U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
(Mark One)
X ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES AND EXCHANGE ACT OF
1934 [FEE REQUIRED]
For the fiscal year ended December 31, 1995
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 0-16210
ANGELES INCOME PROPERTIES, LTD. 6
California 95-4106139
(State or other jurisdiction of
incorporation or organization) (I.R.S. Employer 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
X
this Form 10-KSB.
State issuer's revenues for its most recent fiscal year. $9,153,798
State the aggregate market value of the voting stock held by non-affiliates of
the Registrant. The aggregate market value shall be computed by reference to
the price at which the stock was sold, or the average bid and asked prices of
such stock, 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 Registrant's belief that
such trading would not exceed $25,000,000.
DOCUMENTS INCORPORATED BY REFERENCE
None
PART I
Item 1. Description of Business
Angeles Income Properties, Ltd. 6 (the "Partnership") is a publicly-held
limited partnership organized under the California Uniform Limited Partnership
Act pursuant to the Agreement of Limited Partnership dated June 29, 1984, as
amended (the "Agreement"). The Partnership's General Partner is Angeles Realty
Corporation II, a California corporation.
The Partnership, through its public offering of Limited Partnership Units,
sold 47,384 units aggregating $47,384,000. 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 and other forms of
equity interests in various types of real property. The General Partner 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 Management
Group, L.P. provides day-to-day management services to all of the Partnership's
investment properties.
The business in which the Partnership is engaged is highly competitive.
Each investment property is located in or near a major urban area and,
accordingly, competes for rentals not only with similar projects in its
immediate area, but with the hundreds of similar projects throughout the urban
areas. Such competition is primarily on the basis of locations, 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 investments in properties:
<TABLE>
<CAPTION>
Date of
Property Purchase Type of Ownership Use
<S> <C> <C> <C>
Lazy Hollow Apartments 07/01/89 Fee ownership, subject Residential Rental
to a first mortgage 178 units
Homestead Apartments 11/10/88 Fee ownership, subject to Residential Rental
first and second mortgages 170 units
Whispering Pines 11/30/87 Fee ownership, subject to Residential Rental
Mobile Home Park first and second mortgages 304 pads
Hawthorne Works 01/18/90 Fee ownership, subject to Commercial
Business Center first and second mortgages 1,313,457 sq.ft.
LaSalle Warehouse 3/31/89 Fee ownership, subject to Commercial
a first mortgage 40,000 sq. ft.
Casa Granada Apartments 04/30/89 Fee ownership, subject to Residential Rental
a first mortgage 108 units
Mesa Dunes 04/01/95 Fee ownership, subject to Residential Rental
Mobile Home Park first and second mortgages 408 pads
Wakonda Shopping Center 04/01/95 Fee ownership Commercial
142,300 sq. ft.
Town & Country 04/01/95 Fee ownership Commercial
Shopping Center 134,353 sq. ft.
</TABLE>
The Partnership became the 100% owner of Mesa Dunes Mobile Home Park, Wakonda
Shopping Center and Town & Country Shopping Center effective April 1, 1995.
These properties were previously owned by the Mesa Dunes, Wakonda, Town &
Country Partners ("Mesa Dunes") (See "Item 6. Management's Discussion and
Analysis or Plan of Operation" for further discussion).
Schedule of Properties:
<TABLE>
<CAPTION>
Gross
Carrying Accumulated Federal
Property Value Depreciation Rate Method Tax Basis
<S> <C> <C> <C> <C> <C>
Lazy Hollow Apartments $ 6,345,896 $1,892,202 5-40 yrs (1) $ 8,778,475
Homestead Apartments 5,318,497 1,460,550 5-40 yrs (1) 5,518,614
Whispering Pines
Mobile Home Park 5,026,253 810,813 5-40 yrs (1) 4,259,819
Hawthorne Works
Business Center 15,812,836 4,012,836 5-40 yrs (1) 27,091,358
LaSalle Warehouse 751,416 171,809 5-40 yrs (1) 1,247,368
Casa Granada Apartments 2,498,424 455,477 5-40 yrs (1) 2,193,517
Mesa Dunes Mobile
Home Park 8,931,190 837,499 5-40 yrs (1) 7,315,970
Wakonda Shopping Center 3,313,129 644,508 5-40 yrs (1) 4,646,994
Town & Country
Shopping Center 4,071,684 544,893 5-40 yrs (1) 3,397,508
$52,069,325 $10,830,587 $64,449,623
<FN>
(1) Straight-line
</TABLE>
See "Note A" of the financial statements included in "Item 7" for a
description of the Partnership's depreciation policy.
Schedule of Mortgages:
<TABLE>
<CAPTION>
Principal Principal
Balance At Stated Balance
December 31, Interest Period Maturity Due At
Property 1995 Rate Amortized Date Maturity
<S> <C> <C> <C> <C>
Lazy Hollow Apartments
1st trust deed $ 4,225,063 7.50% 30 yrs 7/2019 $ --
Homestead Apartments
1st trust deed 2,918,733 9.88% 30 yrs 1/1997 2,895,160
2nd trust deed 47,478 11.00% 30 yrs 10/1998 46,446
Whispering Pines
Mobile Home Park
1st trust deed 5,031,102 7.83% 28.67 yrs 10/2003 4,423,358
2nd trust deed 159,120 7.83% (1) 10/2003 159,120
Hawthorne Works
1st trust deed
(in default) (7) 15,021,817 (2) (1) 12/1995 15,021,817
2nd trust deed
(in default) (7) 2,667,274 (3) (1) 12/1995 2,667,274
Casa Granada Apartments
1st trust deed 1,322,986 10.07% 30 yrs 9/1999 1,279,824
LaSalle Warehouse
1st trust deed
(in default) (4) 911,134 11.50% (1) 11/2003 911,134
Mesa Dunes Mobile
Home Park
1st trust deed 6,482,693 7.83% 28.67 yrs 10/2003 5,699,354
2nd trust deed 205,020 7.83% (1) 10/2003 205,020
Angeles Income
Properties, Ltd. 6
1st trust deed (5) 3,447,646 9.0% 30 yrs 12/2003 3,125,355
Working capital loan (6) 446,258 Prime+2% (1) 11/1997 446,258
42,886,324
Less unamortized
discount (198,553) $36,880,120
Total $42,687,771
<FN>
(1) Interest only payments.
(2) Corporate Base Rate plus 1.75%.
(3) Based on a 90 day LIBOR rate plus 4%.
(4) Debt in default due to failure to service the debt.
(5) Payable to Angeles Mortgage Investment Trust.
(6) Payable to Angeles Acceptance Pool, L.P.
(7) Debt in default due to non-payment upon maturity.
