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 [NO FEE REQUIRED]
For the fiscal year ended December 31, 1996
[ ] 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 (I.R.S. Employer
incorporation or organization) Identification No.)
One Insignia Financial Plaza, P.O. Box 1089
Greenville, South Carolina 29602
(Address of principal executive offices) (Zip Code)
Issuer's telephone number (864) 239-1000
Securities registered under Section 12(b) of the Exchange Act:
None
Securities registered under Section 12(g) of the Exchange Act:
Limited Partnership Units
(Title of class)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the Registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes [X]
Check if there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B contained in this form, and no disclosure will be contained, to
the best of Registrant's knowledge in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-KSB or any amendment to
this Form 10-KSB.[X]
State issuer's revenues for its most recent fiscal year. $9,537,000
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" or "Registrant") 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 Residential
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:
Date of
Property Purchase Type of Ownership Use
Lazy Hollow Apartments 07/01/89 Fee ownership, subject Residential Rental
Columbia, MD to a first mortgage 178 units
Homestead Apartments 11/10/88 Fee ownership, subject to Residential Rental
East Langsing, MI a first mortgage 170 units
Whispering Pines 11/30/87 Fee ownership, subject to Residential Rental
Mobile Home Park first and second mortgages 304 pads
Lantana, FL
LaSalle Warehouse 03/31/89 Fee ownership, subject to Commercial
Las Vegas, NV a first mortgage 40,000 sq. ft.
Casa Granada Apartments 04/30/89 Fee ownership, subject to Residential Rental
Harlingen, TX a first mortgage 108 units
Mesa Dunes 04/01/95 Fee ownership, subject to Residential Rental
Mobile Home Park first and second mortgages 451 pads
Mesa, AZ
Wakonda Shopping Center 04/01/95 Fee ownership Commercial
Demoines, IA 147,664 sq. ft.
Town & Country 04/01/95 Fee ownership Commercial
Shopping Center 122,449 sq. ft.
Cedar Rapids, IA
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:
(dollar amounts in thousands)
Gross
Carrying Accumulated Federal
Property Value Depreciation Rate Method Tax Basis
Lazy Hollow Apartments $ 6,436 $ 2,098 5-40 yrs (1) $ 8,556
Homestead Apartments 5,391 1,599 5-40 yrs (1) 5,388
Whispering Pines
Mobile Home Park 5,032 919 5-40 yrs (1) 4,163
LaSalle Warehouse 751 197 5-40 yrs (1) 1,219
Casa Granada Apartments 2,575 533 5-40 yrs (1) 2,195
Mesa Dunes Mobile
Home Park 8,940 1,033 5-40 yrs (1) 7,444
Wakonda Shopping Center 3,384 767 5-40 yrs (1) 4,709
Town & Country
Shopping Center 4,095 688 5-40 yrs (1) 3,422
$ 36,604 $ 7,834 $ 37,096
(1) Straight-line
See "Note A" of the financial statements included in "Item 7." for a
description of the Partnership's depreciation policy.
SCHEDULE OF MORTGAGES:
(dollar amounts in thousands)
Principal Principal
Balance At Stated Balance
December 31, Interest Period Maturity Due At
Property 1996 Rate Amortized Date Maturity
Lazy Hollow Apartments
1st trust deed $ 4,157 7.50% 30 yrs 07/2019 $ --
Homestead Apartments
1st trust deed 3,197 7.33% 30 yrs 11/2003 2,935
Whispering Pines
Mobile Home Park
1st trust deed 4,972 7.83% 28.67 yrs10/2003 4,423
2nd trust deed 159 7.83% (1) 10/2003 159
Casa Granada Apartments
1st trust deed 1,313 10.07% 30 yrs 09/1999 1,280
LaSalle Warehouse
1st trust deed
(in default) (2 & 3) 911 11.50% (1) 11/2003 911
Mesa Dunes Mobile
Home Park
1st trust deed 6,407 7.83% 28.67 yrs10/2003 5,699
2nd trust deed 205 7.83% (1) 10/2003 205
Wakonda Shopping Center/
Town & Country Shopping
Center
1st trust deed (3) 3,420 9.0% 30 yrs 12/2003 3,125
Working capital loan (4) 446 Prime+2% (1) 11/1997 446
25,187
Less unamortized
discount (178) $ 19,183
Total $ 25,009
(1) Interest only payments.
(2) Debt in default due to failure to service the debt.
(3) Payable to Angeles Mortgage Investment Trust ("AMIT") (See "Note E").
(4) Payable to Angeles Acceptance Pool, L.P. ("AAP") (See "Note E").
Average annual rental rate and occupancy for 1996 and 1995 for each property:
Average Annual Average
Rental Rates Occupancy
Property 1996 1995 1996 1995
Lazy Hollow Apartments $8,740/unit $8,564/unit 94% 95%
Homestead Apartments 7,058/unit 6,941/unit 95% 95%
Whispering Pines Mobile Home Park 3,524/unit 3,540/unit 96% 97%
LaSalle Warehouse 3.50/s.f. 3.42/s.f. 100% 100%
Casa Granada Apartments 5,528/unit 5,523/unit 94% 91%
Mesa Dunes Mobile Home Park (1) 2,776/unit 2,877/unit 87% 86%
Wakonda Shopping Center (2) 4.90/s.f. 4.11/s.f. 89% 95%
Town & Country Shopping Center (3) 5.72/s.f. 5.64/s.f. 96% 84%
(1) Although the average occupancy at Mesa Dunes Mobile Home Park has
increased over the same period in 1995, the property continues to
experience low occupancy. The tenant base is primarily retirement
age and as the base declines, the park's electrical supply cannot
accommodate the needs of the more popular double-wide mobile homes.
