FORM 10-QSB.--QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
Quarterly or Transitional Report
(As last amended by 34-32231, eff. 6/3/93.)
U.S. Securities and Exchange Commission
Washington, D.C. 20549
Form 10-QSB
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1996
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period.........to.........
Commission file number 0-16210
ANGELES INCOME PROPERTIES LTD. 6
(Exact name of small business issuer as specified in its charter)
California 95-4106139
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
One Insignia Financial Plaza, P.O. Box 1089
Greenville, South Carolina 29602
(Address of principal executive offices) (Zip Code)
Issuer's telephone number (864) 239-1000
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes X No
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
a) ANGELES INCOME PROPERTIES. LTD. 6
CONSOLIDATED BALANCE SHEET
(Unaudited)
(in thousands, except unit data)
March 31, 1996
Assets
Cash and cash equivalents:
Unrestricted $ 1,669
Restricted--tenant security deposits 214
Accounts receivable, net of allowance
of $727 696
Escrow for taxes 659
Restricted escrows 386
Other assets 1,134
Investment properties:
Land $ 7,616
Buildings and related personal property 44,535
52,151
Less accumulated depreciation (11,207) 40,944
$ 45,702
Liabilities and Partners' Deficit
Liabilities
Accounts payable $ 140
Tenant security deposits 257
Accrued taxes 1,111
Other liabilities 1,335
Notes payable, including $17,645 in default 42,584
Partners' (Deficit) Capital
General partner $ (402)
Limited partners (47,377 units issued
and outstanding) 677 275
$ 45,702
See Accompanying Notes to Consolidated Financial Statements
b) ANGELES INCOME PROPERTIES, LTD. 6
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(in thousands, except unit data)
Three Months Ended
March 31,
1996 1995
Revenues:
Rental income $ 2,718 $ 1,860
Other income 151 38
Total revenues 2,869 1,898
Expenses:
Operating 848 664
General and administrative 77 103
Maintenance 224 139
Depreciation 377 268
Interest 1,020 819
Property taxes 386 269
Bad debt expense (recovery) 21 (100)
Total expenses 2,953 2,162
Loss before equity in
income from joint venture (84) (264)
Equity in income from
joint venture -- 70
Net loss $ (84) $ (194)
Net loss allocated
to general partner (1%) $ (1) $ (2)
Net loss allocated
to limited partners (99%) (83) (192)
Net loss $ (84) $ (194)
Net loss per limited
partnership unit $ (1.75) $ (4.05)
See Accompanying Notes to Consolidated Financial Statements
c) ANGELES INCOME PROPERTIES, LTD. 6
CONSOLIDATED STATEMENT OF CHANGES IN PARTNERS' CAPITAL (DEFICIT)
(Unaudited)
(in thousands, except unit data)
<TABLE>
<CAPTION>
Limited
Partnership General Limited
Units Partner Partners Total
<S> <C> <C> <C> <C>
Original capital contributions 47,384 $ 1 $47,384 $47,385
Partners' (deficit) capital at
December 31, 1995 47,377 $ (401) $ 760 $ 359
Net loss for the three months
ended March 31, 1996 -- (1) (83) (84)
Partners' (deficit) capital at
March 31, 1996 47,377 $ (402) $ 677 $ 275
<FN>
See Accompanying Notes to Consolidated Financial Statements
</TABLE>
d) ANGELES INCOME PROPERTIES, LTD. 6
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
1996 1995
<S> <C> <C>
Cash flows from operating activities:
Net loss $ (84) $ (194)
Adjustments to reconcile net loss to net cash
provided by (used in) operating activities:
Depreciation 377 268
Amortization of discounts, loan costs, and
leasing commissions 58 48
Bad debt expense (recovery) 21 (100)
Equity in income from joint venture -- (70)
Change in accounts:
Restricted cash (4) (2)
Accounts receivable (278) 59
Escrows for taxes (142) (220)
Other assets 39 19
Accounts payable (115) (361)
Tenant security deposit liabilities 5 52
Accrued taxes 222 68
Other liabilities 288 (9)
Net cash provided by (used in)
operating activities 387 (442)
Cash flows from investing activities:
Property improvements and replacements (82) (260)
Deposits to restricted escrows (11) (10)
Withdrawals from restricted escrows 37 61
Net cash used in
investing activities (56) (209)
Cash flows from financing activities:
Payments on notes payable (109) (37)
Additions to notes payable -- 518
Net cash (used in) provided by financing
activities (109) 481
Net increase (decrease) in cash 222 (170)
Cash at beginning of period 1,447 694
Cash at end of period $ 1,669 $ 524
Supplemental disclosure of cash flow information:
Cash paid for interest $ 798 $ 920
Interest on notes transferred to principal $ -- $ 44
Fixed assets included in accounts payable $ -- $ 116
<FN>
See Accompanying Notes to Consolidated Financial Statements
</TABLE>
ANGELES INCOME PROPERTIES, LTD. 6
NOTES TO CONSOLIDATED STATEMENTS
(Unaudited)
Note A - Basis of Presentation
The accompanying unaudited financial statements have been prepared in accordance
with generally accepted accounting principles for interim financial information
and with the instructions to Form 10-QSB and Item 310(b) of Regulation S-B.
