FORM 10-QSB--QUARTERLY OR TRANSITIONAL 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
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended September 30, 1999
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _________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 (I.R.S. Employer
incorporation or organization) Identification No.)
55 Beattie Place, PO Box 1089
Greenville, South Carolina 29602
(Address of principal executive offices)
(864) 239-1000
(Issuer's telephone number)
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)
September 30, 1999
Assets
Cash and cash equivalents $ 1,852
Receivables and deposits 600
Restricted escrows 357
Other assets 632
Investment properties:
Land $ 2,544
Buildings and related personal property 20,919
23,463
Less accumulated depreciation (7,751) 15,712
$ 19,153
Liabilities and Partners' Capital
Liabilities
Accounts payable $ 117
Tenant security deposit liabilities 97
Accrued property taxes 347
Other liabilities 258
Due to General Partner 212
Mortgage notes payable 11,783
Partners' Capital
General partner $ 63
Limited partners (47,311 units issued and
outstanding) 6,276 6,339
$ 19,153
See Accompanying Notes to Consolidated Financial Statements
b)
ANGELES INCOME PROPERTIES, LTD. 6
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(in thousands, except unit data)
Three Months Ended Nine Months Ended
September 30, September 30,
1999 1998 1999 1998
Revenues:
Rental income $ 1,283 $ 1,525 $ 4,129 $ 5,142
Other income 68 80 293 332
Gain on sale of investment property -- 2,995 1,783 2,995
Total revenues 1,351 4,600 6,205 8,469
Expenses:
Operating 521 614 1,530 2,139
General and administrative 84 111 239 329
Depreciation 219 240 650 755
Interest 245 395 819 1,400
Property tax 144 157 431 545
Total expenses 1,213 1,517 3,669 5,168
Income before extraordinary item 138 3,083 2,536 3,301
Extraordinary loss on early
extinguishment of debt -- (229) (1,011) (229)
Net income $ 138 $ 2,854 $ 1,525 $ 3,072
Net income allocated
to general partner $ 1 $ 434 $ 297 $ 436
Net income allocated
to limited partners 137 2,420 1,228 2,636
$ 138 $ 2,854 $ 1,525 $ 3,072
Per limited partnership unit:
Income before extraordinary item $ 2.90 $ 55.94 $ 47.12 $ 60.50
Extraordinary loss on early
extinguishment of debt -- (4.79) (21.16) (4.79)
Net income $ 2.90 $ 51.15 $ 25.96 $ 55.71
Distribution per limited partnership
unit $106.72 $ -- $106.72 $ --
See Accompanying Notes to Consolidated Financial Statements
c)
ANGELES INCOME PROPERTIES, LTD. 6
CONSOLIDATED STATEMENT OF CHANGES IN PARTNERS' CAPITAL
(Unaudited)
(in thousands, except unit data)
Limited
Partnership General Limited
Units Partner Partners Total
Original capital contributions 47,384 $ 1 $47,384 $47,385
Partners' capital at
December 31, 1998 47,311 $ 102 $10,097 $10,199
Distributions paid -- (336) (5,049) (5,385)
Net income for the nine months
ended September 30, 1999 -- 297 1,228 1,525
Partners' capital
at September 30, 1999 47,311 $ 63 $ 6,276 $ 6,339
See Accompanying Notes to Consolidated Financial Statements
d)
ANGELES INCOME PROPERTIES, LTD. 6
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
Nine Months Ended
September 30,
1999 1998
Cash flows from operating activities:
Net income $ 1,525 $ 3,072
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 650 755
Amortization of mortgage discounts, loan costs,
and leasing commissions 52 104
Gain on sale of investment property (1,783) (2,995)
Extraordinary loss in early extinguishment of debt 1,011 229
Change in accounts:
Receivables and deposits 23 343
Other assets (156) (98)
Accounts payable 22 8
Tenant security deposit liabilities -- (8)
Accrued property taxes (30) (111)
Other liabilities (450) 1
Net cash provided by operating activities 864 1,300
Cash flows from investing activities:
Property improvements and replacements (511) (426)
Lease commissions paid (7) --
Net (deposits to) withdrawals from restricted escrows (54) 4
Proceeds from sale of investment property 9,292 6,959
Net cash provided by investing activities 8,720 6,537
Cash flows used in financing activities:
Payments on mortgage notes payable (143) (226)
Proceeds from long-term borrowing 1,413 --
Repayment of mortgage notes payable (7,702) (5,027)
Distributions paid (5,385) --
Loan costs paid (46) --
Prepayment penalty (787) --
Net cash used in financing activities (12,650) (5,253)
Net (decrease) increase in cash and cash equivalents (3,066) 2,584
Cash and cash equivalents at beginning of period 4,918 1,941
Cash and cash equivalents at end of period $ 1,852 $ 4,525
Supplemental disclosure of cash flow information:
Cash paid for interest $ 826 $ 1,340
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 consolidated financial statements of Angeles Income
Properties, Ltd. 6 (the "Partnership" or "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 ("ARC II"
or 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 nine month periods ended September 30, 1999,
are not necessarily indicative of the results that may be expected for the
fiscal year ending December 31, 1999. For further information, refer to the
consolidated financial statements and footnotes thereto included in the
Partnership's Annual Report on Form 10-KSB for the fiscal year ended December
31, 1998.
