FORM 10-QSB.--QUARTERLY REPORT UNDER SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
QUARTERLY OR TRANSITIONAL REPORT
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended March 31, 1997
[ ] TRANSITION REPORT PURSUANT TO 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
For the transition period.........to.........
Commission file number 0-16210
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
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, 1997
Assets
Cash and cash equivalents:
Unrestricted $ 2,220
Restricted--tenant security deposits 78
Accounts receivable, net of allowance of $129 225
Escrow for taxes 528
Restricted escrows 291
Other assets 862
Investment properties:
Land $ 6,066
Buildings and related personal property 30,588
36,654
Less accumulated depreciation (8,088) 28,566
$ 32,770
Liabilities and Partners' Capital
Liabilities
Accounts payable $ 96
Tenant security deposits 114
Accrued taxes 287
Other liabilities 463
Notes payable 25,362
Partners' (Deficit) Capital
General partner $ (340)
Limited partners (47,314 units issued
and outstanding) 6,788 6,448
$ 32,770
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,
1997 1996
Revenues:
Rental income $ 1,848 $ 2,718
Other income 143 151
Total revenues 1,991 2,869
Expenses:
Operating 598 848
General and administrative 93 77
Maintenance 179 224
Depreciation 254 377
Interest 701 1,020
Property taxes 213 386
Bad debt (recovery) expense, net (30) 21
Total expenses 2,008 2,953
Net loss $ (17) $ (84)
Net loss allocated
to general partner (1%) $ -- $ (1)
Net loss allocated
to limited partners (99%) (17) (83)
Net loss $ (17) $ (84)
Net loss per limited
partnership unit $ (.36) $ (1.75)
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, 1996 47,314 $ (340) $ 6,805 $ 6,465
Net loss for the three months
ended March 31, 1997 -- -- (17) (17)
Partners' (deficit) capital at
March 31, 1997 47,314 $ (340) $ 6,788 $ 6,448
<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,
1997 1996
<S> <C> <C>
Cash flows from operating activities:
Net loss $ (17) $ (84)
Adjustments to reconcile net loss to net cash
provided by operating activities:
Depreciation 254 377
Amortization of discounts, loan costs, and
leasing commissions 38 58
Bad debt (recovery) expense, net (30) 21
Change in accounts:
Restricted cash 1 (4)
Accounts receivable 84 (278)
Escrows for taxes 116 (142)
Other assets 20 39
Accounts payable (50) (115)
Tenant security deposit liabilities -- 5
Accrued taxes (21) 222
Other liabilities 117 288
Net cash provided by operating activities 512 387
Cash flows from investing activities:
Property improvements and replacements (50) (82)
Deposits to restricted escrows (19) (11)
Withdrawals from restricted escrows -- 37
Net cash used in investing activities (69) (56)
Cash flows used in financing activities:
Payments on notes payable (75) (109)
Net increase in unrestricted cash and
cash equivalents 368 222
Unrestricted cash and cash equivalents at
beginning of period 1,852 1,447
Unrestricted cash and cash equivalents at
end of period $ 2,220 $ 1,669
Supplemental disclosure of cash flow information:
Cash paid for interest $ 464 $ 798
Supplemental disclosure of non-cash financing activities:
Interest on notes transferred to principal $ 423 $ --
<FN>
See Accompanying Notes to Consolidated Financial Statements
</TABLE>
ANGELES INCOME PROPERTIES, LTD. 6
NOTES TO CONSOLIDATED FINANCIAL 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 Angeles Realty Corporation II (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, 1997, are not necessarily indicative of the results that
may be expected for the fiscal year ending December 31, 1997. For further
information, refer to the financial statements and footnotes thereto included in
the Angeles Income Properties Ltd. 6's (the "Partnership" or the "Registrant")
annual report on Form 10-KSB for the fiscal year ended December 31, 1996.
Certain reclassifications have been made to the 1996 information to conform to
the 1997 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, 1997 and 1996:
1997 1996
(in thousands)
Property management fees $ 86 $ 121
Reimbursement for services of affiliates 66 58
Property lease commissions 22 1
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.
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 plus accrued interest of $184,000 at March 31, 1997, 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, 1997 and 1996.
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 $1,334,000 plus accrued interest of $13,000 at March 31, 1997. Total
interest expense on this financing was $184,000 and $26,000 for the three months
ended March 31, 1997 and 1996, respectively (See "Note C" regarding the
restructure of this indebtedness). 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 $3,409,000 at March
31, 1997. Total interest expense on this financing was $73,000 and $108,000 for
the three months ended March 31, 1997 and 1996, respectively.
MAE GP Corporation ("MAE GP"), an affiliate of the General Partner, owns
1,675,113 Class B Shares of AMIT. The terms of the Class B Shares provide that
they are convertable, in whole or in part, into Class A Shares on the basis of 1
Class A Share for every 49 Class B Shares (however, in connection with the
settlement agreement described in the following paragraph, MAE GP has agreed not
to convert the Class B Shares so long as AMIT's option is outstanding). These
Class B Shares entitle MAE GP to receive 1% of the distributions of net cash
distributed by AMIT. These Class B Shares also entitle MAE GP to vote on the
same basis as Class A Shares, providing MAE GP with approximately 39% of the
total voting power of AMIT (unless and until converted to Class A Shares, in
which case the percentage of the vote controlled represented by the shares held
by MAE GP would approximate 1.3% of the vote). Between the date of acquisition
of these shares (November 24, 1992) and March 31, 1995, MAE GP declined to vote
these shares. Since that date, MAE GP voted its shares at the 1995 and 1996
annual meetings in connection with the election of trustees and other matters.