</TABLE>
Average annual rental rate and occupancy for 1995 and 1994 for each property:
<TABLE>
<CAPTION>
Average Annual Average
Rental Rates Occupancy
Property 1995 1994 1995 1994
<S> <C> <C> <C> <C>
Lazy Hollow Apartments $8,564/unit $8,460/unit 95% 93%
Homestead Apartments (1) 6,941/unit 6,943/unit 95% 90%
Whispering Pines Mobile Home Park 3,540/unit 3,299/unit 97% 99%
Hawthorne Works Business Center (2) 2.80/s.f. 2.58/s.f. 70% 57%
LaSalle Warehouse 3.42/s.f. 3.22/s.f. 100% 100%
Casa Granada Apartments (3) 5,523/unit 5,335/unit 91% 97%
Mesa Dunes Mobile Home Park 2,877/unit 2,807/unit 86% 88%
Wakonda Shopping Center 4.11/s.f. 4.05/s.f. 95% 93%
Town & Country Shopping Center (4) 5.64/s.f. 4.80/s.f. 84% 98%
<FN>
(1) Homestead Apartments has continued its efforts to prelease units thereby
increasing its occupancy rate over 1994.
(2) Hawthorne Works Business Center experienced steady increases in occupancy
during 1995 as a result of the General Partner's negotiation of new leases
and lease renewals.
(3) Casa Granada experienced decreased occupancy in 1995 due to several
factors. This property is located near the border of Texas and Mexico.
The Peso devaluation as well as a lack of tourist traffic during the winter
months have contributed to the decrease in occupancy. In addition, a
competitor began leasing 24 new apartment units in the area during the
fourth quarter of 1995.
(4) At December 31, 1995, Town and Country occupancy was at 98% with 700 square
feet available for lease. This property is located in a mature, affluent
residential neighborhood where retail space is very limited. The outlook
continues to be favorable for this property.
</TABLE>
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 and commercial buildings
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.
The following is a schedule of the lease expirations for the years 1996-2005:
<TABLE>
<S> <C> <C> <C> <C>
Number of % of Gross
Hawthorne Works Expirations Square Feet Annual Rent Annual Rent
1996 4 75,600 $153,727 5%
1997 5 354,624 819,377 29%
1998 5 209,399 664,541 23%
1999 1 132,000 382,743 13%
2000 3 62,844 175,181 6%
LaSalle Warehouse
1998 (1) 1 20,000 59,400 46%
Wakonda Shopping Center
1996 7 28,830 177,615 28%
1997 5 60,870 129,225 20%
1998 3 3,742 23,955 4%
1999 5 17,115 112,654 18%
2000 0 0 0 0
2001-2005 2 9,710 66,159 10%
Town & Country Shopping Center
1996 9 18,260 90,053 14%
1997 10 42,562 212,489 33%
1998 10 27,565 155,659 24%
1999 1 2,640 20,010 3%
2000 5 39,989 182,181 28%
2001-2005 1 1,680 12,180 2%
<FN>
(1) There is another tenant whose lease expired in 1995. The General Partner
is in negotiations to renew this lease (20,000 sq. ft.) at December 31,
1995. Meanwhile, the tenant leases on a month-to-month basis.
</TABLE>
The following schedule reflects information on tenants occupying 10% or more of
the leasable square feet for each property:
<TABLE>
<CAPTION>
Square Footage Annual Rent Lease
Property Nature of Business Leased Per Square Expiration
<S> <C> <C> <C> <C>
LaSalle Feed Manufacturer 20,000 $2.97 01/31/98
Warehouse
Hawthorne Bottling Company 132,000 2.90 04/30/99
Works Transportation Company 115,765 4.22 11/30/98
Business Distribution/Storage 214,090 2.39 12/31/97
Center
Wakonda Grocery 47,382 .78 01/31/97
Shopping
Center
Town and Country Bowling Lanes 18,600 2.40 05/31/97
Shopping Center Variety Discount 26,766 3.36 09/30/00
</TABLE>
Real estate taxes and rates in 1995 for each property were:
1995 1995
Billing Rate
Lazy Hollow Apartments $132,984 4.27
Homestead Apartments 161,916 6.51
Whispering Pines Mobile Home Park 122,844 3.21
Hawthorne Works Business Center 644,876* 4.75
LaSalle Warehouse 10,136 2.61
Casa Granada Apartments 37,213 6.79
Mesa Dunes Mobile Home Park 29,673 1.12
Wakonda Shopping Center 136,792* 2.69
Town & Country Shopping Center 91,145* 3.34
*Estimate for 1995 billings. Tax bills for 1995 not yet received.
Item 3. Legal Proceedings
Angeles Mortgage Investment Trust ("AMIT"), a real estate investment trust,
made a loan to Mesa Dunes, Wakonda and Town & Country Partners ("Mesa Dunes") on
September 30, 1991, in the amount of $5,000,000 secured by the Partnership's
real properties known as Mesa Dunes Mobile Home Park, Wakonda Shopping Center
and Town & Country Shopping Center. At December 31, 1995, the balance of this
loan was $3,447,646. The Partnership believed that this loan was made on a non-
recourse basis. AMIT asserted that this loan is recourse by virtue of a certain
amendment ("Note Modification") purportedly entered into as of November 1, 1992,
but which the Partnership and Mesa Dunes have been informed and believe were
actually executed in December of 1992. The Partnership and Mesa Dunes have been
further informed and believe that the amendment may have been executed at the
direction of Angeles Corporation ("Angeles") by an individual in his purported
capacity as an officer of the General Partner of the Partnership and Mesa Dunes
at a time when such person was not in fact an officer of such entities. In the
event AMIT prevails in its assertion that the loan is a recourse, rather than a
non-recourse loan, the Partnership and Mesa Dunes may have a claim against
Angeles for any damages caused by Angeles' conduct in purporting to enter into
the amendment. Accordingly, the Partnership and Mesa Dunes filed a Proof of
Claim in the Angeles bankruptcy proceeding with respect to such purported
amendment. Additionally, the Partnership and Mesa Dunes filed a Proof of Claim
in the Angeles Funding Corporation and Angeles Real Estate Corporation
bankruptcy proceedings on similar grounds. Both Angeles Funding Corporation and
Angeles Real Estate Corporation are affiliates of Angeles. Angeles has now
agreed to cooperate with the Partnership in any action commenced by or against
them by AMIT asserting that the $3,447,646 obligation owed to AMIT is recourse
to the Partnership. Angeles has further agreed to waive the attorney-client
privilege with respect to the Note Modification. Accordingly, the Partnership
withdrew its Proof of Claim on August 9, 1995. The Partnership has had and
continues to have discussions with AMIT regarding resolution of this issue. No
agreement has been reached with AMIT at this time.
MAE GP Corporation ("MAE GP"), an affiliate of the General Partner, owns
1,675,113 Class B Shares of AMIT. MAE GP has the option to convert these Class
B Shares, in whole or in part, into Class A Shares on the basis of 1 Class A
Share for every 49 Class B Shares. These Class B Shares entitle MAE GP to
receive 1.2% of the distributions of net cash distributed by AMIT. These Class
B Shares also entitle MAE GP to vote on the same basis as Class A Shares which
allows MAE GP to vote approximately 37% of the total shares (unless and until
converted to Class A Shares at which time the percentage of the vote controlled
represented by the shares held by MAE GP would approximate 1.2% of the vote).
Between the date of acquisition of these shares (November 24, 1992) and March
31, 1995, MAE GP declined to vote these shares. Since that date, MAE GP voted
its shares at the 1995 annual meeting in connection with the election of
trustees and other matters. MAE GP has not exerted, and continues to decline to
exert, any management control over or participate in the management of AMIT.
