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, 2000
[ ] 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, 2000
<TABLE>
<CAPTION>
Assets
<S> <C> <C>
Cash and cash equivalents $ 2,522
Receivables and deposits 289
Restricted escrows 83
Other assets 190
Investment properties:
Land $ 1,398
Buildings and related personal property 11,932
13,330
Less accumulated depreciation (5,211) 8,119
$11,203
Liabilities and Partners' (deficit) capital
Liabilities
Accounts payable $ 209
Tenant security deposit liabilities 51
Accrued property taxes 16
Other liabilities 112
Mortgage notes payable 6,927
Partners' (deficit) capital
General partner $ (48)
Limited partners (47,311 units issued and
outstanding) 3,936 3,888
$11,203
See Accompanying Notes to Consolidated Financial Statements
</TABLE>
<PAGE>
b)
ANGELES INCOME PROPERTIES, LTD. 6
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(in thousands, except unit data)
<TABLE>
<CAPTION>
Three Months Nine Months
Ended September 30, Ended September 30,
2000 1999 2000 1999
(Restated) (Restated)
Revenues:
<S> <C> <C> <C> <C>
Rental income $ 872 $ 818 $ 2,620 $ 2,714
Other income 96 59 200 258
Gain on sale of investment property -- -- -- 1,783
Total revenues 968 877 2,820 4,755
Expenses:
Operating 336 383 1,084 1,127
General and administrative 53 84 202 239
Depreciation 139 122 435 387
Interest 162 170 488 594
Property tax 77 81 288 241
Loss on sale of investment property 284 -- 284 --
Total expenses 1,051 840 2,781 2,588
(Loss) income before (loss) from
discontinued operations, loss on sale of
discontinued operations, and loss on
early extinguishment of debt (83) 37 39 2,167
(Loss) income from discontinued
operations (33) 101 (71) 369
Loss on sale of discontinued operations -- -- (344) --
Loss on early extinguishment of debt (110) -- (110) (1,011)
Net (loss) income $ (226) $ 138 $ (486) $ 1,525
Net (loss) income allocated to
general partner $ (3) $ 1 $ 81 $ 297
Net (loss) income allocated to
limited partners (223) 137 (567) 1,228
Net (loss) income $ (226) $ 138 $ (486) $ 1,525
Per limited partnership unit:
(Loss) income before discontinued
operations, loss on sale of discontinued
operations, and loss on early
extinguishment of debt $ (1.74) $ .79 $ .82 $ 39.41
(Loss) income from discontinued
operations (0.67) 2.11 (1.46) 7.71
Loss on sale of discontinued operations -- -- (9.04) --
Loss on early extinguishment of debt (2.30) -- (2.30) (21.16)
Net (loss) income per limited
partnership unit $ (4.71) $ 2.90 $(11.98) $ 25.96
Distributions per limited partnership unit $ -- $106.72 $ 36.61 $106.72
See Accompanying Notes to Consolidated Financial Statements
</TABLE>
<PAGE>
c)
ANGELES INCOME PROPERTIES, LTD. 6
CONSOLIDATED STATEMENT OF CHANGES IN PARTNERS' (DEFICIT) CAPITAL
(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' capital at
December 31, 1999 47,311 $ 63 $ 6,235 $ 6,298
Distribution to partners -- (192) (1,732) (1,924)
Net income (loss) for the nine
months ended September 30, 2000 -- 81 (567) (486)
Partners' (deficit) capital at
September 30, 2000 47,311 $ (48) $ 3,936 $ 3,888
See Accompanying Notes to Consolidated Financial Statements
</TABLE>
<PAGE>
d)
ANGELES INCOME PROPERTIES, LTD. 6
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
2000 1999
Cash flows from operating activities:
<S> <C> <C>
Net (loss) income $ (486) $ 1,525
Adjustments to reconcile net (loss) income to net cash
provided by operating activities:
Depreciation 581 650
Amortization of loan costs and leasing commissions 30 52
Loss (gain) on sale of investment property 628 (1,783)
Extraordinary loss on early extinguishment of debt 110 1,011
Change in accounts:
Receivables and deposits 396 23
Other assets 93 (156)
Accounts payable 37 22
Tenant security deposit liabilities (46) --
Accrued property taxes (309) (30)
Other liabilities (150) (450)
Net cash provided by operating activities 884 864
Cash flows from investing activities:
Property improvements and replacements (372) (511)
Net withdrawals from (deposits to) restricted escrows 162 (54)