Principles of Consolidation
The consolidated financial statements of the Partnership include its 99% limited
partnership interests in Granada AIPL 6, Ltd., AIP 6 GP, LP, Whispering Pines
AIP 6, LP and Lazy Hollow Partners, Ltd. The Partnership may remove the general
partner of all the above partnerships; therefore, the partnerships are
controlled and consolidated by the Partnership. Also included in the
consolidated financial statements are Mesa Dunes GP, LLC, Wakonda Partners, Town
and Country Partners and Mesa Dunes Partners, which are wholly-owned by the
Partnership. All significant inter-entity balances have been eliminated.
Certain reclassifications have been made to the 1998 information to conform to
the 1999 presentation.
NOTE B - TRANSFER OF CONTROL
Pursuant to a series of transactions which closed on October 1, 1998 and
February 26, 1999, Insignia Financial Group, Inc. and Insignia Properties Trust
("IPT") merged into Apartment Investment and Management Company ("AIMCO"), a
publicly traded real estate investment trust, with AIMCO being the surviving
corporation (the "Insignia Merger"). As a result, AIMCO acquired 100% ownership
interest in the General Partner. The General Partner does not believe that this
transaction will have a material effect on the affairs and operations of the
Partnership.
NOTE C - 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 certain payments to affiliates for
services and as reimbursement of certain expenses incurred by affiliates on
behalf of the Partnership.
The following payments were paid or accrued to the General Partner and
affiliates during the nine month period ended September 30, 1999 and 1998:
1999 1998
(in thousands)
Property management fees (included in operating
expenses) $143 $254
Property lease commissions (included in other
assets and operating expenses) -- 34
Reimbursement for services of affiliates
(included in investment properties and
operating and general and administrative expenses) 132 221
During the nine months ended September 30, 1999 and 1998, affiliates of the
General Partner were entitled to receive 5% of gross receipts from all the
Partnership's residential properties for providing property management services.
The Registrant paid to such affiliates approximately $143,000 and $215,000 for
the nine months ended September 30, 1999 and 1998, respectively. For the nine
months ended September 30, 1998, affiliates of the General Partner were entitled
to receive varying percentages of gross receipts from all of the Registrant's
commercial properties for providing property management services. The
Registrant paid to such affiliates approximately $39,000 for the nine months
ended September 30, 1998. Effective October 1, 1998, (the effective date of the
Insignia Merger), property management services for the commercial properties
were provided by an unrelated party.
The Partnership paid leasing commissions of approximately $34,000 to an
affiliate of the General Partner during the nine months ended September 30,
1998. No leasing commissions were paid to affiliates during the nine months
ended September 30, 1999. Leasing commissions are capitalized and amortized over
the lives of the respective leases. Unamortized leasing commissions are
included in other assets.
An affiliate of the General Partner received reimbursement of accountable
administrative expenses amounting to approximately $132,000 and $221,000 for the
nine months ended September 30, 1999 and 1998, respectively. Included in these
amounts are approximately $12,000 and $7,000 of construction oversight
reimbursements as of September 30, 1999 and 1998, respectively.
Pursuant to the Partnership Agreement, the General Partner is entitled to
receive a distribution equal to 3% of the aggregate disposition price of sold
properties. Pursuant to this provision, during the nine months ended September
30, 1999, the Partnership declared and paid a distribution of approximately
$285,000 payable to the General Partner related to the sale of Mesa Dunes Mobile
Home Park. In addition approximately $212,000 related to the sale of Whispering
Pines Mobile Home Park was accrued at September 30, 1999. This amount was paid
to the General Partner during the fourth quarter of 1999. These fees are
subordinate to the limited partners receiving a preferred return, as specified
in the Partnership Agreement. If the limited partners have not received their
preferred return when the Partnership terminates, the General Partner will
return these amounts to the Partnership.
On May 13, 1999, AIMCO Properties, L.P., an affiliate of the General Partner,
commenced a tender offer to purchase up to 18,928.89 (approximately 40.01% of
the total outstanding units) units of the limited partnership interest in the
Partnership for a purchase price of $318 per unit. The offer expired on July
30, 1999. Pursuant to the offer, AIMCO Properties, L.P. acquired 3,226 units.
As a result, AIMCO and its affiliates currently own 9,242.00 units of limited
partnership interest in the Partnership representing approximately 19.53% of the
total outstanding units. It is possible that AIMCO or its affiliates will make
one or more additional offers to acquire additional limited partnership
interests in the Partnership for cash or in exchange for units in the operating
partnership of AIMCO (see "Note H - Legal Proceedings").
The Partnership has a first mortgage to Angeles Mortgage Investment Trust
("AMIT") in the amount of $3,350,000, which is secured by Wakonda Shopping
Center and Town & Country Shopping Center. Pursuant to a series of
transactions, affiliates of the General Partner acquired ownership interests in
AMIT. On September 17, 1998, AMIT was merged with and into IPT. Effective
February 26, 1999, IPT merged into AIMCO. As a result, AIMCO became the holder
of the AMIT note. The Partnership paid approximately $225,000 and $227,000 in
interest expense on this note to AMIT for each of the nine months ended
September 30, 1999 and 1998, respectively.
