FORM 10-KSB-ANNUAL OR TRANSITIONAL REPORT UNDER
SECTION 13 OR 15(D)
FORM 10-KSB
(Mark One)
[X] ANNUAL REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT
OF 1934 [NO FEE REQUIRED]
For the fiscal year ended December 31, 1997
[] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934 [NO FEE REQUIRED]
For the transition period from ___________ to __________
Commission file number 0-16209
ANGELES PARTNERS 16
(Name of small business insurer in its charter)
California 95-4106417
(State or other jurisdiction of (I.R.S. 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
Securities registered under Section 12(b) of the Exchange Act:
None
Securities registered under Section 12(g) of the Exchange Act:
Limited Partnership Units
(Title of class)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the Registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes X No
Check if there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B contained in this form, and no disclosure will be contained, to
the best of registrant's knowledge in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-KSB or any amendment to
this Form 10-KSB.[X]
State issuer's revenues for its most recent fiscal year. $2,974,000.
State the aggregate market value of the voting partnership interests held by
non-affiliates computed by reference to the price at which the partnership
interests were sold, or the average bid and asked prices of such partnership
interests, as of a specified date within the past 60 days. Market value
information for Registrant's partnership interests is not available. Should a
trading market develop for these interests, it is the General Partner's belief
that the aggregate market value of the voting partnership interests would not
exceed $25,000,000.
PART I
ITEM 1. DESCRIPTION OF BUSINESS
Angeles Partners 16 (the "Partnership" or "Registrant") is a publicly-held
limited partnership organized under the California Uniform Limited Partnership
Act pursuant to the Certificate and Restated Agreement of Limited Partnership -
(the "Agreement") dated March 24, 1987. The Partnership's General Partner is
Angeles Realty Corporation II ("General Partner" or "ARC II"), a California
corporation and wholly-owned subsidiary of MAE GP Corporation ("MAE GP").
Effective February 25, 1998, MAE GP was merged into Insignia Properties Trust
("IPT"), which is an affiliate of Insignia Financial Group, Inc. ("Insignia").
Thus, the General Partner is now a wholly-owned subsidiary of IPT.
On March 17, 1998, Insignia entered into an agreement to merge its national
residential property management operations, and its controlling interest in
Insignia Properties Trust, with Apartment Investment and Management Company
("AIMCO"), a publicly traded real estate investment trust. The closing, which
is anticipated to happen in the third quarter 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.
The Partnership, through its public offering of Limited Partnership Units, sold
14,050 units aggregating $14,050,000. The General Partner contributed capital
in the amount of $1,000 for a 1% interest in the Partnership. The Partnership
was formed for the purpose of acquiring fee interests in various types of real
property. The Partnership presently owns two investment properties. The General
Partner of the Partnership intends to maximize the operating results and,
ultimately, the net realizable value of each of the Partnership's properties in
order to achieve the best possible return for the investors. Such results may
best be achieved through property sales, refinancings, debt restructurings or
relinquishment of the assets. The Partnership intends to evaluate each of its
holdings periodically to determine the most appropriate strategy for each of the
assets.
The Partnership has no full time employees. The General Partner is vested with
full authority as to the general management and supervision of the business and
affairs of the Partnership. Limited Partners have no right to participate in
the management or conduct of such business and affairs. Insignia Residential
Group, L.P., an affiliate of Insignia, provides day-to-day property management
services to all of the Partnership's investment properties.
The business in which the Partnership is engaged is highly competitive, and the
Partnership is not a significant factor in its industry. Each investment
property is located in or near a major urban area and, accordingly, competes for
rentals not only with similar properties in its immediate area but with hundreds
of similar properties throughout the urban area. Such competition is primarily
on the basis of location, rents, services and amenities. In addition, the
Partnership competes with significant numbers of individuals and organizations
(including similar partnerships, real estate investment trusts and financial
institutions) with respect to the sale of improved real properties, primarily on
the basis of the prices and terms of such transactions.
ITEM 2. DESCRIPTION OF PROPERTIES:
The following table sets forth the Registrant's investment in properties:
<TABLE>
<CAPTION>
Date of
Property Purchase Type of Ownership Use
<S> <C> <C> <C>
Whispering Pines Apartments 06/30/89 Fee ownership subject Residential
to first trust deed Rental
136 units
Silver Ridge Apartments 12/29/87 Fee ownership subject Residential
to first mortgage Rental
bond payable and 186 units
second trust deed
</TABLE>
SCHEDULE OF PROPERTIES:
(dollar amounts in thousands)
Gross
Carrying Accumulated Federal
Property Value Depreciation Rate Method Tax Basis
Whispering Pines $ 5,087 (1) (1) (1) $ 4,813
Apartments
Silver Ridge 5,400 (1) (1) (1) 5,332
Apartments
Total $ 10,487 $10,145
(1) As a result of adopting the liquidation basis of accounting, the gross
carrying values of the properties were adjusted to their net realizable
value and will not be depreciated further.
See "Note B" of the financial statements included in "Item 7." for a description
of the Partnership's former depreciation policy.
SCHEDULE OF MORTGAGES:
(dollar amounts in thousands)
<TABLE>
<CAPTION>
Principal Principal
Balance At Stated Balance
December 31, Interest Period Maturity Due At
Property/Partnership 1997 Rate Amortized Date Maturity
<S> <C> <C> <C> <C> <C>
Whispering Pines Apartments
First trust deed, in default $ 4,252 (2) 30 yrs 01/97 $ 4,252
Silver Ridge Apartments
First mortgage bond payable 4,525 (3) (1) 07/23 4,525
Second trust deed, in default 375 10.00% (1) 12/97 375
Angeles Partners 16
Note payable, in default (5) 859 12.50% (7) (1) 06/97 859
Note payable, in default (5) 2,017 12.25% (7) (1) 06/96 2,017
Working capital loan, in
default (6) 1,517 (4) (1) 11/97 1,517
Total $ 13,545 $ 13,545
<FN>
(1) Interest payments only.
(2) 11th District Federal Home Loan Bank Board base rate plus 2.25%, monthly
payment varies with interest rate (7.084% at December 31, 1997).
(3) Interest only payments based on a variable rate not to exceed 12% (3.40% at
December 31, 1997).
(4) Interest only payments at the prime rate plus 2% payable from available cash
flow, as defined (10.50% at December 31, 1997).
(5) Payable to Angeles Mortgage Investment Trust ("AMIT").
(6) Payable to Angeles Acceptance Pool, L.P ("AAP").
(7) Default interest rate of 18.00%.
</FN>
</TABLE>
Average annual rental rate and occupancy information for 1997 and 1996 for each
property:
Average Annual Average Annual
Rental Rates Occupancy
Property 1997 1996 1997 1996
Whispering Pines Apartments $7,761/unit $7,754/unit 96% 86%
Silver Ridge Apartments $8,037/unit $7,774/unit 94% 97%
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.
As noted under "Item 1. Description of Business," the real estate industry is
highly competitive. All of the properties of the Partnership are subject to
competition from other residential apartment complexes in the area. The General
Partner believes that all of the properties are adequately insured. The multi-
family residential properties' lease terms are for one year or less. No
residential tenant leases 10% or more of the available rental space.
Real estate taxes and rates in 1997 for each property were:
1997 1997
Billing Rate
(in thousands)
Whispering Pines Apartments $ 126 2.46%
Silver Ridge Apartments 245* 4.79%
*Amount per 1996 billings; tax bills for 1997 not yet received.
ITEM 3. 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 was not covered by insurance, was 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. In January 1998, the Partnership received a "Site Closure
Letter" from the Minnesota Pollution and Control Agency which states that
environmental risks have been reduced to minimal levels and that monitoring and
remedial efforts may be discontinued. The 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 have tentatively 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 December 31, 1997, accrued interest on
this debt payable to AMIT totaled approximately $329,000. 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. Under
the laws of the State Minnesota, this foreclosure is subject to a one year right
of redemption. On January 30, 1998, the Partnership executed an Agreement for
Deed in Lieu of Foreclosure by and between the Partnership, the General Partner
and AMIT. Pursuant thereto, the Partnership conveyed the Silver Ridge
Apartments, located in Maplewood, Minnesota, to AMIT and thereby waived its one
year right of redemption.
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 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Unit holders of the Partnership did not vote on any matter during the fiscal
year covered by this report.
PART II
ITEM 5. MARKET FOR THE PARTNERSHIP'S COMMON EQUITY AND RELATED SECURITY
HOLDER MATTERS
The Partnership, a publicly-held limited partnership, sold 14,050 Limited
Partnership Units aggregating $14,050,000 during its offering period through
December 30, 1988, and at December 31, 1997, has 13,993 Limited Partnership
Units outstanding held by 1,466 Limited Partners of record. There is no
intention to sell additional Limited Partnership Units nor is there an
established market for these units.
The Partnership has discontinued making cash distributions and does not
anticipate any cash being available for distributions upon the liquidation of
the Partnership.
ITEM 6. MANAGEMENTS' DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
This item should be read in conjunction with the financial statements and other
items contained elsewhere in this report.
Results of Operations
As of December 31, 1997, the Partnership adopted the liquidation basis of
accounting due to the imminent loss of its investment properties. The
Partnership has experienced significant recurring operating losses, is in
default on substantially all of its indebtedness and continues to suffer from
inadequate liquidity. No other 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.