Proceeds from sale of investment properties 5,711 9,292
Lease commissions paid (4) (7)
Net cash provided by investing activities 5,497 8,720
Cash flows from financing activities:
Distributions to partners (1,924) (5,385)
Payments on mortgage notes payable (129) (143)
Repayment of mortgage notes payable (3,298) (7,702)
Prepayment penalty -- (787)
Loan costs paid -- (46)
Proceeds from long term borrowing -- 1,413
Net cash used in financing activities (5,351) (12,650)
Net increase (decrease) in cash and cash equivalents 1,030 (3,066)
Cash and cash equivalents at beginning of period 1,492 4,918
Cash and cash equivalents at end of period $ 2,522 $ 1,852
Supplemental disclosure of cash flow information:
Cash paid for interest $ 631 $ 826
At December 31, 1999, approximately $95,000 of property improvements and
replacements were included in accounts payable.
See Accompanying Notes to Consolidated Financial Statements
</TABLE>
<PAGE>
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, 2000,
are not necessarily indicative of the results that may be expected for the year
ending December 31, 2000. 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 year ended December 31, 1999.
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 1999 information to conform to
the 2000 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 has had or 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 (i) certain payments to affiliates for
services and (ii) reimbursement of certain expenses incurred by affiliates on
behalf of the Partnership.
<PAGE>
The following payments were paid to the General Partner and its affiliates
during the nine month period ended September 30, 2000 and 1999:
2000 1999
(in thousands)
Property management fees (included in operating
expense) $137 $143
Reimbursement for services of affiliates
(included in investment properties and general
and administrative expense) 111 132
During the nine months ended September 30, 2000 and 1999, 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 $137,000 and $143,000 for
the nine months ended September 30, 2000 and 1999, respectively.
An affiliate of the General Partner received reimbursement of accountable
administrative expenses amounting to approximately $111,000 and $132,000 for the
nine months ended September 30, 2000 and 1999, 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 to the General Partner related to the sale of Mesa Dunes Mobile Home
Park. During the nine months ended September 30, 2000, the Partnership paid a
distribution of approximately $174,000 to the General Partner related to the
sale of Wakonda Shopping Center and Town and Country Shopping Center. 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 any such amounts paid from the Partnership.
In addition to its indirect ownership of the general partner interest in the
Partnership, AIMCO and its affiliates currently own 17,705 limited partnership
units in the Partnership representing 37.42% of the outstanding units. A number
of these units were acquired pursuant to tender offers made by AIMCO or its
affiliates. 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. Under the Partnership Agreement, unitholders holding a majority of the
Units are entitled to take action with respect to a variety of matters, which
would include without limitation, voting on certain amendments to the
Partnership Agreement and voting to remove the General Partner. When voting on
matters, AIMCO would in all likelihood vote the Units it acquired in a manner
favorable to the interest of the General Partner because of their affiliation
with the General Partner.
<PAGE>
The Partnership had a first mortgage to Angeles Mortgage Investment Trust
("AMIT") which was 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 repaid this
note in full as a result of the sale of these two properties during the nine
months ended September 30, 2000. The Partnership paid approximately $121,000 and
$225,000 in interest expense on this note to AMIT for each of the nine months
ended September 30, 2000 and 1999, respectively.
Note D - Sale of Investment Properties
On September 21, 2000, the Partnership sold Casa Granada Apartments, to an
unaffiliated third party, for net proceeds of approximately $408,000 after
payment of closing costs and the assumption of $1,384,000 in debt by the
purchaser. The Partnership realized a loss of approximately $284,000 on the sale
during the third quarter of 2000. In addition, the Partnership recorded loss on
early extinguishment of debt of approximately $110,000 as a result of
unamortized loan costs being written off.
The following unaudited pro forma information reflects the operations of the
Partnership for the nine months ended September 30, 2000 and 1999, as if Casa
Granada had been sold on January 1, 1999 (in thousands):
2000 1999
Revenues $ 2,402 $ 4,311
Expenses 2,069 2,196
(Loss) income from discontinued
operations (71) 369
Loss on sale of discontinued operations (344) --
Loss on early extinguishment of debt -- (1,011)
Net income $ (82) $ 1,473
Net income per Limited Partnership Unit $ (1.73) $ 31.13
These pro forma adjustments are not necessarily reflective of the results that
actually would have occurred if the sale had been in effect as of the periods
presented or what may be achieved in the future.
On February 19, 1999, the Partnership sold Mesa Dunes Mobile Home Park to an
unaffiliated third party for net sales proceeds of approximately $9,292,000
after payment of closing costs. A portion of the proceeds were used to pay off
the mortgage encumbering the investment property of approximately $6,423,000.
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.
Note E - Disposition of Discontinued Operations
During the nine months ended September 30, 2000, the Partnership sold Wakonda
Shopping Center and Town & Country Shopping Center to an unaffiliated third
party for approximately $5,800,000. After payoff of the first mortgage and
payment of closing costs the distributable net proceeds were approximately
$2,006,000. The Partnership recorded a loss of approximately $344,000 on the
sale during the second quarter of 2000.
Wakonda Shopping Center and Town & Country Shopping Center were the only
commercial properties owned by the Partnership and represented one segment of
the Partnership's operations. Due to the sale of the two commercial properties
in 2000, the results of the commercial segment have been shown as (loss) income
from discontinued operations and loss on sale of discontinued operations for the
three and nine months ended September 30, 2000 and 1999. Accordingly, the 1999
consolidated statement of operations has been restated to reflect this
presentation. The revenues of these properties for the nine months ended
September 30, 2000 were approximately $517,000, as compared to approximately
$1,450,000 for the nine months ended September 30, 1999. Loss from discontinued
operations for the three and nine months ended September 30, 2000 was
approximately $33,000 and $71,000, respectively, compared to income of
approximately $101,000 and $369,000 for the three and nine months ended
September 30, 1999, respectively.
Note F - Distributions
During the nine months ended September 30, 2000, the Partnership distributed
approximately $1,500,000 (approximately $1,485,000 to limited partners or $31.39
per limited partnership unit) from the Town and Country and Wakonda Shopping
Center sale proceeds and approximately $223,000 (approximately $221,000 to
limited partners or $4.67 per limited partnership unit) from operations and
approximately $27,000 (approximately $26,000 to limited partners or $0.55 per
limited partnership unit) from the Casa Granada refinance proceeds. 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
$174,000 and $285,000 to the General Partner representing the disposition fee
relating to the sales of Wakonda and Town and Country Shopping Centers and Mesa
Dunes Mobile Home Park during the nine months ended September 30, 2000 and 1999,
respectively. However, these fees are subordinate to the limited partners
receiving a preferred return, as specified in the Partnership Agreement.
<PAGE>
Subsequent to September 30, 2000 the Partnership declared and paid a
distribution of approximately $1,233,000 to the partners. Of this amount
approximately $807,000 was from operations (approximately $798,000 to limited
partners or $16.87 per limited partnership unit) and approximately $426,000 was
from the sale of Casa Granada Apartments (approximately $422,000 to limited
partners or $8.92 per limited partnership unit).
Note G - Segment Reporting
Description of the types of products and services from which reportable segments
derive their revenues:
The Partnership had two reportable segments: residential and commercial
properties. The Partnership's residential property segment consists of two
apartment complexes, one each in Maryland and Michigan. The Partnership rents
apartment units to tenants for terms that are typically twelve months or less.