MAE GP may choose to vote these shares as it deems appropriate in the future.
In addition, Liquidity Assistance, LLC, ("LAC"), an affiliate of the General
Partner and an affiliate of Insignia Financial Group, Inc., which provides
property management and partnership administration services to the Partnership,
owns 63,200 Class A Shares of AMIT. These Class A Shares entitle LAC to vote
approximately 1.5% of the total shares.
As part of a settlement of certain disputes with AMIT, MAE GP granted to
AMIT an option to acquire the Class B Shares owned by it. This option can be
exercised at the end of 10 years or when all loans made by AMIT to partnerships
affiliated with MAE GP as of November 9, 1994, (which is the date of execution
of a definitive Settlement Agreement), have been paid in full, but in no event
prior to November 9, 1997. AMIT delivered to MAE GP cash in the sum of $250,000
at closing, which occurred on 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.
Also, 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 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 4. Submission of Matters to a Vote of Security Holders
The unit holders of the Partnership did not vote on any matter during the
fourth quarter of 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 47,384 Limited
Partnership Units during its offering period through September 30, 1988, and
currently has 47,377 Limited Partnership Units outstanding and 4,461 Limited
Partners of record. There is no intention to sell additional Limited Partnership
Units nor is there an established market for these units. During the year, the
number of Limited Partnership Units decreased by 2 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.
The Partnership has discontinued making cash distributions from operations
until the financial condition of the Partnership and other relevant factors
warrant resumption of distributions.
Item 6. Management's Discussion and Analysis or Plan of Operation
Results of Operations
This item should be read in conjunction with the consolidated financial
statements and other items contained elsewhere in this report.
The Partnership realized a net loss of $720,663 for the year ended December
31, 1995, versus a net loss of $2,791,485 for the year ended December 31, 1994.
The decrease in net loss for the year ended December 31, 1995, as compared to
the year ended December 31, 1994, can be primarily attributed to increased
revenue and increased equity in income from the joint venture.
The consolidation of Mesa Dunes Mobile Home Park, Wakonda Shopping Center,
and Town & Country Shopping Center, with the Partnership during the second
quarter of 1995, resulted in increases in rental and other income, along with
increases in operating, property management fees, maintenance, depreciation,
amortization, interest, property tax expense and tenant reimbursements. The
operating expenses of the Partnership for the year ended December 31, 1995, also
increased due to increases in water and sewer charges at Hawthorne Works
Business Center and Whispering Pines Mobile Home Park. Whispering Pines Mobile
Home Park also had increased credit collection, legal fees and professional
expenses relating to collection of rental revenues. General and administrative
expenses decreased due to a decrease in cost reimbursements for partnership
administration services from 1994 to 1995. Interest expense also increased due
to an increased principal balance resulting from interest added to principal on
the debt that is secured by Hawthorne Works Business Center (Note C).
Bad debt expense for the year ended December 31, 1995 and 1994 can be
attributed to several tenants at Hawthorne Works Business Center and Whispering
Pines Mobile Home Park suffering from deteriorating financial conditions
resulting in delinquency in their payments; therefore, the Partnership reserved
a portion of the receivable relating to these tenants. The decrease in bad debt
expense for the year ended December 31, 1995, versus the year ended December 31,
1994, is due to the collection of a portion of these receivables from tenants at
Hawthorne Works Business Center that had previously been reserved.
Casa Granada Apartments replaced three roofs during 1995 that were not yet
fully depreciated resulting in a loss on disposal of property of $9,453.
In 1993, Mesa Dunes fully reserved its $5,000,000 note receivable from
Angeles Income Properties, Ltd. V ("AIPL V"), the previous 50% owner of Mesa
Dunes, along with the related accrued interest. Accordingly, the Partnership
recorded its proportionate share of the loss totalling $2,825,000 due to the
uncertainty of the Partnership's rights to the collateral under the note. Due
to the foreclosure by Mesa Dunes of AIPL V's interest in the joint venture and
the resulting consolidation of the Mesa Dunes properties by the Partnership, the
Partnership recorded a recovery of the $2,825,000 previously reserved through
its equity interest in the earnings of the joint venture during the second
quarter of 1995. This recovery amount, in addition to the equity in income of
the joint venture of $69,652 during the first quarter of 1995, resulted in a
$2,894,652 equity in the income from the joint venture for the year ended
December 31, 1995. The Partnership recognized $292,896 equity in income from
the joint venture for the year ended December 31, 1994.
During the fourth quarter of 1995, the Partnership adopted FASB Statement
No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to Be Disposed Of", which requires impairment losses to be recorded on
long-lived assets used in operations when indicators of impairment are present
and the undiscounted cash flows estimated to be generated by those assets are
less than the assets' carrying amount. The impairment loss is measured by
comparing the fair value of the asset to its carrying amount. As a result of
this adoption, the assets of Hawthorne Works Business Center were written down
by $2,213,212. During the fourth quarter of 1994, the General Partner believed
that the estimated fair value of Lazy Hollow Apartments, based upon 1994 net
operating income and other factors using an appropriate capitalization rate,
indicated an other than temporary decline in the fair value of the property.
This decline in net operating income was due to maintenance expenditures
necessary at the property. These maintenance items had been deferred in the
past, but were necessary to maintain the occupancy levels and rental rates. The
maintenance needs of this property will be ongoing. Therefore, the Partnership
recorded a write-down of $926,000 against the property as of December 31, 1994.
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 known costs to empty and
dispose of the contents of the septic tank and to retest the property are not
material, however, 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. The General Partner is
currently attempting to sell this property and believes this would be in the
best interest of the Partnership. Any proceeds from this sale would be used to
pay off the AMIT debt, which is currently in default due to failure to service
the debt (see Notes B and E).
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.
Liquidity and Capital Resources
The Partnership had unrestricted cash of $1,447,073 versus unrestricted
cash of $693,501 as of December 31, 1995 and 1994, respectively. Net cash flow
from operating activities increased primarily due to improved operations in
1995. Net cash used in investing activities decreased due to an increase in
property improvements and replacements, offset by the proceeds received from the
foreclosure of Mesa Dunes. Net cash provided by financing activities decreased
slightly due to increased principal payments on notes payable during 1995.
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 $302,900 to establish tax and insurance and tenant
improvement escrows. In addition, accrued interest of $741,043 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 $753,755 to the principal balance of the first mortgage. Accrued
interest of $110,393 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
$17,974,019.
Subsequent to December 31, 1995, the General Partner entered into a
contract to sell the Cable Plant at the Hawthorne Works Business Center for
$7,500,000. This sale is expected to be consummated in 1996. In addition, the
CM Complex at the Hawthorne Works Business Center is for sale. The General
Partner is hopeful that the holder of the mortgages secured by Hawthorne Works
Business Center will allow for sufficient time for the property to be sold,
thereby avoiding foreclosure. However, there are no assurances that the
property will not be lost via foreclosure.
On December 6, 1994, Mesa Dunes gave notice to AIPL V, the previous 50%
owner of Mesa Dunes, that the note 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. In
February 1995, Mesa Dunes gave notice that it intended to foreclose on the
$5,000,000 note payable, which is secured by AIPL V's interest in Mesa Dunes.
