FORM 10-QSB--QUARTERLY OR TRANSITIONAL REPORT UNDER SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
QUARTERLY OR TRANSITIONAL REPORT
U.S. Securities and Exchange Commission
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended June 30, 1998
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from.........to.........
Commission file number 0-15547
ANGELES INCOME PROPERTIES, LTD. V
(Exact name of small business issuer as specified in its charter)
California 95-4049903
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
One Insignia Financial Plaza, P.O. Box 1089
Greenville, South Carolina 29602
(Address of principal executive offices)
(864) 239-1000
(Issuer's telephone number)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes X No
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
ANGELES INCOME PROPERTIES, LTD. V
STATEMENT OF NET LIABILITIES IN LIQUIDATION
(Unaudited)
June 30, 1998
(in thousands)
Assets
Cash and cash equivalents $ 15
Receivables and deposits 80
Investment property 3,243
3,338
Liabilities
Accounts payable 28
Tenant security deposit liabilities 31
Accrued interest 2,835
Other liabilities 93
Mortgage notes payable, $2,198 in default 4,743
Estimated costs during the period of
liquidation (Note A) 400
8,130
Net liabilities in liquidation (Note A) $(4,792)
See Accompanying Notes to Financial Statements
ANGELES INCOME PROPERTIES, LTD. V
STATEMENTS OF CHANGES IN NET LIABILITIES IN LIQUIDATION
(Unaudited)
(in thousands)
Six Months Ended
June 30,
1998 1997
Net liabilities in liquidation at beginning of period $(4,355) $(3,824)
Changes in net liabilities in liquidation
attributed to:
Decrease in cash and cash equivalents (25) (88)
(Decrease) increase in receivables and deposits (4) 4
Increase in other assets -- 18
Increase (decrease) in investment property 24 (136)
(Increase) decrease in accounts payable (10) 3
Increase in tenant security deposit liabilities (2) (2)
Increase in accrued interest (412) (346)
Increase in other liabilities (13) (3)
Decrease in mortgage notes payable 24 22
(Increase) decrease in estimated costs during the period
period of liquidation (19) 316
Net liabilities in liquidation at end of period $(4,792) $(4,036)
See Accompanying Notes to Financial Statements
ANGELES INCOME PROPERTIES, LTD. V
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
NOTE A - BASIS OF PRESENTATION
As of July 1, 1996, Angeles Income Properties, Ltd. V (the "Partnership")
adopted the liquidation basis of accounting. The Partnership has had
significant recurring operating losses and continues to suffer from inadequate
liquidity. The Partnership is in default on recourse indebtedness and does not
generate sufficient cash flows to meet current operating requirements. In
addition, there are no other capital resources available to the Partnership.
Until November 1995, the Partnership had a recourse first mortgage note payable
to Angeles Mortgage Investment Trust ("AMIT") in the amount of $1,800,000 plus
accrued interest on University Park Center - Phase IV that was in default due to
nonpayment of interest. In May 1995, AMIT initiated foreclosure proceedings and
acquired the property in a sheriff's sale, subject to Minnesota law of one year
right of redemption, leaving a deficiency judgment. In November 1995, the
Partnership granted to AMIT Deeds in Lieu of Foreclosure on University Park
Center Phase I and II and agreed to waive the right of redemption on Phase IV.
The Partnership had a non-recourse mortgage of $850,000 secured by University
Park Center - Phase III which was in default due to nonpayment of interest. The
lender foreclosed on University Park Center - Phase III in 1996.
The Partnership had a nonrecourse second mortgage note payable to AMIT, in the
amount of $1,720,000 plus accrued interest secured by Springdale Lake Estates
Mobile Home Park that was in default due to nonpayment upon maturity. On April
11, 1996, a formal demand for payment of the unpaid principal balance and
accrued interest was received from AMIT for the debt secured by Springdale Lake
Estates Mobile Home Park. Payment was not made and AMIT foreclosed on the
property on August 15, 1996.