MAE GP has not exerted and continues to decline to exert any management control
over or participate in the management of AMIT. MAE GP may choose to vote these
shares as it deems appropriate in the future. In addition, Insignia Properties,
L.P. ("IPLP"), an affiliate of the General Partner and an affiliate of Insignia
Financial Group, Inc. ("Insignia"), which provides property management and
partnership administration services to the Partnership, owns 96,800 Class A
Shares of AMIT at March 31, 1997. These Class A Shares represent approximately
2.2% of the total voting power of AMIT.
As part of a settlement of certain disputes with AMIT, MAE GP granted to AMIT an
option to acquire the Class B shares owned by it. This option can be exercised
at the end of 10 years or when all loans made by AMIT to partnerships affiliated
with MAE GP as of November 9, 1994 (which is the date of execution of a
definitive Settlement Agreement) have been paid in full, but in no event prior
to November 9, 1997. In connection with such settlement, AMIT delivered to MAE
GP cash in the sum of $250,000 at closing (which occurred April 14, 1995) as
payment for the option. If and when the option is exercised, AMIT will be
required to remit to MAE GP an additional $94,000.
Simultaneously with the execution of the option and as part of the settlement,
MAE GP executed an irrevocable proxy in favor of AMIT, the result of which is
that MAE GP is permitted to vote the Class B Shares on all matters except those
involving transactions between AMIT and MAE GP affiliated borrowers or the
election of any MAE GP affiliate as an officer or trustee of AMIT. On those
matters, MAE GP is obligated to deliver to the AMIT trustees, in their capacity
as trustees of AMIT, proxies with regard to the Class B Shares instructing such
trustees to vote said Class B Shares in accordance with the vote of the majority
of the Class A Shares voting to be determined without consideration of the votes
of "Excess Class A Shares" (as defined in Section 6.13 of the Declaration of
Trust of AMIT).
On April 3, 1997, Insignia and AMIT entered into a non-binding agreement in
principle contemplating, among other things, a business combination of AMIT and
Insignia Properties Trust, an entity owned 98% by Insignia and its affiliates
("IPT"). It is anticipated that the resulting combined entity would be owned
approximately 82% by Insignia and its affiliates and 18% by the pre-combination
AMIT shareholders (including MAE GP and IPLP). The proposed transaction is
contingent upon, among other things, satisfactory review of the business,
operations, properties and assets of AMIT and IPT, the negotiation and execution
of definitive agreements and the approval of the proposed transaction by the
trustees and shareholders of each of AMIT and IPT.
NOTE C - RESTRUCTURE OF DEBT SECURED BY LASALLE WAREHOUSE
The General Partner successfully negotiated a restructure of the mortgage
indebtedness to AMIT, which is secured by the LaSalle Warehouse, during the
first quarter of 1997. The terms of the restructure include adding previously
accrued interest of $423,000 to the principal balance, interest will accrue at
the rate of 11.5 percent per annum and the note is due December 31, 2003.
Additionally, AMIT has been granted a second mortgage on the Wakonda Shopping
Center and the Town and Country Shopping Center as additional security on this
loan.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS
The Partnership's investment properties consist of three 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, 1997, and 1996:
Average
Occupancy
Property 1997 1996
Lazy Hollow Apartments
Columbia, Maryland (1) 90% 93%
Homestead Apartments
East Lansing, Michigan (2) 92% 98%
Whispering Pines Mobile Home Park
Lantana, Florida 95% 97%
LaSalle Warehouse
Las Vegas, Nevada 100% 100%
Casa Granada Apartments
Harlingen, Texas (3) 88% 92%
Mesa Dunes Mobile Home Park
Mesa, Arizona 97% 94%
Wakonda Shopping Center
Des Moines, Iowa (4) 83% 89%
Town & Country Shopping Center
Cedar Rapids, Iowa 94% 98%
1) The decrease at Lazy Hollow Apartments is due to increased rental rates,
which have motivated tenants to seek housing elsewhere.
2) The decrease in occupancy at Homestead Apartments is also due to increased
rental rates being unattractive to consumers.
3) The decrease in occupancy at Casa Granada Apartments is due to new
apartment complexes opening in the area, resulting in increased
competition.
4) Wakonda Shopping Center is located in a stable, mature, residential area.
The property has had difficulty attracting retail tenants, due in part to a
local enclosed mall and lack of restaurants in the area.
The Partnership realized a net loss of $17,000 for the three months ended March
31, 1997, versus a net loss of $84,000 for the three months ended March 31,
1996. The decreased loss is due primarily to the reduction in expenses, created
by the sale of the Hawthorne Works Business Center ("Hawthorne") in July 1996.