At December 31, 1997, the Partnership was in default on $2,876,000 of unsecured
indebtedness payable to Angeles Mortgage Investment Trust ("AMIT"), plus related
accrued interest of approximately $987,000, due to its inability to make
interest and principal payments when due. In addition, during January 1998, AMIT
purchased the second trust deed, in the amount of $375,000, which is secured by
Silver Ridge Apartments and matured in December 1997. The lender obtained a
judgment against the Partnership that secured 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 was subject to a one year right of redemption. In January 1998, the
Partnership granted to AMIT a Deed in Lieu of Foreclosure on Silver Ridge
Apartments thereby waiving its right of redemption.
The first mortgage, in the amount of $4,252,000, which is secured by Whispering
Pines Apartments, is in default due to nonpayment upon its maturity in January
1997. ARC II is currently marketing this investment property for sale. Monthly
payments of principal and interest are still being made and the lender has not
initiated foreclosure proceedings. AMIT intends to purchase this first trust
deed in April 1998 if the General Partner is unsuccessful in obtaining a
purchase agreement. At that time AMIT intends to initiate foreclosure
proceedings. The General Partner expects to lose this last investment property
in May 1998, and it anticipates that the Partnership will terminate in June
1998.
As a result of the decision to liquidate the Partnership, the Partnership
changed its basis of accounting for its financial statements at December 31,
1997, from the going concern basis of accounting to the liquidation basis of
accounting. Consequently, assets have been valued at estimated net 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 December 31, 1997,
includes approximately $261,000 of costs, net of income, that the General
Partner estimates will be incurred during the period of liquidation, based on
the assumption that the liquidation process will be completed by June 30, 1998.
These costs principally include interest and administrative expenses. 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.
At December 31, 1997, in accordance with the liquidation basis of accounting,
assets were adjusted to their estimated net realizable value and liabilities
were adjusted to their settlement amount and include all estimated costs
associated with carrying out the liquidation. The net adjustment required to
convert to the liquidation basis of accounting was a decrease in net liabilities
of approximately $1,678,000 which is included in the Statement of Changes in
Partners' Capital (Deficit)/Net Liabilities In Liquidation. The adjustments are
summarized as follows:
(Increase) Decrease
in Net Liabilities
(in thousands)
Adjustment from book value of property and
improvements to estimated net realizable value $ 2,157
Adjustment to record estimated costs associated
with the liquidation (Note A) (261)
Adjustment of other assets and liabilities (218)
Net decrease in net liabilities $ 1,678
Prior to adopting the liquidation basis of accounting, the Partnership realized
a net loss of approximately $383,000 for the year ended December 31, 1997,
versus a net loss of approximately $499,000 for the year ended December 31,
1996. The decrease in net loss for the year ended December 31, 1997, is
attributable to an increase in total revenues, primarily attributable to the
income from the settlement of certain litigation (see discussion below),
partially offset by an increase in expenses.
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 for the year ended December 31, 1997, due to an
increase in advertising and maintenance expenses. The increase in advertising
is a result of concessions being offered at Whispering Pines Apartments in an
effort to increase occupancy. Maintenance expense increased due to an interior
painting project at Silver Ridge Apartments. Also, interest expense increased
for the year ended December 31, 1997, due to the assessment of a late charge on
the $859,000 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
$2,017,000 note payable to AMIT ("North Prior debt").
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 was not covered by insurance, was 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. In January 1998, the Partnership received a "Site
Closure Letter" from the Minnesota Pollution and Control Agency which states
that environmental risks have been reduced to minimal levels and that monitoring
and remedial efforts may be discontinued. The remaining funds in the escrow
account will be used to pay down Partnership debt to AMIT. The Partnership was
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 and is included in total revenues at December 31, 1997.
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 year ended December 31, 1997, the Partnership recognized a loss on
disposal of property of approximately $127,000. 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 operating expense for the year ended December 31, 1997, is
approximately $9,000 of major repairs and maintenance comprised mainly of major
landscaping expenses. Included in operating expense for the year ended December
31, 1996, is approximately $16,000 of major repairs and maintenance comprised
mainly of exterior building repairs.
LIQUIDITY AND CAPITAL RESOURCES
The Partnership's primary source of cash is from the operations of its
properties and from financing placed on such properties. Cash from these
sources is utilized for property operations, capital improvements, and/or
repayment of debt.
The financial statements have been prepared assuming the Partnership will
liquidate during 1998 (see "Note A" to the financial statements). The
Partnership has incurred recurring operating losses, is in default on
substantially all of its indebtedness and continues to suffer from inadequate
liquidity. In addition, there are no identified capital resources available to
the Partnership.
At December 31, 1997, the Partnership had cash and cash equivalents of $479,000
versus $529,000 at December 31, 1996. For the year ended December 31, 1997, net
cash decreased by approximately $50,000 compared to an increase of approximately
$123,000 for the year ended December 31, 1996. Net cash provided by operating
activities increased for the year ended December 31, 1997, compared to the year
ended December 31, 1996, primarily due to the decrease in net loss and a lesser
decrease in other liabilities. The decrease in other liabilities reflects the
payments for the clean up of the fuel oil contamination at North Prior
Industrial Complex. Net cash used in investing activities increased for the
year ended December 31, 1997, versus the year ended December 31, 1996, due
primarily to an increase in property improvements and replacements resulting
from the roof replacement project at Silver Ridge Apartments. Net cash used in
financing activities increased for the year ended December 31, 1997, as compared
to the year ended December 31, 1996, despite a decrease in principal payments,
due to additions to notes payable in 1996. The 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 year ended December 31, 1997.
The mortgage indebtedness of approximately $13,545,000 consists of, (1) a first
mortgage of approximately $4,252,000, 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 approximately $375,000 and $1,517,000, respectively, which are in
default due to their maturity 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
approximately $859,000 and $2,017,000 which is in default due to their maturity
in June 1997 and June 1996, respectively. As mentioned previously, the
Partnership granted AMIT a Deed in Lieu of Foreclosure for Silver Ridge
Apartments in January 1998. Total mortgage indebtedness secured by this
property amounted to $4,900,000 at December 31, 1997. The Partnership has
discontinued making cash distributions and does not anticipate any cash being
available for distributions upon the liquidation of the Partnership.
Other
Certain items discussed in this annual 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 to be materially different from any future results, performance
or achievements of the Partnership expressed or implied by such forward-looking
statements. Such forward-looking statements speak only as of the date of this
annual 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.
ITEM 7. FINANCIAL STATEMENTS
ANGELES PARTNERS 16
LIST OF FINANCIAL STATEMENTS
Report of Ernst & Young LLP, Independent Auditors
Statement of Net Liabilities in Liquidation - December 31, 1997
Statements of Operations - Years ended December 31, 1997 and 1996
Statements of Changes in Partners' Deficit/Net Liabilities in
Liquidation - Years ended December 31, 1997 and 1996
Statements of Cash Flows - Years ended December 31, 1997 and 1996
Notes to Financial Statements
Report of Ernst & Young LLP, Independent Auditors
The Partners
Angeles Partners 16
We have audited the statement of net liabilities in liquidation of Angeles
Partners 16 as of December 31, 1997, and the related statements of operations,
changes in partners' deficit/net liabilities in liquidation and cash flows for
each of the two years in the period ended December 31, 1997. These financial
statements are the responsibility of the Partnership's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by the
Partnership's management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
As more fully described in Note A, due to the imminent disposal of its
investment properties, the General Partner has decided, effective December 31,
1997, to liquidate the Partnership. As a result, the Partnership has changed
its basis of accounting as of December 31, 1997 from a going concern basis to a
liquidation basis.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the net liabilities in liquidation of Angeles Partners 16
at December 31, 1997, and the results of its operations and its cash flows for
each of the two years in the period ended December 31, 1997, in conformity with
generally accepted accounting principles.