The Partnership's commercial property segment consisted of two retail shopping
centers, both located in Iowa which were sold during the nine months ended
September 30, 2000. As a result of the sale of the commercial properties during
2000, the commercial segment is shown as discontinued operations (see "Note E -
Disposition of Discontinued Operations" for further discussion regarding the
sales).
Measurement of segment profit or loss:
The Partnership evaluates performance based on segment profit (loss) before
depreciation. 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, 1999.
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 three and nine month periods ended September 30,
2000 and 1999, 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.
<PAGE>
<TABLE>
<CAPTION>
Three Months Ended
September 30, 2000 Residential Commercial Other Totals
(discontinued)
<S> <C> <C> <C> <C>
Rental income $ 872 $ -- $ -- $ 872
Other income 79 -- 17 96
Interest expense 162 -- -- 162
Depreciation 139 -- -- 139
General and administrative
expense -- -- 53 53
Loss from discontinued
operations -- (33) -- (33)
Loss on sale of investment
property (284) -- -- (284)
Loss on early extinguishment
of debt (110) -- -- (110)
Segment loss (157) (33) (36) (226)
</TABLE>
<TABLE>
<CAPTION>
Nine Months Ended
September 30, 2000 Residential Commercial Other Totals
(discontinued)
<S> <C> <C> <C> <C>
Rental income $ 2,620 $ -- $ -- $ 2,620
Other income 172 -- 28 200
Interest expense 488 -- -- 488
Depreciation 435 -- -- 435
General and administrative
expense -- -- 202 202
Loss from discontinued
operations -- (71) -- (71)
Loss on sale of discontinued
operations -- (344) -- (344)
Loss on sale of investment
property (284) -- -- (284)
Loss on early extinguishment
of debt (110) -- -- (110)
Segment profit (loss) 103 (415) (174) (486)
Total assets 9,625 -- 1,578 11,203
Capital expenditures 268 9 -- 277
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Three Months Ended
September 30, 1999 Residential Commercial Other Totals
(discontinued)
<S> <C> <C> <C> <C>
Rental income $ 818 $ -- $ -- $ 818
Other income 39 -- 20 59
Interest expense 170 -- -- 170
Depreciation 122 -- -- 122
General and administrative
expense -- -- 84 84
Income from discontinued
operations -- 101 -- 101
Segment profit (loss) 101 101 (64) 138
</TABLE>
<TABLE>
<CAPTION>
Nine Months Ended
September 30, 1999 Residential Commercial Other Totals
(discontinued)
<S> <C> <C> <C> <C>
Rental income $ 2,714 $ -- $ -- $ 2,714
Other income 190 -- 68 258
Interest expense 594 -- -- 594
Depreciation 387 -- -- 387
General and administrative
expense -- -- 239 239
Gain on sale of investment
property 1,783 -- -- 1,783
Loss on early extinguishment
of debt (1,011) -- -- (1,011)
Income from discontinued
operations -- 369 -- 369
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
</TABLE>
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, its General Partner and several of their affiliated
partnerships and corporate entities. The action 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 of interests in certain general partner
entities by Insignia Financial Group, Inc. and entities which were, at one time,
affiliates of Insignia; past tender offers by the Insignia affiliates to acquire
limited partnership units; the management of partnerships by the Insignia
affiliates; and the Insignia Merger. The plaintiffs seek 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,
settling claims, subject to final court approval, on behalf of the Partnership
and all limited partners who owned units as of November 3, 1999. Preliminary
approval of the settlement was obtained on November 3, 1999 from the Court, at
which time the Court set a final approval hearing for December 10, 1999. Prior
to the December 10, 1999 hearing, the Court received various objections to the
settlement, including a challenge to the Court's preliminary approval based upon
the alleged lack of authority of prior lead counsel to enter the settlement. On
December 14, 1999, the General Partner and its affiliates terminated the
proposed settlement. In February 2000, counsel for some of the named plaintiffs
filed a motion to disqualify plaintiff's lead and liaison counsel who negotiated
the settlement. On June 27, 2000, the Court entered an order disqualifying them
from the case. The Court is considering applications for lead counsel and has
currently scheduled a hearing on the matter for November 20, 2000. 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.