Consequently, the Partnership became the 100% owner of the Mesa Dunes
properties.
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 December 31, 1995, the mortgage debt secured
by the Hawthorne Works Business Center, in the amount of $17,689,091 plus
accrued interest of $284,928, 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.
In addition, the mortgage secured by LaSalle Warehouse, in the amount of
$911,134, is in default due to failure to service the debt. The remaining debt
of the Partnership, in the amount of $24,087,546 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.
Item 7. Financial Statements
ANGELES INCOME PROPERTIES, LTD. 6
LIST OF FINANCIAL STATEMENTS
Report of Independent Auditors
Balance Sheet - December 31, 1995
Statements of Operations - Years ended December 31,
1995 and 1994
Statements of Changes in Partners' Capital (Deficit) - Years ended
December 31, 1995 and 1994
Statements of Cash Flows - Years ended December 31,
1995 and 1994
Notes to Financial Statements
Report of Ernst & Young LLP, Independent Auditors
The Partners
Angeles Income Properties, Ltd. 6
We have audited the accompanying balance sheet of Angeles Income Properties,
Ltd. 6 as of December 31, 1995, and the related statements of operations,
changes in partners' capital (deficit) and cash flows for each of the two years
in the period ended December 31, 1995. 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.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Angeles Income Properties, Ltd.
6 as of December 31, 1995, and the results of its operations and its cash flows
for each of the two years in the period ended December 31, 1995, in conformity
with generally accepted accounting principles.
As discussed in Notes A and I, during the fourth quarter of 1995 the Partnership
changed its method of accounting for the impairment of long-lived assets and for
long-lived assets to be disposed of.
/S/ ERNST & YOUNG LLP
Greenville, South Carolina
February 14, 1996
ANGELES INCOME PROPERTIES, LTD. 6
BALANCE SHEET
December 31, 1995
Assets
Cash and cash equivalents:
Unrestricted $ 1,447,073
Restricted--tenant security deposits 210,029
Accounts receivable, (net of allowance
of $779,621) 438,834
Escrow for taxes 516,873
Restricted escrows 411,695
Other assets 1,224,843
Investment properties (Notes B, F and I):
Land $ 7,616,187
Buildings and related personal property 44,453,138
52,069,325
Less accumulated depreciation (10,830,587) 41,238,738
$45,488,085
Liabilities and Partners' Capital (Deficit)
Liabilities
Accounts payable $ 254,724
Tenant security deposits 251,818
Accrued taxes 888,567
Other liabilities 1,046,474
Notes payable, including $18,600,225 in
default (Notes B, E and F) 42,687,771
Partners' Capital (Deficit)
General partner $ (400,876)
Limited partners (47,377 units issued
and outstanding) 759,607 358,731
$45,488,085
See Accompanying Notes to Financial Statements
ANGELES INCOME PROPERTIES, LTD. 6
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Years Ended December 31,
1995 1994
<S> <C> <C>
Revenues:
Rental income $ 8,800,982 $ 6,051,670
Other income 352,816 141,943
Total revenues 9,153,798 6,193,613
Expenses:
Operating 2,564,491 1,814,756
General and administrative 427,733 572,072
Property management fees (Note E) 420,231 286,902
Maintenance 906,772 810,248
Depreciation 1,438,804 1,099,510
Amortization 134,324 49,470
Interest 3,968,663 2,883,907
Property taxes 1,350,546 1,014,023
Bad debt expense 89,006 313,062
Tenant reimbursements (754,122) (491,956)
Total expenses 10,546,448 8,351,994
Loss before loss on disposal of
property, equity in income of
joint venture and write-down
of investment property (1,392,650) (2,158,381)
Loss on disposal of property (9,453) --
Equity in income of
joint venture (Note G) 2,894,652 292,896
Write-down of investment property (Note I) (2,213,212) (926,000)
Net loss $ (720,663) $(2,791,485)
Net loss allocated
to general partner (1%) $ (7,207) $ (27,915)
Net loss allocated
to limited partners (99%) (713,456) (2,763,570)
Net loss $ (720,663) $(2,791,485)
Net loss per limited
partnership unit $ (15.06) $ (58.33)
<FN>
See Accompanying Notes to Financial Statements
</TABLE>
ANGELES INCOME PROPERTIES, LTD. 6
STATEMENT OF CHANGES IN PARTNERS' CAPITAL (DEFICIT)
<TABLE>
<CAPTION>
Limited
Partnership General Limited
Units Partner Partners Total
<S> <C> <C> <C> <C>
Original capital contributions 47,384 $ 1,000 $47,384,000 $47,385,000
Partners' (deficit) capital at
December 31, 1993 47,384 $(365,754) $ 4,236,633 $ 3,870,879
Abandonment of Limited
Partnership Units (Note J) (5) -- -- --
Net loss for the year ended
December 31, 1994 -- (27,915) (2,763,570) (2,791,485)
Partners' (deficit) capital
at December 31, 1994 47,379 (393,669) 1,473,063 1,079,394
Abandonment of Limited
Partnership Units (Note J) (2) -- -- --
Net loss for the year ended
December 31, 1995 -- (7,207) (713,456) (720,663)
Partners' (deficit) capital
at December 31, 1995 47,377 $(400,876) $ 759,607 $ 358,731
<FN>
See Accompanying Notes to Financial Statements
</TABLE>
ANGELES INCOME PROPERTIES, LTD. 6
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Years ended December 31,
1995 1994
<S> <C> <C>
Cash flows from operating activities:
Net loss $ (720,663) $(2,791,485)
Adjustments to reconcile net loss to net cash
provided by (used in) operating activities:
Depreciation 1,438,804 1,099,510
Amortization of discounts, loan costs, and
leasing commissions 248,714 198,673
Bad debt expense 89,006 313,062
Loss on disposal of property 9,453 --
Write-down of investment property 2,213,212 926,000
Equity in income from joint venture (2,894,652) (292,896)
Change in accounts:
Restricted cash (33,789) (99,982)
Accounts receivable (228,719) (418,097)
Escrows for taxes (3,950) 73,168
Other assets (9,360) (100,926)
Accounts payable (8,523) 56,594
Tenant security deposit liabilities 53,087 (19,823)
Accrued taxes 79,162 (11,645)
Other liabilities 149,763 626,969
Net cash provided by (used in)
operating activities 381,545 (440,878)
Cash flows from investing activities:
Property improvements and replacements (1,073,664) (675,901)
Deposits to restricted escrows (110,109) (420,450)
Withdrawals from restricted escrows 173,497 499,197
Distributions from joint venture -- 300,250
Proceeds received from foreclosure of Mesa Dunes 876,108 --
Net cash used in investing activities (134,168) (296,904)
Cash flows from financing activities:
Proceeds from long-term borrowing 753,755 736,451
Payments on notes payable (247,560) (152,519)
Loan costs -- (30,779)
Net cash provided by financing activities 506,195 553,153
Net increase (decrease) in cash 753,572 (184,629)
Cash at beginning of period 693,501 878,130
Cash at end of period $1,447,073 $ 693,501
Supplemental disclosure of cash flow information:
Cash paid for interest $3,483,448 $1,825,551
Interest on notes transferred to principal $ 110,393 $ 741,043
Fixed assets included in accounts payable $ -- $ 331,358
<FN>
See Accompanying Notes to Financial Statements
</TABLE>
ANGELES INCOME PROPERTIES, LTD. 6
Notes to Financial Statements
December 31, 1995
Note A - Organization and Significant Accounting Policies
Organization: Angeles Income Properties, Ltd. 6 (the Partnership ) is a
California limited partnership organized in June 1984, to acquire and operate
residential and commercial real estate properties. The Partnership's General
Partner is Angeles Realty Corporation II ("ARC II"), an affiliate of Insignia
Financial Group, Inc. As of December 31, 1995, the Partnership operates five
residential and four commercial properties located in or near major urban areas
in the United States.