/S/ ERNST & YOUNG LLP
Greenville, South Carolina
February 25, 1998,
except for Note K, as to which the date is
March 17, 1998
ANGELES PARTNERS 16
STATEMENT OF NET LIABILITIES IN LIQUIDATION
December 31, 1997
(in thousands)
Assets
Cash and cash equivalents $ 479
Receivables and deposits 323
Restricted escrows 1,264
Investment properties 10,487
12,553
Liabilities
Accounts payable 31
Tenant security deposits 69
Accrued taxes 383
Accrued interest 1,783
Other liabilities 815
Notes payable, including $9,020 in default 13,545
Estimated costs during the period of liquidation 261
16,887
Net liabilities in liquidation $ (4,334)
See Accompanying Notes to Financial Statements
ANGELES PARTNERS 16
STATEMENTS OF OPERATIONS
(in thousands, except unit data)
Years Ended December 31,
1997 1996
Revenues:
Rental income $ 2,380 $ 2,302
Other income 254 228
Income from settlement of litigation 340 --
Total revenues 2,974 2,530
Expenses:
Operating 1,113 1,025
General and administrative 131 139
Depreciation 308 297
Interest 1,304 1,194
Property taxes 374 374
Loss on disposal of property 127 --
Total expenses 3,357 3,029
Net loss $ (383) $ (499)
Net loss allocated to general
partner (1%) $ (4) $ (5)
Net loss allocated to limited
partners (99%) (379) (494)
Net loss $ (383) $ (499)
Net loss per limited partnership unit: $ (27.10) $ (35.20)
See Accompanying Notes to Financial Statements
ANGELES PARTNERS 16
STATEMENTS OF CHANGES IN PARTNERS' DEFICIT/
NET LIABILITIES IN LIQUIDATION
(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
(going concern basis) 14,033 $ (169) $ (4,961) $ (5,130)
Abandoned limited
partnership units (40) -- -- --
Net loss for the year ended
December 31, 1996 -- (5) (494) (499)
Partners' deficit at
December 31, 1996
(going concern basis) 13,993 (174) (5,455) (5,629)
Net loss for the year ended
December 31, 1997 -- (4) (379) (383)
Partners deficit at
December 31, 1997
(going concern basis) 13,993 (178) (5,834) (6,012)
Adjustment to liquidation basis 1,678
Net liabilities in liquidation at
December 31, 1997 $ (4,334)
<FN>
See Accompanying Notes to Financial Statements
</FN>
</TABLE>
ANGELES PARTNERS 16
STATEMENTS OF CASH FLOWS
(in thousands)
<TABLE>
<CAPTION>
Years Ended December 31,
1997 1996
<S> <C> <C>
Cash flows from operating activities:
Net loss $ (383) $ (499)
Adjustments to reconcile net loss to net cash provided
by operating activities:
Depreciation 308 297
Amortization of loan costs 9 9
Loss on disposal of property 127 --
Change in accounts:
Receivables and deposits (8) 111
Other assets (13) --
Accounts payable (6) (2)
Tenant security deposit liabilities 4 2
Accrued taxes (22) (37)
Accrued interest 452 511
Other liabilities (93) (283)
Net cash provided by operating activities 375 109
Cash flows from investing activities:
Property improvements and replacements (321) (62)
Net (deposits to) withdrawals from restricted escrows (21) 130
Net cash (used in) provided by investing activities (342) 68
Cash flows from financing activities:
Additions to notes payable -- 44
Payments on notes payable (83) (98)
Net cash used in financing activities (83) (54)
Net (decrease) increase in cash and cash equivalents (50) 123
Cash and cash equivalents at beginning of period 529 406
Cash and cash equivalents at end of period $ 479 $ 529
Supplemental disclosure of cash flow information:
Cash paid for interest $ 843 $ 674
Interest on notes transferred to notes payable $ -- $ 807
<FN>
See Accompanying Notes to Financial Statements
</FN>
</TABLE>
ANGELES PARTNERS 16
Notes to Financial Statements
December 31, 1997
NOTE A - BASIS OF PRESENTATION
As of December 31, 1997, Angeles Partners 16 (the "Partnership" or "Registrant")
adopted the liquidation basis of accounting due to the imminent loss of its
investment properties. The Partnership has experienced significant recurring
operating losses, is in default on substantially all of its indebtedness and
continues to suffer from inadequate liquidity. No other sources of additional
financing are available to the Partnership and Angeles Realty Corporation II
("ARC II" or the "General Partner") does not have any other plans to remedy the
liquidity problems the Partnership is currently experiencing.
At December 31, 1997, the Partnership was in default on $2,876,000 of unsecured
indebtedness payable to Angeles Mortgage Investment Trust ("AMIT"), plus related
accrued interest of approximately $987,000, due to its inability to make
interest and principal payments when due. In addition, during January 1998, AMIT
purchased the second trust deed, in the amount of $375,000, which is secured by
Silver Ridge Apartments and matured in December 1997. The lender obtained a
judgment against the Partnership that secured 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 was subject to a one year right of redemption. In January 1998, the
Partnership granted to AMIT a Deed in Lieu of Foreclosure on Silver Ridge
Apartments thereby waiving its right of redemption.
The first mortgage, in the amount of $4,252,000, which is secured by Whispering
Pines Apartments, is in default due to nonpayment upon its maturity in January
1997. ARC II is currently marketing this investment property for sale. Monthly
payments of principal and interest are still being made and the lender has not
initiated foreclosure proceedings. AMIT intends to purchase this first trust
deed in April 1998 if the General Partner is unsuccessful in obtaining a
purchase agreement. At that time AMIT intends to initiate foreclosure
proceedings. The General Partner expects to lose this last investment property
in May 1998, and it anticipates that the Partnership will terminate in June
1998.
As a result of the decision to liquidate the Partnership, the Partnership
changed its basis of accounting for its financial statements at December 31,
1997, from the going concern basis of accounting to the liquidation basis of
accounting. Consequently, assets have been valued at estimated net 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 December 31, 1997,
includes approximately $261,000 of costs, net of income, that the General
Partner estimates will be incurred during the period of liquidation, based on
the assumption that the liquidation process will be completed by June 30, 1998.
These costs principally include interest and administrative expenses. 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 - ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
Organization: The Partnership is a California limited partnership organized on
March 24, 1987, to acquire fee or other equity interests in, or long-term
leasehold interests in, improved residential, commercial or industrial
properties. The Partnership's General Partner is ARC II, a California
corporation and wholly-owned subsidiary of MAE GP Corporation ("MAE GP").
Effective February 25, 1998, MAE GP was merged into Insignia Properties Trust
("IPT"), which is an affiliate of Insignia Financial Group, Inc. ("Insignia").
Thus the General Partner is now a wholly-owned subsidiary of IPT. As of December
31, 1997, the Partnership operates two residential properties located in
Fitchburg, Wisconsin and Maplewood, Minnesota.
Allocations to Partners: In accordance with the Partnership Agreement, any gain
from the sale or other disposition of Partnership assets will be allocated first
to the General Partner to the extent of the amount of any Incentive Interests
(as defined below) to which the General Partner is entitled. Any gain remaining
after said allocation will be allocated to the General Partner and Limited
Partners in proportion to their interests in the Partnership; provided that the
gain shall first be allocated to Partners with negative account balances, in
proportion to such balances, in an amount equal to the sum of such negative
capital account balances.
The Partnership will allocate other profits and losses 1% to the General Partner
and 99% to the Limited Partners.
Except as discussed below, the Partnership will allocate distributions 1% to the
General Partner and 99% to the Limited Partners. Upon the sale or other
disposition, or refinancing of any asset of the Partnership, the Distributable
Net Proceeds shall be distributed as follows: (i) First, to the Partners in
proportion to their interests until the Limited Partners have received proceeds
equal to their Original Capital Investment applicable to the property; (ii)
Second, to the Partners until the Limited Partners have received distributions
from all sources equal to their 6% Cumulative Distribution; (iii) Third, to the
General Partner until it has received an amount equal to 3% of the aggregate
disposition price of all properties ("Initial Incentive Interest") and (iv)
Fourth, to the Partners according to their Interests in the Partnership until
the Limited Partners have received distributions from all sources equal to their
10% Cumulative Distribution and, thereafter, until certain of the Limited
Partners receive additional priority returns ranging from 1.5% to 4.5% per annum
on their Adjusted Capital Investment (not compounded) as set forth in the
Partnership Agreement and (v) thereafter, 85% to the Partners in proportion to
their interests and 15% ("Final Incentive Interest") to the General Partner.
Depreciation: Depreciation was calculated by the straight-line method over the
estimated lives of the investment properties and related personal property
through December 31, 1997. No depreciation will be recorded under the
liquidation basis of accounting. For Federal income tax purposes, the
accelerated cost recovery method is used (1) for real property over 18 years for
additions after March 15, 1984, and before May 9, 1985, and 19 years for
additions after May 8, 1985, and before January 1, 1987, and (2) for personal
property over 5 years for additions prior to January 1, 1987. As a result of
the Tax Reform Act of 1986, for additions after December 31, 1986, the
alternative depreciation system is used for depreciation of (1) real property
additions over 40 years, and (2) personal property additions over 6-20 years.
Cash and Cash Equivalents: Cash and cash equivalents includes cash on hand and
in banks, money market funds and certificates of deposit with original
maturities of less than 90 days. At certain times, the amount of cash deposited
at a bank may exceed the limit on insured deposits.
Loan Costs: Loan costs were being amortized on a straight line basis over the
lives of the related loans. At December 31, 1997, these loan costs were written
off in the adjustment to liquidation basis because the Partnership determined
that these intangible assets no longer have value.
Leases: The Partnership generally leases apartment units for twelve-month terms
or less.
Tenant Security Deposits: The Partnership requires security deposits from
lessees for the duration of the lease and such deposits are included in
receivables and deposits. The security deposits are refunded when the tenant
vacates, provided the tenant has not damaged its space and is current on its
rental payments.
Advertising Costs: Advertising costs, approximately $51,000 in 1997 and
approximately $45,000 in 1996, are charged to expense as they are incurred and
are included in operating expenses in the statements of operations.
Investment Properties: Investment properties were stated at cost. Acquisition
fees are capitalized as a cost of real estate. The Partnership records
impairment losses on long-lived assets used in operations when events and
circumstances indicate that the assets might be impaired and the undiscounted
cash flows estimated to be generated by those assets are less than the carrying
amounts of those assets. As a result of the Partnership adopting the
liquidation basis of accounting, the investment properties were adjusted to
their estimated net realizable values at December 31, 1997. The effect of
adoption was to increase the carrying value of the investment properties by
approximately $2,157,000.
Use of Estimates: The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
Reclassifications: Certain reclassifications have been made to the 1996
balances to conform to the 1997 presentation.