<PAGE>
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 three apartment complexes.
The following table sets forth the average occupancy of the properties for the
nine months ended September 30, 2000 and 1999:
Average Occupancy
Property 2000 1999
Lazy Hollow Apartments 98% 97%
Columbia, Maryland
Homestead Apartments (1) 93% 93%
East Lansing, Michigan
Results from Operations
The Partnership realized a net loss of approximately $486,000 compared to net
income of approximately $1,525,000 for the nine months ended September 30, 2000
and 1999, respectively. The Partnership realized a net loss of approximately
$226,000 compared to net income of approximately $138,000 for the three months
ended September 30, 2000 and 1999, respectively. The decrease in net income for
the nine months ended September 30, 2000 is due primarily to the gain of
approximately $1,783,000 realized on the sale of Mesa Dunes Mobile Home Park in
February 1999 partially offset by the loss of approximately $1,011,000 on the
early extinguishment of debt encumbering the Mesa Dunes Mobile Home Park during
the first quarter of 1999, and a loss of approximately $628,000 on the sale of
Town and Country Shopping Center, Wakonda Shopping Center, and Casa Granada
Apartments during the nine months ended September 30, 2000. See "Part I -
Financial Information, Item 1. Financial Statements, Note D - Sale of Investment
Property" and "Note E - Disposition of Discontinued Operations" for a discussion
of the Mesa Dunes Mobile Home Park, Town and Country Shopping Center, and
Wakonda Shopping Center, and Casa Granada Apartments property sales.
Excluding the operations of Mesa Dunes, Town and Country, and Wakonda Shopping
Center and the related gain/loss on the sale of the investment properties,
income from continuing operations was approximately $323,000 and $384,000 for
the nine months and approximately $201,000 and $37,000 for the three months
ended September 30, 2000 and 1999, respectively. The decrease in net income at
the Partnership's residential properties for the nine months ended September 30,
2000 is primarily due to a decrease in total revenue partially offset by a
decrease in total expenses. Total expenses decreased due to decreases in
operating, interest and general and administrative expenses partially offset by
increases in depreciation and property tax expenses. Operating expenses
decreased due to decreases in maintenance expenses at Homestead Apartments and
Lazy Hollow Apartments and due to a decrease in advertising expense at Lazy
Hollow Apartments, offset by increases in courtesy patrol and health insurance
costs at Homestead Apartments. Interest expense decreased as a result of
scheduled principal payments made on the Partnership's remaining two properties
in addition to the decrease in mortgages as a result of property sales.
Depreciation expense increased due to fixed asset additions over the past twelve
months. Property tax expense increased as a result of an increase in the
assessed value of Homestead Apartments.
Total revenues decreased for the nine months ended September 30, 2000 due to
decreases in rental revenue and other income. Rental revenue decreased due to
the sale of Mesa Dunes in the prior year and due to the sale of Casa Granada in
September 2000. Excluding these sales rental revenue actually increased due to
an increase in rental rates at both Homestead and Lazy Hollow Apartments. Other
income decreased as a result of lower interest income which declined during the
period ended September 30, 2000 as a result of lower cash balances held in
interest bearing accounts.
The increase in net income for the three months ended September 30, 2000 is
primarily due to an increase in total revenue and a decrease in total expenses.
Rental income increased due to an increase in the average rental rates at the
Partnership's remaining investment properties. Other income increased as a
result of an increase in lease cancellation fees and pet fees. Total expenses
decreased as a result of a decrease in operating expense, as discussed above,
and general and administrative expenses.
