general and administrative expenses
and investment properties) 31 26
Due from General Partner -- 15
<PAGE>
During the six months ended June 30, 2000 and 1999, affiliates of the General
Partner were entitled to receive 5% of gross receipts from both of the
Partnership's properties as compensation for providing property management
services. The Partnership paid to such affiliates approximately $61,000 and
$62,000 for the six months ended June 30, 2000 and 1999, respectively.
An affiliate of the General Partner received reimbursements of accountable
administrative expense amounting to approximately $31,000 and $26,000 for the
six months ended June 30, 2000 and 1999, respectively.
AIMCO and its affiliates currently own 5,209 limited partnership units in the
Partnership representing 41.92% of the outstanding units. A number of these
units were acquired pursuant to tender offers made by AIMCO or its affiliates.
It is possible that AIMCO or its affiliates will make one or more additional
offers to acquire additional limited partnership interests in the Partnership
for cash or in exchange for units in the operating partnership of AIMCO. Under
the Partnership Agreement, unitholders holding a majority of the Units are
entitled to take action with respect to a variety of matters. As a result of its
ownership of 41.92% of the outstanding units, AIMCO is in a position to
significantly influence all voting decisions with respect to the Registrant.
When voting on matters, AIMCO would in all likelihood vote the Units it acquired
in a manner favorable to the interest of the General Partner because of their
affiliation with the General Partner.
Note D - Distributions
During the six months ended June 30, 2000, distributions of approximately
$898,000 (approximately $889,000 to the limited partners or $71.55 per limited
partnership unit) were paid to the partners from cash from operations. In
conjunction with the transfer of funds from certain majority-owned sub-tier
limited partnerships to the Partnership, approximately $9,000 was distributed to
the general partner of the majority-owned sub-tier limited partnerships. There
were no distributions during the six months ended June 30, 1999.
Note E - Segment Reporting
Description of the types of products and services from which the reportable
segment derives its revenues: 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 tenants for terms that are typically twelve months or less.
Measurement of segment profit or loss: The Partnership evaluates performance
based on segment profit (loss) before depreciation. The accounting policies of
the reportable segment are the same as those of the Partnership as described in
the Partnership's Annual Report on Form 10-KSB for the year ended December 31,
1999.
Factors management used to identify the enterprise's reportable segments: 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.
<PAGE>
Segment information for the three and six month periods ended June 30, 2000 and
1999, is shown in the tables below. The "Other" column includes Partnership
administration related items and income and expense not allocated to the
reportable segments.
Three months ended June 30, 2000 Residential Other Totals
(in thousands)
Rental income $ 586 $ -- $ 586
Other income 37 1 38
Interest expense 110 -- 110
Depreciation 86 -- 86
General and administrative expense -- 58 58
Segment profit (loss) 114 (57) 57
Six months ended June 30, 2000 Residential Other Totals
(in thousands)
Rental income $ 1,153 $ -- $ 1,153
Other income 59 2 61
Interest expense 214 -- 214
Depreciation 171 -- 171
General and administrative expense -- 86 86
Segment profit (loss) 218 (84) 134
Total assets 6,764 38 6,802
Capital expenditures for
investment properties 55 -- 55
Three months ended June 30, 1999 Residential Other Totals
(in thousands)
Rental income $ 586 $ -- $ 586
Other income 23 7 30
Interest expense 110 -- 110
Depreciation 73 -- 73
General and administrative expense -- 42 42
Segment profit (loss) 135 (35) 100
Six months ended June 30, 1999 Residential Other Totals
(in thousands)
Rental income $ 1,173 $ -- $ 1,173
Other income 50 15 65
Interest expense 220 -- 220
Depreciation 150 -- 150
General and administrative expense -- 81 81
Segment profit (loss) 275 (66) 209
Total assets 7,125 797 7,922
Capital expenditures for
investment properties 122 -- 122
Note F - 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, its General Partner and several of their affiliated
partnerships and corporate entities. The action 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 of interests in certain general partner
entities by Insignia Financial Group, Inc. and entities which were, at one time,
affiliates of Insignia; past tender offers by the Insignia affiliates to acquire
limited partnership units; the management of partnerships by the Insignia
affiliates; and the Insignia Merger. The plaintiffs seek 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 February 1999.