Therefore, potential tenants are selecting other mobile home parks
which will accommodate the needs of double-wide homes.
(2) Wakonda Shopping Center is located in a stable, mature residential
area. Occupancy declined during the last six months of 1995, but has
remained steady in 1996. The property has had difficulty attracting
retail tenants due in part to a local enclosed mall and lack of
restaurants in the area.
(3) The increase in average occupancy at Town & Country Shopping Center
is attributed to the execution of an anchor tenant lease in
September 1995.
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 1997-2006
(dollar amounts in thousands):
<TABLE>
<CAPTION>
Number of % of Gross
Expirations Square Feet Annual Rent Annual Rent
<S> <C> <C> <C> <C>
LaSalle Warehouse
1998 (1) 1 20,000 $ 72 51%
Wakonda Shopping Center
1997 (2) 7 32,102 191 31%
1998 5 6,238 40 6%
1999 6 18,515 131 21%
2000 - -- -- --
2001 3 3,728 38 6%
2002-2006 3 57,092 102 17%
Town & Country Shopping Center
1997 (2) 10 42,562 234 32%
1998 (2) 11 26,176 187 26%
1999 3 5,342 39 5%
2000 4 13,223 94 13%
2001 4 24,381 115 16%
2002-2006 - -- -- --
<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, 1996.
Meanwhile, the tenant leases on a month-to-month basis.
(2)The General Partner anticipates re-negotiating these leases with the current
tenants.
</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 Ft Expiration
<S> <C> <C> <C> <C>
LaSalle Feed Manufacturer 20,000 $ 3.60 01/31/98
Warehouse Moving and Storage 20,000 3.58 month to month
Wakonda Grocery 47,382 .78 01/31/02
Shopping
Center
Town and Country Bowling Lanes 18,600 2.40 05/31/97
Shopping Center Variety Discount 14,112 6.02 01/31/01
Auto Parts Store 13,455 7.20 01/31/97
</TABLE>
Real estate taxes and rates in 1996 for each property were:
(dollar amounts in thousands)
1996 1996
Billing Rate
Lazy Hollow Apartments $ 133 4.28
Homestead Apartments 169 6.58
Whispering Pines Mobile Home Park 127 3.32
LaSalle Warehouse 10 2.61
Casa Granada Apartments 38 2.30
Mesa Dunes Mobile Home Park 29 10.83
Wakonda Shopping Center 219 4.21
Town & Country Shopping Center 94 3.17
ITEM 3. LEGAL PROCEEDINGS
Angeles Corporation ("Angeles"), either directly or through an affiliate,
maintained a central disbursement account (the "account") for the properties and
partnerships managed by Angeles and its affiliates, including the Registrant.
Angeles caused the Partnership to make deposits to the account ostensibly to
fund the payment of certain obligations of the Partnership. Angeles further
caused checks on such account to be written to or on behalf of certain other
partnerships. At least $12,206 deposited by or on behalf of the Partnership was
used for purposes other than satisfying the liabilities of the Partnership.
Accordingly, the Partnership filed a Proof of Claim in the Angeles bankruptcy
proceedings for such amount. However, subsequently, the General Partner of the
Partnership has determined that the cost involved to pursue such claim would
likely exceed any amount received, if in fact such claim were to be resolved in
favor of the Partnership. Therefore, the Partnership withdrew this claim on
August 9, 1995.
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. The General Partner is currently in negotiations
with AMIT to release the property from foreclosure in exchange for the
Partnership curing it's default status on the debt to AMIT. The General Partner
anticipates that such release will be granted in 1997.
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 47,314 Limited Partnership Units outstanding and 4,444 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 63 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
For the year ended December 31, 1996, the Partnership realized net income of
$6,106,000 versus a net loss of $720,000 for the year ended December 31, 1995.
The increase in income can be attributed to the gain recognized on early
extinguishment of debt upon the sale of Hawthorne Works Business Center.
The Partnership experienced a decrease in rental income due to the sale of
Hawthorne Works Business Center in July 1996, that was partially offset by
increases in tenant reimbursements at Town & Country Shopping Center and Wakonda
Shopping Center relating to the Partnership obtaining full ownership of these
properties in 1995. Other income increased due to an increase in lease
cancellation fees, laundry income, and interest income. Operating and
depreciation expenses are comparable to the prior year, excluding decreases
associated with the sale of Hawthorne Works Business Center. Interest expense
also decreased due to the Hawthorne Works Business Center sale with the
remainder of the decrease being attributed to normal amortization of debt. Bad
debt expense increased due to certain tenant receivables which were deemed
uncollectible at Hawthorne Works Business Center, Wakonda Shopping Center, and
Whispering Pines Mobile Home Park.
Included in maintenance expense for the year ended December 31, 1996, is
$243,000 of major repairs and maintenance comprised of parking lot repairs,
exterior and interior renovation, landscaping and pool repairs.
On July 23, 1996, a sales contract was executed by the General Partner for the
sale of Hawthorne Works Business Center. The sales price was $9,150,000, which
was substantially less than the $17,645,000 in debt that was secured by this
property. This indebtedness was non-recourse to the Partnership. Net sales
proceeds of $8,865,000 were used as partial satisfaction of the indebtedness
secured by the property and the unsatisfied portion resulted in a $10,135,000
extraordinary gain on early extinguishment of debt, as well as a $2,874,000 loss
on sale of the property.
