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
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended September 30, 1997
[ ] TRANSITION REPORT PURSUANT TO 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
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
Greenville, South Carolina 29602
(Address of principal executive offices) (Zip Code)
(864) 239-1000
Issuer's telephone number
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes X No
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
a) ANGELES PARTNERS 16
BALANCE SHEET
(Unaudited)
(in thousands, except unit data)
September 30, 1997
Assets
Cash and cash equivalents:
Unrestricted $ 466
Restricted--tenant security deposits 68
Accounts receivable 15
Escrow for taxes 276
Restricted escrows (Note D) 1,259
Other assets 224
Investment properties:
Land $ 1,076
Buildings and related personal property 10,800
11,876
Less accumulated depreciation (3,498) 8,378
$ 10,686
Liabilities and Partners' Deficit
Liabilities
Accounts payable $ 74
Tenant security deposits 68
Accrued taxes 433
Accrued interest 1,581
Other liabilities (Note D) 832
Notes payable, including $7,147 in default 13,564
Partners' Deficit
General partner $ (176)
Limited partners (14,050 units
issued and 13,993 units outstanding) (5,690) (5,866)
$ 10,686
See Accompanying Notes to Financial Statements
b) ANGELES PARTNERS 16
STATEMENTS OF OPERATIONS
(Unaudited)
(in thousands, except unit data)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
1997 1996 1997 1996
<S> <C> <C> <C> <C>
Revenues:
Rental income $ 596 $ 507 $ 1,800 $ 1,679
Other income 59 68 191 173
Total revenues 655 575 1,991 1,852
Expenses:
Operating 245 233 698 648
General and administrative 31 28 97 103
Maintenance 64 63 149 136
Depreciation 83 74 234 221
Interest 326 287 971 903
Property taxes 104 107 301 292
Total expenses 853 792 2,450 2,303
Loss before gain on sale of
investment property, income
from settlement of litigation
and loss on disposal of property (198) (217) (459) (451)
Gain on sale of
investment property -- -- -- 20
Income from settlement of
litigation -- -- 340 --
Loss on disposal of property (118) -- (118) --
Net loss $ (316) $ (217) $ (237) $ (431)
Net loss allocated
to general partner (1%) $ (3) $ (2) $ (2) $ (4)
Net loss allocated
to limited partners (99%) (313) (215) (235) (427)
Net loss $ (316) $ (217) $ (237) $ (431)
Net loss per limited
partnership unit: $ (22.37) $ (15.32) $ (16.79) $ (30.43)
<FN>
See Accompanying Notes to Financial Statements
</FN>
</TABLE>
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, 1996 13,993 $ (174) $ (5,455) $ (5,629)
Net loss for the nine months
ended September 30, 1997 -- (2) (235) (237)
Partners' deficit at
September 30, 1997 13,993 $ (176) $ (5,690) $ (5,866)
<FN>
See Accompanying Notes to Financial Statements
</FN>
</TABLE>
d) ANGELES PARTNERS 16
STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
1997 1996
<S> <C> <C>
Cash flows from operating activities:
Net loss $ (237) $ (431)
Adjustments to reconcile net loss to net cash
provided by operating activities:
Depreciation 234 221
Amortization of loan costs 7 7
Loss on disposal of property 118 --
Change in accounts:
Restricted cash (1) 5
Accounts receivable 8 120
Escrows for taxes (51) (30)
Other assets (17) 1
Accounts payable 37 25
Tenant security deposit liabilities 3 (6)
Accrued taxes 28 3
Accrued interest 250 398
Other liabilities (76) (181)
Net cash provided by operating activities 303 132
Cash flows from investing activities:
Property improvements and replacements (286) (43)
Deposits to restricted escrows (314) (271)
Withdrawals from restricted escrows 298 404
Net cash (used in) provided by
investing activities (302) 90
Cash flows from financing activities:
Payments on notes payable (64) (130)
Additions to notes payable -- 44
Net cash used in financing activities (64) (86)
Net (decrease) increase in unrestricted cash and cash
equivalents (63) 136
Unrestricted cash and cash equivalents at
beginning of period 529 406
Unrestricted cash and cash equivalents at
end of period $ 466 $ 542
Supplemental disclosure of cash flow information:
Cash paid for interest $ 715 $ 498
<FN>
See Accompanying Notes to Financial Statements
</FN>
</TABLE>
e)
ANGELES PARTNERS 16
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
September 30, 1997
NOTE A - GOING CONCERN
The financial statements have been prepared assuming Angeles Partners 16 (the
"Partnership" or the "Registrant") will continue as a going concern. The
Partnership has incurred recurring operating losses, is in default on a portion
of its indebtedness and continues to suffer from inadequate liquidity. As a
result, the Partnership has not had cash available to perform the substantial
rehabilitation necessary at each of the investment properties.