Accordingly, they do not include all of the information and footnotes required
by generally accepted accounting principles for complete financial statements.
In the opinion of the General Partner, all adjustments (consisting of normal
recurring accruals) considered necessary for a fair presentation have been
included. Operating results for the three month period ended March 31, 1996,
are not necessarily indicative of the results that may be expected for the
fiscal year ending December 31, 1996. For further information, refer to the
financial statements and footnotes thereto included in the Angeles Income
Properties Ltd. 6's (the "Partnership") annual report on Form 10-KSB for the
fiscal year ended December 31, 1995.
Certain reclassifications have been made to the 1995 information to conform to
the 1996 presentation.
Note B - Transactions with Affiliated Parties
The Partnership has no employees and is dependent on the General Partner and its
affiliates for the management and administration of all Partnership activities.
The Partnership Agreement provides for payments to affiliates for services and
as reimbursement of certain expenses incurred by affiliates on behalf of the
Partnership. The following payments were paid to the General Partner and
affiliates during the three months ended March 31, 1996 and 1995:
1996 1995
(in thousands)
Property management fees $121 $ 85
Reimbursement for services of affiliates 58 74
Property lease commissions 1 13
The Partnership insures its properties under a master policy through an agency
and insurer unaffiliated with the General Partner. An affiliate of the General
Partner acquired, in the acquisition of a business, certain financial
obligations from an insurance agency which was later acquired by the agent who
placed the current year's master policy. The current agent assumed the
financial obligations to the affiliate of the General Partner, who receives
payment on these obligations from the agent. The amount of the Partnership's
insurance premiums accruing to the benefit of the affiliate of the General
Partner by virtue of the agent's obligations is not significant.
Note B - Transactions with Affiliated Parties (continued)
In November 1992, Angeles Acceptance Pool, L.P. ("AAP"), a Delaware limited
partnership was organized to acquire and hold the obligations evidencing the
working capital loan previously provided to the Partnership by Angeles Capital
Investments, Inc. ("ACII"). Angeles Corporation ("Angeles") is the 99% limited
partner of AAP and Angeles Acceptance Directives, Inc.("AAD"), an affiliate of
the General Partner, was, until April 14, 1995, the 1% general partner of AAP.
On April 14, 1995, as part of a settlement of claims between affiliates of the
General Partner and Angeles, AAD resigned as general partner of AAP and
simultaneously received a 1/2% limited partner interest in AAP. An affiliate of
Angeles now serves as the general partner of AAP. Total indebtedness was
$446,000 at March 31, 1996 and 1995, with monthly interest only payments at
prime plus 2%. 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, or iii)
November 25, 1997. Total interest expense for this loan was $12,000 for the
three months ended March 31, 1996 and 1995.
Angeles Mortgage Investment Trust ("AMIT"), a real estate investment trust,
formerly affiliated with Angeles, has provided first trust financing secured by
the Partnership's investment property, LaSalle Warehouse. Total indebtedness
was $911,000 at March 31, 1996 and 1995. In addition, AMIT made a loan to Mesa
Dunes, Wakonda and Town & Country Partners ("Mesa Dunes") secured by the Mesa
Dunes real properties known as Mesa Dunes Mobile Home Park, Wakonda Shopping
Center and Town & Country Shopping Center. Total indebtedness was $3,441,000 at
March 31, 1996. Total interest expense on this financing was $108,000 and
$107,000 for the three months ended March 31, 1996 and 1995, respectively.
MAE GP Corporation ("MAE GP"), an affiliate of the General Partner, owns
1,675,113 Class B Shares of AMIT. MAE GP has the option to convert these Class
B Shares, in whole or in part, into Class A Shares on the basis of 1 Class A
Share for every 49 Class B Shares. These Class B Shares entitle MAE GP to
receive 1.2% of the distributions of net cash distributed by AMIT. These Class
B Shares also entitle MAE GP to vote on the same basis as Class A Shares which
allows MAE GP to vote approximately 37% of the total shares (unless and until
converted to Class A Shares at which time the percentage of the vote controlled
represented by the shares held by MAE GP would approximate 1.2% of the vote).