During 1995, a fire broke out in a warehouse space at the Hawthorne Works
Business Center damaging approximately 5,000 square feet of warehouse space.
The General Partner did not repair the damaged area and the entire amount of
insurance proceeds received, $180,000 in 1996, were sent to the mortgage holder
and applied towards the outstanding accrued interest on the debt secured by this
property.
Casa Granada Apartments replaced three roofs during 1995 that were not yet fully
depreciated resulting in a loss on disposal of property of $9,000.
As mentioned previously, until April 1, 1995, the Partnership accounted for its
50% interest in Mesa Dunes using the equity method of accounting. For the year
ended December 31, 1995, the Partnership's share of Mesa Dunes earnings amounted
to $2,895,000. Of this amount, approximately $2,825,000 represented the
Partnership's pro-rata share of bad debt recovery that Mesa Dunes recorded as a
result of its foreclosure of the note receivable that Mesa Dunes held from AIPL
V.
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 $2,213,000.
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
At December 31, 1996, the Partnership had unrestricted cash of $1,852,000 versus
unrestricted cash of $1,447,000 at December 31, 1995. Net cash used in
operating activities increased during the year ended December 31, 1996, as
compared to the year ended December 31, 1995, due to decreases in accounts
payable, tenant security deposit liabilities and accrued taxes. Net cash
provided by investing activities increased primarily due to proceeds from the
Hawthorne Works Business Center sale. Net cash used in financing activities
increased due to the pay-down of debt upon the August 1996, sale of Hawthorne
Works Business Center.
The first mortgage debt secured by LaSalle Warehouse, in the amount of $911,000,
is in default at December 31, 1996, due to delinquent interest payments. The
General Partner is currently in negotiations with AMIT to release the property
from foreclosure in exchange for the Partnership accruing it's default status on
the debt to AMIT. The General Partner anticipates that such release will be
granted in 1997. The General Partner is currently marketing the property for
sale and anticipates that the property will be sold in 1997.
On November 1, 1996, the General Partner refinanced the mortgage debt secured by
Homestead Apartments. The principal amount of the new debt was $3,200,000, at a
rate of 7.33% per annum. This note matures on November 1, 2003.
he 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 and other operating needs of the Partnership. Such assets are
currently thought to be sufficient for any near-term needs of the Partnership.
The debt of the Partnership, in the amount of $25,009,000, 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 years ended December 31, 1996 or 1995.
ITEM 7. FINANCIAL STATEMENTS
ANGELES INCOME PROPERTIES, LTD. 6
LIST OF FINANCIAL STATEMENTS
Report of Independent Auditors
Consolidated Balance Sheet - December 31, 1996
Consolidated Statements of Operations - Years ended December 31,
1996 and 1995
Consolidated Statement of Changes in Partners' Capital (Deficit) - Years
ended December 31, 1996 and 1995
Consolidated Statements of Cash Flows - Years ended December 31, 1996
and 1995
Notes to Consolidated Financial Statements
Report of Ernst & Young LLP, Independent Auditors
The Partners
Angeles Income Properties, Ltd. 6
We have audited the accompanying consolidated balance sheet of Angeles Income
Properties, Ltd. 6 as of December 31, 1996, and the related consolidated
statements of operations, changes in partners' capital (deficit) and cash flows
for each of the two years in the period ended December 31, 1996. 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 consolidated financial position of Angeles Income
Properties, Ltd. 6 as of December 31, 1996, and the consolidated results of its
operations and its cash flows for each of the two years in the period ended
December 31, 1996, in conformity with generally accepted accounting principles.
/S/ ERNST & YOUNG LLP
Greenville, South Carolina
February 13, 1997
ANGELES INCOME PROPERTIES, LTD. 6
CONSOLIDATED BALANCE SHEET
(in thousands except unit data)
December 31, 1996
Assets
Cash and cash equivalents:
Unrestricted $ 1,852
Restricted--tenant security deposits 79
Accounts receivable, (net of allowance
of $181) 279
Escrow for taxes 664
Restricted escrows 272
Other assets 895
Investment properties (Notes B & F):
Land $ 6,066
Buildings and related personal property 30,538
36,604
Less accumulated depreciation (7,834) 28,770
$ 32,811
Liabilities and Partners' Capital
Liabilities
Accounts payable $ 146
Tenant security deposits 114
Accrued taxes 308
Other liabilities 769
Notes payable, including $911
in default (Notes B & F): 25,009
Partners' (Deficit) Capital
General partner $ (340)
Limited partners (47,314 units issued
and outstanding) 6,805 6,465
$ 32,811
See Accompanying Notes to Consolidated Financial Statements
ANGELES INCOME PROPERTIES, LTD. 6
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except unit data)
Years Ended December 31,
1996 1995
Revenues:
Rental income $ 9,109 $ 9,555
Other income 428 353
Total revenues 9,537 9,908
Expenses:
Operating 2,960 3,118
General and administrative 406 428
Maintenance 903 907
Depreciation 1,360 1,439
Interest 3,693 3,969
Property taxes 1,289 1,351
Bad debt expense 261 89
Total expenses 10,872 11,301
Loss before loss on sale of investment property,
casualty gain, loss on disposal of property,
equity in income of joint venture, write-
down of investment property and
extraordinary item (1,335) (1,393)
