FORM 10-QSB.--QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
Quarterly or Transitional Report
(As last amended by 34-32231, eff. 6/3/93.)
U.S. Securities and Exchange Commission
Washington, D.C. 20549
Form 10-QSB
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1996
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT
For the transition period.........to.........
Commission file number 0-16209
ANGELES PARTNERS 16
(Exact name of small business issuer as specified in its charter)
California 95-4106417
(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) (Zip Code)
Issuer's telephone number (864) 239-1000
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes X No
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
a) ANGELES PARTNERS 16
BALANCE SHEET
(Unaudited)
(in thousands, except unit data)
March 31, 1996
Assets
Cash and cash equivalents:
Unrestricted $ 519
Restricted--tenant security deposits 64
Accounts receivable 13
Escrow for taxes 159
Restricted escrows (Note D) 1,312
Other assets 220
Investment properties:
Land $ 1,076
Buildings and related personal property 10,616
11,692
Less accumulated depreciation (3,079) 8,613
$ 10,900
Liabilities and Partners' Deficit
Liabilities
Accounts payable $ 29
Tenant security deposits 64
Accrued taxes 395
Accrued interest 1,815
Other liabilities (Note D) 1,149
Notes payable, including $1,879 in
default 12,673
Partners' Deficit
General partner $ (170)
Limited partners (14,033 units
issued and outstanding) (5,055) (5,225)
$ 10,900
See Accompanying Notes to Financial Statements
b) ANGELES PARTNERS 16
STATEMENTS OF OPERATIONS
(Unaudited)
(in thousands, except unit data)
Three Months Ended
March 31,
1996 1995
Revenues:
Rental income $ 591 $ 922
Other income 53 46
Total revenues 644 968
Expenses:
Operating 215 297
General and administrative 37 44
Maintenance 34 65
Depreciation 73 161
Interest 322 472
Property taxes 121 276
Bad debt recovery -- (4)
Total expenses 802 1,311
Loss before gain on sale of
investment property (158) (343)
Gain on sale of investment
property 64 --
Net loss $ (94) $ (343)
Net loss allocated to general
partner (1%) $ (1) $ (3)
Net loss allocated to limited
partners (99%) (93) (340)
Net loss $ (94) $ (343)
Net loss per limited partnership unit: $ (6.63) $(24.23)
See Accompanying Notes to Financial Statements
c) ANGELES PARTNERS 16
STATEMENT OF CHANGES IN PARTNERS' DEFICIT
(Unaudited)
(in thousands, except unit data)
<TABLE>
<CAPTION>
Limited
Partnership General Limited
Units Partner Partners Total
<S> <C> <C> <C> <C>
Original capital contributions 14,050 $ 1 $14,050 $14,051
Partners' deficit at
December 31, 1995 14,033 $ (169) $(4,962) $(5,131)
Net loss for the three months
ended March 31, 1996 -- (1) (93) (94)
Partners' deficit at
March 31, 1996 14,033 $ (170) $(5,055) $(5,225)
<FN>
See Accompanying Notes to Financial Statements
</TABLE>
d) ANGELES PARTNERS 16
STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
1996 1995
<S> <C> <C>
Cash flows from operating activities:
Net loss $ (94) $ (343)
Adjustments to reconcile net loss to net cash
provided by operating activities:
Depreciation 73 161
Amortization of loan costs and leasing commissions 2 13
Gain on sale of investment property (64) --
Bad debt recovery -- (4)
Change in accounts:
Restricted cash (1) 11
Accounts receivable 126 (46)
Escrows for taxes 65 57
Other assets -- (39)
Accounts payable (11) (3)
Tenant security deposit liabilities 2 1
Accrued taxes (46) 109
Accrued interest 189 330
Other liabilities (44) 43
Net cash provided by operating activities 197 290
Cash flows from investing activities:
Property improvements and replacements (6) (9)
Deposits to restricted escrows (94) (49)
Withdrawals from restricted escrows 155 4
Net cash provided by (used in) investing activities 55 (54)
Cash flows used in financing activities:
Payments on notes payable (139) (12)
Net increase in cash 113 224
Cash at beginning of period 406 1,773
Cash at end of period $ 519 $ 1,997
Supplemental disclosure of cash flow information:
Cash paid for interest $ 131 $ 135
<FN>
See Accompanying Notes to Financial Statements
</TABLE>
e) ANGELES PARTNERS 16
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
Note A - Going Concern
The financial statements have been prepared assuming that Angeles Partners 16
(the "Partnership") will continue as a going concern. The Partnership has
incurred recurring operating losses and continues to suffer from inadequate
liquidity. In addition, there are limited identified capital resources
available to the Partnership. As a result, the Partnership has not had cash
available to perform the substantial rehabilitation necessary at each of the
investment properties.