Between the date of acquisition of these shares (November 24, 1992) and March
31, 1995, MAE GP declined to vote these shares. Since that date, MAE GP voted
its shares at the 1995 annual meeting in connection with the election of
trustees and other matters. MAE GP has not exerted, and continues to decline to
exert, any management control over or participate in the management of AMIT.
MAE GP may choose to vote these shares as it deems appropriate in the future.
In addition, Liquidity Assistance, LLC, ("LAC"), an affiliate of the General
Partner and an affiliate of Insignia Financial Group, Inc., which provides
property management and partnership administration services to the Partnership,
owns 63,200 Class A Shares of AMIT. These Class A Shares entitle LAC to vote
approximately 1.5% of the total shares.
Note B - Transactions with Affiliated Parties (continued)
As part of a settlement of certain disputes with AMIT, MAE GP granted to AMIT an
option to acquire the Class B Shares owned by it. This option can be exercised
at the end of 10 years or when all loans made by AMIT to partnerships affiliated
with MAE GP as of November 9, 1994, (which is the date of execution of a
definitive Settlement Agreement), have been paid in full, but in no event prior
to November 9, 1997. AMIT delivered to MAE GP cash in the sum of $250,000 at
closing, which occurred April 14, 1995, as payment for the option. Upon
exercise of the option, AMIT would remit to MAE GP an additional $94,000.
Simultaneously with the execution of the option, MAE GP executed an irrevocable
proxy in favor of AMIT the result of which is MAE GP will be able to vote the
Class B Shares on all matters except those involving transactions between AMIT
and MAE GP affiliated borrowers or the election of any MAE GP affiliate as an
officer or trustee of AMIT. On those matters, MAE GP granted to the AMIT
trustees, in their capacity as trustees of AMIT, proxies with regard to the
Class B Shares instructing such trustees to vote said Class B Shares in
accordance with the vote of the majority of the Class A Shares voting to be
determined without consideration of the votes of "Excess Class A Shares" as
defined in Section 6.13 of the Declaration of Trust of AMIT.
Note C - Mesa Dunes, Wakonda and Town & Country Partners
Prior to April 1, 1995, the Partnership had a 50% investment in Mesa Dunes. On
December 6, 1994, Mesa Dunes gave notice to Angeles Income Properties, Ltd. V
("AIPL V"), a California Limited Partnership and the other previous 50% owner of
Mesa Dunes, that the note receivable that Mesa Dunes held from AIPL V in the
amount of $5,000,000, dated September 20, 1991, and originally due on September
30, 1996, was in default because of failure to perform under the terms and
conditions of said note and security interest, including but not limited to,
failure to make interest payments. On April 1, 1995, Mesa Dunes foreclosed on
its collateral and AIPL V lost its 50% interest in Mesa Dunes. This foreclosure
effectively dissolved Mesa Dunes and the Mesa Dunes Mobile Home Park, Wakonda
Shopping Center and Town & Country Shopping Center properties became 100% owned
by the Partnership.
As of April 1, 1995, the assets, liabilities, revenues and expenses of the
properties were consolidated into the Partnership and were no longer accounted
for using the equity method of accounting.