Loss on sale of investment property (Note C) (2,874) --
Casualty gain (Note L) 180 --
Loss on disposal of property -- (9)
Equity in income of joint venture (Note G) -- 2,895
Write-down of investment property (Note I) -- (2,213)
Loss before extraordinary item (4,029) (720)
Extraordinary gain on early extinguishment
of debt (Note C) 10,135 --
Net income (loss) $ 6,106 $ (720)
Net income (loss) allocated
to general partner (1%) $ 61 $ (7)
Net income (loss) allocated
to limited partners (99%) 6,045 (713)
Net income (loss) $ 6,106 $ (720)
Per limited partnership unit:
Loss before extraordinary item $ (84.19) $ (15.06)
Extraordinary gain on early extinguishment of debt 211.79 --
Net income (loss) $ 127.60 $ (15.06)
See Accompanying Notes to Consolidated Financial Statements
ANGELES INCOME PROPERTIES, LTD. 6
CONSOLIDATED STATEMENT OF CHANGES IN PARTNERS' CAPITAL (DEFICIT)
(in thousands, except unit data)
Limited
Partnership General Limited
Units Partner Partners Total
Original capital contributions 47,384 $ 1,000 $ 47,384 $ 47,385
Partners' (deficit) capital at
December 31, 1994 47,379 $ (394) $ 1,473 $ 1,079
Abandonment of Limited
Partnership Units (Note J) (2) -- -- --
Net loss for the year ended
December 31, 1995 -- (7) (713) (720)
Partners' (deficit) capital
at December 31, 1995 47,377 (401) 760 359
Abandonment of Limited
Partnership Units (Note J) (63) -- -- --
Net income for the year ended
December 31, 1996 -- 61 6,045 6,106
Partners' (deficit) capital
at December 31, 1996 47,314 $ (340) $ 6,805 $ 6,465
See Accompanying Notes to Consolidated Financial Statements
ANGELES INCOME PROPERTIES, LTD. 6
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
Years ended December 31,
1996 1995
Cash flows from operating activities:
Net income (loss) $ 6,106 $ (720)
Adjustments to reconcile net income (loss) to net cash
(used in) provided by operating activities:
Depreciation 1,360 1,439
Amortization of discounts, loan costs, and
leasing commissions 202 249
Bad debt expense 261 89
Loss on sale of investment property 2,874 --
Casualty gain (180) --
Extraordinary gain on early extinguishment of debt (10,135) --
Loss on disposal of property -- 9
Write-down of investment property -- 2,213
Equity in income of joint venture -- (2,895)
Change in accounts:
Restricted cash 131 (34)
Accounts receivable (202) (229)
Escrows for taxes (61) (4)
Other assets (21) (9)
Accounts payable (143) (8)
Tenant security deposit liabilities (138) 53
Accrued taxes (541) 79
Other liabilities 331 150
Net cash (used in) provided by
operating activities (156) 382
Cash flows from investing activities:
Property improvements and replacements (410) (1,074)
Deposits to restricted escrows (110) (110)
Withdrawals from restricted escrows 75 174
Proceeds from sale of investment property 8,865 --
Insurance proceeds 180 --
Proceeds received from foreclosure of Mesa Dunes -- 876
Net cash provided by (used in) investing activities 8,600 (134)
Cash flows from financing activities:
Proceeds from long-term borrowing 3,200 754
Payments on notes payable (355) (248)
Repayment of notes payable (10,792) --
Loan costs paid (92) --
Net cash (used in) provided by financing activities (8,039) 506
Net increase in cash 405 754
Unrestricted cash and cash equivalents at beginning
of period 1,447 693
Unrestricted cash and cash equivalents at end of period $ 1,852 $ 1,447
Supplemental disclosure of cash flow information:
Cash paid for interest $ 2,966 $ 3,483
Interest on notes transferred to principal $ -- $ 110
See Accompanying Notes to Consolidated Financial Statements
ANGELES INCOME PROPERTIES, LTD. 6
Notes to Consolidated Financial Statements
December 31, 1996
NOTE A - ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
Organization: Angeles Income Properties, Ltd. 6 (the "Partnership" or
"Registrant") 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, 1996, the
Partnership operates five residential and three 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.
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.
Unrestricted Cash - 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.
Restricted Cash - Tenant Security Deposits: The Partnership requires security
deposits from all apartment lessees for the duration of the lease and considers
the deposits to be restricted cash. Deposits are refunded when the tenant
vacates the apartment if there has been no damage to the unit.
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.
Restricted Escrows:
Capital Reserves: At the time of the refinancing of Mesa Dunes Mobile Home Park
and Whispering Pines Apartments proceeds were designated for "capital
improvement escrows" for certain capital improvements. At December 31, 1996,
Mesa Dunes Mobile Home Park and Whispering Pines Apartments had unexpended
balances including interest of $8,000 and $43,000 for capital improvements.
Upon completion of scheduled property improvements, any excess funds will be
returned for property operations.
Replacement Reserves: As a result of the refiancings of Homestead Apartments,
Casa Granada Apartments, and Lazy Hollow Apartments, general reserve accounts
were established to cover necessary repairs and replacements of existing
improvements. In 1996, the refinancing of Homestead Apartments established its
reserve account with an initial deposit of $54,000, with required monthly
deposits of $2,000, the balance in this account as of December 31, 1996, is
$56,000. The balance for Casa Granada Apartments at December 31, 1996, is
$12,000, with required monthly deposits of $2,000. The balance for Lazy Hollow
Apartments at December 31, 1996, is $153,000 with required monthly deposits of
$2,000.