Pending the ruling on such demurrers, settlement negotiations commenced. On
November 2, 1999, the parties executed and filed a Stipulation of Settlement,
settling claims, subject to final court approval, on behalf of the Partnership
and all limited partners who owned units as of November 3, 1999. Preliminary
approval of the settlement was obtained on November 3, 1999 from the Court, at
which time the Court set a final approval hearing for December 10, 1999. Prior
to the December 10, 1999 hearing, the Court received various objections to the
settlement, including a challenge to the Court's preliminary approval based upon
the alleged lack of authority of prior lead counsel to enter the settlement. On
December 14, 1999, the General Partner and its affiliates terminated the
proposed settlement. In February 2000, counsel for some of the named plaintiffs
filed a motion to disqualify plaintiff's lead and liaison counsel who negotiated
the settlement. On June 27, 2000, the Court entered an order disqualifying them
from the case. The Court will entertain applications for lead counsel which must
be filed by August 4, 2000. The Court has scheduled a hearing on August 21, 2000
to address the issue of appointing lead counsel. The General Partner does not
anticipate that costs associated with this case will 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.
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS
The matters discussed in this Form 10-QSB contain certain forward-looking
statements and involve risks and uncertainties (including changing market
conditions, competitive and regulatory matters, etc.) detailed in the
disclosures contained in this Form 10-QSB and the other filings with the
Securities and Exchange Commission made by the Partnership from time to time.
The discussions of the Partnership'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 Partnership'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.
The Partnership's investment properties consist of two apartment complexes. The
following table sets forth the average occupancy for each of the properties for
the six months ended June 30, 2000 and 1999:
Average Occupancy
Property 2000 1999
Lake Meadows Apartments 98% 97%
Garland, Texas
Lakewood Apartments (1) 90% 94%
Tomball, Texas
(1) Occupancy at Lakewood Apartments decreased due to new apartments
constructed in the area and a layoff by a major employer.
Results of Operations
The Partnership had net income of approximately $134,000 for the six months
ended June 30, 2000, as compared to net income of approximately $209,000 for the
six months ended June 30, 1999. The Partnership had net income of approximately
$57,000 for the three months ended June 30, 2000, as compared to net income of
approximately $100,000 for the three months ended June 30, 1999. The decrease in
net income for the six months ended June 30, 2000 was due to a decrease in total
revenues and an increase in total expenses. For the three months ended June 30,
2000 the decrease in net income was due to an increase in total expenses,
slightly offset by an increase in total revenues. The decrease in total revenues
for the six month period was due to reduced rental income. Rental income for the
six month period decreased due to reduced occupancy at Lakewood Apartments
partially offset by increased rental rates at Lake Meadows Apartments. For the
three month period, total revenues increased due to increased other income,
while rental income remained constant. The increase in other income for the
three month period was due to increased interest income and increased vending
and cable television income.
Total expenses for the three and six month periods ended June 30, 2000 increased
primarily due to increased operating, depreciation, and general and
administrative expenses. In addition, general and administrative expense
increased during the three month period ended June 30, 2000. The increase in
operating expenses is primarily due to increases in maintenance expenses, salary
increases and commissions and bonuses paid primarily at Lakewood Apartments. The
increase in depreciation expense is primarily attributable to the increase in
depreciable assets put into service in the last twelve months. The increase in
general and administrative expenses is primarily attributable to an increase in
professional fees and general partner reimbursements partially offset by reduced
legal fees. Included in general and administrative expenses for the three and
six months ended June 30, 2000 and 1999 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.
As part of the ongoing business plan of the Partnership, the General Partner
monitors the rental market environment 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.
Liquidity and Capital Resources
At June 30, 2000, the Partnership had cash and cash equivalents of approximately
$112,000 compared to approximately $1,184,000 for the corresponding period in
1999. The net decrease in cash and cash equivalents was approximately $773,000
from the year ended December 31, 1999, and is due to approximately $920,000 and
$102,000 of cash used in financing and investing activities, respectively,
partially offset by approximately $249,000 of cash provided by operating
activities. Cash used in financing activities consisted of distributions to the
partners and, to a lesser extent, payments of principal made on the mortgage
encumbering Lake Meadows Apartments. Cash used in investing activities consisted
of property improvements and replacements and net deposits to restricted escrows
maintained by the mortgage lenders. 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 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. Capital improvements for
each of the Partnership's properties are detailed below.