The Partnership is in default on $1,879,000 of its indebtedness, plus related
accrued interest of $1,303,000 due to its inability to make interest and
principal payments when due. The debt is unsecured debt of the Partnership
payable to Angeles Mortgage Investment Trust ("AMIT") (See "Note C").
The Partnership is presently paying non-debt related expenses of the properties,
is current on its mortgages secured by the remaining two investment properties
and is negotiating forbearance agreements with AMIT on the debt in default.
As a result of the above conditions, there is substantial doubt about the
Partnership's ability to continue as a going concern. The financial statements
do not include any adjustments to reflect the possible future effects on the
recoverability or classification of assets or amounts or classification of
liabilities that may result from these uncertainties.
Note B - Basis of Presentation
The accompanying unaudited financial statements 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 the General Partner, all adjustments (consisting of normal
recurring accruals) considered necessary for a fair presentation have been
included. Operating results for the three month period ended March 31, 1996,
are not necessarily indicative of the results that may be expected for the
fiscal year ending December 31, 1996. For further information, refer to the
financial statements and footnotes thereto included in the Partnership's annual
report on Form 10-KSB for the fiscal year ended December 31, 1995.
Certain reclassifications have been made to the 1995 balances to conform to the
1996 presentation.
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 payments to affiliates for services and
as reimbursement of certain expenses incurred by affiliates on behalf of the
Partnership. The following amounts were paid to the General Partner and
affiliates during the three months ended March 31, 1996 and 1995:
1996 1995
(in thousands)
Property management fees $31 $30
Reimbursement for services of affiliates 14 21
The Partnership insures its properties under a master policy through an agency
and 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 were later acquired by the agent who
placed the current year's master policy. The current agent assumed the
financial obligations to the affiliate of the General Partner, who receives
payment on these obligations from the agent. The amount of the Partnership's
insurance premiums accruing to the benefit of the affiliate of the General
Partner by virtue of the agent's obligations is not significant.
In November 1992, Angeles Acceptance Pool, L.P. ("AAP"), a Delaware limited
partnership was organized to acquire and hold the obligations evidencing the
working capital loan previously provided to the Partnership by Angeles Capital
Investments, Inc. ("ACII"). Angeles Corporation ("Angeles") is the 99% limited
partner of AAP and Angeles Acceptance Directives, Inc. ("AAD"), an affiliate of
the General Partner, 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 1/2% limited partner interest in AAP. An affiliate of
Angeles now serves as the general partner of AAP.
The AAP working capital loan funded the Partnership's operating deficits in
prior years. Total indebtedness, including accrued interest of $473,000, was
$1,990,000 at March 31, 1996, with monthly interest only payments at the prime
rate plus 2% from available cash flow. Principal is to be paid the earlier of
i) the availability of funds, ii) the sale of one or more properties owned by
the Partnership generating excess proceeds, or iii) November 25, 1997. Total
interest expense for this loan was $39,000 and $41,000 for the three months
ended March 31, 1996 and 1995, respectively.
Note C - Transactions with Affiliated Parties (continued)
AMIT currently holds two unsecured notes receivable from the Partnership. Total
indebtedness of $1,879,000 is in default at March 31, 1996, due to non-payment.
Total interest expense on this financing was $155,000 and $108,000 for the three
months ended March 31, 1996 and 1995, respectively. Accrued interest was
$1,303,000 at March 31, 1996.