Loan Costs: Loan costs of $845,000 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 $261,000.
Advertising Costs: Advertising costs, $117,000 in 1996 and $131,000 in 1995,
are charged to expense as they are incurred and are included in "Operating"
expenses.
Lease Commissions: Lease commissions of $204,000 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 $103,000.
Leases: The Partnership generally leases apartment units for twelve-month terms
or less. Commercial building lease terms are from twelve months to ten years.
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 1995
balances to conform to the 1996 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 (see
"Note B").
NOTE B - NOTES PAYABLE
The principal terms of notes payable are as follows (dollar amounts in
thousands):
Monthly Principal Principal
Payment Stated Balance Balance At
Including Interest Maturity Due At December 31,
Property Interest Rate Date Maturity 1996
Lazy Hollow Apartments
1st trust deed $ 32 7.50% 07/2019 $ -- $ 4,157
Homestead Apartments
1st trust deed 22 7.33% 11/2003 2,935 3,197
Whispering Pines
Mobile Home Park
1st trust deed 38 7.83% 10/2003 4,423 4,972
2nd trust deed (1) 1 7.83% 10/2003 159 159
Casa Granada Apartments
1st trust deed 12 10.07% 09/1999 1,280 1,313
LaSalle Warehouse
1st trust deed,
in default (1, 2 & 3) 9 11.50% 11/2003 911 911
Mesa Dunes Mobile
Home Park
1st trust deed 49 7.83% 10/2003 5,699 6,407
2nd trust deed (1) 1 7.83% 10/2003 205 205
Wakonda Shopping Center/
Town & Country
Shopping Center
1st trust deed (3) 28 9.0% 12/2003 3,125 3,420
Working capital
loan (1 & 4) -- Prime+2% 11/1997 446 446
$ 192 $ 19,183 25,187
Less unamortized discounts (178)
$ 25,009
(1) Interest only payments.
(2) Debt in default due to failure to service the debt.
(3) Payable to Angeles Mortgage Investment Trust ("AMIT") (see "Note E").
(4) Payable to Angeles Acceptance Pool, L.P. ("AAP") (see "Note E").
The carrying value of the Partnership's debt approximates its estimated fair
value.
The mortgage secured by LaSalle Warehouse of $911,000, plus past due accrued
interest, is in default due to non-payment of interest when due. In November
1996, AMIT initiated foreclosure proceedings. The General Partner is currently
in negotiations with AMIT to release the property from foreclosure in exchange
for the Partnership accruing it's default status on the debt to AMIT. The
General Partner anticipates that such release will be granted in 1997. The
General Partner is currently marketing the property for sale and anticipates
that the property will be sold in 1997.
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.
Scheduled principal payments of notes payable subsequent to December 31, 1996,
are as follows:
(in thousands)
1997 $ 1,652
1998 318
1999 1,620
2000 358
2001 387
Thereafter 20,852
$ 25,187
On November 1, 1996, the Partnership refinanced the mortgage encumbering
Homestead Apartments. The mortgage principal refinanced was $2,897,000. The new
mortgage indebtedness of $3,200,000 carries a stated interest rate of 7.33% and
is being amortized over 30 years with a balloon payment due in November 2003.
The Partnership capitalized loan costs of $92,000 related to the refinancing.
NOTE C - SALE OF HAWTHORNE WORKS BUSINESS CENTER
On July 23, 1996, a sales contract was executed by the General Partner for the
sale of Hawthorne Works Business Center. The sales price was $9,150,000, which
was substantially less than the $17,645,000 in debt plus accrued interest that
was secured by this property. This indebtedness was non-recourse to the
Partnership. Net sales proceeds of $8,865,000 were used as partial satisfaction
of the indebtedness secured by the property and the unsatisfied portion resulted
in a $10,135,000 extraordinary gain on early extinguishment of debt, as well as
a $2,874,000 loss on sale of the property.
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 income (loss) as reported and Federal taxable loss
result primarily from (1) the write-down and disposal 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 income (loss) and Federal taxable loss (in thousands, except unit data):
1996 1995
Net income (loss) as reported $ 6,106 $ (720)
Add (deduct):
Depreciation differences (206) (233)
Unearned income (35) 72
Bad debt expense (57) 57
Investment in joint venture -- 82
Write-down of investment property -- (681)
Disposition of investment property (14,935) --
Other (80) (26)
Federal taxable loss $ (9,207) $ (1,449)
Federal taxable loss per limited
partnership unit $ (192.65) $ (30.28)
The following is a reconciliation between the Partnership's reported amounts and
Federal tax basis of net assets and liabilities:
(in thousands)
Net assets as reported $ 6,465
Land and buildings 7,648
Accumulated depreciation 678
Syndication and distribution costs 6,802
Other 93
Net assets - Federal tax basis $ 21,686
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.
The following payments were made to the General Partner and affiliates in 1996
and 1995:
1996 1995
(in thousands)
Property management fees $ 400 $ 420
Property lease commissions 34 63
Reimbursement for services of affiliates 287 306
A director of Insignia Financial Group, Inc. is affiliated with a professional
legal association that received fees of $12,000 in connection with the 1996
refinancing of Homestead (see "Note B").
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, 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
$172,000 at December 31, 1996, 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 $46,000 and $48,000 for the
years ended December 31, 1996 and 1995, respectively.