NOTE C - ADJUSTMENT TO LIQUIDATION BASIS OF ACCOUNTING
At December 31, 1997, in accordance with the liquidation basis of accounting,
assets were adjusted to their estimated net realizable value and liabilities
were adjusted to their estimated settlement amount and include all estimated
costs associated with carrying out the liquidations. The net adjustment
required to convert to the liquidation basis of accounting was a decrease in net
liabilities of approximately $1,678,000. The adjustments are summarized as
follows:
(Increase) Decrease
in Net Liabilities
(in thousands)
Adjustment from book value of property and
improvements to estimated net realizable value $ 2,157
Adjustment to record estimated costs associated
with the liquidation (Note A) (261)
Adjustment of other assets and liabilities (218)
Net decrease in net liabilities $ 1,678
NOTE D - NOTES PAYABLE
The principle terms of notes payable are as follows:
(dollar amounts in thousands)
<TABLE>
<CAPTION>
Monthly Principal
Payment Stated Balance Balance at
Including Interest Maturity Due at December 31,
Property/Partnership Interest Rate Date Maturity 1997
<S> <C> <C> <C> <C> <C>
Whispering Pines Apartments
First trust deed, in default $ 32 (1) Jan. 1997 $ 4,252 $ 4,252
Silver Ridge Apartments
First mortgage bond payable 15 (3) July 2023 4,525 4,525
Second trust deed, in default 3 10.00% Dec. 1997 375 375
Angeles Partners 16
Note payable, in default (4) 22 12.50% (6) June 1997 859 859
Note payable, in default (4) 30 12.25% (6) June 1996 2,017 2,017
Working capital loan,
in default (5) 14 (2) Nov. 1997 1,517 1,517
$ 116 $13,545 $ 13,545
<FN>
(1) 11th District Federal Home Loan Bank Board base rate plus 2.25%, monthly
payment varies with interest rate (7.084% at December 31, 1997).
(2) Interest only payments at the prime rate plus 2% payable from available
cash flow, as defined (10.50% at December 31, 1997).
(3) Interest only payments based on a variable rate not to exceed 12% (3.40% at
December 31, 1997)
(4) Payable to AMIT.
(5) Payable to AAP.
(6) Default interest rate of 18.00%.
</FN>
</TABLE>
The first mortgage notes payable are nonrecourse and are secured by pledge of
certain of the Partnership's investment properties and by pledge of revenues
from the respective investment properties. Certain of the notes include
prepayment penalties if repaid prior to maturity.
The Partnership is in default on approximately $9,020,000 of its indebtedness,
plus related accrued interest of approximately $1,767,000 due to maturity.
Scheduled principal payments of notes payable subsequent to December 31, 1997,
are as follows (dollar amounts in thousands):
1998 $ 9,020
1999 --
2000 --
2001 --
2002 --
Thereafter 4,525
$ 13,545
NOTE E - INCOME TAXES
Taxable income or loss of the Partnership is reported in the income tax returns
of its partners. Accordingly, no provision for income taxes is made in the
financial statements of the Partnership.
The following is a reconciliation of reported net loss and Federal taxable loss:
1997 1996
(in thousands)
Net loss as reported $ (383) $ (499)
Add (deduct):
Roof replacement 127 --
Environmental clean-up costs (63) (269)
Depreciation differences (70) (72)
Unearned income (3) (15)
Miscellaneous 85 97
Federal taxable loss $ (307) $ (758)
Federal taxable loss per limited
partnership unit $ (21.70) $ (53.48)
The following is a reconciliation between the Partnership's reported amounts and
Federal tax basis of net liabilities:
Net liabilities in liquidation, as reported $ (4,334)
Land and buildings 3,005
Accumulated depreciation (3,347)
Syndication and distribution costs 2,043
Estimated costs of liquidation 261
Accrued environmental clean-up costs 759
Prepaid rent 100
Other 266
Net liabilities - Federal tax basis $ (1,287)
NOTE F - 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 as reimbursement of certain expenses incurred by affiliates on
behalf of the Partnership. The following payments were paid or accrued to the
General Partner and affiliates in 1997 and in 1996:
1997 1996
(in thousands)
Property management fees (included in operating expenses) $ 129 $ 122
Reimbursements for services of affiliates
(included in operating and general and administrative
expenses and investment property) 86 67
Included in "Reimbursements for services of affiliates" for 1997 is
approximately $7,000 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 approximately
$751,000, was approximately $2,267,000 at December 31, 1997, all of which is in
default due to nonpayment at maturity in November 1997. Total interest expense
for this loan was approximately $161,000 and $156,000 for the years ended
December 31, 1997 and 1996, respectively.
At December 31, 1997, AMIT holds one secured and two unsecured notes receivable
from the Partnership. Total indebtedness from the two unsecured notes, including
accrued interest of approximately $987,000, is approximately $3,863,000 all of
which is in default at December 31, 1997, due to maturity. Subsequent to
December 31, 1997, a second trust deed of $375,000 and related accrued interest
of approximately $3,000 was purchased by AMIT. This second trust deed matured
December 1997. Total interest expense paid or accrued to AMIT was $619,000 and
$514,000 for the years ended December 31, 1997 and 1996, respectively. As
discussed in "Note A", in January 1998, the Partnership granted AMIT a Deed in
Lieu of Foreclosure on Silver Ridge Apartments. This transfer of the investment
property to AMIT effectively reduced the amounts owed to AMIT by approximately
$992,000. AMIT assumed the first mortgage of approximately $4,525,000 secured
by the property.
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 of AMIT 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 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 grant 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 Insignia
Properties Trust ("IPT"), an affiliate of Insignia Financial Group, Inc.
("Insignia"), 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 and intends
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 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 December
31, 1997. 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, an entity 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 when this transaction is consummated.
NOTE G - INVESTMENT PROPERTIES AND ACCUMULATED DEPRECIATION
<TABLE>
<CAPTION>
Initial Cost
To Partnership
(in thousands)
Cost
Buildings Capitalized Adjustment
and Related (Removed) to
Personal Subsequent to Liquidation
Description Encumbrances Land Property Acquisition Basis
<S> <C> <C> <C> <C> <C>
Whispering Pines Apartments $ 4,252 $ 579 $ 5,211 $ (312) $ (391)
Silver Ridge Apartments 4,900 642 6,244 (464) (1,022)
Angeles Partners 16 4,393 -- -- -- --
Totals $ 13,545 $1,221 $ 11,455 $ (776) $(1,413)
</TABLE>
<TABLE>
<CAPTION>
At December 31, 1997
(in thousands)
Buildings
And Related
Personal Accumulated Date Depreciable
Description Land Property Total Depreciated Acquired Life-Years
<S> <C> <C> <C> <C> <C> <C>
Whispering Pines Apartments $ 509 $ 4,578 $ 5,087 (1) 06/30/89 (1)
Silver Ridge Apartments 567 4,833 5,400 (1) 12/29/87 (1)
Totals $1,076 $ 9,411 $10,487
<FN>
(1) As a result of adopting the liquidation basis of accounting, the gross
carrying values of the properties were adjusted to their net realizable value
and will not be depreciated further.
</FN>
</TABLE>
Reconciliation of "Investment Properties and Accumulated Depreciation":
Years Ended December 31,
1997 1996
(in thousands)
Investment Properties
Balance at beginning of year $ 11,747 $ 11,685
Property improvements 321 62
Adjustments to liquidation basis (1,413) --
Dispositions (168) --
Balance at end of Year $ 10,487 $ 11,747
Accumulated Depreciation
Balance at beginning of year $ 3,303 $ 3,006
Additions charged to expense 308 297
Adjustments to liquidation basis (3,570) --
Dispositions (41) --
Balance at end of Year $ -- $ 3,303
The aggregate cost of the real estate for Federal income tax purposes at
December 31, 1997 and 1996, is $13,492,000 and $13,169,000. The accumulated
depreciation taken for Federal income tax purposes at December 31, 1997 and
1996, is $3,347,000 and $2,968,000.
NOTE H - 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 December 31, 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 was not covered by insurance, was 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
December 31, 1997, the balance remaining in this account was approximately
$872,000. 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. In January 1998, the Partnership
received a "Site Closure Letter" from the Minnesota Pollution and Control Agency
which states that environmental risks have been reduced to minimal levels and
that monitoring and remedial efforts may be discontinued for the present. The
General Partner has not decreased the accrual for this liability as it believes
the obligation has not been satisfied. The Partnership expects to receive any
remaining funds in the escrow account in 1998. They will be used to pay down
the AMIT debt discussed above (see "Note D").
NOTE I - LEGAL SETTLEMENT
The Partnership was the plaintiff in a lawsuit filed against the fuel oil
distributor for damages sustained as discussed in "Note H" 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 and is included in total
revenues at December 31, 1997. 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.
NOTE J - ABANDONMENT OF LIMITED PARTNERSHIP UNITS
In 1996, the number of Limited Partnership Units decreased by 40 units due to
limited partners abandoning their units. In abandoning his or her Limited
Partnership Units, a limited partner relinquishes all right, title and interest
in the Partnership as of the date of abandonment. However, during the year of
abandonment, the Limited Partner will still be allocated his or her share of the
income or loss for that entire year. The loss per limited partnership unit in
the accompanying statements of operations is calculated based on the number of
units outstanding at the beginning of the year.
NOTE K - SUBSEQUENT EVENT
On March 17, 1998, Insignia entered into an agreement to merge its national
residential property management operations, and its controlling interest in
Insignia Properties Trust, with Apartment Investment and Management Company
("AIMCO"), a publicly traded real estate investment trust. The closing, which
is anticipated to happen in the third quarter 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.
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANT ON ACCOUNTING AND
FINANCIAL DISCLOSURES
There were no disagreements with Ernst & Young LLP regarding the 1997 or 1996
audits of the Partnership's financial statements.
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE
WITH SECTION 16(A) OF THE EXCHANGE ACT
Angeles Realty Corporation II ("ARC II" or the "General Partner"), is a wholly-
owned subsidiary of MAE GP Corporation (MAE GP), an affiliate of Insignia
Financial Group, Inc. ("Insignia"). Effective February 25, 1998, MAE GP was
merged into Insignia Properties Trust ("IPT"), which is an affiliate of
Insignia. Thus the Managing General Partner is now a wholly-owned subsidiary of
IPT.