MAE GP Corporation ("MAE GP"), an affiliate of the General Partner, owns
1,675,113 Class B Shares of AMIT. MAE GP has the option to convert these Class
B Shares, in whole or in part, into Class A Shares on the basis of 1 Class A
Share for every 49 Class B Shares. These Class B Shares entitle MAE GP to
receive 1.2% of the distributions of net cash distributed by AMIT. These Class
B Shares also entitle MAE GP to vote on the same basis as Class A Shares which
allows MAE GP to vote approximately 37% of the total shares (unless and until
converted to Class A Shares at which time the percentage of the vote controlled
represented by the shares held by MAE GP would approximate 1.2% of the vote).
Between the date of acquisition of these shares (November 24, 1992) and March
31, 1995, MAE GP declined to vote these shares. Since that date, MAE GP voted
its shares at the 1995 annual meeting in connection with the election of
trustees and other matters. MAE GP has not exerted, and continues to decline to
exert, any management control over or participate in the management of AMIT.
MAE GP may choose to vote these shares as it deems appropriate in the future.
In addition, Liquidity Assistance, LLC, ("LAC"), an affiliate of the General
Partner and an affiliate of Insignia Financial Group, Inc., which provides
property management and partnership administration services to the Partnership,
owns 63,200 Class A Shares of AMIT. These Class A Shares entitle LAC to vote
approximately 1.5% of the total shares.
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 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, but in no event prior
to November 9, 1997. AMIT delivered to MAE GP cash in the sum of $250,000 at
closing, which occurred April 14, 1995, as payment for the option. Upon
exercise of the option, AMIT would remit to MAE GP an additional $94,000.
Note C - Transactions with Affiliated Parties (continued)
Simultaneously with the execution of the option, MAE GP executed an irrevocable
proxy in favor of AMIT the result of which is MAE GP will be able to vote the
Class B 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. On those matters, MAE GP granted to the AMIT
trustees, in their capacity as trustees of AMIT, proxies with regard to the
Class B Shares instructing such trustees to vote said Class B Shares in
accordance with the vote of the majority of the Class A Shares voting to be
determined without consideration of the votes of "Excess Class A Shares" as
defined in Section 6.13 of the Declaration of Trust of AMIT.
Note D - Sale of Investment Property
On June 12, 1995, the Partnership sold the North Prior Industrial Park to an
unrelated party, recognizing a gain on the sale of $1,010,000. The net proceeds
of $10,325,000, were used to pay the first mortgage and related accrued
interest, to pay AMIT in partial satisfaction of a recourse second mortgage, and
to fund restricted escrows. The holder of the first mortgage forgave $56,000,
which the Partnership recognized as an extraordinary gain on extinguishment of
debt. The unpaid balance of the note payable to AMIT is now unsecured
Partnership debt (see "Note C").
As required by the sales agreement, the Partnership established three escrows as
described below:
Tenant Improvements Escrow - This escrow was being held pending completion of
tenant improvements that were begun by the receiver prior to the sale. At March
31, 1996, the escrow balance had been expended. All funds were used for the
improvement projects and the residual, or $56,000, was used to reduce the debt
to AMIT.
Environmental Escrow - This escrow was established for costs associated with
fuel oil contamination at the property. In January 1993, a local fuel oil
distributor pumped fuel oil into a testing well instead of into the storage tank
at North Prior Industrial Park. The Partnership notified the necessary
authorities and engaged an environmental engineering firm to develop a plan of
action to clean up the site. The cost of the clean up, which is not covered by
insurance, is estimated to be approximately $900,000 over a five year period. A
liability has been recorded to cover the estimated costs to clean-up the site
and is included in "Other Liabilities", and the funds have been set aside in an
escrow account. The Partnership entered into an agreement with the buyer of the
property limiting
Note D - Contingencies (continued)
the Partnership's liability with regard to the clean up of this site to the
balance of the escrow account. This agreement will terminate when the
Partnership receives a "Site Closure Letter" from the Minnesota Pollution and
Control Agency. Upon receipt of this letter, any remaining funds in the escrow
account will be used to pay down the AMIT debt discussed above.