NOTE D - SEGMENT REPORTING
Description of the types of products and services from which reportable segments
derive their revenues:
The Partnership has two reportable segments: residential and commercial
properties. The Partnership's residential property segment consists of three
apartment complexes, one each in Maryland, Michigan and Texas. The Partnership
rents apartment units to tenants for terms that are typically twelve months or
less. The Partnership's commercial property segment consists of two retail
shopping centers located in Iowa. The Partnership rents commercial space to
tenants under various lease terms expiring during 1999 through 2008. Both
properties lease space to various specialty retail outlets, several fast food
enterprises and discount stores and Wakonda also leases space to a grocery
store.
Measurement of segment profit or loss:
The Partnership evaluates performance based on net income. The accounting
policies of the reportable segments are the same as those of the Partnership as
described in the Partnership's Annual Report on Form 10-KSB for the year ended
December 31, 1998.
Factors management used to identify the enterprise's reportable segments:
The Partnership's reportable segments consist of investment properties that
offer different products and services. The reportable segments are each managed
separately, because they provide services with different types of products and
customers.
Segment information for the nine months ended September 30, 1999 and 1998, is
shown in the tables below (in thousands). The "Other" column includes
Partnership administration related items and income and expense not allocated to
the reportable segments.
1999 Residential Commercial Other Totals
Rental income $ 2,714 $ 1,415 $ -- $ 4,129
Other income 190 35 68 293
Interest expense 594 225 -- 819
Depreciation 387 263 -- 650
General and administrative expense -- -- 239 239
Gain on sale of property 1,783 -- -- 1,783
Loss on extraordinary item (1,011) -- -- (1,011)
Segment profit (loss) 1,327 369 (171) 1,525
Total assets 11,742 6,541 870 19,153
Capital expenditures for
investment properties 484 27 -- 511
1998 Residential Commercial Other Totals
Rental income $ 3,913 $ 1,229 $ -- $ 5,142
Other income 243 44 45 332
Interest expense 1,173 227 -- 1,400
Depreciation 550 205 -- 755
General and administrative expense -- -- 329 329
Gain on sale of property 2,995 -- -- 2,995
Loss on extraordinary item (229) -- -- (229)
Segment profit (loss) 3,171 185 (284) 3,072
Total assets 21,325 7,223 813 29,361
Capital expenditures for
investment properties 169 257 -- 426
NOTE E - SALE OF INVESTMENT PROPERTIES
On February 19, 1999, the Partnership sold Mesa Dunes Mobile Home Park to an
unaffiliated third party for distributable net sales proceeds of approximately
$2,081,000 after payoff of the first and second mortgages and payment of closing
costs. The Partnership realized a gain of approximately $1,783,000 on the sale
during the first quarter of 1999. The Partnership also realized a loss on the
early extinguishment of debt encumbering the property of approximately
$1,011,000 during the first quarter of 1999 consisting of a prepayment penalty
and the write off of unamortized loan costs and mortgage discount.
On July 16, 1998, the Partnership sold Whispering Pines Mobile Home Park to an
unaffiliated third party for net sales proceeds of approximately $1,935,000
after payoff of the first and second mortgages and payment of closing costs.
The Partnership realized a gain of approximately $2,995,000 on the sale during
the third quarter of 1998. The Partnership also realized a loss on the early
extinguishment of debt encumbering Whispering Pines Mobile Home Park of
approximately $229,000 during the third quarter of 1998 consisting of the write
off of unamoritized loan costs and mortgage discount.
NOTE F - REFINANCING
On September 30, 1999, the Partnership refinanced the mortgage encumbering Casa
Granada Apartments. Interest on the new mortgage is 7.65%. Interest on the old
mortgage was 10.07%. The refinancing replaced indebtedness of approximately
$1,279,000, including accrued interest of approximately $11,000 with a new
mortgage in the amount of $1,413,000. Payments of approximately $12,000 are due
on the first day of each month until the loan matures on October 1, 2019. The
prior note matured in September 1999.
NOTE G - DISTRIBUTIONS
The Partnership distributed approximately $4,016,000 (approximately $3,976,000
to the limited partners or $84.04 per limited partnership unit) from the Mesa
Dunes Mobile Home Park and Whispering Pines Mobile Home Park sale proceeds and
approximately $1,084,000 (approximately $1,073,000 to the limited partners or
$22.68 per limited partnership unit) from operations during the nine months
ended September 30, 1999. In addition, the Partnership paid a distribution of
$285,000 to the General Partner representing the disposition fee relating to the
sale of Mesa Dunes Mobile Home Park. However, this fee is subordinate to the
limited partners receiving a preferred return, as specified in the Partnership
Agreement. No distributions were paid during the nine months ended September
30, 1998.
NOTE H - LEGAL PROCEEDINGS
In March 1998, several putative unit holders of limited partnership units of the
Partnership commenced an action entitled ROSALIE NUANES, ET AL. V. INSIGNIA
FINANCIAL GROUP, INC., ET AL. in the Superior Court of the State of California
for the County of San Mateo. The plaintiffs named as defendants, among others,
the Partnership, the General Partner and several of their affiliated
partnerships and corporate entities. The complaint purports to assert claims on
behalf of a class of limited partners and derivatively on behalf of a number of
limited partnerships (including the Partnership) which are named as nominal
defendants, challenging the acquisition by Insignia Financial Group, Inc.
("Insignia") and entities which were, at one time, affiliates of Insignia
("Insignia Affiliates") of interests in certain general partner entities, past
tender offers by Insignia Affiliates to acquire limited partnership units, the
management of partnerships by Insignia Affiliates and the Insignia Merger (see
"Note B - Transfer of Control"). The complaint seeks monetary damages and
equitable relief, including judicial dissolution of the Partnership. On June
25, 1998, the General Partner filed a motion seeking dismissal of the action.
In lieu of responding to the motion, the plaintiffs have filed an amended
complaint. The General Partner filed demurrers to the amended complaint which
were heard February 1999. Pending the ruling on such demurrers, settlement
negotiations commenced. On November 2, 1999, the parties executed and filed a
Stipulation of Settlement ("Stipulation"), settling claims, subject to final
court approval, on behalf of the Partnership and all limited partners who own
units as of November 3, 1999. The Court has preliminarily approved the
Settlement and scheduled a final approval hearing for December 10, 1999. In
exchange for a release of all claims, the Stipulation provides that, among other
things, an affiliate of the General Partner will make tender offers for all
outstanding limited partnership interests in 49 partnerships, including the
Registrant, subject to the terms and conditions set forth in the Stipulation,
and has agreed to establish a reserve to pay an additional amount in settlement
to qualifying class members (the "Settlement Fund"). At the final approval
hearing, Plaintiffs' counsel will make an application for attorneys' fees and
reimbursement of expenses, to be paid in part by the partnerships and in part
from the Settlement Fund. The General Partner does not anticipate that costs
associated with this case will be material to the Partnership's overall
operations.
The Partnership is unaware of any other pending or outstanding litigation that
is not of a routine nature arising in the ordinary course of business.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS
The matters discussed in this Form 10-QSB contain certain forward-looking
statements and involve risks and uncertainties (including changing market
conditions, competitive and regulatory matters, etc.) detailed in the
disclosures contained in this Form 10-QSB and the other filings with the
Securities and Exchange Commission made by the Registrant from time to time.
The discussions of the Registrant's business and results of operations,
including forward-looking statements pertaining to such matters, does not take
into account the effects of any changes to the Registrant's business and results
of operations. Accordingly, actual results could differ materially from those
projected in the forward-looking statements as a result of a number of factors,
including those identified herein.
The Partnership's investment properties consist of two commercial properties and
three apartment complexes. The following table sets forth the average occupancy
of the properties for the nine months ended September 30, 1999 and 1998:
Average Occupancy
Property 1999 1998
Lazy Hollow Apartments 97% 97%
Columbia, Maryland
Homestead Apartments (1) 93% 89%
East Lansing, Michigan
Casa Granada Apartments 95% 93%
Harlingen, Texas
Wakonda Shopping Center 86% 85%
Des Moines, Iowa
Town & Country Shopping Center 98% 86%
Cedar Rapids, Iowa (2)
(1)The increase in occupancy at Homestead Apartments is due to increased
marketing efforts.
(2)The increase in occupancy at Town & Country Shopping Center is due to the
addition of four new tenants in the third and fourth quarters of 1998.
Results from Operations
The Partnership realized net income of approximately $1,525,000 versus net
income of approximately $3,072,000 for the nine month periods ended September
30, 1999 and 1998, respectively. The decrease in net income is due primarily to
a decrease in total revenues resulting from the gain of approximately $1,783,000
realized on the sale of Mesa Dunes Mobile Home Park in February 1999 partially
offset by the extraordinary loss on early extinguishment of debt of
approximately $1,011,000 during the first quarter of 1999 compared to a gain of
approximately $2,995,000 realized on the sale of Whispering Pines Mobile Home
Park in July 1998 partially offset by the extraordinary loss on early
extinguishment of debt of approximately $229,000 during the third quarter of
1998. See below for a discussion of the Mesa Dunes Mobile Home Park and
Whispering Pines Mobile Home Park property sales. The decrease in total
revenues was partially offset by a decrease in total expenses. As a result of
the property sale during the nine months ended September 30, 1999, the
Partnership realized decreases in rental and other income in addition to
operating expenses, depreciation, general and administrative expenses interest
expenses, and property taxes. Excluding the operations of Mesa Dunes and
Whispering Pines, the Partnership realized net income of approximately $707,000
and $210,000 for the nine month periods ended September 30, 1999 and 1998,
respectively. Excluding the operations of Mesa Dunes and Whispering Pines, the
Partnership realized net income of approximately $129,000 for the three months
ended September 30, 1999, and $118,000 for the comparable period in 1998. The
increase in net income at the Partnership's remaining properties is due to an
increase in rental income combined with decreases in operating and general and
administrative expenses partially offset by an increase in depreciation expense.
Rental income increased due to rental rate increases and improved occupancy at
all of the remaining properties. The decrease in operating expense is due to
decreases in insurance, common area expenses, and advertising. Advertising
expense declined due to a reduction in advertising due to improved occupancy at
the commercial properties. The decrease in insurance expense is due to a change
in insurance carriers which resulted in new policies with lower premiums. The
decrease in common area expenses is due to parking lot repairs performed at
Wakonda in 1998. The decrease in general and administrative expenses is due to
a decline in general partner reimbursements relating to Whispering Pines which
was sold in 1998. The increase in depreciation expense is due to property
improvements and replacements placed into service at the remaining properties
over the last twelve months.
Included in general and administrative expenses at both September 30, 1999 and
1998, are management reimbursements to the General Partner allowed under the
Partnership Agreement. In addition, costs associated with the quarterly and
annual communications with investors and regulatory agencies and the annual
audit required by the Partnership Agreement are also included.
As part of the ongoing business plan of the Partnership, the General Partner
monitors the rental market environment of its investment properties to assess
the feasibility of increasing rents, maintaining or increasing occupancy levels
and protecting the Partnership from increases in expense. As part of this plan,
the General Partner attempts to protect the Partnership from the burden of
inflation-related increases in expenses by increasing rents and maintaining a
high overall occupancy level. However, due to changing market conditions, which
can result in the use of rental concessions and rental reductions to offset
softening market conditions, there is no guarantee that the General Partner will
be able to sustain such a plan.
Liquidity and Capital Resources
At September 30, 1999, the Partnership had cash and cash equivalents of
approximately $1,852,000 versus approximately $4,525,000 at September 30, 1998.
For the nine months ended September 30, 1999, cash decreased by approximately
$3,066,000 from the Partnership's year ended December 31, 1998. The decrease in
cash and cash equivalents is due to approximately $12,650,000 of cash used in
financing activities offset by approximately $8,720,000 of cash provided by
investing activities and approximately $864,000 of cash provided by operating
activities. Cash used in financing activities consisted primarily of the
repayments of the mortgages encumbering Mesa Dunes Mobile Home Park and Casa
Granada Apartments mortgages, distributions paid to the partners, payments on
mortgages encumbering the remaining properties, a prepayment penalty on the
repayment of the Mesa Dunes mortgage and loan costs paid on the Casa Granada
refinancing. This was partially offset by the proceeds from the Casa Granada
refinancing. Cash provided by investing activities consisted primarily of the
proceeds from the sale of Mesa Dunes in the first quarter of 1999, which was
partially offset by property improvements and replacements, net deposits to
restricted escrows maintained by the mortgage lenders, and lease commissions.
The Registrant invests its working capital reserves in money market accounts.
On February 19, 1999, the Partnership sold Mesa Dunes Mobile Home Park to an
unaffiliated third party for distributable net sales proceeds of approximately
$2,080,000 after payoff of the first and second mortgages and payment of closing
costs. The Partnership realized a gain of approximately $1,783,000 on the sale
during the first quarter of 1999. The Partnership also realized a loss on the
early extinguishment of debt encumbering the property of approximately
$1,011,000 during the first quarter of 1999 consisting of a prepayment penalty
and the write off of unamortized loan costs and mortgage discount.
On July 16, 1998, the Partnership sold Whispering Pines Mobile Home Park to an
unaffiliated third party for net sales proceeds of approximately $1,935,000
after payoff of the first and second mortgages and payment of closing costs.
The Partnership realized a gain of approximately $2,995,000 on the sale during
the third quarter of 1998. The Partnership also realized a loss on the early
extinguishment of debt encumbering Whispering Pines Mobile Home Park of
approximately $229,000 during the third quarter of 1998 consisting of the write
off of unamoritized loan costs and mortgage discount.
On September 30, 1999, the Partnership refinanced the mortgage encumbering Casa
Granada Apartments. Interest on the new mortgage is 7.65%. Interest on the old
mortgage was 10.07%. The refinancing replaced indebtedness of approximately
$1,279,000, including accrued interest of approximately $11,000, with a new
mortgage in the amount of $1,413,000. Payments of approximately $12,000 are due
on the first day of each month until the loan matures on October 1, 2019. The
prior note matured in September 1999.
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 properties to adequately maintain the physical
assets and other operating needs of the Registrant and to comply with Federal,
state, and local legal and regulatory requirements. Capital improvements for
each of the Partnership's properties are detailed below.
Town and Country Shopping Center
During the nine months ended September 30, 1999, the Partnership completed
approximately $4,000 of capital improvements at Town and Country Shopping Center
consisting of tenant improvements. These improvements were funded from cash flow
from operations. Based on a report received from an independent third party
consultant analyzing necessary exterior improvements and estimates made by the
Managing General Partner on interior improvements, it is estimated that the
property requires approximately $1,308,000 of capital improvements over the next
few years. The Partnership has budgeted, but is not limited to, capital
improvements of approximately $1,308,000 for 1999, which include certain of the
required improvements and consist of tenant improvements.
Wakonda Shopping Center
During the nine months ended September 30, 1999, the Partnership completed
approximately $25,000 of capital improvements at Wakonda Shopping Center
consisting of tenant improvements and HVAC units. These improvements were
funded from cash flow from operations. Based on a report received from an
independent third party consultant analyzing necessary exterior improvements and
estimates made by the General Partner on interior improvements, it is estimated
that the property requires approximately $326,000 of capital improvements over
the next few years. The Partnership has budgeted, but is not limited to, capital
improvements of approximately $38,000 for 1999, which include certain of the
required improvements and consist of tenant improvements and building
improvements.
Homestead Apartments
During the nine months ended September 30, 1999, the Partnership completed
approximately $57,000 of capital improvements at Homestead Apartments consisting
primarily of roof replacements, and land improvements. These improvements were
funded from cash flow from operations. Based on a report received from an
independent third party consultant analyzing necessary exterior improvements and
estimates made by the General Partner on interior improvements, it is estimated
that the property requires approximately $183,000 of capital improvements over
the next few years. The Partnership has budgeted, but is not limited to,
capital improvements of approximately $183,000 for 1999, which include certain
of the required improvements and consist of tenant improvements and building
improvements.
Casa Granada Apartments
During the nine months ended September 30, 1999, the Partnership completed
approximately $36,000 of capital improvements at Casa Granada Apartments
primarily consisting of floor covering replacements and appliances. These
improvements were funded from replacement reserves and cash flow from
operations. Based on a report received from an independent third party
consultant analyzing necessary exterior improvements and estimates made by the
General Partner on interior improvements, it is estimated that the property
requires approximately $429,000 of capital improvements over the next few years.
The Partnership has budgeted, but is not limited to, capital improvements of
approximately $429,000 for 1999, which include certain of the required
improvements and consist of interior and exterior building improvements.
Lazy Hollow Apartments
During the nine months ended September 30, 1999, the Partnership completed
approximately $388,000 of capital improvements at Lazy Hollow Apartments
consisting of HVAC replacements and floor covering replacements. These
improvements were funded from cash flow from operations. Based on a report
received from an independent third party consultant analyzing necessary exterior
improvements and estimates made by the General Partner on interior improvements,
it is estimated that the property requires approximately $444,000 of capital
improvements over the next few years. The Partnership has budgeted, but is not
limited to, capital improvements of approximately $586,000 for 1999, which
include certain of the required improvements and consist of interior and
exterior building improvements.
Mesa Dunes Mobile Home Park
Before the sale of this property, the Partnership completed approximately $1,000
of capital improvements consisting primarily of building improvements.
The additional capital expenditures will be incurred only if cash is available
from operations or from Partnership reserves. To the extent that such budgeted
capital improvements are completed, the Registrant's distributable cash flow, if
any, may be adversely affected at least in the short term.
The Partnership's current assets are thought to be sufficient for any near-term
needs (exclusive of capital improvements) of the Partnership. At September 30,
1999, the mortgage indebtedness of approximately $11,783,000 has maturity dates
ranging from October 2003 to October 2019. The General Partner will attempt to
refinance such remaining indebtedness and/or sell the properties prior to such
maturity dates. If the properties cannot be refinanced or sold for a sufficient
amount, the Partnership will risk losing such properties through foreclosure.
During the nine months ended September 30, 1999, the Partnership declared and
paid a distribution of approximately $285,000 payable to the General Partner in
connection with the sale of Mesa Dunes Mobile Home Park. However, this fee is
subordinate to the limited partners receiving a preferred return, as specified
in the partnership agreement. If the limited partners have not received their
preferred return when the Partnership terminates, the General Partner will
return these amounts to the Partnership. In addition, the Partnership
distributed approximately $4,016,000 (approximately $3,976,000 to the limited
partners or $84.04 per limited partnership unit) from the Mesa Dunes Mobile Home
Park and Whispering Pines Mobile Home Park sale proceeds and approximately
$1,084,000 (approximately $1,073,000 to the limited partners or $22.68 per
limited partnership unit) from operations during the nine months ended September
30, 1999. No distributions were paid during the nine months ended September 30,
1998. The Partnership's distribution policy is reviewed on a semi-annual basis.
Future cash distributions will depend on the levels of net cash generated from
operations, the availability of cash reserves, and the timing of debt
maturities, refinancings, and/or property sales. There can be no assurance,
however, that the Partnership will generate sufficient funds from operations
after required capital expenditures to permit any further distributions to its
partners during the remainder of 1999 or subsequent periods.
Tender Offer
On May 13, 1999, AIMCO Properties, L.P., an affiliate of the General Partner
commenced a tender offer to purchase up to 18,928.89 (approximately 40.01% of
the total outstanding units) units of the limited partnership interest in the
Partnership for a purchase price of $318 per unit. The offer expired on July
30, 1999. Pursuant to the offer, AIMCO Properties, L.P. acquired 3,226 units.
As a result, AIMCO and its affiliates currently own 9,242.00 units of limited
partnership interest in the Partnership representing approximately 19.53% of the
total outstanding units. It is possible that AIMCO or its affiliate will make
one or more additional offers to acquire additional limited partnership
interests in the Partnership for cash or in exchange for units in the operating
partnership of AIMCO (see "Item 1. Financial Statements, Note H - Legal
Proceedings").