Note D - Contingencies
In December 1994, certain chemicals were discovered in the septic system of
LaSalle Warehouse which appears to have been caused by one of the present
tenants (the "Tenant"). An environmental consulting firm was engaged in January
1995 to determine the level of contamination. The consultant's report was
submitted to the Nevada Division of Environmental Protection (NDEP). During
1995, the Partnership and the Tenant entered into a remediation agreement
whereby the Tenant has agreed to be solely responsible for any costs associated
with the clean-up of this site. On March 25, 1996, the NDEP issued a letter to
the Partnership that stated that no further action is necessary at this site
concerning the contaminant. The General Partner is currently negotiating a sale
of this property and any proceeds would be used to pay off the AMIT debt,
however, the outcome of such negotiations can not presently be determined.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS
The Partnership's investment properties consist of four commercial properties,
three apartment complexes and two mobile home parks. The following table sets
forth the average occupancy of the properties for the three months ended March
31, 1996 and 1995:
Average
Occupancy
Property 1996 1995
Lazy Hollow Apartments
Columbia, Maryland 93% 93%
Homestead Apartments
East Lansing, Michigan 98% 92%
Whispering Pines Mobile Home Park
Lantana, Florida 97% 97%
Hawthorne Works Business Center
Chicago, Illinois 74% 63%
LaSalle Warehouse
Las Vegas, Nevada 100% 100%
Casa Granada Apartments
Harlingen, Texas 92% 93%
Mesa Dunes Mobile Home Park
Mesa, Arizona 94% 96%
Wakonda Shopping Center
Des Moines, Iowa 89% 95%
Town & Country Shopping Center
Cedar Rapids, Iowa 98% 78%
The increase in average occupancy at Homestead Apartments for the three months
ended March 31, 1996, as compared to the three months ended March 31, 1995, is
due to a strengthening market, increased advertising and property improvements
which are attracting new tenants. The increase in average occupancy at
Hawthorne Works Business Center for the three months ended March 31, 1996,
versus the three months ended March 31, 1995, is the result of steady increases
during 1995 due to successful negotiations of new leases. The General Partner
anticipates that this property will be lost through sale or foreclosure in 1996,
however, the outcome is not known at this time. The decrease in average
occupancy at Wakonda Shopping Center is due to a softening market and the fact
that some businesses are moving toward the regional mall. However, the General
Partner is actively marketing this property for lease and is encouraged by the
recent negotiations. The outcome of such negotiations can not be determined at
this time. Average occupancy at Town & Country Shopping Center has increased
for the three months ended March 31, 1996, as compared to the three months ended
March 31, 1995. The Cedar Rapids, Iowa, area has a strong economy with steady
growth and expansion and Town & Country Shopping Center is located in a very
active commercial corridor.
The Partnership realized a net loss of $84,000 for the three months ended March
31, 1996, versus a net loss of $194,000 for the three months ended March 31,
1995. The decreased net loss can be attributed to increased revenues.
As mentioned previously, effective April 1, 1995, Mesa Dunes Mobile Home Park,
Wakonda Shopping Center and Town & Country Shopping Center were consolidated
into the Partnership and are no longer accounted for using the equity method of
accounting. The consolidation of Mesa Dunes Mobile Home Park, Wakonda Shopping
Center, and Town & Country Shopping Center with the Partnership in 1995 resulted
in increases in rental and other income along with increases in operating,
maintenance, depreciation, interest and property tax expense. Although the
consolidation of the Mesa Dunes properties accounted for the majority of the
increases in revenues and expenses, there were other fluctuations, as discussed
below. General and administrative expenses have decreased due to a decrease in
reimbursements for partnership accounting, investor relations and asset
management services. In addition, administrative expenses have increased at
Whispering Pines Mobile Home Park due to eviction procedures for five tenants in
the first three months of 1996. As a result, legal fees and collection costs
have risen in an effort to collect past due amounts. Maintenance expenses
increased due to increased snow removal costs. In addition, Casa Granada
Apartments increased interior painting due to increased apartment turnover and
the refurbishing of three laundry rooms. Interest expense also increased for
the three months ended March 31, 1996, as compared to the three months ended
March 31, 1995, due to increasing default interest and late charges on the AMIT
debt along with an increased principal balance resulting from the refinancing of
the debt that is secured by the Hawthorne Works Business Center (see discussion
below). Bad debt expense for the three months ended March 31, 1996, can be
attributed to the General Partner's evaluation of certain past due amounts from
tenants of Hawthorne Works Business Center, Whispering Pines Mobile Home Park
and Wakonda Shopping Center. These past due amounts were deemed uncollectible
and therefore were reserved. For the three months ended March 31, 1995, the
Partnership received a portion of past due amounts that had been previously
reserved resulting in bad debt recovery.
The General Partner continues to monitor the rental market environment at each
of its investment properties to assess the feasibility of increasing rents to
maintain or increase the occupancy level and to protect the Partnership from
increases in expenses. The General Partner expects to be able, at a minimum, to
continue protecting the Partnership from inflation-related increases in expenses
by increasing rents and maintaining a high overall occupancy level. However,
rental concessions and rental reductions needed to offset softening market
conditions could affect the ability to sustain such a plan.
At March 31, 1996, the Partnership had unrestricted cash of $1,669,000 versus
unrestricted cash of $524,000 at March 31, 1995. Net cash from operating
activities increased during the three months ended March 31, 1996, as compared
to the three months ended March 31, 1995, due to the decreased net loss and
increases in accrued taxes and other liabilities. Net cash from investing
activities increased due to a decrease in property improvements and
replacements. Net cash from financing activities decreased due to no additions
to notes payable in 1996 (see discussion below).