AMIT, a real estate investment trust, formerly affiliated with Angeles, has
provided first trust financing secured by the Partnership's investment property,
LaSalle Warehouse. Total indebtedness was $911,000 plus accrued interest of
$252,000 at December 31, 1996. This debt is in default at December 31, 1996, due
to non-payment of interest when due. 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 $3,420,000 at
December 31, 1996. Total interest expense on this financing was $316,000 and
$354,000 for the years ended December 31, 1996 and 1995, respectively.
MAE GP Corporation ("MAE GP"), an affiliate of the General Partner, owns
1,675,113 Class B Shares of AMIT. MAE GP has the option to convert these Class
B Shares, in whole or in part, into Class A Shares on the basis of 1 Class A
Share for every 49 Class B Shares. These Class B Shares entitle MAE GP to
receive 1% 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 39% 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 1.3% 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.
However, 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., ("Insignia")
which provides property management and partnership administration services to
the Partnership, owns 126,500 Class A Shares of AMIT at December 31, 1996. As
of February 1, 1997, the number of shares owned by LAC decreased to 96,800.
These Class A Shares entitle LAC to vote approximately 2.2% of the total shares.
In addition, Insignia has engaged and continues to engage in discussions with
AMIT regarding various potential business combinations with affiliates of
Insignia.
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
Initial Cost
To Partnership
(in thousands)
Cost
Buildings Capitalized
and Related (Removed)
Personal Subsequent to
Description Encumbrances Land Property Acquisition
Lazy Hollow Apartments $ 4,157 $ 998 $ 8,988 $ (3,550)
Homestead Apartments 3,197 557 5,988 (1,154)
Whispering Pines Mobile
Home Park 5,131 1,196 3,627 209
LaSalle Warehouse 911 123 1,174 (546)
Casa Granada Apartments 1,313 235 1,930 410
Mesa Dunes Mobile
Home Park 6,612 2,205 6,724 11
Wakonda Shopping Center 1,710 873 2,469 42
Town & Country
Shopping Center 1,710 38 3,994 63
Angeles Income Properties,
Ltd. 6 446 -- -- --
25,187 $ 6,225 $ 34,894 $ (4,515)
Less unamortized discounts (178)
$ 25,009
<TABLE>
<CAPTION>
Gross Amount At Which Carried
At December 31, 1996
(dollar amounts in thousands)
Buildings
And
Related
Personal Accumulated Date Depreciable
Description Land Property Total Depreciation Acquired Life-Years
<S> <C> <C> <C> <C> <C> <C>
Lazy Hollow Apartments $ 841 $ 5,595 $ 6,436 $ 2,098 07/01/89 10-40
Homestead Apartments 557 4,834 5,391 1,599 11/10/88 10-40
Whispering Pines Mobile
Home Park 1,196 3,836 5,032 919 11/30/87 10-40
LaSalle Warehouse 122 629 751 197 03/31/89 10-40
Casa Granada Apartments 234 2,341 2,575 533 04/30/89 10-40
Mesa Dunes Mobile Home Park 2,205 6,735 8,940 1,033 04/01/95 10-40
Wakonda Shopping Center 873 2,511 3,384 767 04/01/95 10-40
Town & Country Shopping Center 38 4,057 4,095 688 04/01/95 10-40
Totals $ 6,066 $ 30,538 $ 36,604$ 7,834
<FN>
The depreciable lives included above are for the buildings and components. The
depreciable lives for related personal property are for 5 to 7 years.
</TABLE>
Reconciliation of "Investment Properties and Accumulated Depreciation:"
Years Ended December 31,
1996 1995
(in thousands)
Investment Properties
Balance at beginning of year $ 52,069 $ 37,253
Consolidation of Mesa Dunes -- 16,302
Property improvements 410 742
Disposal of property (15,875) (15)
Property write-down -- (2,213)
Balance at end of Year $ 36,604 $ 52,069
Accumulated Depreciation
Balance at beginning of year $ 10,831 $ 7,713
Consolidation of Mesa Dunes -- 1,684
Additions charged to expense 1,360 1,439
Disposal of property (4,357) (5)
Balance at end of Year $ 7,834 $ 10,831
The aggregate cost of the investment properties for Federal income tax purposes
at December 31, 1996 and 1995, is $44,252,000 and $74,485,000, respectively.
The accumulated depreciation taken for Federal income tax purposes at December
31, 1996 and 1995, is $7,156,000 and $10,035,000, respectively.
NOTE G - INVESTMENT IN JOINT VENTURE
Prior to April 1, 1995, the Partnership had a 50% investment in Mesa Dunes. On
December 6, 1994, Mesa Dunes gave notice to Angeles Income Properties, Ltd. V
("AIPL V"), a California Limited Partnership and the other previous 50% owner of
Mesa Dunes, that the note receivable that Mesa Dunes held from AIPL V in the
amount of $5,000,000, dated September 20, 1991, and originally due on September
30, 1996, was in default because of failure to perform under the terms and
conditions of said note and security interest, including but not limited to,
failure to make interest payments. On April 1, 1995, Mesa Dunes foreclosed on
its collateral and AIPL V lost its 50% interest in Mesa Dunes. This foreclosure
effectively dissolved Mesa Dunes and the Mesa Dunes Mobile Home Park, Wakonda
Shopping Center and Town & Country Shopping Center properties became 100% owned
by the Partnership.