The Partnership has a second mortgage payable to AMIT in the amount of
$2,000,000 which is secured by Southgate Village Apartments. This indebtedness
is in default due to nonpayment upon maturity and is recourse to the
Partnership. On February 29, 1996, a formal demand for payment of the unpaid
principal balance and accrued interest was received from AMIT for the debt
secured by Southgate Village Apartments. On June 12, 1996, AMIT filed a
Complaint For Foreclosure and Other Relief. The Partnership entered into a
forbearance agreement with AMIT, effective July 1, 1996, which provides that
surplus cash be deposited into a separate account on which the Partnership has
granted AMIT a first priority lien. In exchange, AMIT agrees to refrain from
appointing a receiver for the property. Angeles Realty Corporation II (the
"General Partner") does not intend to contest the foreclosure and anticipates
that this property will be lost in 1998 through foreclosure.
The Partnership is presently paying non-debt related expenses of the property
and is current on its first mortgage note payable. However, the debt to Angeles
Acceptance Pool, L.P. ("AAP") of approximately $198,000 matured in November 1997
and the Partnership does not have the ability to satisfy the indebtedness, which
is subordinated to the AMIT debt. At this time, the General Partner believes
the equity in Southgate Village Apartments is not sufficient to retire the AMIT
debt, therefore, the General Partner expects to transfer the Partnership's
interest in Southgate Village Apartments to AMIT. These transactions are
anticipated to occur during 1998. The General Partner does not expect to contest
any of these proceedings. The General Partner does not have any other plans to
remedy the liquidity problems the Partnership is experiencing.
The Partnership does not intend to purchase any additional properties and the
General Partner has decided to terminate the Partnership upon foreclosure of the
final property.
As a result of the decision to liquidate the Partnership, the Partnership
changed its basis of accounting for its financial statements on July 1, 1996,
from the going concern basis of accounting to the liquidation basis of
accounting in accordance with generally accepted accounting principles.
Consequently, assets have been valued at estimated realizable value (including
subsequent actual transactions described below) and liabilities are presented at
their estimated settlement amounts, including estimated costs associated with
carrying out the liquidation. The valuation of assets and liabilities
necessarily requires many estimates and assumptions and there are substantial
uncertainties in carrying out the liquidation. The actual realization of assets
and settlement of liabilities could be higher or lower than amounts indicated
and is based upon the General Partner's estimates as of the date of the
financial statements.
The statement of net liabilities in liquidation as of June 30, 1998, includes
approximately $400,000 of costs, net of income, that the General Partner
estimates will be incurred during the period of liquidation based upon the
assumption that the liquidation process will be completed by December 31, 1998.
These costs include anticipated legal fees, administrative expenses, and loss
from property operations. Because the success in realization of assets and the
settlement of liabilities is based on the General Partner's best estimates, the
liquidation period may be shorter than projected or it may be extended beyond
the projected period.
NOTE B - TRANSACTIONS WITH AFFILIATED PARTIES
The Partnership has no employees and is dependent on the General Partner and its
affiliates for the management and administration of all partnership activities.
Effective February 25, 1998, the General Partner became wholly-owned by Insignia
Properties Trust ("IPT"), an affiliate of Insignia Financial Group, Inc.
("Insignia"). On February 25, 1998, the former owner of the Managing General
Partner, MAE GP Corporation ("MAE GP"), an affiliate of Insignia, was merged
into IPT. The Partnership Agreement provides for payments to affiliates for
services and as reimbursement of certain expenses incurred by affiliates on
behalf of the Partnership.
The following expenses were paid or accrued to the General Partner and
affiliates during the six months ended June 30, 1998 and 1997 (in thousands):
1998 1997
Property management fees (included in operating expenses) $21 $20
Reimbursement for services of affiliates (included in
general and administrative expenses) 28 26
For the period from January 1, 1997, to August 31, 1997, the Partnership insured
its properties under a master policy through an agency affiliated with the
General Partner, but 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 payments on
these obligations from the agent. The amount of the Partnership's insurance
premiums that accrued to the benefit of the affiliate of the General Partner by
virtue of the agent's obligations is not significant.
On March 17, 1998, Insignia entered into an agreement to merge its national
residential property management operations, and its controlling interest in IPT,
with Apartment Investment and Management Company ("AIMCO"), a publicly traded
real estate investment trust. The closing, which is anticipated to happen in
September or October of 1998, is subject to customary conditions, including
government approvals and the approval of Insignia's shareholders. If the
closing occurs, AIMCO will then control the General Partner of the Partnership.