The names of the directors and executive officers of ARC II, their ages and the
nature of all positions with ARC II presently held by them are as follows:
Name Age Position
Carroll D. Vinson 57 President and Director
Robert D. Long, Jr. 30 Vice President and Chief
Accounting Officer
William H. Jarrard, Jr. 51 Vice President
Daniel M. LeBey 32 Secretary
Kelley M. Buechler 40 Assistant Secretary
Carroll D. Vinson has been President and Director of the General Partner and
President of Metropolitan Asset Enhancement, L.P. ("MAE"), and subsidiaries
since August 1994. He has acted as Chief Operating Officer of IPT, since May
1997. During 1993 to August 1994, Mr. Vinson was affiliated with Crisp, Hughes &
Co. (regional CPA firm) and engaged in various other investment and consulting
activities which included portfolio acquisitions, asset dispositions, debt
restructurings and financial reporting. Briefly, in early 1993, Mr. Vinson
served as President and Chief Executive Officer of Angeles Corporation, a real
estate investment firm. From 1991 to 1993, Mr. Vinson was employed by Insignia
in various capacities including Managing Director - President during 1991.
Robert D. Long, Jr. has been Vice President of the General Partner since August
1994. Mr. Long joined MAE in September 1993. Since 1994 he has acted as Vice
President and Chief Accounting Officer of the MAE subsidiaries. Mr. Long was an
accountant for Insignia until joining MAE in 1993. Prior to joining Insignia,
Mr. Long was an auditor for the State of Tennessee and was associated with the
accounting firm of Harsman Lewis and Associates.
William H. Jarrard, Jr. has been Vice President of the General Partner since
December 1992. He has acted as Senior Vice President of IPT since May 1997. Mr.
Jarrard previously acted as Managing Director - Partnership Administration of
Insignia from January 1991 through September 1997 and served as Managing
Director - Partnership Administration and Asset Management from July 1994 until
January 1996.
Daniel M. LeBey has been Secretary of the General Partner since January 29, 1998
and Insignia's Assistant Secretary since April 30, 1997. Since July 1996 he has
also served as Insignia's Associate General Counsel. From September 1992 until
June 1996, Mr. LeBey was an attorney with the law firm of Alston & Bird LLP,
Atlanta, Georgia.
Kelley M. Buechler has been Assistant Secretary of the General Partner since
December 1992 and Assistant Secretary of Insignia since 1991.
ITEM 10. EXECUTIVE COMPENSATION
No direct form of compensation or remuneration was paid by the Partnership to
any officer or director of ARC II. The Partnership has no plan, nor does the
Partnership presently propose a plan, which will result in any remuneration
being paid to any officer or director upon termination of employment. However,
certain fees and other payments have been made to the Partnership's General
Partner and its affiliates, as described in "Item 12." below.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
As of January 1, 1997, no person owned of record more than 5% of the Limited
Partnership Units of the Partnership nor was any person known by the Partnership
to own of record and beneficially, or beneficially only, more than 5% of such
securities.
The Partnership knows of no contractual arrangements, the operation of the terms
of which may at a subsequent date result in a change in control of the
Partnership, except as follows: Article 12.1 of the Agreement, which provides
that upon a vote of the Limited Partners holding more than 50% of the then
outstanding Limited Partnership Units the General Partner may be expelled from
the Partnership upon 90 days written notice. In the event that a successor
general partner has been elected by Limited Partners holding more than 50% of
the then outstanding Limited Partnership Units and if said Limited Partners
elect to continue the business of the Partnership, the Partnership is required
to pay in cash to the expelled General Partner an amount equal to the accrued
and unpaid management fee described in Article 10 of the Agreement and to
purchase the General Partner's interest in the Partnership on the effective date
of the expulsion, which shall be an amount equal to the difference between i)
the balance of the General Partner's capital account and ii) the fair market
value of the share of Distributable Net Proceeds to which the General Partner
would be entitled. Determination of the fair market value of the share of
Distributable Net Proceeds is defined in Article 12.2 (b) of the Agreement.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
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 as reimbursement of certain expenses incurred by affiliates on
behalf of the Partnership. The following payments were paid or accrued to the
General Partner and affiliates in 1997 and in 1996:
1997 1996
(in thousands)
Property management fees $ 129 $ 122
Reimbursements for services of affiliates 86 67
Included in "Reimbursements for services of affiliates" for 1997 is
approximately $7,000 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 approximately
$751,000, was approximately $2,267,000 at December 31, 1997, all of which is in
default due to maturity. This loan requires monthly interest only payments at
prime plus 2% paid 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 approximately $161,000 and $156,000 for
the years ended December 31, 1997 and 1996, respectively.
At December 31, 1997, AMIT holds one secured and two unsecured notes receivable
from the Partnership. Total indebtedness from the two unsecured notes, including
accrued interest of approximately $987,000, is approximately $3,863,000 all of
which is in default at December 31, 1997, due to maturity. Subsequent to
December 31, 1997, a second trust deed of $375,000 and related accrued interest
of approximately $3,000 was purchased by AMIT. Total interest expense paid or
accrued to AMIT was $619,000 and $514,000 for the years ended December 31, 1997
and 1996, respectively. As discussed in "Note A", in January 1998, the
Partnership granted AMIT a Deed in Lieu of Foreclosure on Silver Ridge
Apartments. This transfer of the investment property to AMIT effectively reduced
the amounts owed to AMIT by approximately $992,000. AMIT assumed the first
mortgage of approximately $4,525,000 secured by the property.
In November 1992, MAE GP Corporation ("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 of AMIT 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
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 grant 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 Insignia
Properties Trust ("IPT"), an affiliate of Insignia Financial Group, Inc.
("Insignia"), 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 and intends
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 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 December
31, 1997. 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, an entity 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 when this transaction is consummated.
On March 17, 1998, Insignia entered into an agreement to merge its national
residential property management operations, and its controlling interest in
Insignia Properties Trust, with Apartment Investment and Management Company
("AIMCO"), a publicly traded real estate investment trust. The closing, which
is anticipated to happen in the third quarter 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.
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K
(a) See Exhibit Index contained herein.
(b) Reports on Form 8-K filed during the fourth quarter of 1997: None.
A Form 8-K was filed on January 30, 1998, reporting Deed in Lieu of
Foreclosure between the Partnership and Angeles Mortgage Investment
Trust.
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the registrant has
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
ANGELES PARTNERS 16
(A California Limited Partnership)
(Registrant)
By: Angeles Realty Corporation II
General Partner
By: /s/ Carroll D. Vinson
Carroll D. Vinson
President and Director
Date: March 26, 1998
In accordance with the Exchange Act, this report has been signed below by the
following persons on behalf of the registrant and in the capacities on the dates
indicated.
/s/ Carroll D. Vinson President and Director Date: March 26, 1998
Carroll D. Vinson
/s/ Robert D. Long, Jr. Vice President and Date: March 26, 1998
Robert D. Long, Jr. Chief Accounting Officer
EXHIBIT INDEX
Exhibit Number Description of Exhibits
3.1 Amended Certificate and Agreement of the Limited Partnership's
filed in the Partnership's prospectus dated June 15, 1987 which
is incorporated herein by reference.
10.1 Agreement of Purchase and Sale of Property with Exhibits -
Angola Beach, filed in Form 8K dated December 29, 1987, which is
incorporated herein by reference.
10.2 Amendment of Contract - Angola Beach filed in Form 8K dated
December 29, 1987, which is incorporated herein by reference.
10.3 Agreement of Purchase and Sale of Property - Silver Ridge filed
in Form 8K dated December 29, 1987, which is incorporated herein
by reference.
10.4 Contract of Sale with Exhibits - Angola Estates, file in Form 8K
dated January 12, 1988, which is incorporated herein by
reference.
10.5 First Trust Deed - Angola Beach, filed in Form 10Q dated
September 30, 1988, which is incorporated herein by reference.
10.6 Agreement of Purchase and Sale of Property - North Prior filed
in Form 8K dated January 18, 1989, which is incorporated herein
by reference.
10.7 Agreement of Purchase and Sale of Property - Whispering Pines
filed in Form 8K dated July 19, 1989, which is incorporated
herein by reference.
10.8 Stock Purchase Agreement dated November 24, 1992 showing the
purchase of 100% of the outstanding stock of Angeles Realty
Corporation II by IAP GP Corporation, a subsidiary of MAE GP
Corporation, filed in Form 8-K dated December 31, 1992, which is
incorporated herein by reference.
10.9 Agreement of Purchase and Sale of Property - Angola Beach and
Angola Estates Mobile Home Park filed in Form 8K dated May 20,
1993, which is incorporated herein by reference.
10.10 Letter from the Registrant's former independent accountant
regarding its concurrence with the statements made by the
Registrant is incorporated by reference to the exhibit filed
with Form 8K dated September 1, 1993.
10.11 Purchase Agreement with Exhibits between Angeles Partners 16 and
North Prior, L.L.C. dated March 3, 1993, documenting the sale of
North Prior Industrial Park.
10.12 First Amendment to Purchase Agreement with Exhibits between
Angeles Partners 16 and North Prior, L.L.C. dated June 12, 1995,
documenting the sale of North Prior Industrial Park.
10.13 Assignment and Assumption of Leases with Exhibits between
Angeles Partners 16 and North Prior, L.L.C. dated June 12, 1995.
10.14 Assignment and Assumption of Service Contracts with Exhibits
between Angeles Partners 16 and North Prior Industrial, L.L.C.
dated June 12, 1995.
10.15 Assignment of Permits and Warranties with Exhibits between
Angeles Partners 16 and North Prior, L.L.C. dated June 12, 1995.