The first mortgage, in the amount of $4,270,000, which is secured by Whispering
Pines Apartments, is in default due to nonpayment upon its maturity in January
1997. Angeles Realty Corporation II (the "General Partner") is in negotiations
with the current lender and others to refinance this indebtedness, however there
can be no assurances that these negotiations will be successful. In addition,
the second trust deed, in the amount of $375,000, which is secured by Silver
Ridge Apartments, matures in December 1997.
The Partnership is in default on $2,877,000 of unsecured indebtedness payable to
Angeles Mortgage Investment Trust ("AMIT") (See "Note C"), plus related accrued
interest of $828,000, due to its inability to make interest and principal
payments when due. The lender obtained a judgment against the Partnership that
secures their position on $2,017,000 of this indebtedness ("North Prior debt").
On June 19, 1997, a Notice of Sheriff's Execution Sale of Personal and Real
Property was filed for the sale of Silver Ridge Apartments. On October 29,
1997, Silver Ridge Apartments was sold at a sheriff's sale to AMIT. Under the
laws of the State of Minnesota, this foreclosure is subject to a one year right
of redemption. The General Partner is in negotiations with AMIT regarding the
foreclosure of this property, however, the General Partner can give no
assurances that such negotiations will lead to a redemption of this property by
the Partnership. The Partnership also has an unsecured working capital loan
payable to Angeles Acceptance Pool, L.P. ("AAP") of $1,517,000 plus related
accrued interest of $710,000 that is due November 25, 1997. The Partnership
does not have the funds to satisfy this debt when it matures.
Limited sources of additional financing are available to the Partnership and the
General Partner does not have any other plans to remedy the liquidity problems
the Partnership is currently experiencing. The General Partner anticipates
positive cash flow after the payment of operating and capital expenditures for
Whispering Pines Apartments for 1997. The General Partner anticipates that the
unrestricted cash of $466,000 at September 30, 1997, will be sufficient to cover
all Partnership level operating expenditures for the remainder of 1997; however,
it does not anticipate paying all AMIT and AAP debt service costs.
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 and nine months ended September 30,
1997, are not necessarily indicative of the results that may be expected for the
fiscal year ending December 31, 1997. 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, 1996.
Certain reclassifications have been made to the 1996 balances to conform to the
1997 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 nine months ended September 30, 1997 and 1996:
1997 1996
(in thousands)
Property management fees $97 $91
Reimbursement for services of affiliates (1) 60 47
(1)Included in "Reimbursements for services of affiliates" for 1997 is
approximately $4,000 in reimbursements for construction oversight costs.
For the period from January 1, 1996, to August 31, 1997, the Partnership insured
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 master policy. The
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 that accrued to the benefit of the affiliate of
the General Partner by virtue of the agent's obligations was not significant.
In November 1992, 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 $710,000, was
$2,227,000 at September 30, 1997, 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 $112,000 and $127,000 for the nine
months ended September 30, 1997 and 1996.
AMIT currently holds two unsecured notes receivable from the Partnership. Total
indebtedness, including accrued interest of $828,000, was $3,705,000 at
September 30, 1997, and is in default due to non-payment of principal and
interest when due. Total interest expense on this financing was $460,000 and
$395,000 for the nine months ended September 30, 1997 and 1996, respectively.
MAE GP Corporation ("MAE GP"), an affiliate of the General Partner, owns
1,675,113 Class B Shares of AMIT. The terms of the Class B Shares provide that
they are convertible, in whole or in part, into Class A Shares on the basis of 1
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 MAE GP 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 has agreed to waive it's right to
receive dividends and distributions so long as AMIT's option is outstanding).
These Class B Shares also entitle MAE GP to vote on the same basis as Class A
Shares, providing MAE GP 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 the shares held by MAE GP would
approximate 1.3% 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 and 1996 annual meetings 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. Subject to the terms of the proxy
described below, MAE GP may choose to vote these shares as it deems appropriate
in the future. In addition, Liquidity Assistance L.L.C., an affiliate of the
General Partner and an affiliate of Insignia Financial Group, Inc. ("Insignia"),
which provides property management and partnership administration services to
the Partnership, owns 96,800 Class A Shares of AMIT at September 30, 1997.
These Class A Shares represent approximately 2.2% 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 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. In connection with such settlement, AMIT delivered to MAE
GP cash in the sum of $250,000 at closing (which occurred April 14, 1995) as
payment for the option. If and when the option is exercised, AMIT will be
required to remit to MAE GP an additional $94,000.
Simultaneously with the execution of the option and as part of the settlement,
MAE GP executed an irrevocable proxy in favor of AMIT, the result of which is
that MAE GP is permitted 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 is obligated to deliver 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).
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
Insignia Properties Trust, an entity owned 98% by Insignia and its affiliates
("IPT"). 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)
and MAE GP (and its affiliates) would own approximately 53.1% and 2.3%,
respectively, of post-merger IPT when this transaction is consummated.
NOTE D - ENVIRONMENTAL ESCROW
In 1995, the Partnership sold the North Prior Industrial Park to an unrelated
party. As required by the sales agreement, the Partnership established three
escrows, one of which has not been expended at September 30, 1997.
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. At
September 30, 1997, the balance remaining in the account was $864,000. The
Partnership entered into an 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 the AMIT debt.
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 nine
months ended September 30, 1997 and 1996:
Property Average Occupancy
1997 1996
Whispering Pines Apartments
Fitchburg, Wisconsin (1) 96% 86%
Silver Ridge Apartments
Maplewood, Minnesota 95% 97%
1) Average occupancy at Whispering Pines Apartments increased due to rental
concessions being offered, as well as the completion of construction that
was impeding access to the property.
The Partnership realized net losses of approximately $316,000 and approximately
$237,000 for the three and nine months ended September 30, 1997, respectively,
versus net losses of approximately $217,000 and approximately $431,000 for the
same periods in 1996, respectively. The decrease in net loss for the nine
months ended September 30, 1997, is attributable to income of $340,000 from the
settlement of certain litigation (see discussion below).
The Partnership experienced an increase in losses before the litigation
settlement for the nine months ended September 30, 1997, due to an overall
increase in total expenses, which was only partially offset by an increase in
total revenues. For the three months ended September 30, 1997, there was a
slight decrease in loss before the loss on disposal of property due to an
increase in total revenues. Rental income increased due to an increase in
occupancy at Whispering Pines Apartments, along with an increase in rental rates
at both Whispering Pines Apartments and Silver Ridge Apartments. Operating
expenses increased as a result of concessions being offered at Whispering Pines
Apartments, in an effort to increase occupancy. Also, interest expense
increased due to the assessment of a late charge on the $860,000 note payable to
AMIT ("Angola debt") due to the maturity of the note on June 30, 1997, along
with the increasing default interest charged on the North Prior debt.
As mentioned previously, the Partnership sold North Prior Industrial Park on
June 12, 1995. 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 nine months ended September 30, 1996, $8,000 in receivables were
collected and the funds were remitted to AMIT to reduce the principal balance.
In addition, during the nine months ended September 30, 1996, tenant improvement
projects were completed, as required by the sale of the property, 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 per the terms of
the promissory note agreement between the Partnership and AMIT, all attorney's
fees and costs incurred by AMIT in pursuit of collection of this note shall be
paid by the Partnership. During the nine months ended September 30, 1996,
$44,000 in costs were added to the outstanding principal balance and were
recorded as a loss on the sale of the property. The net gain on the sale of the
property for the nine months ended September 30, 1996, amounted to $20,000.
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. The Partnership is the plaintiff in a lawsuit filed against the fuel
distributor, among others, for damages sustained as a result of the above. A
mediation hearing was held in December 1996 in which the defendants agreed that
the claims may be resolved by payment by the defendants to the Partnership.
During the second quarter of 1997, a complete settlement of the litigation was
concluded. The total amount of the settlement was $340,000. These funds were
remitted to AMIT and were applied to the principal balance ($11,000) and accrued
interest ($329,000) on the North Prior debt.
For the three and nine month periods ended September 30, 1997, the Partnership
recognized a loss on disposal of property of $118,000. This loss resulted from
a roof replacement project at Silver Ridge Apartments. These roofs were not
fully depreciated at the time of the write-off.
Included in maintenance expense for the nine months ended September 30, 1996, is
$15,000 of major repairs and maintenance mainly comprised of exterior building
improvements and exterior painting expenses.
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 September 30, 1997, the Partnership held unrestricted cash and cash
equivalents of $466,000 versus $542,000 at September 30, 1996. Net cash
provided by operating activities increased primarily due to the decrease in net
loss, as explained above, partially offset by a lesser decrease in accounts
receivable. The large decrease in accounts receivable for the period ended
September 30, 1996, resulted from the collection of monies held by the receiver
of North Prior Industrial Complex. Despite the fact that the Partnership has
debt which is in default and the Partnership is not servicing this debt on a
monthly basis, causing interest to continue to accrue, accrued interest
increased by a lesser amount during the nine months ended September 30, 1997.
This is due to the interest payment of $329,000 as a result of the receipt of
the settlement on the North Prior litigation. Cash flows from investing
activities decreased primarily due to an increase in property improvements and
replacements resulting from the roof replacement project at Silver Ridge
Apartments. The decrease can also be attributed to increased deposits to
restricted escrows and decreased withdrawals from restricted escrows. Cash
flows used in financing activities decreased in part due to decreased principal
payments made on the mortgage notes payable. For the nine months ended September
30, 1996, the Partnership made additional principal payments on the North Prior
debt. These additional payments were primarily the result of unused funds that
were previously held in escrow. Also, during the nine months ended September
30, 1996, additions to notes payable of approximately $44,000 were recorded as a
result of the costs incurred by AMIT in pursuit of the collection of the North
Prior debt. No such activity occurred during the nine months ended September
30, 1997.
The financial statements have been prepared assuming the Partnership will
continue as a going concern. The Partnership has incurred recurring operating
losses, is in default on a portion of its indebtedness and continues to suffer
from inadequate liquidity. As a result, the Partnership has not had cash
available to perform the substantial rehabilitation necessary at each of the
investment properties.
The first mortgage, in the amount of $4,270,000, which is secured by Whispering
Pines Apartments, is in default due to nonpayment upon its maturity in January
1997. The General Partner is in negotiations with the current lender and others
to refinance this indebtedness, however there can be no assurances that these
negotiations will be successful. In addition, the second trust deed, in the
amount of $375,000, which is secured by Silver Ridge Apartments, matures in
December 1997.