Lake Meadows Apartments
Approximately $65,000 was budgeted for capital improvements for the year 2000 at
Lake Meadows Apartments consisting primarily of carpet and vinyl replacement,
interior decorations, parking lot improvements, and structural improvements.
During the six months ended June 30, 2000, the Partnership completed
approximately $19,000 of such budgeted capital improvements at Lake Meadows
Apartments, consisting primarily of carpet and vinyl replacement, appliances,
and structural upgrades. These improvements were funded from operating cash flow
and replacement reserves.
Lakewood Apartments
Approximately $93,000 was budgeted for capital improvements for the year 2000 at
Lakewood Apartments consisting primarily of carpet and tile replacement, air
conditioning unit replacement, structural upgrades, and appliance replacements.
During the six months ended June 30, 2000, the Partnership completed
approximately $36,000 of such budgeted capital improvements at the property,
consisting primarily of carpet and tile replacements, appliance replacements,
air conditioning unit replacements, and office equipment. These improvements
were funded from operating cash flow.
The additional capital expenditures will be incurred only to the extent of cash
available from operations and from the Partnership's reserves. To the extent
that such budgeted 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 $5,384,000, net of discount, is interest only
(with respect to $3,750,000 of such indebtedness) or is being amortized over 343
months (with respect to $1,643,000 of such indebtedness) with in both instances
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.
During the six months ended June 30, 2000, distributions of approximately
$898,000 (approximately $889,000 to the limited partners or $71.55 per limited
partnership unit) were paid to the partners consisting of cash from operations.
In conjunction with the transfer of funds from certain majority-owned sub-tier
limited partnerships to the Partnership, approximately $9,000 was distributed to
the general partner of the majority-owned sub-tier limited partnerships. There
were no distributions during the six months ended June 30, 1999. The
Partnership's distribution policy is reviewed on a semi-annual basis. Future
cash distributions will depend on the levels of net cash generated from
operations, the availability of cash reserves, and the timing of debt
maturities, refinancings, and/or property sales. 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 for the remainder of 2000 or subsequent periods.
<PAGE>
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEDINGS
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, its General Partner and several of their affiliated
partnerships and corporate entities. The action 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 of interests in certain general partner
entities by Insignia Financial Group, Inc. and entities which were, at one time,
affiliates of Insignia; past tender offers by the Insignia affiliates to acquire
limited partnership units; the management of partnerships by the Insignia
affiliates; and the Insignia Merger. The plaintiffs seek 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 February 1999.
Pending the ruling on such demurrers, settlement negotiations commenced. On
November 2, 1999, the parties executed and filed a Stipulation of Settlement,
settling claims, subject to final court approval, on behalf of the Partnership
and all limited partners who owned units as of November 3, 1999. Preliminary
approval of the settlement was obtained on November 3, 1999 from the Court, at
which time the Court set a final approval hearing for December 10, 1999. Prior
to the December 10, 1999 hearing, the Court received various objections to the
settlement, including a challenge to the Court's preliminary approval based upon
the alleged lack of authority of prior lead counsel to enter the settlement. On
December 14, 1999, the General Partner and its affiliates terminated the
proposed settlement. In February 2000, counsel for some of the named plaintiffs
filed a motion to disqualify plaintiff's lead and liaison counsel who negotiated
the settlement. On June 27, 2000, the Court entered an order disqualifying them
from the case. The Court will entertain applications for lead counsel which must
be filed by August 4, 2000. The Court has scheduled a hearing on August 21, 2000
to address the issue of appointing lead counsel. The General Partner does not
anticipate that costs associated with this case will be material to the
Partnership's overall operations.
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, 2000.
<PAGE>
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/Patrick J. Foye
Patrick J. Foye
Executive Vice President
By: /s/Martha L. Long
Martha L. Long
Senior Vice President
and Controller
Date:
