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 June 30, 1997
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period.........to.........
Commission file number 0-16210
ANGELES INCOME PROPERTIES LTD. 6
(Exact name of small business issuer as specified in its charter)
California 95-4106139
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
One Insignia Financial Plaza
Greenville, South Carolina 29602
(Address of principal executive offices) (Zip Code)
Issuer's telephone number (803) 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)
June 30, 1997
Assets
Cash and cash equivalents:
Unrestricted $ 2,546
Restricted--tenant security deposits 77
Accounts receivable, net of an allowance of $181 234
Escrow for taxes 692
Restricted escrows 255
Other assets 835
Investment properties:
Land $ 6,066
Buildings and related personal property 30,649
36,715
Less accumulated depreciation (8,343) 28,372
$ 33,011
Liabilities and Partners' Capital
Liabilities
Accounts payable $ 65
Tenant security deposits 113
Accrued taxes 426
Other liabilities 598
Notes payable 25,294
Partners'(Deficit) Capital
General partner $ (339)
Limited partners (47,384 units issued and
47,314 outstanding) 6,854 6,515
$ 33,011
See Accompanying Notes to Consolidated Financial Statements
b) ANGELES INCOME PROPERTIES, LTD. 6
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(in thousands, except unit data)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
1997 1996 1997 1996
<S> <C> <C> <C> <C>
Revenues:
Rental income $ 1,818 $ 2,297 $ 3,666 $ 5,015
Other income 127 110 270 261
Total revenues 1,945 2,407 3,936 5,276
Expenses:
Operating 590 793 1,187 1,620
General and administrative 98 100 191 198
Maintenance 114 236 293 460
Depreciation 256 382 510 759
Interest 556 1,013 1,258 2,033
Property taxes 212 294 425 680
Bad debt expense, net 52 210 22 231
Total expenses 1,878 3,028 3,886 5,981
Income (loss) before casualty gain 67 (621) 50 (705)
Casualty gain -- 144 -- 144
Net income (loss) $ 67 $ (477) $ 50 $ (561)
Net income (loss) allocated
to general partner (1%) $ 1 $ (5) $ 1 $ (6)
Net income (loss) allocated
to limited partners (99%) 66 (472) 49 (555)
Net income (loss) $ 67 $ (477) $ 50 $ (561)
Net income (loss) per limited
partnership unit $ 1.40 $ (9.96) $ 1.04 $ (11.71)
<FN>
See Accompanying Notes to Consolidated Financial Statements
</TABLE>
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 income for the six months
ended June 30, 1997 -- 1 49 50
Partners' (deficit) capital at
June 30, 1997 47,314 $ (339) $ 6,854 $ 6,515
<FN>
See Accompanying Notes to Consolidated Financial Statements
</TABLE>
d) ANGELES INCOME PROPERTIES, LTD. 6
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
Six Months Ended
June 30,
1997 1996
Cash flows from operating activities:
Net income (loss) $ 50 $ (561)
Adjustments to reconcile net income (loss) to
net cash provided by operating activities:
Depreciation 510 759
Amortization of discounts, loan costs 85 114
and leasing commissions
Bad debt expense, net 22 231
Casualty gain -- (144)
Change in accounts:
Restricted cash 2 (6)
Accounts receivable 23 (77)
Escrows for taxes (28) (245)
Other assets (14) 36
Accounts payable (82) (92)
Tenant security deposit liabilities (2) (5)
Accrued taxes 118 347
Other liabilities 251 352
Net cash provided by operating activities 935 709
Cash flows from investing activities:
Property improvements and replacements (110) (244)
Deposits to restricted escrows (37) (22)
Withdrawals from restricted escrows 53 75
Insurance proceeds -- 144
Net cash used in investing activities (94) (47)
Cash flows from financing activities:
Payments on notes payable (147) (175)
Net cash used in financing activities (147) (175)
Net increase in unrestricted cash and cash equivalents 694 487
Unrestricted cash and cash equivalents at
beginning of period 1,852 1,447
Unrestricted cash and cash equivalents at
end of period $ 2,546 $ 1,934
Supplemental disclosure of cash flow information:
Cash paid for interest $ 1,400 $ 1,601
Supplemental disclosure of non-cash financing
activities:
Interest on notes transferred to principal $ 423 $ --
See Accompanying Notes to Consolidated Financial Statements
e) ANGELES INCOME PROPERTIES, LTD. 6.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE A - BASIS OF PRESENTATION
The accompanying unaudited financial statements of Angeles Income Properties
Ltd. 6 (the "Partnership" or the "Registrant") 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 and six
month periods ended June 30, 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 Partnership's 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 made to the General Partner and
affiliates during each of the six months ended June 30, 1997 and 1996:
1997 1996
(in thousands)
Property management fees (included in
operating expenses) $ 171 $ 228
Reimbursement for services of affiliates
(included in general administrative
expenses) 119 123
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 $196,000 at June 30, 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 $23,000 for the six months ended June 30, 1997 and 1996, respectively.
Angeles Mortgage Investment Trust ("AMIT") currently holds notes receivable from
the Partnership in the aggregate amount of $4,735,000, secured by the
Partnership's investment properties known as LaSalle Warehouse, Mesa Dunes
Mobile Home Park, Wakonda Shopping Center and Town & Country Shopping Center.
Total interest expense on this financing was $372,000 and $214,000 for the six
months ended June 30, 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(however, in connection with the settlement agreement
described in the following paragraph, MAE GP has agreed to waive it's right to
receive dividends and distributions so long as AMIT's option is outstanding).
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, Liquidity Assistance L.L.C.,
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 June 30, 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"). On July 18, 1997, IPT, Insignia and MAE GP entered into a definitive
merger agreement pursuant to which (subject to shareholder approval and certain
other conditions, including the receipt by AMIT of a fairness opinion from its
investment bankers) AMIT would be merged with and into IPT, with each Class A
Share and Class B Share being converted into 1.625 and 0.0332 common shares of
IPT, respectively. The foregoing exchange ratios are subject to adjustment to
account for dividends paid by AMIT from January 1, 1997, through the closing
date of the merger. It is anticipated that Insignia (and its affiliates) and MAE
GP (and its affiliates) would own approximately 55% and 2.4%, respectively, of
post-merger IPT when this transaction is consummated.
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% 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 & Country Shopping Center as additional security on this
loan.
NOTE D - 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.
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 each of the six months ended
June 30, 1997 and 1996:
Average
Occupancy
Property 1997 1996
Lazy Hollow Apartments
Columbia, Maryland (1) 91% 93%
Homestead Apartments
East Lansing, Michigan (2) 91% 95%
Whispering Pines Mobile Home Park
Lantana, Florida 95% 97%
LaSalle Warehouse
Las Vegas, Nevada 100% 100%
Casa Granada Apartments
Harlingen, Texas (3) 91% 93%
Mesa Dunes Mobile Home Park
Mesa, Arizona (4) 91% 89%
Wakonda Shopping Center
Des Moines, Iowa (5) 83% 89%
Town & Country Shopping Center
Cedar Rapids, Iowa (6) 86% 98%
1) The decrease in occupancy 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.
3) The decrease in occupancy at Casa Granada Apartments is due to new
apartment complexes opening in the area, resulting in increased
competition.
4) Occupancy at Mesa Dunes Mobile Home Park is cyclical with low occupancy
during the summer months due to unfavorably hot weather.
5) 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.
6) The decrease in occupancy at Town & Country Shopping Center is due to the
move out of two large tenants. One tenant that had occupied approximately
13,000 square feet of space moved out and ceased business in the Cedar
Rapids area. The second tenant that had occupied approximately 19,000
square feet of space purchased an area competitor and moved operations to
that location.
For the three and six months ended June 30, 1997, the Partnership realized net
income of $67,000 and $50,000, respectively, versus net losses of approximately
$477,000 and $561,000 for the three and six months ended June 30, 1996. The
increase in net income is due primarily to the reduction in expenses, created by
the sale of the Hawthorne Works Business Center in July 1996 (See "Note D").
This property operated at a net loss of approximately $427,000 and $654,000 for
the three and six months ended June 30, 1996. Other than fluctuations relating
to the sale, the Partnership experienced two other significant variances in
expenses. Interest expense increased as a result of the default interest
accruing on the debt secured by LaSalle Warehouse until it was cured in March
1997 (See "Note C" regarding the restructure of this mortgage debt). Partially
offsetting the increase in interest expense for the six months ended June 30,
1997, was a decrease in maintenance expense resulting from parking lot repairs
which were completed at Lazy Hollow Apartments in 1996. 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.
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 through June 30, 1996, or $144,000, were sent to the
mortgage holder and applied towards the outstanding accrued interest on the debt
secured by this property.
Included in maintenance expense at June 30, 1997, is approximately $27,000 of
major repairs and maintenance, mainly comprised of major landscaping and
exterior building improvements. At June 30, 1996, maintenance expense included
approximately $68,000 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 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 June 30, 1997, the Partnership had unrestricted cash and cash equivalents of
approximately $2,546,000 versus approximately $1,934,000 at June 30, 1996. Net
cash provided by operating activities increased during the six months ended
June 30, 1997, compared to the six months ended June 30, 1996, due primarily to
the increase in net income, as discussed above. Net cash used in investing
activities increased primarily due to the receipt of $144,000 in insurance
proceeds from the fire at Hawthorne Works Business Center in the second quarter
1996, offset partially by the decreased property improvements and replacements
during the first half of 1997. Net cash used in financing activities decreased
due to the sale of the Hawthorne Works Business Center and the payments on its
associated debt in 1996.
During the first quarter of 1997, the mortgage debt secured by LaSalle Warehouse
was restructured (See "Note C"). The Partnership has a contract to sell this
property for $1,300,000 to an unrelated 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 June 30, 1997, the mortgage debt, in the
amount of approximately $25,294,000, 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 six
months ended June 30, 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 sought in its complaint an order appointing a
receiver and to have all rents, issues and profits collected on behalf of the
Partnership be paid to the Court-appointed receiver for the benefit of AMIT; as
well as all books and records related to the LaSalle Warehouse; 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 an order requiring the Partnership to provide an accounting for
the period of March 31, 1992, through November 30, 1996, attorneys fees and
costs and other relief. Effective March 1, 1997, the General Partner
successfully negotiated with AMIT to release the property from foreclosure in
exchange for the Partnership curing the 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 quarter ended June 30, 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: August 13, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from Angeles
Income Properties Ltd. 6 1997 Second 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> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> JUN-30-1997
<CASH> 2,546
<SECURITIES> 0
<RECEIVABLES> 234
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0<F1>
<PP&E> 36,715
<DEPRECIATION> 8,343
<TOTAL-ASSETS> 33,011
<CURRENT-LIABILITIES> 0<F1>
<BONDS> 25,294
0
0
<COMMON> 0
<OTHER-SE> 6,515
<TOTAL-LIABILITY-AND-EQUITY> 33,011
<SALES> 0
<TOTAL-REVENUES> 3,936
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 3,886
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,258
<INCOME-PRETAX> 50
<INCOME-TAX> 0
<INCOME-CONTINUING> 50
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 50
<EPS-PRIMARY> 1.04<F2>
<EPS-DILUTED> 0
<FN>
<F1>Registrant has an unclassified balance sheet.
<F2>Multiplier is 1.
</FN>
</TABLE>