Principles of Consolidation: The financial statements include all of the
accounts of the Partnership and its majority owned partnerships. All
significant interpartnership balances have been eliminated. Minority interest
is immaterial and not shown separately in the financial statements.
Allocations and Distributions to Partners: In accordance with the Agreement of
Limited Partnership, 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 Interest 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 General Partner, on account of the current and accrued
Management Fee payable, deferred as contemplated therein (ii) Second, to the
Partners in proportion to their interests until the Limited Partners have
received proceeds equal to their unrecovered Capital Contributions (iii) Third,
to the Partners until the Limited Partners have received distributions equal to
their 6% (not compounded) Cumulative Distribution; (iv) Fourth, to the General
Partner until it has received an amount equal to 3% of the aggregate Disposition
Prices of all properties or investments sold (Initial Incentive Interest); (v)
Fifth, to the Partners until the Limited Partners have received distributions
equal to their 8% (not compounded) Cumulative Distribution, with certain limited
partners receiving additional priority distributions ranging from 1.5% to 4.5%
per annum (not compounded); and (vi) Sixth, thereafter, 86% to the Partners in
proportion to their interests and 14% (Final Incentive Interest) to the General
Partner.
Note A -Organization and Significant Accounting Policies (continued)
Depreciation: Depreciation is provided by the straight-line method over the
estimated lives of the investment properties and related personal property. 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: The Partnership considers all highly liquid
investments with a maturity when purchased of three months or less to be cash
equivalents. At certain times, the amount of cash deposited at a bank may
exceed the limit on insured deposits.
Investment Properties: Prior to the fourth quarter of 1995, investment
properties were carried at the lower of cost or estimated fair value, which was
determined using the higher of the property's non-recourse debt amount, when
applicable, or the net operating income of the investment property capitalized
at a rate deemed reasonable for the type of property. During the fourth quarter
of 1995, the Partnership adopted FASB Statement No. 121, Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of,
which requires impairment losses to be recorded on long-lived assets used in
operations when indicators of impairment are present and the undiscounted cash
flows estimated to be generated by those assets are less than the assets'
carrying amount. The impairment loss is measured by comparing the fair value of
the asset to its carrying amount.
Loan Costs: Loan costs of $860,596 are included in "Other assets" and are being
amortized on a straight-line basis over the lives of the respective loans.
Current accumulated amortization is $274,940.
Advertising Costs: Advertising costs, $131,258 in 1995 and $91,495 in 1994, are
charged to expense as they are incurred and are included in operating expenses.
Lease Commissions: Lease commissions of $504,238 are included in "Other assets"
and are being amortized using the straight-line method over the terms of the
respective leases. Current accumulated amortization is $247,551.
Leases: The Partnership generally leases apartment units for twelve-month terms
or less. Commercial building lease terms are from twelve months to ten years.
Tenant Security Deposits: The Partnership requires security deposits from all
apartment lessees for the duration of the lease. Deposits are refunded when the
tenant vacates the apartment if there has been no damage to the unit.
Note A -Organization and Significant Accounting Policies (continued)
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 1994
balances to conform to the 1995 presentation.
Fair Value: In 1995, the Partnership implemented Statement of Financial
Accounting Standards No. 107, "Disclosure about Fair Value of Financial
Instruments," which requires disclosure of fair value information about
financial instruments for which it is practicable to estimate that value. The
carrying amount of the Partnership's cash and cash equivalents approximates fair
value due to short-term maturities. The Partnership estimates the fair value of
its fixed rate mortgage by discounted cash flow analysis, based on estimated
borrowing rates currently available to the Partnership. The carrying amounts of
variable rate mortgages approximate fair value due to frequent re-pricing (Note
B).
Note B - Notes Payable
The principle terms of notes payable are as follows:
<TABLE>
<CAPTION>
Monthly Principal Principal
Payment Stated Balance Balance At
Including Interest Maturity Due At December 31,
Property Interest Rate Date Maturity 1995
<S> <C> <C> <C> <C> <C>
Lazy Hollow Apartments
1st trust deed $ 31,916 7.50% 7/2019 $ -- $ 4,225,063
Homestead Apartments
1st trust deed 26,075 9.88% 1/1997 2,895,160 2,918,733
2nd trust deed 463 11.00% 10/1998 46,446 47,478
Whispering Pines
Mobile Home Park
1st trust deed 37,600 7.83% 10/2003 4,423,358 5,031,102
2nd trust deed 1,038 7.83% 10/2003 159,120 159,120
Hawthorne Works
Business Center
1st trust deed
(in default) (1) (2) 12/1995 15,021,817 15,021,817
2nd trust deed
(in default) (4) (3) 12/1995 2,667,274 2,667,274
Casa Granada Apartments
1st trust deed 11,917 10.07% 9/1999 1,279,824 1,322,986
LaSalle Warehouse
1st trust deed,
in default (5) 8,731 11.50% 11/2003 911,134 911,134
Mesa Dunes Mobile
Home Park
1st trust deed 48,446 7.83% 10/2003 5,699,354 6,482,693
2nd trust deed 1,338 7.83% 10/2003 205,020 205,020
</TABLE>
Note B - Notes Payable (continued)
<TABLE>
<CAPTION>
Monthly Principal Principal
Payment Stated Balance Balance At
Including Interest Maturity Due At December 31,
Property Interest Rate Date Maturity 1995
<S> <C> <C> <C> <C> <C>
Angeles Income
Properties, Ltd. 6
1st trust deed (6) 28,162 9.0% 12/2003 3,125,355 3,447,646
Angeles Income
Properties, Ltd. 6
Working capital
loan (7) (1) Prime+2% 11/1997 446,258 446,258
$195,686 $36,880,120 42,886,324
Less unamortized (198,553)
discounts $42,687,771
<FN>
(1) Interest only payments.
(2) Corporate Base Rate plus 1.75%.
(3) Based on the 90 day LIBOR rate plus 4%.
(4) Based on net cash flow.
(5) Debt in default due to failure to service the debt.
(6) Payable to Angeles Mortgage Investment Trust (Note E).
(7) Payable to Angeles Acceptance Pool, L.P. (Note E).
(8) The estimated fair value of the Partnership's aggregate mortgages that are
not in default is approximately $25,300,000 compared to the carrying value
of $24,800,000. This estimate is not necessarily indicative of the
amounts the Partnership may pay in actual market transactions. The General
Partner believes that it is not appropriate to use the Partnership's
incremental borrowing rate for the working capital loan held by an
affiliate (See Note E) as there is no market in which the Partnership could
obtain similar financing. In addition, due to the default status of the
debt secured by Hawthorne Works Business Center, the fair value amount of
the Partnership debt, is exclusive of this debt. The General Partner
believes that a refinancing of this indebtedness is not probable due to the
poor operations and maintenance needs of the property.