Attorney Fee Escrow - This escrow is being held for attorney fees relating to
the environmental issue described above. At March 31, 1996, the balance in this
account is $95,000. All funds are expected to be used for attorney fees;
however, any remaining funds will be used to reduce the debt to AMIT.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS
The Partnership's investment properties consist of two apartment complexes. The
following table sets forth the average occupancy of the properties for the three
months ended March 31, 1996 and 1995:
Property 1996 1995
Whispering Pines Apartments
Fitchburg, Wisconsin (1) 90% 95%
Silver Ridge Apartments
Maplewood, Minnesota 99% 92%
(1) Decrease in occupancy due to increased home sales in the area. New home
construction and low interest rates for home buyers has made renting less
appealing and thereby decreased occupancy.
The Partnership realized a net loss of $94,000 for the three months ended March
31, 1996, versus a net loss of $343,000 for the three months ended March 31,
1995. The decrease in net loss for the three months ended March 31, 1996, as
compared to the three months ended March 31, 1995, is primarily due to the sale
of North Prior Industrial Park on June 12, 1995.
Rental income decreased for the three months ended March 31, 1996, as compared
to the three months ended March 31, 1995, due to the sale of North Prior
Industrial Park on June 12, 1995, resulting in the loss of rental revenue
relating to this property. Also contributing to the decrease in rental income
was the decrease in occupancy at Whispering Pines Apartments, which was
partially offset by an increase in occupancy at Silver Ridge Apartments.
For the three months ended March 31, 1996, versus the three months ended March
31, 1995, the Partnership realized decreases in the following expense
categories: operating, maintenance, depreciation, interest and property tax.
These decreases are due to the sale of North Prior Industrial Park. These
decreases were partially offset by a slight increase in interest expense at
Whispering Pines Apartments due to higher interest expense resulting from a
fluctuating interest rate on the mortgage.
As mentioned previously, the Partnership sold North Prior Industrial Park on
June 12, 1995. The net proceeds were used to pay the first mortgage and related
accrued interest. As a result of the sale, tenant receivable balances were
written off due to the doubts regarding the collectibility of such amounts.
However, during the three months ended March 31, 1996, $8,000 in receivables
were collected and the funds were remitted to AMIT to reduce the principal
balance. In addition, during the three months ended March 31, 1996, the tenant
improvement projects were completed, as required by the sale of the property
(see "Note D"), and funds remaining in the escrow account were also remitted to
AMIT to reduce the principal balance. The funds remitted amounted to $56,000.
As a result of these transactions, the Partnership recognized an additional
$64,000 gain on the sale of the investment property during the three months
ended March 31, 1996.
As part of the ongoing business plan of the Partnership, the General Partner
monitors the rental market environment of each of its investment properties to
assess the feasibility of increasing rents, maintaining or increasing occupancy
levels and protecting the Partnership from increases in expenses. As part of
this plan, the General Partner attempts to protect the Partnership from the
burden of inflation-related increases in expenses by increasing rents and
maintaining a high overall occupancy level. However, due to changing market
conditions, which can result in the use of rental concessions and rental
reductions to offset softening market conditions, there is no guarantee that the
General Partner will be able to sustain such a plan.
At March 31, 1996, the Partnership had unrestricted cash of $519,000 versus
$1,997,000 at March 31, 1995. Net cash provided by operating activities
decreased primarily due to a decrease in accrued taxes and a lesser increase in
accrued interest. Net cash provided by investing activities increased due to
increased withdrawals from the restricted escrows. Net cash used in financing
activities increased slightly due to increased payments on the notes payable to
AMIT.