AMIT currently holds a note receivable from the Partnership in the total
principal amount of $2,000,000 secured by Southgate Village Apartments. This
debt is in default at June 30, 1998. Total interest incurred on this financing
was approximately $402,000 and $221,000 for the six months ended June 30, 1998
and 1997, respectively. Accrued interest was approximately $2,700,000 at June
30, 1998.
In November 1992, MAE GP acquired 1,675,113 Class B Common Shares of AMIT. The
terms of the Class B Shares provide that they are convertible, in whole or in
part, into Class A Common Shares on the basis of one Class A Share for every 49
Class B Shares (however, in connection with the settlement agreement described
in the following paragraph, MAE GP has agreed not to convert the Class B Shares
so long as AMIT's option is outstanding). These Class B Shares entitle the
holder to receive 1% of the distributions of net cash distributed by AMIT
(however, in connection with the settlement agreement described in the following
paragraph, MAE GP agreed to waive its right to receive dividends and
distributions so long as AMIT's option is outstanding). The holder of the Class
B Shares is also entitled to vote on the same basis as the holders of Class A
Shares, providing the holder with approximately 39% of the total voting power of
AMIT (unless and until converted to Class A Shares, in which case the percentage
of the vote controlled represented by such shares would approximate 1.3% of the
total voting power of AMIT).
As part of a settlement of certain disputes with AMIT, MAE GP granted to AMIT an
option to acquire the Class B Shares owned by it. This option can be exercised
at the end of 10 years or when all loans made by AMIT to partnerships which were
affiliated with MAE GP as of November 9, 1994 (which is the date of execution of
a definitive Settlement Agreement) have been paid in full. In connection with
such settlement, AMIT delivered to MAE GP cash in the sum of $250,000 at closing
(which occurred April 14, 1995) as payment for the option. If and when the
option is exercised, AMIT will be required to remit to MAE GP an additional
$94,000.
Simultaneously with the execution of the option and as part of the settlement,
MAE GP also executed an irrevocable proxy in favor of AMIT, which provides that
the holder of the Class B Shares is permitted to vote those shares on all
matters except those involving transactions between AMIT and MAE GP affiliated
borrowers or the election of any MAE GP affiliate as an officer or trustee of
AMIT. With respect to such matters, the trustees of AMIT are required to vote
(pursuant to the irrevocable proxy) the Class B Shares (as a single block) in
the same manner as a majority of the Class A Shares are voted (to be determined
without consideration of the votes of "Excess Class A Shares" (as defined in
Section 6.13 of AMIT's Declaration of Trust)).
Between its acquisition of the Class B Shares (in November 1992) and March 31,
1995, MAE GP declined to vote these shares. Since that date, MAE GP voted its
shares at the 1995 and 1996 annual meetings in connection with the election of
trustees and other matters. In February 1998, MAE GP was merged into IPT, and in
connection with that merger, MAE GP dividended all of the Class B Shares to its
sole stockholder, Metropolitan Asset Enhancement, L.P. ("MAE"). As a result,
MAE, as the holder of the Class B Shares, is now subject to the terms of the
settlement agreement, option and irrevocable proxy described in the two
preceding paragraphs. Neither MAE GP nor MAE has exerted or has any current
intention to exert any management control over or participate in the management
of AMIT. However, subject to the terms of the proxy described below, MAE may
choose to vote the Class B Shares or otherwise exercise its rights as a
shareholder of AMIT as it deems appropriate in the future.
Liquidity Assistance L.L.C., which is an affiliate of the General Partner, MAE
and Insignia (which provides property management and partnership administration
services to the Partnership), owned 96,800 Class A Shares of AMIT at June 30,
1998. These Class A Shares represent approximately 2.2% of the total voting
power of AMIT.
On April 3, 1997, Insignia and AMIT entered into a non-binding agreement in
principle contemplating, among other things, a business combination of AMIT and
IPT, which was then owned 98% by Insignia and its affiliates. On July 18, 1997,
IPT, Insignia and MAE GP entered into a definitive merger agreement pursuant to
which (subject to shareholder approval and certain other conditions, including
the receipt by AMIT of a fairness opinion from its investment bankers) AMIT
would be merged with and into IPT, with each Class A Share and Class B Share
being converted into 1.625 and 0.0332 Common Shares of IPT, respectively. The
foregoing exchange ratios are subject to adjustment to account for dividends
paid by AMIT from January 1, 1997 and dividends paid by IPT from February 1,
1997. It is anticipated that Insignia and its affiliates (including MAE) would
own approximately 57% of post-merger IPT if this transaction is consummated.