</TABLE>
The mortgages secured by Hawthorne Works Business Center, in the amount of
$17,689,091, are in default due to non-payment upon maturity. The mortgage
secured by LaSalle Warehouse of $911,134 went into default due to non-payment of
interest in 1995. The General Partner stopped making payments when certain
contamination was discovered at this site (see Note K). The Partnership
anticipates resuming payments upon the resolution of this matter. The LaSalle
Warehouse debt is included in the estimated fair value above.
The mortgage notes payable are nonrecourse and are secured by pledge of certain
of the Partnership's rental properties and by pledge of revenues from the
respective rental properties. Certain of the notes impose prepayment penalties
if repaid prior to maturity.
Note B - Notes Payable (continued)
Scheduled principal payments of notes payable subsequent to December 31, 1995,
are as follows:
1996 $18,870,042
1997 3,603,456
1998 332,249
1999 1,584,201
2000 319,454
Thereafter 18,176,922
$42,886,324
Note C - Hawthorne Works Business Center
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 $302,900 to establish tax and insurance and tenant
improvement escrows. In addition, accrued interest of $741,043 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 $753,755 to the principal balance of the first mortgage. Accrued
interest of $110,393 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
$17,974,019.
Subsequent to December 31, 1995, the General Partner entered into a contract to
sell the Cable Plant at the Hawthorne Works Business Center for $7,500,000.
This sale is expected to be consummated in 1996. In addition, the CM Complex at
the Hawthorne Works Business Center is for sale. The General Partner is hopeful
that the holder of the mortgages secured by Hawthorne Works Business Center will
allow for sufficient time for the property to be sold, thereby avoiding
foreclosure. However, there are no assurances that the property will not be
lost via foreclosure.
Note D - 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.
Differences between the net loss as reported and Federal taxable income result
primarily from (1) the write-downs of investment properties and (2) depreciation
over different methods and lives and on differing cost bases of investment
properties. The following is a reconciliation of reported net loss and Federal
taxable loss:
1995 1994
Net loss as reported $ (720,663) $(2,791,485)
Add (deduct):
Depreciation differences (233,158) (269,378)
Unearned income 72,361 32,347
Bad debt expense 57,625 32,612
Investment in joint venture 81,781 122,260
Write-down of investment property (681,439) 926,000
Other (25,514) (47,623)
Federal taxable loss $(1,449,007) $(1,995,267)
Federal taxable loss per limited
partnership unit $ (30.28) $ (41.69)
The following is a reconciliation between the Partnership's reported amounts and
Federal tax basis of net assets and liabilities:
Net assets as reported $ 358,731
Land and buildings 22,415,175
Accumulated depreciation 795,710
Syndication and distribution costs 6,802,271
Other 519,914
Net assets - Federal tax basis $30,891,801
Note E 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.
Note E Transactions with Affiliated Parties (continued)
The following payments were made to the General Partner and affiliates in 1995
and 1994:
1995 1994
Property management fees $420,231 $286,902
Property lease commissions 63,454 45,689
Reimbursement for services of affiliates 305,925 435,774
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
payments on these obligations from the agent. The amount of the Partnership's
insurance premiums accruing to the benefit of the affiliate of the General
Partner by virtue of the agent's obligations is not significant.
In November 1992, Angeles Acceptance Pool, L.P. ("AAP"), a Delaware limited
partnership was organized to acquire and hold the obligations evidencing the
working capital loan previously provided to the Partnership by Angeles Capital
Investments, Inc. ("ACII"). Angeles Corporation ("Angeles") is the 99% limited
partner of AAP and Angeles Acceptance Directives, Inc.("AAD"), an affiliate of
the General Partner, was, until April 14, 1995, the 1% general partner of AAP.
On April 14, 1995, as part of a settlement of claims between affiliates of the
General Partner and Angeles, AAD resigned as general partner of AAP and
simultaneously received a 1/2% limited partner interest in AAP. An affiliate of
Angeles now serves as the general partner of AAP. Total indebtedness was
$446,258 plus accrued interest of $126,564 at December 31, 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 $48,345 and $41,279 for the years ended December 31, 1995 and 1994,
respectively.
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 $911,134 plus accrued interest of $155,219 at December 31, 1995. This debt
is in default at December 31, 1995 due to non-payment. 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
$3,447,646 at December 31, 1995. Total interest expense on this financing was
$354,317 and $313,488 for the years ended December 31, 1995 and 1994,
respectively.
Note E Transactions with Affiliated Parties (continued)
MAE GP Corporation ("MAE GP"), an affiliate of the General Partner, owns
1,675,113 Class B Shares of AMIT. MAE GP has the option to convert these Class
B Shares, in whole or in part, into Class A Shares on the basis of 1 Class A
Share for every 49 Class B Shares. These Class B Shares entitle MAE GP to
receive 1.2% of the distributions of net cash distributed by AMIT. These Class
B Shares also entitle MAE GP to vote on the same basis as Class A Shares which
allows MAE GP to vote approximately 37% of the total shares (unless and until
converted to Class A Shares at which time the percentage of the vote controlled
represented by the shares held by MAE GP would approximate 1.2% of the vote).
Between the date of acquisition of these shares (November 24, 1992) and March
31, 1995, MAE GP declined to vote these shares. Since that date, MAE GP voted
its shares at the 1995 annual meeting in connection with the election of
trustees and other matters. MAE GP has not exerted, and continues to decline to
exert, any management control over or participate in the management of AMIT.
MAE GP may choose to vote these shares as it deems appropriate in the future.
In addition, Liquidity Assistance, LLC, ("LAC"), an affiliate of the General
Partner and an affiliate of Insignia Financial Group, Inc., which provides
property management and partnership administration services to the Partnership,
owns 63,200 Class A Shares of AMIT. These Class A Shares entitle LAC to vote
approximately 1.5% of the total shares.
As part of a settlement of certain disputes with AMIT, MAE GP granted to AMIT an
option to acquire the Class B Shares owned by it. This option can be exercised
at the end of 10 years or when all loans made by AMIT to partnerships affiliated
with MAE GP as of November 9, 1994, (which is the date of execution of a
definitive Settlement Agreement), have been paid in full, but in no event prior
to November 9, 1997. AMIT delivered to MAE GP cash in the sum of $250,000 at
closing, which occurred April 14, 1995, as payment for the option. Upon
exercise of the option, AMIT would remit to MAE GP an additional $94,000.