During the fourth quarter of 1994, the Partnership refinanced the first and
second mortgage notes which encumber the Hawthorne Works Business Center. The
refinancing included $303,000 to establish tax and insurance and tenant
improvement escrows. In addition, accrued interest of $741,000 was added to the
principal balances of the new mortgage notes. During 1995, the mortgage holder
again funded the escrow for tenant improvements and leasing commissions and as a
result, added $754,000 to the principal balance of the first mortgage. Accrued
interest of $110,000 was also added to the second mortgage during 1995. The
refinanced notes matured December 31, 1995, and are in default as of that date
due to non-payment at maturity. Total debt and accrued interest in default is
$18,117,000.
Currently, the General Partner is negotiating a refinance of the mortgages
secured by Homestead Apartments, which total $2,960,000 at March 31, 1996. The
General Partner is negotiating a reduced interest rate and an extended maturity
date, however, the outcome of such negotiations can not presently be determined.
The sufficiency of existing liquid assets to meet future liquidity and capital
expenditure requirements is directly related to the level of capital
expenditures required at the various properties to adequately maintain the
physical assets, meet mortgage obligations, and other operating needs of the
Partnership. Such assets are currently thought to be sufficient for any near-
term needs of the Partnership. At March 31, 1996, the mortgage debt secured by
the Hawthorne Works Business Center, in the amount of $17,645,000, was in
default due to non-payment upon maturity. The General Partner does not have an
extension of the maturity date nor does the General Partner intend to negotiate
an extension or refinance this indebtedness. As mentioned previously, the
General Partner anticipates that the Hawthorne Works Business Center will be
lost through sale or foreclosure in 1996, however, the future of this property
remains uncertain. The remaining debt of the Partnership, in the amount of
$24,939,000 has maturity dates ranging from January 1997 to July 2019. Future
cash distributions will depend on the levels of net cash generated from
operations, refinancings, property sales, and the availability of cash reserves.
There were no cash distributions during the three months ended March 31, 1996 or
1995.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
Angeles Corporation ("Angeles"), either directly or through an affiliate,
maintained a central disbursement account (the "account") for the properties and
partnerships managed by Angeles and its affiliates, including the Registrant.
Angeles caused the Partnership to make deposits to the account ostensibly to
fund the payment of certain obligations of the Partnership. Angeles further
caused checks on such account to be written to or on behalf of certain other
partnerships. At least $12,206 deposited by or on behalf of the Partnership was
used for purposes other than satisfying the liabilities of the Partnership.
Accordingly, the Partnership filed a Proof of Claim in the Angeles bankruptcy
proceedings for such amount. However, subsequently, the General Partner of the
Partnership has determined that the cost involved to pursue such claim would
likely exceed any amount received, if in fact such claim were to be resolved in
favor of the Partnership. Therefore, the Partnership withdrew this claim on
August 9, 1995.
The Registrant is unaware of any other pending or outstanding litigation that is
not of a routine nature. The General Partner of the Registrant believes that
all such pending or outstanding litigation will be resolved without a material
adverse effect upon the business, financial condition, or operations of the
Partnership.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a) Exhibits -
Exhibit 27, Financial Data Schedule, is filed as an exhibit to this
report.
b) Reports on Form 8-K:
None filed during the three months ended March 31, 1996.
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
ANGELES INCOME PROPERTIES, LTD. 6
By: Angeles Realty Corporation II
General Partner
By: /s/Carroll D. Vinson
Carroll D. Vinson
President
By: /s/Robert D. Long
Robert D. Long
Vice President/CAO
Date: May 10, 1996
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from Angeles
Income Properties Ltd 6 1996 First Quarter 10-QSB and is qualified in its
entirety by reference to such 10-QSB filing.
</LEGEND>
<CIK> 0000812564
<NAME> ANGELES INCOME PROPERTIES LTD 6
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> MAR-31-1996
<CASH> 1,669
<SECURITIES> 0
<RECEIVABLES> 696
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 3,634
<PP&E> 52,151
<DEPRECIATION> 11,207
<TOTAL-ASSETS> 45,702
<CURRENT-LIABILITIES> 1,508
<BONDS> 42,584
0
0
<COMMON> 0
<OTHER-SE> 275
<TOTAL-LIABILITY-AND-EQUITY> 45,702
<SALES> 0
<TOTAL-REVENUES> 2,869
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 2,953
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,020
<INCOME-PRETAX> (84)
<INCOME-TAX> 0
<INCOME-CONTINUING> (84)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (84)
<EPS-PRIMARY> (.00175)
<EPS-DILUTED> 0
</TABLE>