This property operated at a net loss of $227,000 during the three months ended
March 31, 1996, with $844,000 in revenues and $1,071,000 in expenses. This
reduction in expenses was only partially offset by a reduction in revenues
relating to the Hawthorne sale. In addition to fluctuations relating to the
sale, the Partnership experienced a decrease in rental income and an increase in
maintenance expense. Rental income decreased as a result of the decreased
occupancy at Lazy Hollow Apartments, Homestead Apartments and Casa Granada
Apartments. Maintenance expense increased due to the increased snow-removal
costs. Bad debt expense can be attributed to the General Partner's evaluation
of certain past due amounts from tenants of Whispering Pines Mobile Home Park,
Town & Country Shopping Center and Wakonda Shopping Center. These past due
amounts were deemed uncollectible and were therefore reserved. For the three
months ended March 31, 1997, the Partnership received a portion of past due
amounts that had been previously reserved, resulting in bad debt recovery.
Included in maintenance expense at March 31, 1997, is $14,000 of major repairs
and maintenance, mainly comprised of exterior building improvements at Lazy
Hollow Apartments. At March 31, 1996, maintenance expense included $42,000 of
major repairs and maintenance, mainly comprised of parking lot repairs and
interior building improvements.
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 the burden of 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, 1997, the Partnership had unrestricted cash and cash equivalents of
$2,220,000 versus $1,669,000 at March 31, 1996. Net cash provided by operating
activities increase during the three months ended March 31, 1997, as compared to
the three months ended March 31, 1996, due primarily to the increased income and
also due to decreases in the escrow for taxes and accounts receivable. Net cash
used in investing activities is consistent with prior years and consists of
property improvements and replacements and deposits to restricted escrows. Net
cash used in financing activities decreased due to the sale of Hawthorne and the
payments on its associated debt in 1996.
During the first quarter of 1997, the mortgage secured by LaSalle Warehouse was
restructured (See "Note C"). The Partnership has a contract to sell this
property for $1,400,000 to an un-related party. All proceeds from the sale will
be applied to the outstanding debt to AMIT. In addition, as part of the
restructure, the Partnership allowed AMIT a second mortgage on the Wakonda
Shopping Center and the Town & Country Shopping Center. There can be no
assurances that the negotiations to sell this property will be successful.
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, 1997, the mortgage debt, in the
amount of $25,362,000, has maturity dates ranging from November 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, 1997 or 1996.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
On or about March 31, 1992, the Partnership executed in favor of Angeles
Mortgage Investment Trust ("AMIT") a promissory note whereby AMIT agreed to lend
the Partnership $935,000. The Partnership executed and delivered to AMIT a deed
of trust, assignment of leases and rents, security agreement and fixture filing.
In a lawsuit brought against the Partnership in Clark County, Nevada District
Court in January 1997, AMIT alleges that the Partnership made unapproved
distributions of $112,500 plus late fees and interest, putting the Partnership
in default under the deed. AMIT prays for relief against the Partnership as
follows: an order appointing a receiver; an order until further notice of the
Court, all rents, issues and profits collected on behalf of the Partnership be
paid to the Court appointed receiver for the benefit of AMIT; an order requiring
the Partnership to immediately deliver to the Court appointed receiver, any
funds arising from or related to La Salle Warehouse together with all books and
records; an order which allows the Court appointed receiver to disburse to AMIT
on a monthly basis, all net income after payment of all operating expenses,
fees, and reimbursements to said receiver as set forth in the proposed Ex Parte
Order for Appointment of a Receiver; for an order requiring the Partnership to
provide an accounting for the period of March 31, 1992, through November 30,
1996 and all Partnerships actions including but not limited to all expenses and
profits arising from or related to La Salle Warehouse; attorneys fees and costs
and all other such relief. Effective March 1, 1997, the General Partner
successfully negotiated with AMIT to release the property from foreclosure in
exchange for the Partnership curing it's default status on the debt to AMIT (See
"Note C").
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, 1997.
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
ANGELES 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 15, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from Angeles
Income Properties Ltd. 6 1997 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-31-1997
<PERIOD-END> MAR-31-1997
<CASH> 2,220
<SECURITIES> 0
<RECEIVABLES> 225
<ALLOWANCES> 129
<INVENTORY> 0
<CURRENT-ASSETS> 0<F1>
<PP&E> 36,654
<DEPRECIATION> 8,088
<TOTAL-ASSETS> 32,770
<CURRENT-LIABILITIES> 0<F1>
<BONDS> 25,362
0
0
<COMMON> 0
<OTHER-SE> 6,448
<TOTAL-LIABILITY-AND-EQUITY> 32,770
<SALES> 0
<TOTAL-REVENUES> 1,991
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 2,008
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 701
<INCOME-PRETAX> (17)
<INCOME-TAX> 0
<INCOME-CONTINUING> (17)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (17)
<EPS-PRIMARY> (.36)<F2>
<EPS-DILUTED> 0
<FN>
<F1>Registrant has an unclassified balance sheet.
<F2>Multiplier is 1.
</FN>
</TABLE>