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 F - Investment Properties and Accumulated Depreciation
<TABLE>
<CAPTION>
Initial Cost
To Partnership
Cost
Buildings Capitalized
and Related (Removed)
Personal Subsequent to
Description Encumbrances Land Property Acquisition
<S> <C> <C> <C> <C>
Lazy Hollow Apartments $ 4,225,063 $ 997,947 $ 8,988,053 $ (3,640,104)
Homestead Apartments 2,966,211 557,184 5,987,816 (1,226,503)
Whispering Pines Mobile
Home Park 5,190,222 1,195,762 3,627,238 203,253
Hawthorne Works
Business Center 17,689,091 1,549,709 27,046,291 (12,783,164)
LaSalle Warehouse 911,134 122,537 1,173,462 (544,583)
Casa Granada Apartments 1,322,986 234,630 1,930,370 333,424
Mesa Dunes Mobile
Home Park 6,687,713 2,204,653 6,723,548 2,989
Wakonda Shopping Center -- 873,172 2,469,336 (29,379)
Town & Country
Shopping Center -- 38,013 3,993,873 39,798
Angeles Income Properties,
Ltd. 6 3,893,904 -- -- --
42,886,324 $7,773,607 $61,939,987 $(17,644,269)
Less unamortized discounts (198,553)
$42,687,771
</TABLE>
Note F - Investment Properties and Accumulated Depreciation (continued)
<TABLE>
<CAPTION>
Gross Amount At Which Carried
At December 31, 1995
Buildings
And Related
Personal Accumulated Date Depreciable
Description Land Property Total Depreciation Acquired Life-Years
<S> <C> <C> <C> <C> <C> <C>
Lazy Hollow $ 840,527 $ 5,505,369 $ 6,345,896 $1,892,202 07/01/89 10-40
Homestead 557,184 4,761,313 5,318,497 1,460,550 11/10/88 10-40
Whispering Pines 1,195,762 3,830,491 5,026,253 810,813 11/30/87 10-40
Hawthorne Works 1,549,709 14,263,127 15,812,836 4,012,836 01/18/90 10-40
LaSalle Warehouse 122,537 628,879 751,416 171,809 03/31/89 10-40
Casa Granada 234,630 2,263,794 2,498,424 455,477 4/30/89 10-40
Mesa Dunes 2,204,653 6,726,537 8,931,190 837,499 04/01/95 10-40
Wakonda 873,172 2,439,957 3,313,129 644,508 04/01/95 10-40
Town & Country 38,013 4,033,671 4,071,684 544,893 04/01/95 10-40
Totals $7,616,187 $44,453,138 $52,069,325 $10,830,587
</TABLE>
The depreciable lives included above are for the buildings and components. The
depreciable lives for related personal property are for 5 to 7 years.
Note F - Investment Properties and Accumulated Depreciation (continued)
Reconciliation of Investment Properties and Accumulated Depreciation:"
Years Ended December 31,
1995 1994
Investment Properties
Balance at beginning of year $37,252,916 $37,171,657
Consolidation of Joint Venture 16,302,241 --
Property improvements 742,306 1,007,259
Disposal of property (14,926) --
Property write-down (2,213,212) (926,000)
Balance at end of Year $52,069,325 $37,252,916
Accumulated Depreciation
Balance at beginning of year $ 7,712,702 $ 6,613,192
Consolidation of Joint Venture 1,684,554 --
Additions charged to expense 1,438,804 1,099,510
Disposal of property (5,473) --
Balance at end of Year $10,830,587 $ 7,712,702
The aggregate cost of the investment properties for Federal income tax purposes
at December 31, 1995 and 1994 is $74,484,500 and $56,858,853, respectively. The
accumulated depreciation taken for Federal income tax purposes at December 31,
1995 and 1994 is $10,034,877 and $7,060,470, respectively.
Note G - Investment in Joint Venture
Prior to April 1, 1995, the Partnership had a 50% investment in Mesa Dunes,
Wakonda and Town & Country Partners ("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.
Note G - Investment in Joint Venture (continued)
The Partnership recognized $2,894,652 as its equity in the income of Mesa Dunes
in 1995, of which $2,825,000 represented its proportionate share of the note
receivable and accrued interest due from AIPL V that had been reserved in prior
years due to the uncertainty of the Partnership's rights to the collateral under
the note.
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.
The rollforward of the investment in Mesa Dunes through March 31, 1995 is as
follows:
Investment in joint venture at December 31, 1994 $ 3,017,116
Equity in earnings of joint venture through
March 31, 1995 2,894,652
Investment in joint venture at March 31, 1995 $5,911,768
Summary of assets and liabilities consolidated
on April 1, 1995
Cash $ 876,108
Investment properties, net 14,617,687
Other assets 907,835
Total assets 16,401,630
Accounts payable and accruals 401,070
Notes payable 10,088,792
Total liabilities 10,489,862
Net assets $ 5,911,768
The recording of the above assets and liabilities, other than cash, and the
related elimination of the investment in joint venture was a non-cash
transaction and is excluded from the statement of cash flows.
The following pro forma statements for the twelve months ended December 31, 1995
and 1994 assume the Partnership became the 100% owner as of January 1, 1994.
Pro Forma Statement
Year Ended December 31, 1995
As Reported Adjustment Pro Forma
Revenues $9,153,798 $ 728,486 $9,882,284
Net loss (720,663) 71,451 (649,212)
Year Ended December 31, 1994
As Reported Adjustment Pro Forma
Revenues $6,193,613 $2,641,832 $8,835,445
Net loss (2,791,485) 295,625 (2,495,860)
Note H - Operating Leases
Tenants of the commercial property are responsible for their own utilities and
maintenance of their space, and payment of their proportionate share of common
area maintenance, utilities, insurance and real estate taxes. Tenants are
generally not required to pay a security deposit.
As of December 31, 1995, the Partnership had minimum future rentals under
noncancellable leases with terms ranging from twelve months to ten years.
1996 $3,303,813
1997 2,888,333
1998 1,735,053
1999 673,449
2000 337,782
Thereafter 297,690
$9,236,120
Note I - Write-down of Investment Property
During the fourth quarter of 1995, the Partnership adopted FASB Statement No.
121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to Be Disposed Of", which requires impairment losses to be recorded on
long-lived assets used in operations when indicators of impairment are present
and the undiscounted cash flows estimated to be generated by those assets are
less than the assets' carrying amount. The impairment loss is measured by
comparing the fair value of the asset to its carrying amount. As a result of
this adoption, the assets of Hawthorne Works Business Center were written down
by $2,213,212.
During the fourth quarter of 1994, the General Partner believed that the
estimated fair value of Lazy Hollow Apartments, based upon 1994 net operating
income and other factors using an appropriate capitalization rate, indicated an
other than temporary decline in the fair value of the property. This decline in
net operating income was due to maintenance expenditures necessary at the
property. These maintenance items had been deferred in the past, but were
necessary to maintain the occupancy levels and rental rates. The maintenance
needs of this property will be ongoing. Therefore, the Partnership recorded a
write-down of $926,000 against the property as of December 31, 1994.
Note J - Abandonment of Limited Partnership Units
In 1995 and 1994, the number of Limited Partnership Units decreased by 2 and 5
units, respectively, due to Limited Partners abandoning their units. In
abandoning his or her 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 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 - Contingency
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 known costs to empty and
dispose of the contents of the septic tank and to retest the property are not
material, however, 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. The General Partner is
currently attempting to sell this property; any proceeds would be used to pay
off the AMIT debt (see Notes B and E).