10.16 Assignment of Rents and Leases with Exhibits between Angeles
Partners 16 and Towle Real Estate Company dated June 12, 1995.
10.17 Assignment of Service Contracts with Exhibits between Angeles
Partners 16 and Towle Real Estate Company dated June 12, 1995.
10.18 Assignment of Permits and Warranties with Exhibits between
Angeles Partners 16 and Towle Real Estate Company dated June 12,
1995.
10.19 Deed in Lieu of Foreclosure between Angeles Partners 16, a
California partnership, Angeles Realty Corporation II, a
California corporation and Angeles Mortgage Investment Trust, a
California business trust, as of January 30, 1998.
27 Financial Data Schedule, is filed as an exhibit to this report.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from Angeles
Partners 16 1997 Year-End 10-KSB and is qualified in its entirety by
reference to such 10-KSB filing.
</LEGEND>
<CIK> 0000812187
<NAME> ANGELES PARTNERS 16
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> DEC-31-1997
<CASH> 479
<SECURITIES> 0
<RECEIVABLES> 323
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0<F1>
<PP&E> 10,487
<DEPRECIATION> 0
<TOTAL-ASSETS> 12,553
<CURRENT-LIABILITIES> 0<F1>
<BONDS> 13,545
0
0
<COMMON> 0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 12,553
<SALES> 0
<TOTAL-REVENUES> 2,974
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 3,357
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,304
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (383)
<EPS-PRIMARY> (27.10)<F2>
<EPS-DILUTED> 0
<FN>
<F1>Registrant has an unclassified balance sheet.
<F2>Multiplier is 1.
</FN>
</TABLE>
AGREEMENT FOR DEED IN LIEU OF FORECLOSURE
This AGREEMENT FOR DEED IN LIEU OF FORECLOSURE (this "Agreement") is made
as of January 30, 1998 by and between ANGELES PARTNERS 16, a California limited
partnership ("AP16"), ANGELES REALTY CORPORATION II, a California corporation
("ARC"), and ANGELES MORTGAGE INVESTMENT TRUST, a California business trust
("AMIT").
RECITALS
A. ARC is the sole general partner of AP16.
B. AP16 is indebted to AMIT pursuant to those certain two Promissory
Notes currently held by AMIT which were originally issued in favor of Stephen E.
Haight, both dated May 20, 1986, in the original principal amounts of $400,000
and $375,000, respectively, as amended by that certain Note and Mortgage
Modification Agreement dated July 14, 1993 (collectively, as amended, the
"Notes").
C. AMIT is the holder of a certain Subordinated Mortgage and Assignment
of Rents in the original principal amount of $775,000 dated May 20, 1986, filed
December 17, 1987, in the office of the Ramsey County Registrar of Titles as
Document No. 857307, as amended by that certain Note and Mortgage Modification
Agreement filed on August 16, 1993 as Document No. 1023847 in said office (as
amended, the "Mortgage"), which Mortgage secures the payment of the Notes.
D. The Mortgage constitutes a second lien against certain improved real
property located in Ramsey County, Minnesota, legally described as follows:
As set forth on Exhibit A attached hereto,
(the "Property"), which Property is commonly known and referred to as Silver
Ridge Apartments, located at 2330 Stillwater Avenue, Maplewood, Minnesota 55119.
E. AP16 has and asserts no offsets, counter claims or defenses to the
indebtedness evidenced by the Notes and the Mortgage, each of which are valid
obligations of AP16, and which Notes are currently due and payable in full.
F. The total amount outstanding on the Notes and Mortgage as of the date
hereof is $396,832.19, computed as follows:
Principal $375,000.00
Accrued Interest to 1/30/98 3,082.19
Late Charge 18,750.00
Total $396,832.19
G. In accordance with the terms and provisions of the Notes and Mortgage,
which are currently in default, AMIT has demanded that AP16 convey to AMIT by
limited warranty deed, bill of sale, and other appropriate assignments and
instruments, all of the AP16's right, title and interest, in and to the
Property, related personal property, the name Silver Ridge Apartments (and
derivatives) and all claims, causes of action, contract rights and other general
intangibles related to the Property, in exchange for which AMIT will release
AP16 from liability on the Notes and Mortgage, and AMIT has agreed to do so on
the terms and subject to the conditions hereinafter set forth.
AGREEMENTS
NOW, THEREFORE, in consideration of the premises and the agreements,
covenants, representations and warranties contained herein and in any other
documents delivered hereunder, and for one dollar and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto agree as follows:
1. Recitals. The information contained in the recitals set forth above
is true and correct in all respects and accurately sets forth the facts and
circumstances under which this Agreement has been executed. The recitals are a
part of this Agreement and incorporated herein by reference.
2. Delivery of Documents. On or prior to the date hereof, AP16 has
delivered or caused to be delivered to AMIT, as the case may be, all of the
following documents dated such date and in form and substance satisfactory to
AMIT, all duly executed and delivered by all appropriate parties:
2.1 A limited warranty deed (the "Deed") conveying the Property to
AMIT subject only to the matters set forth in Exhibit B hereto (the
"Permitted Encumbrances") with non-merger language acceptable to AMIT.
2.2 A bill of sale and assignment (the "Bill of Sale") conveying to
AMIT all tangible and intangible personal property on or related to the
Property and, if any, all warranties and any claims under warranties with
respect to the real and personal property together with any and all
certificates of title pertaining to such personal property required by law
to be registered or certificated.
2.3 An executed assignment of leases (the "Lease Assignment")
conveying to AMIT all leases pertaining to the Property and, if any, all
guaranties of such leases and all of AP16's rights under the leases and
guaranties, and all security deposits related thereto and interest thereon.
2.4 Owner's duplicate certificate of title no. 335310 covering the
Property.
2.5 A commitment for an ALTA owner's policy of title insurance issued
by Commonwealth Land Title Insurance Company ("Title") in favor of AMIT
covering the Property in form and substance acceptable to AMIT whereby
Title commits to issue its owner's policy of title insurance in favor of
AMIT, which policy will be free from all standard exceptions and all other
exceptions except for the Permitted Encumbrances and other exceptions
specifically approved by AMIT. AMIT shall be responsible for payment for
this title commitment and any premiums for the final title insurance
policy.
2.6 An as-built survey of the Property, if in the possession of AP16
or its agents.
2.7 A complete set of as-built plans and specifications for the
improvements on the Property (the "Existing Plans"), together with all
proposed plans and specifications (including detailed proposed site plans)
for proposed changes to the Property (the "Proposed Plans"), if in the
possession of AP16 or its agents. The Existing Plans and Proposed Plans
all being assigned to AMIT pursuant to the Bill of Sale.
2.8 Copies of all certificates of occupancy, permits and licenses
pertaining to the Property and available in the records of AP16 or its
agents.
2.9 Copies of all appraisals related to the Property available in the
records of AP16 or its agents.
2.10 Copies of any and all soil tests, engineering studies,
environmental assessments and other information pertaining to the Property
available in the records of AP16 or its agents.
2.11 Originals of all leases and related guaranties pertaining to
tenants currently occupying or having rights to occupy any portion of the
Property together with all amendments thereto and all rental payment and
security deposit records and all correspondence pertaining to lease matters
related thereto (the "Lease Files") and, to the extent available in the
records of AP16 or its agents, copies of all other leases pertaining to the
Property together with all amendments thereto and all correspondence
pertaining to lease matters related thereto. Such items may be left with
AMIT's property manager at the Property.
2.12 Copies of any and all management agreements, service contracts,
leases of personal property, unrecorded easements, covenants and
restrictions and other agreements related to the Property (the
"Contracts").
2.13 All keys and other entry devices.
2.14 Copies of any and all other documents pertaining to the title,
condition, operation and maintenance of the Property, if any, in the
possession of AP16 or its agents.
2.15 An incumbency certificate and partnership documents of AP16
including a certified partnership agreement, together with all amendments
thereto, and resolutions of the partnership authorizing this Agreement and
the transactions contemplated hereby executed by the general and limited
partners of AP16 as required under the partnership agreement.
2.16 An incumbency certificate and corporate documents of ARC
including certified Articles of Incorporation and Bylaws, a Certificate of
Good Standing issued by the Minnesota Secretary of State, and resolutions
of the corporation authorizing this Agreement and the transactions
contemplated hereby.
2.17 Seller's affidavit of no judgments, mechanic's liens or other
unrecorded interests.
2.18 Certificate of real estate value.
2.19 Internal Revenue Service '1445 certification of nonforeign
status.
2.20 Internal Revenue Service '1099 certification of taxpayer
identification.
2.21 UCC and state and federal tax and judgment lien searches on AP16
and ARC.
2.22 Current financial statement of AP16 certified as being true and
correct as of the date delivered.
2.23 Written instructions to AP16's current property manager to
deliver and pay to AMIT all security deposits and interest thereon and all
other amounts held by or under the control of said manager relating to the
use, ownership, occupancy, maintenance and operation of the Property. As
of January 30, 1998, the amounts held by said property manager are
$394,355.73.
2.24 Notice letters to every tenant regarding change in ownership of
the Property, transfer of security deposits and instructions for future
payment of rents.
2.25 Termination of existing management agreement.
2.26 Termination of all Contracts, unless specifically assumed by
AMIT, at AMIT's election.
2.27 Current rent roll of the Property, certified as being true and
correct by AP16.
2.28 Such other documents and certificates as may be reasonably
required by Title or AMIT.
Hereinafter, the documents referred to in this Section 2 shall be referred
to collectively as the "Conveyance Documents."