The Partnership recognized $2,895,000 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:
(in thousands)
Investment in joint venture at December 31, 1994 $ 3,017
Equity in earnings of joint venture through
March 31, 1995 2,895
Investment in joint venture at March 31, 1995 $ 5,912
Summary of assets and liabilities consolidated
on April 1, 1995
Cash $ 876
Investment properties, net 14,618
Other assets 908
Total assets 16,402
Accounts payable and accruals 401
Notes payable 10,089
Total liabilities 10,490
Net assets $ 5,912
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, assume the Partnership became the 100% owner as of January 1, 1995.
Pro Forma Statement
Year Ended December 31, 1995
(in thousands)
As Reported Adjustment Pro Forma
Revenues $ 9,154 $ 728 $ 9,882
Net loss (721) 71 (650)
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, 1996, the Partnership had minimum future rentals under
noncancellable leases with terms ranging from twelve months to ten years.
(in thousands)
1997 $ 997
1998 661
1999 449
2000 290
2001 127
Thereafter 226
$ 2,750
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 $2,213,000 to its appraised value at December 31, 1995.
NOTE J - ABANDONMENT OF LIMITED PARTNERSHIP UNITS
In 1996 and 1995, the number of Limited Partnership Units decreased by 63 and 2
units, respectively, due to Limited Partners abandoning their units. In
abandoning 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 income (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 chemical presence appears to have been caused by one of
the present tenants (the "Tenant"). An environmental consulting firm was
engaged in January 1995, to determine the level of contamination. The
consultant's report was submitted to the Nevada Division of Environmental
Protection (NDEP). During 1995, the Partnership and the Tenant entered into a
redemption agreement whereby the Tenant has agreed to be solely responsible for
any costs associated with the clean-up of this site. On March 25, 1996, the
NDEP issued a letter to the Partnership that stated that no further action is
necessary at this site concerning the contaminant.
NOTE L - CASUALTY GAIN
During 1995, a fire broke out in a warehouse space at the Hawthorne Works
Business Center damaging approximately 5,000 square feet of warehouse space.
The General Partner did not repair the damaged area and the entire amount of
insurance proceeds received in 1996, or $180,000, were sent to the mortgage
holder and applied towards the outstanding accrued interest on the debt secured
by this property.
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANT ON ACCOUNTING AND FINANCIAL
DISCLOSURES
There were no disagreements with Ernst & Young LLP regarding the 1995 or 1996
audits of the Partnership's financial statements.
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
The names of the directors and executive officers of Angeles Realty Corporation
II ("ARC II"), the Partnership's General Partner as of December 31, 1996, their
ages and the nature of all positions with ARC II presently held by them are as
follows:
Name Age Position
Carroll D. Vinson 56 President, Director
Robert D. Long, Jr. 29 Controller and Principal
Accounting Officer
William H. Jarrard, Jr. 50 Vice President
John K. Lines, Esq. 37 Vice President and
Secretary
Kelley M. Buechler 39 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. has been Managing Director - Partnership Administration
of Insignia since January 1991. Mr. Jarrard served as Managing Director -
Partnership Administration & Asset Management from July 1994 until January 1996.
John K. Lines has been Insignia's General Counsel since June 1994, and General
Counsel and Secretary since July 1994. From May 1993 until June 1994, Mr. Lines
was the Assistant General Counsel and Vice President of Ocwen Financial
Corporation, West Palm Beach, Florida. From October 1991 until May 1993, Mr.
Lines was a Senior Attorney with Banc One Corporation, Columbus, Ohio. From May
1984, until October 1991, Mr. Lines was an attorney with Squire Sanders &
Dempsey, Columbus, Ohio.
Kelley M. Buechler is Assistant Secretary of the General Partner and has served
as Assistant Secretary of Insignia since 1991.
ITEM 10. EXECUTIVE COMPENSATION
No direct form of compensation or remuneration was paid by the Partnership to
any officer or director of ARC II. The Partnership has no plan, nor does the
Partnership presently propose a plan, which will result in any remuneration
being paid to any officer or director upon termination of employment. However,
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, 1997, 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, 1996, and December 31, 1995, 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 1996.
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 26, 1997
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 Date: March 26, 1997
Carroll D. Vinson
/s/Robert D. Long, Jr. Controller and
Robert D. Long, Jr. Principal Accounting Date: March 26, 1997
Officer
EXHIBIT INDEX
EXHIBIT
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 here in by reference.
10.5 Agreement of Purchase and Sale of Property with Exhibits - Wakonda
Shopping Center and Town and Country Shipping 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 1989, which is
incorporated herein by reference.
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.
10.13 Contract to Purchase and Sell Property - Cable Plant and CM Complex of
Hawthorne Business Works - between CP and CMC and Greybeard Properties,
LLC, dated July 1, 1996.
10.14 Assignment and Assumption of Leases - Cable Plant and CM Complex of
Hawthorne Business Works - between CP and CMC and LaSalle National
Trust, as Trustee dated August 28, 1996.
10.15 Assignment and Assumption of Contracts - Cable Plant and CM Complex of
Hawthorne Business Works - between CP and CMC and Hawthorne Street
Properties, LLC, as agent of LaSalle National Trust, as Trustee dated
August 28, 1996.
10.16 Bill of Sale - Cable Plant and CM Complex of Hawthorne Business Works -
between CP and CMC and LaSalle National Trust, as Trustee dated August
28, 1996.
10.17 Multifamily Note dated November 1, 1996, between Angeles Income
Properties Ltd. 6, a California Limited Partnership and Lehman Brothers
Holdings, Inc., relating to Homestead Apartments.