In November 1992, AAP, a Delaware limited partnership which now controls the
working capital loan previously provided by Angeles Capital Investment, Inc.
("ACII"), was organized. Angeles Corporation ("Angeles") is the 99% limited
partner of AAP and Angeles Acceptance Directives, Inc.("AAD"), which is wholly-
owned by IPT, was, until April 14, 1995, the 1% general partner of AAP. On
April 14, 1995, as part of a settlement of claims between affiliates of the
General Partner and Angeles, AAD resigned as general partner of AAP and
simultaneously received a .5% limited partner interest in AAP. An affiliate of
Angeles now serves as the general partner of AAP.
This working capital loan funded the Partnership's operating deficits in prior
years. Total indebtedness, which is included as a note payable, was
approximately $198,000 at June 30, 1998, with monthly interest only payments at
prime plus 2%. This loan is currently in default and is subordinated to the
AMIT debt (described above). Total interest incurred for this loan was
approximately $10,000 for the six months ended June 30, 1998 and 1997. Accrued
interest was approximately $112,000 at June 30, 1998.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS AND PLAN OF OPERATION
As of July 1, 1996, the Partnership adopted the liquidation basis of accounting.
The Partnership has significant recurring operating losses and continues to
suffer from inadequate liquidity. The Partnership is in default on recourse
indebtedness totaling $2,000,000 due to AMIT and $198,000 due to AAP (which is
subordinated to the AMIT debt) and does not generate sufficient cash flows to
meet current operating requirements. In addition, there are limited identified
capital resources available to the Partnership.
The Partnership has a second mortgage in the amount of $2,000,000 which is
secured by Southgate Village Apartments. This indebtedness is in default due to
nonpayment upon maturity and is recourse to the Partnership. On February 29,
1996, a formal demand for payment of the unpaid principal balance and accrued
interest was received from AMIT for the debt secured by Southgate Village
Apartments. On June 12, 1996, AMIT filed a Complaint For Foreclosure and Other
Relief. The Partnership entered into a forbearance agreement with AMIT,
effective July 1, 1996, which provides that surplus cash be deposited into a
separate account on which the Partnership has granted AMIT a first priority
lien. In exchange, AMIT agrees to refrain from appointing a receiver for the
property. The General Partner does not intend to contest the foreclosure and
anticipates that this property will be lost during 1998 through foreclosure.
The Partnership is presently paying non-debt related expenses and is current on
its first mortgage note payable. However, the debt to AAP of approximately
$198,000 matured in November 1997 and the Partnership does not have the ability
to satisfy the indebtedness, which is subordinated to the AMIT debt. The
General Partner believes the equity in Southgate Village Apartments is not
sufficient to retire the AMIT debt, therefore, the General Partner expects to
transfer the Partnership's interest in Southgate Village Apartments to AMIT.
These transactions are anticipated to occur during 1998. The Partnership does
not expect to contest any of these proceedings. The General Partner does not
have any other plans to remedy the liquidity problems the Partnership is
experiencing. The Partnership does not intend to purchase any additional
properties and the General Partner has decided to terminate the Partnership upon
foreclosure of the final property.
As a result of the decision to liquidate the Partnership, the Partnership
changed its basis of accounting for its financial statements on July 1, 1996,
from the going concern basis of accounting to the liquidation basis of
accounting in accordance with generally accepted accounting principles.
Consequently, assets have been valued at estimated realizable value (including
subsequent actual transactions described below) and liabilities are presented at
their estimated settlement amounts, including estimated costs associated with
carrying out the liquidation. The valuation of assets and liabilities
necessarily requires many estimates and assumptions and there are substantial
uncertainties in carrying out the liquidation. The actual realization of assets
and settlement of liabilities could be higher or lower than amounts indicated
and is based upon the General Partner's estimates as of the date of the
financial statements.
For the six months ended June 30, 1998, the Partnership recorded a net increase
in net liabilities in liquidation of approximately $437,000. The statement of
net liabilities in liquidation as of June 30, 1998, includes approximately
$400,000 of costs, net of income, that the General Partner estimates will be
incurred during the period of liquidation based upon the assumption that the
liquidation process will be completed by December 31, 1998. These costs include
anticipated legal fees, administrative expenses, and loss from property
operations. Because the success in realization of assets and the settlement of
liabilities is based on the General Partner's best estimates, the liquidation
period may be shorter than projected or it may be extended beyond the projected
period.