Year 2000 Compliance
General Description of the Year 2000 Issue and the Nature and Effects of the
Year 2000 on Information Technology (IT) and Non-IT Systems
The Year 2000 issue is the result of computer programs being written using two
digits rather than four digits to define the applicable year. The Partnership
is dependent upon the General Partner and its affiliates for management and
administrative services ("Managing Agent"). Any of the computer programs or
hardware that have date-sensitive software or embedded chips may recognize a
date using "00" as the year 1900 rather than the year 2000. This could result
in a system failure or miscalculations causing disruptions of operations,
including, among other things, a temporary inability to process transactions,
send invoices, or engage in similar normal business activities.
Over the past two years, the Managing Agent has determined that it will be
required to modify or replace significant portions of its software and certain
hardware so that those systems will properly utilize dates beyond December 31,
1999. The Managing Agent presently believes that with modifications or
replacements of existing software and certain hardware, the Year 2000 issue can
be mitigated. However, if such modifications and replacements are not made, or
not completed in time, the Year 2000 issue could have a material impact on the
operations of the Partnership.
The Managing Agent's plan to resolve Year 2000 issues involves four phases:
assessment, remediation, testing, and implementation. To date, the Managing
Agent has fully completed its assessment of all the information systems that
could be significantly affected by the Year 2000, and has begun the remediation,
testing and implementation phases on both hardware and software systems.
Assessments are continuing in regards to embedded systems. The status of each
is detailed below.
Status of Progress in Becoming Year 2000 Compliant, Including Timetable for
Completion of Each Remaining Phase
Computer Hardware:
During 1997 and 1998, the Managing Agent identified all of the computer systems
at risk and formulated a plan to repair or replace each of the affected systems.
In August 1998, the main computer system used by the Managing Agent became fully
functional. In addition to the main computer system, PC-based network servers,
routers and desktop PCs were analyzed for compliance. The Managing Agent has
begun to replace each of the non-compliant network connections and desktop PCs
and, as of September 30, 1999, had virtually completed this effort.
The total cost to the Managing Agent to replace the PC-based network servers,
routers and desktop PCs is expected to be approximately $1.5 million of which
$1.3 million has been incurred to date.
Computer Software:
The Managing Agent utilizes a combination of off-the-shelf, commercially
available software programs as well as custom-written programs that are designed
to fit specific needs. Both of these types of programs were studied, and
implementation plans written and executed with the intent of repairing or
replacing any non-compliant software programs.
In April 1999 the Managing Agent embarked on a data center consolidation project
that unifies its core financial systems under its Year 2000 compliant system.
The estimated completion date for this project is October 1999.
During 1998, the Managing agent began converting the existing property
management and rent collection systems to its management properties Year 2000
compliant systems. The estimated additional costs to convert such systems at
all properties, is $200,000, and the implementation and testing process was
completed in June 1999.
The final software area is the office software and server operating systems.
The Managing Agent has upgraded all non-compliant office software systems on
each PC and has upgraded virtually all of the server operating systems.
Operating Equipment:
The Managing Agent has operating equipment, primarily at the property sites,
which needed to be evaluated for Year 2000 compliance. In September 1997, the
Managing Agent began taking a census and inventory of embedded systems
(including those devices that use time to control systems and machines at
specific properties, for example elevators, heating, ventilating, and air
conditioning systems, security and alarm systems, etc.).
The Managing Agent has chosen to focus its attention mainly upon security
systems, elevators, heating, ventilating and air conditioning systems, telephone
systems and switches, and sprinkler systems. While this area is the most
difficult to fully research adequately, management has not yet found any major
non-compliance issues that put the Managing Agent at risk financially or
operationally.
A pre-assessment of the properties by the Managing Agent has indicated virtually
no Year 2000 issues. A complete, formal assessment of all the properties by the
Managing Agent was virtually completed by September 30, 1999. Any operating
equipment that is found non-compliant will be repaired or replaced.
The total cost incurred for all properties managed by the Managing Agent as of
September 30, 1999 to replace or repair the operating equipment was
approximately $75,000. The Managing Agent estimates the cost to replace or
repair any remaining operating equipment is approximately $125,000.
The Managing Agent continues to have "awareness campaigns" throughout the
organization designed to raise awareness and report any possible compliance
issues regarding operating equipment within its enterprise.
Nature and Level of Importance of Third Parties and Their Exposure to the Year
2000
The Managing Agent has banking relationships with three major financial
institutions, all of which have designated their compliance. The Managing Agent
has updated data transmission standards with all of the financial institutions.
All financial institutions have communicated that they are Year 2000 compliant
and accordingly no accounts were required to be moved from the existing
financial institutions.
The Partnership does not rely heavily on any single vendor for goods and
services, and does not have significant suppliers and subcontractors who share
information systems (external agent). To date, the Partnership is not aware of
any external agent with a Year 2000 compliance issue that would materially
impact the Partnership's results of operations, liquidity, or capital resources.
However, the Partnership has no means of ensuring that external agents will be
Year 2000 compliant.