3. Representations and Warranties. In addition to the other
representations and warranties made by them elsewhere in this Agreement or in
any schedules, documents or affidavits delivered hereunder, AP16 and ARC each
hereby represent and warrants to AMIT as of the date hereof:
3.1 They are in full compliance with the terms and conditions of this
Agreement.
3.2 None of their representations herein or in any schedule delivered
hereunder is false or misleading in any material respect.
3.3 To the knowledge of AP16 and ARC, the valuation of the Property
conveyed to AMIT pursuant to the Conveyance Documents, as established by
the Ramsey County Assessor, is $5,115,000. AMIT has also obtained a recent
appraisal of the Property which states that the present fair market value
of the Property is $5,400,000. By entering into this Agreement, AMIT has
paid full and fair consideration for the property conveyed pursuant to the
Conveyance Documents.
3.4 AP16 has no equity in the property conveyed to AMIT by the
Conveyance Documents.
3.5 Each of them has been represented by independent legal counsel
and such other financial and tax advisors as they have deemed necessary and
have relied on such counsel and advisors with respect to all legal and tax
consequences of the transactions contemplated herein.
3.6 EACH OF THEM HAS BEEN ADVISED AS FOLLOWS WITH RESPECT TO THE
PROPERTY AND THE MORTGAGE: THEY HAVE THE RIGHT TO REQUIRE A FORECLOSURE
SALE OF THE PROPERTY UNDER THE MORTGAGE AND TO REQUIRE A MINIMUM OF SIX
WEEKS PUBLISHED NOTICE OF SUCH SALE; THEY HAVE THE RIGHT TO REQUEST THAT
THE COURT ORDER A DELAY OF THE SALE; THEY MAY BRING A COURT ACTION TO
CONTEST THE FORECLOSURE AND SALE OF THE PROPERTY; FOLLOWING FORECLOSURE
SALE, THEY HAVE THE RIGHT TO REMAIN IN POSSESSION OF THE PROPERTY DURING A
12-MONTH PERIOD OF REDEMPTION; AND THEY (AND EACH OF THEM) HAS VOLUNTARILY
WAIVED EACH RIGHT REFERRED TO ABOVE.
3.7 AP16 covenants, represents and warrants that it is the sole owner
of and has good right and lawful authority to sell, transfer, assign and
convey the Property pursuant to the terms hereof free and clear of all
mortgages, liens, pledges, claims, charges, easements, rights of way,
covenants, conditions, restrictions, encumbrances and any other matters
affecting title thereto except for the Permitted Encumbrances and will
defend the title to the Property against all claims and demands whatsoever
not specifically excepted as Permitted Encumbrances.
3.8 AP16 is a limited partnership duly organized, validly existing
and in good standing under the laws of the State of California and has the
power, authority, permits, consents, authorizations and licenses necessary
to execute, deliver and perform this Agreement and the Conveyance
Documents. ARC is the sole general partner of AP16. All consents of the
general and limited partners of AP16 necessary to authorize the execution,
delivery and performance of this Agreement and the Conveyance Documents
have been duly obtained and are in full force and effect. This Agreement
and the Conveyance Documents have been duly authorized, executed and
delivered by and on behalf of AP16 so as to constitute the valid and
binding obligations of AP16 enforceable in accordance with their terms.
3.9 ARC is a corporation duly organized, validly existing and in good
standing under the laws of the State of California and has all power,
authority, permits, consents, authorizations and licenses necessary to
execute, deliver and perform this Agreement and the Conveyance Documents.
All resolutions of the directors and shareholders of ARC necessary to
authorize the execution, delivery and performance of this Agreement and the
Conveyance Documents have been duly adopted and are in full force and
effect. This Agreement and the Conveyance Documents have been duly
authorized, executed and delivered by and on behalf of ARC so as to
constitute the valid and binding obligations of ARC enforceable in
accordance with their terms.
3.10 There is no provision in any indenture, contract or agreement to
which any one or more of them is a party or by which they or any one of
them is bound and, to the best of their knowledge, no law, statute,
ordinance, rule, regulation or restriction, or order of any court or
administrative agency to which they or any one of them is subject or by
which they or any one of them is bound, which prohibits the execution and
delivery of this Agreement, the Conveyance Documents, or the performance
and observance of terms, covenants or conditions of this Agreement or any
of the Conveyance Documents.
3.11 Any and all financial statements heretofore delivered to AMIT by
or on behalf of any one or more of them are true and correct in all
material respects, and fairly represent the financial condition of the
subjects thereof as of the respective dates thereof. No material change
has occurred in the financial condition reflected in the most recent
financial statement of any one or more of them since the respective dates
of the most recent financial statement delivered by each. None of the
aforesaid financial statements or any certificate or statement furnished to
AMIT by or on behalf of any one or more of them in connection with this
Agreement or any of the Conveyance Documents contains any untrue statement
of a material fact or omits a material fact necessary in order to make the
statements contained therein taken as a whole, not misleading.
3.12 Neither of them has received notice of any actions, suits,
proceedings or investigations commenced or, to the best of their knowledge,
threatened against them or any one of them or the Property in any court or
before any federal, state, municipal or other governmental agency and they
(and each of them) are not in default with respect to any order of any
court or governmental agency.
3.13 They (and each of them) will reasonably cooperate with AMIT in
collecting the rents and accounts assigned to AMIT pursuant to the terms of
the Conveyance Documents including, without limitation, by providing
witnesses, documentation and/or any additional information necessary to
effectuate the collection of the rents and accounts by AMIT.
3.14 To the best of their knowledge, the Property does not violate any
federal, state, local or other governmental law, ordinance or regulation
including, without limitation, any environmental, building, zoning, health,
safety, planning or subdivision law, ordinance or regulation, or any
applicable private restriction. No notice of the violation of any said
laws, ordinances, regulations or restrictions has been received by either
of them. Neither of them has notice, information or knowledge of any
change contemplated in any applicable law, ordinance, regulation or
restriction, any notice of pending or threatened condemnation, zoning
change or any judicial, administrative, governmental or quasi-governmental
action or any action by adjacent landowners which could have a materially
adverse affect on the Property.
3.15 There are no outstanding or unpaid claims, actions or causes of
actions related to any transaction or obligation entered into or incurred
by any one or more of them with respect to the Property. Except for the
specific unpaid claims listed on Schedule 1 that AMIT has agreed to assume,
they and each of them agree that they will satisfy or make arrangements to
satisfy all other unpaid claims listed on Schedule 1 and any other
outstanding claims related to the Property, whether or not listed on
Schedule 1, before they become a lien on the Property.
3.16 AP16 has turned over to AMIT any and all funds on deposit in any
account or otherwise held by AP16 or its agents and all instruments,
judgments, agreements and other property constituting rents, revenues and
other income (including, without limitation, tenant security deposits,
insurance proceeds, tax refunds or other rebates or reimbursements and
judgment or settlement awards) generated by the Property for any and all
occupancy of the Property. If, at any time in the future, AP16 receives
any cash, instruments or other property constituting rents, revenues or
other income related to or generated by the Property, regardless of the
period from which said amounts relate, AP16 will hold the same in trust for
AMIT and will forthwith pay and deliver all such cash, instruments, and
other property to AMIT in the form received duly endorsed or assigned to
AMIT. AP16 and ARC each agree that as of the date hereof they have no
interest in or claim to any such funds, instruments, judgments, agreements
or other property constituting past, present or future rents, revenues or
other income generated by the Property.
3.17 On or prior to the date hereof, AP16 and ARC have turned over to
AMIT the originals of all current leases and related guaranties, if any,
pertaining to the Property together with all amendments thereto and all
correspondence related thereto. AP16 and ARC each represent and warrant
that there are no other current leases and no amendments to current leases
and no correspondence or other documentation related to the leases
(including, without limitation, non-disturbance agreements, notices with
respect to exercise of options, existence of defaults or other notices or
letters of intent) that have not been turned over to AMIT.
3.18 On or prior to the date hereof, AP16 and ARC delivered to AMIT
the originals (or, if originals were not available, copies) of all
management agreements, service contracts, leases of personal property,
unrecorded easements, covenants and restrictions and all other agreements
related to the Property. AP16 and ARC each represent and warrant that
there are no other management agreements, service contracts, leases of
personal property, unrecorded easements, covenants or restrictions or other
agreements related to the Property that have not been turned over to AMIT.
3.19 As of the date hereof AP16 is not in default under any leases,
service contracts, easements, or restrictive covenants pertaining to the
Property and there were no outstanding obligations under any such documents
to be performed by AP16.
3.20 There are no actions, suits, proceedings or investigations
pending or, to the knowledge of any of them threatened against AP16 or the
Property in any court or before any federal, state, municipal or other
governmental agency.
3.21 The rent roll provided to AMIT pursuant to Section 2.27 hereof is
complete, true and correct.
3.22 To the best of their knowledge, there are no Hazardous Substances
in or upon the Property originating from any source and no violation of any
Environment Law relating to the Property. "Hazardous Substance" means any
material, waste, substance, pollutant or contaminant which may or could
pose a risk of injury or a threat to health or the environment including,
without limitation, polychlorinated biphenyls, petroleum or petroleum
products, asbestos in any form or asbestos containing materials, flammable
explosives, radioactive materials, radon gas, urea formaldehyde, foam
insulation or products and those substances included within the definitions
of "hazardous substance," "hazardous waste," "hazardous material," "toxic
substance," "solid waste," "pollutant" or "contaminate" in or otherwise
regulated by any federal, state or local laws, ordinances or regulations.
"Environmental Law" means any federal, state or local law, ordinance or
regulation pertaining to health, industrial hygiene, or the regulation or
protection of the environment, including ambient air, soil, groundwater,
surface water and/or land use.