Certain items discussed in this quarterly report may constitute forward-looking
statements within the meaning of the Private Securities Litigation Reform Act of
1995 (the "Reform Act") and as such may involve known and unknown risks,
uncertainties and other factors which may cause the actual results, performance
or achievements of the Partnership to be materially different from any future
results, performance or achievements expressed or implied by such forward-
looking statements. Such forward-looking statements speak only as of the date
of this quarterly report. The Partnership expressly disclaims any obligation or
undertaking to release publicly any updates or revisions to any forward-looking
statements contained herein to reflect any change in the Partnership's
expectations with regard thereto or any change in events, conditions or
circumstances on which any such statement is based.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Partnership has a second mortgage in the amount of $2,000,000 which is
secured by Southgate Village Apartments. This indebtedness is in default due to
nonpayment upon maturity and is recourse to the Partnership. On February 29,
1996, a formal demand for payment of the unpaid principal balance and accrued
interest was received from AMIT for the debt secured by Southgate Village
Apartments. On June 12, 1996, AMIT filed a Complaint For Foreclosure and Other
Relief. The General Partner does not intend to contest the foreclosure and
anticipates that this property will be lost in 1998 through foreclosure.
The Partnership, along with other affiliates, has been named in a suit brought
by a company which owned a 20% interest ("Plaintiff") in Fort Worth's investment
property, the W.T. Waggoner Building, which was sold in 1995. The Plaintiff is
suing for breach of contract and negligence for mismanagement of the property.
The General Partner believes that there is no merit in this suit and intends to
vigorously defend it.
In March 1998, several putative unit holders of limited partnership units of the
Partnership commenced an action entitled Rosalie Nuanes, et al. v. Insignia
Financial Group, Inc., et al. in the Superior Court of the State of California
for the County of San Mateo. The plaintiffs named as defendants, among others,
the Partnership, the General Partner and several of their affiliated
partnerships and corporate entities. The complaint purports to assert claims on
behalf of a class of limited partners and derivatively on behalf of a number of
limited partnerships (including the Partnership) which are named as nominal
defendants, challenging the acquisition by Insignia and its affiliates of
interests in certain general partner entities, past tender offers by Insignia
affiliates to acquire limited partnership units, the management of partnerships
by Insignia affiliates as well as a recently announced agreement between
Insignia and AIMCO. The complaint seeks monetary damages and equitable relief,
including judicial dissolution of the Partnership. The General Partner believes
the action to be without merit, and intends to vigorously defend it. On June 24,
1998, the General Partner filed a motion seeking dismissal of the action.
The Partnership is unaware of any other pending or outstanding litigation that
is not of a routine nature. The General Partner of the Partnership believes
that all such pending or outstanding litigation will be resolved without a
material adverse effect upon the business, financial condition or operations of
the Partnership.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a) Exhibits:
Exhibit 27, Financial Data Schedule, is filed as an exhibit to
this report
b) Reports on form 8-K:
None filed during the quarter ended June 30, 1998
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
ANGELES INCOME PROPERTIES, LTD. V
By: Angeles Realty Corporation II
Its General Partner
By: /s/Carroll D. Vinson
Carroll D. Vinson
President and Director
By: /s/Robert D. Long, Jr.
Robert D. Long, Jr.
Vice President and Chief Accounting Officer
Date: August 4, 1998
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from
Angeles Income Properties, Ltd. V 1998 Second Quarter 10-QSB and is qualified
in its entirety by reference to such 10-QSB filing.
</LEGEND>
<CIK> 0000792181
<NAME> ANGELES INCOME PROPERTIES, LTD. V
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> JUN-30-1998
<CASH> 15
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0<F1>
<PP&E> 3,243
<DEPRECIATION> 0
<TOTAL-ASSETS> 3,338
<CURRENT-LIABILITIES> 0<F1>
<BONDS> 4,743
0
0
<COMMON> 0
<OTHER-SE> 400
<TOTAL-LIABILITY-AND-EQUITY> 8,130
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 0
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
<FN>
<F1>Registrant has an unclassified balance sheet.
</FN>
</TABLE>