The financial statements have been prepared assuming the Partnership will
continue as a going concern. The Partnership has incurred recurring operating
losses and continues to suffer from inadequate liquidity. In addition, there
are limited identified capital resources available to the Partnership. As a
result, the Partnership has not had cash available to perform the substantial
rehabilitation necessary at each of the investment properties. The Partnership
is in default on $1,879,000 of its indebtedness due to its inability to make
interest and principal payments when due. The debt is unsecured debt of the
Partnership payable to AMIT. The Partnership is presently paying non-debt
related expenses of the properties, is current on its mortgages secured by its
two remaining investment properties and is negotiating forbearance agreements
with AMIT on the debt in default. As a result of the above conditions, there is
substantial doubt about the Partnership's ability to continue as a going
concern. The financial statements do not include any adjustments to reflect the
possible future effects on the recoverability or classification of assets or
amounts or classification of liabilities that may result from these
uncertainties.
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. Such assets are currently
thought to be sufficient for any near-term needs of the Partnership. The
mortgage indebtedness of $12,673,000 consists of a first mortgage of $4,377,000,
which is being amortized over 30 years and is due January 1997, a second trust
deed and a working capital loan with principal balances of $375,000 and
$1,517,000, respectively, (interest only) with maturity dates in November and
December 1997, and a first mortgage bond payable in the principal amount of
$4,525,000 (interest only) due July 2023. This Partnership also has unsecured
debt to AMIT in the amount of $859,000 and $1,020,000 (interest only) with
maturity dates of June 1997 and June 1996, respectively, which is in default.
Future cash distributions will depend on the levels of net cash generated from
operations, refinancings and property sales. At this time, the General Partner
does not anticipate making a cash distribution during fiscal 1996.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
In January 1993, a local fuel oil distributor pumped fuel oil into a testing
well instead of into the storage tank at North Prior Industrial Park. The
Partnership notified the necessary authorities and engaged an environmental
engineering firm to develop a plan of action to clean up the site. The cost of
the clean up, which is not covered by insurance, is estimated to be
approximately $900,000 over a five year period. A liability has been recorded
to cover the estimated costs to clean up the site and the funds have been set
aside in an escrow account. The Partnership entered into an Environmental
Undertaking and Indemnity Agreement with the buyer of the property limiting the
Partnership's liability with regard to the clean up of this site to the balance
of the escrow account. This agreement will terminate when the Partnership
receives a "Site Closure Letter" from the Minnesota Pollution and Control
Agency. Upon receipt of this letter, any remaining funds in the escrow account
will be used to pay down Partnership debt to AMIT. In January 1995, the holder
of the first mortgage, along with the former receiver, initiated two separate
lawsuits against the Partnership, among others, for damages sustained as a
result of the above. In June 1995, the suit with the former holder of the first
mortgage was dismissed. During November 1995, the Partnership was removed as
the defendant and became the Plaintiff in the lawsuit initiated by the former
receiver in a suit filed against the fuel distributor, among others. The former
receiver was removed as Plaintiff in the suit due to it no longer being a party-
in-interest.
The Registrant is unaware of any other pending or outstanding litigation that is
not of a routine nature. The General Partner of the Registrant 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 three months ended March 31, 1996.
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 PARTNERS 16
By: Angeles Realty Corporation II
General Partner
By: /s/Carroll D. Vinson
Carroll D. Vinson
President
By: /s/Robert D. Long
Robert D. Long
Vice President/CAO
Date: May 8, 1996
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from Angeles
Partners 16 1996 First Quarter 10-QSB and is qualified in its entirety by
reference to such 10-QSB filing.
</LEGEND>
<CIK> 0000812187
<NAME> ANGELES PARTNERS 16
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> MAR-31-1996
<CASH> 519
<SECURITIES> 0
<RECEIVABLES> 13
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 2,067
<PP&E> 11,692
<DEPRECIATION> 3,079
<TOTAL-ASSETS> 10,900
<CURRENT-LIABILITIES> 488
<BONDS> 12,673
0
0
<COMMON> 0
<OTHER-SE> (5,225)
<TOTAL-LIABILITY-AND-EQUITY> 10,900
<SALES> 0
<TOTAL-REVENUES> 644
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 802
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 322
<INCOME-PRETAX> (94)
<INCOME-TAX> 0
<INCOME-CONTINUING> (94)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (94)
<EPS-PRIMARY> (6.63)
<EPS-DILUTED> 0
</TABLE>