3.23 AP16 and ARC will reasonably cooperate with AMIT and the holder
of the first mortgage on the Property ("Holder") in order to obtain the
consent of Holder to the conveyance by AP16 to AMIT herein described. In
connection therewith, AP16 and ARC shall execute and deliver such
instruments, certifications, instructions, affidavits, consents, approvals,
assignments and such other agreements and documents as Holder and/or AMIT
shall reasonably request.
All of the representations and warranties made hereunder are true and
correct and all information provided to AMIT by the other parties in connection
with this Agreement has not and does not contain any statement which, at the
time and in light of the circumstances under which it was made, would be false
or misleading with respect to any material fact or would omit any material fact
necessary in order to make any such statement contained therein not false or
misleading in any material respect. If any of said parties subsequently
obtains knowledge that any such representation or warranty was or is untrue,
such party shall immediately notify AMIT as to the untrue nature of said
representation and agree to take such action as may be necessary to cause such
representation to become true.
4. Release from Obligations. In consideration of the delivery of the
documents set forth in Section 2 and in reliance on the representations and
warranties of AP16 and ARC set forth herein and the due performance by such
persons and entities of the obligations set forth herein, AMIT, for itself and
its successors and assigns, releases AP16 and ARC and their respective officers,
directors, shareholders, partners, agents and employees, and the personal
representatives, heirs, successors and assigns of any and all of the foregoing
from liability on the Notes and Mortgage and any related loan documents. In
addition, AP16 and ARC have obligations to AMIT separate and apart from the
Notes and Mortgage. The parties hereby acknowledge and agree that the release
set forth in this Section 4 does not release or affect in any way the liability
of such persons or entities to AMIT other than under the Notes and Mortgage.
The release as set forth above is expressly conditioned on the following:
4.1 Full compliance by AP16 and ARC with the terms of this Agreement.
4.2 No representation of AP16 and ARC made in this Agreement or any
of the documents required to be delivered under this Agreement shall prove
to be false in any material respect.
4.3 The financial statements delivered in connection with this
Agreement accurately and completely reflect the assets and liabilities of
each respective person or entity.
4.4 AMIT shall not be required to restore to any person or entity for
any reason all or any part of the property it has received pursuant to the
Conveyance Documents.
In the event the above conditions are not met, the indebtedness and
liability of each person and entity shall automatically be revived, reinstated
and restored.
5. Release. As an inducement to AMIT to enter into this Agreement and in
consideration of AMIT's release of liability on indebtedness under Section 4
hereof and effective upon execution of this Agreement:
5.1 AP16 (for itself and each of its limited partners, agents and
employees), ARC (for itself and its officers, directors, shareholders,
agents and employees), and the personal representatives, heirs, successors
and assigns of any and all of the foregoing (collectively, the "Releasing
Parties") each hereby releases, acquits and forever discharges AMIT, its
parent, affiliates, officers, employees, directors, agents,
representatives, attorneys, insurers, predecessors and their respective
personal representatives, successors and assigns (collectively, the
"Released Parties") of and from, any and all manner of action or causes of
action, suits, claims, damages, judgments and liabilities, whether known or
unknown, liquidated or unliquidated, fixed, contingent, direct or indirect,
which the Releasing Parties (or any of them) may in the past have asserted,
may now assert or may in the future assert against the Released Parties (or
any of them) under or with respect to the Notes or the Mortgage or any
document related thereto or referred to therein or with respect to any
actions or inactions regarding the Property or any leases or proposed sales
of any of the Property.
5.2 Each of the Releasing Parties acknowledge that (i) it has agreed
to enter into the foregoing release freely and voluntarily upon its own
information and investigation; (ii) it is aware that its attorneys may
discover facts different from or in addition to the facts that they now
know or believe to be true with respect to the subject matter of the
foregoing release; and (iii) it is its intention to (and upon execution of
this Agreement, its release shall) fully, finally, absolutely and forever
settle any and all claims, disputes and differences which now exist, may
exist or have ever existed in favor of the Releasing Parties (or any of
them) against the Released Parties (or any of them). The foregoing release
shall operate as a full and complete release between the parties
notwithstanding the discovery of any different or additional facts.
6. Miscellaneous.
6.1 Choice of Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of Minnesota. AP16 and ARC each
hereby consents to the personal jurisdiction of the state and federal
courts located in the State of Minnesota in connection with any controversy
related to this Agreement.
6.2 Integration. This Agreement from and after the date hereof
supersedes, and has merged into it, all prior oral and written offers,
negotiations, understandings or agreements on the same subjects by or
between the parties hereto with the effect that this Agreement shall
control. Prior drafts of this Agreement may not be introduced as evidence
in any subsequent proceeding involving the parties or any of them.
6.3 Counterparts. This Agreement may be executed in any number of
counterparts, each of which when so executed and delivered shall be deemed
to be an original and all of which taken together shall constitute but one
and the same instrument.
6.4 Binding Agreement. This Agreement shall be binding upon and
inure to the benefit of the parties and their respective personal
representatives, heirs, successors, and assigns, except that AP16 and ARC
shall not have the right to assign its or their rights hereunder or any
interest herein without the prior written consent of AMIT.
6.5 Amendments. No amendment or modification of this Agreement shall
be effective unless in writing signed by all parties hereto and no waiver
or consent to any departure of any provision hereof by AP16 and ARC of any
of the provisions of this Agreement shall be effective unless the same
shall be in writing and signed by AMIT and then shall be effective only in
the specific instance and for the specific purpose for which given.
6.6 Exclusive Benefit. This Agreement represents a personal
concession to AP16 and ARC only for the sole and exclusive benefit of the
parties hereto and nothing contained herein shall be deemed to confer any
right or benefit on any other person not a party hereto.
6.7 Construction. The captions and headings of the various sections
of this Agreement are for convenience only and shall not be deemed a part
of this Agreement and shall not be construed as defining or as limiting in
any way the scope or intent of the provisions hereof. Wherever the context
requires or permits, the singular shall include the plural and the plural
shall include the singular and the masculine, feminine and neuter shall be
freely interchangeable.
6.8 Certain Expenses. AMIT agrees to pay the closing costs of this
transaction, including but not limited to any updated survey, appraisal
report, title insurance premium, transfer taxes, current real estate taxes
and AMIT's legal fees; provided, however, that no expenses incurred by AP16
or ARC shall be paid by AMIT unless previously approved in writing by AMIT.
IN WITNESS WHEREOF, this Agreement has been executed as of the date and year
first above written.
AP16: ANGELES PROPERTIES 16,
a California limited partnership
By ANGELES REALTY CORPORATION II,
a California corporation, general partner
By /s/ Robert D. Long, Jr.
Its Vice President
ARC: ANGELES REALTY CORPORATION II, a
California corporation
By /s/ Robert D. Long, Jr.
Its Vice President
AMIT: ANGELES MORTGAGE INVESTMENT
TRUST, a California business trust
By/s/Anna Merguerian_________
Anna Merguerian, Vice President
EXHIBIT A
(Legal Description)
That certain real property located in Ramsey County, Minesota, described as
follows:
Parcel 1. Commencing on the East line of the Northwest quarter of
the Southwest quarter of Section 25, Township 29, Range 22 at a
point in the center of the Stillwater Road, which is 227 feet South
of the Northeast corner of said Northwest quarter of the Southwest
quarter; thence South along the Easterly line of the Northwest
quarter of the Southwest quarter to the Southeast corner of said
Northwest quarter of the Southwest quarter; thence Westerly along
the Southerly line of the Northwest quarter of the Southwest quarter
to the Southwest corner of the Northwest quarter of the Southwest
quarter; thence Northerly along the Westerly line of the Northwest
quarter of the Southwest quarter to the center line of Stillwater
Road; thence Easterly along the center line of Stillwater Road to
the point of beginning, except therefrom the following; That part
of the North 3/4 of the Northwest quarter of the Southwest quarter
of Section 25, Township 29 North, Range 22 West, lying South of the
center line of the Stillwater Connection (formerly Stillwater Road)
and lying east of a line running parallel with and distant 642 feet
East of the West line of said Northwest quarter of Southwest quarter
lying Westerly of a line running Northwest at an angle of 63 degrees
37 minutes to the South line of said North 3/4 of Northwest quarter
of Southwest quarter from a point thereon distant 1038 feet East of
the Southwest corner of said last described fraction of said Section
25, also except part taken for Registered Land Survey No. 21 and
also except part taken for Registered Land Survey No. 137, and also
except that part lying Southeasterly of State Trunk Highway No. 212.
Parcel 2. That part of the North 3/4 of NW 1/4 of SW 1/4 of Section
25, Township 29 North, Range 22 West, lying South of the center line
of the Stillwater Connection (formerly Stillwater Road) and lying
East of a line running parallel with and distant 642 feet East of
the West line of said NW 1/4 of SW 1/4 and lying Westerly of a line
running Northwest at an angle of 63 degrees 37 minutes to the South
line of said N 3/4 of NW 1/4 of SW 1/4 from a point thereon distant
1038 feet East of the Southwest corner last described fraction of
said Section 25.
EXHIBIT B
(Permitted Encumbrances)
1. The lien of real estate taxes and special assessments due and payable in
the year 1998 and thereafter.
2. The rights of tenants, as tenants only, in possession under unrecorded
leases.
3. Mortgage filed as Document No. 1023845 and Assignment filed as Document No.
1023846.
4. Rights of judgment creditor under those instruments filed as Documents No.
1150960, 1157128 and 1169334.
5. Judgment filed as Document No. 1172662.
6. Easements, covenants, restrictions and declarations of record, if any.