Item 8. Changes in and Disagreements with Accountant on Accounting and
Financial Disclosures
There were no disagreements with Ernst & Young LLP regarding the 1994 or
1995 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
The name of the directors and executive officers of Angeles Realty
Corporation ("ARC II"), the Partnership's General Partner as of December 31,
1995, their age and the nature of all positions with ARC II presently held by
them are as follows:
Name Age Position
Carroll D. Vinson 55 President
Robert D. Long, Jr. 28 Controller and
Principal Accounting
Officer
William H. Jarrard, Jr. 49 Vice President
John K. Lines 36 Secretary
Kelley M. Buechler 38 Assistant Secretary
Carroll D. Vinson has been President of Metropolitan Asset Enhancement, L.P.,
and subsidiaries since August of 1994. Prior to that, 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. 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. From 1986 to 1990, Mr. Vinson was President and
a Director of U.S. Shelter Corporation, a real estate services company, which
sold substantially all of its assets to Insignia in December 1990.
Robert D. Long, Jr. is Controller and Principal Accounting Officer. Prior to
joining Metropolitan Asset Enhancement, L.P., and subsidiaries, he was an
auditor for the State of Tennessee and was associated with the accounting firm
of Harshman Lewis and Associates. He is a graduate of the University of
Memphis.
William H. Jarrard, Jr. is Managing Director - Partnership Administration of
Insignia Financial Group, Inc. ("Insignia"). During the five years prior to
joining Insignia in 1991, he served in a similar capacity for U.S. Shelter. He
was previously associated with the accounting firm, Ernst & Young LLP, for
eleven years. Mr. Jarrard is a graduate of the University of South Carolina and
a certified public accountant.
John K. Lines has been General Counsel and Secretary of Insignia since June
1994. From May 1993 until June 1994, Mr. Lines was the Assistant General
Counsel and Vice President of Ocwen Financial Corporation in West Palm Beach,
Florida. From October 1991 until April 1993, Mr. Lines was a Senior Attorney
with Banc One Corporation in Columbus, Ohio. From May 1984 until October 1991,
Mr. Lines was employed as an Associate Attorney with Squire Sanders & Dempsey in
Columbus, Ohio.
Kelley M. Buechler is Assistant Secretary of Insignia. During the five years
prior to joining Insignia in 1991, she served in a similar capacity for U.S.
Shelter. Ms. Buechler is a graduate of the University of North Carolina.
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,
fees and other payments have been made to the Partnership's General Partner and
its affiliates, as described in "Note E" of the Financial Statements included
under "Item 7", which is incorporated herein by reference.
Item 11. Security Ownership of Certain Beneficial Owners and Management
As of January 1, 1996, no person owned of record more than 5% of 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 for: 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 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 capital account and (ii) the fair market
value of the share of Distributable Net Proceeds to which the General Partner
would be entitled. Such 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
No transactions have occurred between the Partnership and any officer or
director of ARC II.
During the years ended December 31, 1995 and December 31, 1994, the
transactions that occurred between the Partnership and ARC II and affiliates of
ARC II pursuant to the terms of the Agreement are disclosed under "Note E" of
the Partnerships' Financial Statements included under "Item 7", which is hereby
incorporated by reference.
PART IV
Item 13. Exhibits and Reports on Form 8-K
(a) Exhibits: See Exhibit Index contained herein.
(b) No reports on Form 8-K were filed during the fourth quarter of
1995.
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 INCOME PROPERTIES, LTD. 6
(A California Limited Partnership)
(Registrant)
By: Angeles Realty Corporation II
By: /s/Carroll D. Vinson
Carroll D. Vinson
President
Date: March 20, 1996
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
date indicated.
/s/Carroll D. Vinson President and Director March 20, 1996
Carroll D. Vinson
/s/Robert D. Long, Jr. Controller March 20, 1996
Robert D. Long, Jr. (Principal Accounting
Officer)
EXHIBIT INDEX
Exhibit No.
3.1 Amended Certificate and Agreement of the Limited
Partnership filed in the Partnership's Prospectus dated
June 11, 1987 which is incorporated herein by reference.
10.1 Agreement of Purchase and Sale of Real Property with
Exhibits - Whispering Pines Mobile Home Park filed in Form
8-K dated November 30, 1987 which is incorporated herein by
reference.
10.2 Agreement of Purchase and Sale of Real Property with
Exhibits - Mesa Dunes Mobile Home Park filed in Form 8-K
dated December 23, 1987 which is incorporated herein by
reference.
10.3 Beneficiary's Statement of Assumption - Mesa Dunes Mobile
Home Park filed in Form 8-K dated December 23, 1987 which
is incorporated herein by reference.
10.4 General Partnership Agreement of Sunny Acres Partners -
Mesa Dunes Mobile Home Park filed in Form 8-K dated
December 23, 1987 which is incorporated herein by
reference.
10.5 Agreement of Purchase and Sale of Property with Exhibits -
Wakonda Shopping Center and Town and Country Shopping
Center filed in Form 8-K dated December 30, 1987 which is
incorporated herein by reference.
10.6 First Amendment to Agreement of Purchase and Sale of
Property - Wakonda Shopping Center and Town and Country
Shopping Center filed in Form 8-K dated December 30, 1987
which is incorporated herein by reference.
10.7 Agreement of Purchase and Sale of Real Property with
Exhibits - Homestead Apartments filed in Form 8-K dated
November 10, 1988 which is incorporated herein by
reference.
10.8 Promissory Note Homestead Apartments filed in Form 10-K
dated March 29, 1991 which is incorporated herein by
reference.
10.9 Agreement of Purchase and Sale of Real Property and
exhibits - Lazy Hollow Apartments filed in Form 8-K dated
December 30, 1989, which is incorporated herein by
reference.
EXHIBIT INDEX
Exhibit No.
10.10 Agreement of Purchase and Sale of Real Property and
exhibits - Hawthorne Works Business Center filed in Form 8-
K dated January 19, 1990, which is incorporated herein by
reference.
10.11 Promissory Note - Whispering Pines Filed in Form 10-K dated
March 27, 1992, which is incorporated herein by reference.
10.12 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.
16.1 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 8-K dated September 1, 1993.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from Angeles
Income Properties Ltd. 6 1995 Year-End 10-KSB and is qualified in its entirety
by reference to such 10-KSB.
</LEGEND>
<CIK> 0000812564
<NAME> ANGELES INCOME PROPERTIES LTD. 6
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<CASH> 1,447,073
<SECURITIES> 0
<RECEIVABLES> 1,218,455
<ALLOWANCES> (779,621)
<INVENTORY> 0
<CURRENT-ASSETS> 0<F1>
<PP&E> 52,069,325
<DEPRECIATION> (10,830,587)
<TOTAL-ASSETS> 45,488,085
<CURRENT-LIABILITIES> 0<F1>
<BONDS> (42,687,771)
0
0
<COMMON> 0
<OTHER-SE> 358,731
<TOTAL-LIABILITY-AND-EQUITY> 45,488,085
<SALES> 0
<TOTAL-REVENUES> 9,153,798
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 10,546,448
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,968,663
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,392,650)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (720,663)
<EPS-PRIMARY> (15.06)
<EPS-DILUTED> 0
<FN>
<F1>The Registrant has an unclassified balance sheet.
</FN>
</TABLE>