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.
27 Financial Data Schedule.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from Angeles
Income Properties 6 1996 Year-End 10-KSB and is qualified in its entirety by
reference to such 10-KSB filing.
</LEGEND>
<CIK> 0000812564
<NAME> ANGELES INCOME PROPERTIES 6
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<CASH> 1,852
<SECURITIES> 0
<RECEIVABLES> 279
<ALLOWANCES> 181
<INVENTORY> 0
<CURRENT-ASSETS> 0<F1>
<PP&E> 36,604
<DEPRECIATION> 7,834
<TOTAL-ASSETS> 32,811
<CURRENT-LIABILITIES> 0<F1>
<BONDS> 25,009
0
0
<COMMON> 0
<OTHER-SE> 6,465
<TOTAL-LIABILITY-AND-EQUITY> 32,811
<SALES> 0
<TOTAL-REVENUES> 9,537
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 10,872
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,693
<INCOME-PRETAX> 6,106
<INCOME-TAX> 0
<INCOME-CONTINUING> 6,106
<DISCONTINUED> 0
<EXTRAORDINARY> 10,135
<CHANGES> 0
<NET-INCOME> 6,106
<EPS-PRIMARY> 127.60<F2>
<EPS-DILUTED> 0
<FN>
<F1>Registrant has an unclassified balance sheet.
<F2>Multiplier is 1.
</FN>
</TABLE>
Loan No. 734105886
Homestead
MULTIFAMILY NOTE
US $3,200,000.00
New York, New York
As of November 1, 1996
FOR VALUE RECEIVED, the undersigned promise to pay LEHMAN BROTHERS HOLDINGS
INC. d/b/a Lehman Capital, A Division of Lehman Brothers Holdings Inc., 3 World
Financial Center, New York, New York 10285, or order, the principal sum of Three
Million Two Hundred Thousand and 00/100 Dollars, with interest on the unpaid
principal balance from the date of this Note, until paid, at the rate of 7.33
percent per annum. Principal and interest shall be payable at 3 World Financial
Center, New York, New York 10285, or such other place as the holder hereof may
designate in writing, in consecutive monthly installments of Twenty-two Thousand
Three and 55/100 Dollars (US $22,003.55) on the first day each month beginning
December 1, 1996, until the entire indebtedness evidenced hereby is fully paid,
except that any remaining indebtedness, if not sooner paid, shall be due and
payable on November 1, 2003.
If any installment under this Note is not paid when due, the entire
principal amount outstanding hereunder and accrued interest thereon shall at
once become due and payable, at the option of the holder hereof. The holder
hereof may exercise this option to accelerate during any default by the
undersigned regardless of any prior forbearance. In the event of any default in
the payment of this Note, and if the same is referred to an attorney at law for
collection or any action at law or in equity is brought with respect hereto, the
undersigned shall pay the holder hereof all expenses and costs, including, but
not limited to, attorney's fees.
Prepayments shall be applied against the outstanding principal balance of
this Note and shall not extend or postpone the due date of any subsequent
monthly installments or change the amount of such installments, unless the
holder hereof shall agree otherwise in writing. The holder hereof may require
that any partial prepayments be made on the date monthly installments are due
and be in the amount of that part of one or more monthly installments which
would be applicable to principal.
From time to time, without affecting the obligation of the undersigned or
the successors or assigns of the undersigned to pay the outstanding principal
balance of this Note and observe the covenants of the undersigned contained
herein, without affecting the guaranty of any person, corporation, partnership
or other entity for payment of the outstanding principal balance of this Note,
without giving notice to or obtaining the consent of the undersigned, the
successors or assigns of the undersigned or guarantors, and without liability on
the part of the holder hereof, the holder hereof may, at the option of of the
holder hereof, extend the time for payment of said outstanding principal balance
or any part thereof, reduce the payments thereon, release anyone liable on any
of said outstanding principal balance, accept a renewal of this Note, modify the
terms and time of payment of said outstanding principal balance, join in any
extension or subordination agreement, release any security given herefor, take
or release other or additional security, and agree in writing with the
undersigned to modify the rate of interest or period of amortization of this
Note or change the amount of the monthly installments payable hereunder.
Presentment, notice of dishonor, and protest are hereby waived by all
makers, sureties, guarantors and endorsers hereof. This Note shall be the joint
and several obligation of all makers, sureties, guarantors and endorsers, and
shall be binding upon them and their successors and assigns.
The indebtedness evidenced by this Note is secured by a Mortgage or Deed of
Trust dated as of the date hereof, and reference is made thereto for rights as
to acceleration of the indebtedness evidenced by this Note. This Note shall be
governed by the law of the jurisdiction in which the Property subject to the
Mortgage or Deed of Trust is located.
The undersigned shall pay any installment of interest due hereunder within
ten (10) calendar days after such installment of interest is due. The
undersigned shall pay any other installment due hereunder or due in accordance
with the terms of the Mortgage or Deed of Trust securing this Note, within
thirty (30) calendar days of the date such installment is due.
IN WITNESS WHEREOF, Borrower has executed this Note or has caused the same
to be executed by its representatives thereunto duly authorized.
ANGELES INCOME PROPERTIES, LTD. 6
a California limited partnership
By: Angeles Realty Corporation II,
a California corporation, its
general partner
By: /s/ William H. Jarrard, Jr.
Name: William H. Jarrard, Jr.
Title: President