The Partnership is in default on $2,877,000 of unsecured indebtedness payable to
AMIT (see "Note C"), plus related accrued interest of $828,000, due to its
inability to make interest and principal payments when due. The lender obtained
a judgment against the Partnership that secures their position on $2,017,000 of
this indebtedness (North Prior debt). On June 19, 1997, a Notice of Sheriff's
Execution Sale of Personal and Real Property was filed for the sale of Silver
Ridge Apartments. On October 29, 1997, Silver Ridge Apartments was sold at a
Sheriff's sale to AMIT. Under the laws of the State of Minnesota, this
foreclosure is subject to a one year right of redemption. The General partner
is in negotiations with AMIT regarding the foreclosure of this property,
however, the General Partner can give no assurances that such negotiations will
lead to a redemption of this property by the Partnership. The Partnership also
has an unsecured working capital loan payable to AAP of $1,517,000 plus related
accrued interest of $710,000 that is due November 25, 1997. The Partnership does
not have the funds to satisfy this debt when it matures.
Limited sources of additional financing are available to the Partnership and the
General Partner does not have any other plans to remedy the liquidity problems
the Partnership is currently experiencing. The General Partner anticipates
positive cash flow after the payment of operating and capital expenditures for
Whispering Pines Apartments for 1997. The General Partner anticipates that the
unrestricted cash of $466,000 at September 30, 1997, will be sufficient to cover
all Partnership level operating expenditures for the remainder of 1997; however,
it does not anticipate paying all AMIT and AAP debt service costs.
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. The mortgage indebtedness
of $13,564,000 consists of, (1) a first mortgage of $4,270,000, which is in
default due to its maturity in January 1997 (2) a second trust deed and a
working capital loan with principal balances of $375,000 and $1,517,000,
respectively, and with maturity dates in December and November 1997,
respectively; and (3) a first mortgage bond payable in the principal amount of
$4,525,000 due July 2023. The Partnership also has unsecured debt to AMIT in
the amount of $860,000 and $2,017,000 with maturity dates of June 1997 and June
1996, respectively, which is in default due to non-payment of principal and
interest when due. As mentioned previously, Silver Ridge Apartments was
foreclosed upon subsequent to September 30, 1997. The total mortgage
indebtedness secured by this property amounted to $4,900,000 at September 30,
1997. Future cash distributions will depend on the levels of net cash generated
from operations, refinancings and property sales. There were no cash
distributions during the nine months ended September 30, 1997 or September 30,
1996. The General Partner does not anticipate making a cash distribution during
fiscal 1997.
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. A mediation hearing was held in December 1996 in which the
defendants agreed that the claims may be resolved by payment by the defendants
to the Partnership. During the second quarter of 1997, a complete settlement of
the litigation was concluded. The total amount of the settlement was $340,000.
During the third quarter of 1996, AMIT filed a complaint against the
Partnership, in the State of Minnesota, demanding payment on the $2,017,000
obligation plus accrued interest. At September 30, 1997, accrued interest on
this debt payable to AMIT totaled $236,000. The debt was in default previously
due to non-payment of interest and now is in default due to non-payment upon
maturity. AMIT has obtained a judgment against the Partnership. On June 19,
1997, a Notice of Sheriff's Execution Sale of Personal and Real Property was
filed for the sale of Silver Ridge Apartments. On October 29, 1997, Silver Ridge
Apartments was sold at a sheriff's sale to AMIT.
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 nine months ended September 30, 1997.
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:November 10, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from Angeles
Partners 16 1997 Third 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> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> SEP-30-1997
<CASH> 466
<SECURITIES> 0
<RECEIVABLES> 15
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0<F1>
<PP&E> 11,876
<DEPRECIATION> 3,498
<TOTAL-ASSETS> 10,686
<CURRENT-LIABILITIES> 0<F1>
<BONDS> 13,564
0
0
<COMMON> 0
<OTHER-SE> (5,866)
<TOTAL-LIABILITY-AND-EQUITY> 10,686
<SALES> 0
<TOTAL-REVENUES> 1,991
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 2,450
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 971
<INCOME-PRETAX> (237)
<INCOME-TAX> 0
<INCOME-CONTINUING> (237)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (237)
<EPS-PRIMARY> (16.79)<F2>
<EPS-DILUTED> 0
<FN>
<F1>Registrant has an unclassified balance sheet.
<F2>Multiplier is 1.
</FN>
</TABLE>