The Managing Agent does not believe that the inability of external agents to
complete their Year 2000 remediation process in a timely manner will have a
material impact on the financial position or results of operations of the
Partnership. However, the effect of non-compliance by external agents is not
readily determinable.
Costs to Address Year 2000
The total cost of the Year 2000 project to the Managing Agent is estimated at
$3.5 million and is being funded from operating cash flows. To date, the
Managing Agent has incurred approximately $2.9 million ($0.7 million expenses
and $2.2 million capitalized for new systems and equipment) related to all
phases of the Year 2000 project. Of the total remaining project costs,
approximately $0.5 million is attributable to the purchase of new software and
operating equipment, which will be capitalized. The remaining $0.2 million
relates to repair of hardware and software and will be expensed as incurred.
The Partnership's portion of these costs are not material.
Risks Associated with the Year 2000
The Managing Agent believes it has an effective program in place to resolve the
Year 2000 issue in a timely manner. As noted above, the Managing Agent has not
yet completed all necessary phases of the Year 2000 program. In the event that
the Managing Agent does not complete any additional phases, certain worst case
scenarios could occur. The worst case scenarios could include elevators,
security and heating, ventilating and air conditioning systems that read
incorrect dates and operate with incorrect schedules (e.g., elevators will
operate on Monday as if it were Sunday). Although such a change would be
annoying to residents, it is not business critical.
In addition, disruptions in the economy generally resulting from Year 2000
issues could also adversely affect the Partnership. The Partnership could be
subject to litigation for, among other things, computer system failures,
equipment shutdowns or failure to properly date business records. The amount of
potential liability and lost revenue cannot be reasonably estimated at this
time.
Contingency Plans Associated with the Year 2000
The Managing Agent has contingency plans for certain critical applications and
is working on such plans for others. These contingency plans involve, among
other actions, manual workarounds and selecting new relationships for such
activities as banking relationships and elevator operating systems.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEDINGS
In March 1998, several putative unit holders of limited partnership units of the
Partnership commenced an action entitled ROSALIE NUANES, ET AL. V. INSIGNIA
FINANCIAL GROUP, INC., ET AL. in the Superior Court of the State of California
for the County of San Mateo. The plaintiffs named as defendants, among others,
the Partnership, the General Partner and several of their affiliated
partnerships and corporate entities. The complaint purports to assert claims on
behalf of a class of limited partners and derivatively on behalf of a number of
limited partnerships (including the Partnership) which are named as nominal
defendants, challenging the acquisition by Insignia Financial Group, Inc.
("Insignia") and entities which were, at one time, affiliates of Insignia
("Insignia Affiliates") of interests in certain general partner entities, past
tender offers by Insignia Affiliates to acquire limited partnership units, the
management of partnerships by Insignia Affiliates and the Insignia Merger (see
"Part I - Financial Information, Item 1. Financial Statements, Note B - Transfer
of Control"). The complaint seeks monetary damages and equitable relief,
including judicial dissolution of the Partnership. On June 25, 1998, the
General Partner filed a motion seeking dismissal of the action. In lieu of
responding to the motion, the plaintiffs have filed an amended complaint. The
General Partner filed demurrers to the amended complaint which were heard
February 1999. Pending the ruling on such demurrers, settlement negotiations
commenced. On November 2, 1999, the parties executed and filed a Stipulation of
Settlement ("Stipulation"), settling claims, subject to final court approval, on
behalf of the Partnership and all limited partners who own units as of November
3, 1999. The Court has preliminarily approved the Settlement and scheduled a
final approval hearing for December 10, 1999. In exchange for a release of all
claims, the Stipulation provides that, among other things, an affiliate of the
General Partner will make tender offers for all outstanding limited partnership
interests in 49 partnerships, including the Registrant, subject to the terms and
conditions set forth in the Stipulation, and has agreed to establish a reserve
to pay an additional amount in settlement to qualifying class members (the
"Settlement Fund"). At the final approval hearing, Plaintiffs' counsel will
make an application for attorneys' fees and reimbursement of expenses, to be
paid in part by the partnerships and in part from the Settlement Fund. The
General Partner does not anticipate that costs associated with this case will be
material to the Partnership's overall operations.
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 September 30, 1999.
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/Patrick J. Foye
Patrick J. Foye
Executive Vice President
By: /s/Martha L. Long
Martha L. Long
Senior Vice President
and Controller
Date:
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from Angeles
Income Properties, Ltd. 6 1999 Third 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> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> SEP-30-1999
<CASH> 1,852
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0<F1>
<PP&E> 23,463
<DEPRECIATION> 7,751
<TOTAL-ASSETS> 19,153
<CURRENT-LIABILITIES> 0<F1>
<BONDS> 11,183
0
0
<COMMON> 0
<OTHER-SE> 6,339
<TOTAL-LIABILITY-AND-EQUITY> 19,153
<SALES> 0
<TOTAL-REVENUES> 6,205
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 3,669
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 819
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> (1,011)
<CHANGES> 0
<NET-INCOME> 1,525
<EPS-BASIC> 25.96<F2>
<EPS-DILUTED> 0
<FN>
<F1>Registrant has an unclassified balance sheet.
<F2>Multiplier is 1.
</FN>
</TABLE>