General and administrative expenses decreased for the three and nine months
ended September 30, 2000 and 1999 due to a decrease in management reimbursements
to the General Partner allowed under the Partnership Agreement. Included in
general and administrative expenses at both September 30, 2000 and 1999, 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, 2000, the Partnership had cash and cash equivalents of
approximately $2,522,000 versus approximately $1,852,000 at September 30, 1999.
For the nine months ended September 30, 2000, cash increased by approximately
$1,030,000 from the Partnership's year ended December 31, 1999. The increase in
cash and cash equivalents is due to approximately $884,000 of cash provided by
operating activities and approximately $5,497,000 of cash provided by investing
activities partially offset by approximately $5,351,000 of cash used in
financing activities. Cash provided by investing activities consisted of
proceeds from the sale of investment properties and net withdrawals from
restricted escrows maintained by the mortgage lenders partially offset by
property improvements and replacements and lease commissions paid. Cash used in
financing activities consisted of repayment of mortgage notes payable, mortgage
principle payments, and distributions to partners. The Registrant invests its
working capital reserves in money market accounts.
During the nine months ended September 30, 2000, the Partnership sold Wakonda
Shopping Center and Town & Country Shopping Center to an unaffiliated third
party for approximately $5,800,000. After payoff of the first mortgage and
payment of closing costs the distributable net proceeds were approximately
$2,006,000. The Partnership recorded a loss of approximately $344,000 on the
sale for the nine months ended September 30, 2000. Also, during the nine months
ended September 30, 2000, the partnership sold Casa Granda Apartments to an
unaffiliated third party for approximately $1,994,000. After the assumption of
the mortgage encumbering the property by the purchaser and payment of closing
costs the distributable net proceeds were approximately $408,000. The
partnership recorded a loss of $284,000 on the sale during the third quarter of
2000. In addition, the Partnership recorded a loss on early extinguishment of
debt of approximately $110,000 as a result of unamortized loan costs being
written off.
On February 19, 1999, the Partnership sold Mesa Dunes Mobile Home Park to an
unaffiliated third party for net sales proceeds of approximately $9,292,000
after 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.
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.
Lazy Hollow Apartments
The Partnership has budgeted, but is not limited to, capital improvements of
approximately $291,000 for the year 2000, which consist of interior and exterior
building improvements, parking lot improvements, floor covering replacements,
and appliance replacements. During the nine months ended September 30, 2000, the
Partnership completed approximately $118,000 of capital improvements at Lazy
Hollow Apartments consisting of HVAC unit replacements, major landscaping,
parking lot improvements, cabinet and countertop replacements, and floor
covering replacements. These improvements were funded from cash flow from
operations.
Homestead Apartments
The Partnership has budgeted, but is not limited to, capital improvements of
approximately $87,000 for the year 2000, which consist primarily of appliance
replacements, floor covering replacements, and parking lot improvements. During
the nine months ended September 30, 2000, the Partnership completed
approximately $92,000 of budgeted and unbudgeted capital improvements at
Homestead Apartments consisting primarily of floor covering replacements,
parking lot improvements, appliance replacements, and major landscaping. These
improvements were funded from cash flow from operations.
<PAGE>
Casa Granada Apartments
The Partnership had budgeted for capital improvements of approximately $79,000
for the year 2000, to consist of floor covering replacements, air conditioning
unit replacements, appliances, water heaters, and window treatments. During the
nine months ended September 30, 2000, the Partnership completed approximately
$59,000 of capital improvements at Casa Granada Apartments primarily consisting
of exterior painting and building improvements and office equipment. These
improvements were funded from cash flow from operations. The property was sold
on September 21, 2000.
Wakonda Shopping Center
During the nine months ended September 30, 2000, the Partnership completed
approximately $6,000 of capital improvements at Wakonda Shopping Center
consisting of office equipment replacements. These improvements were funded from
cash flow from operations. This property was sold on May 4, 2000.
Town and Country Shopping Center
During the nine months ended September 30, 2000, the Partnership completed
approximately $2,000 of capital improvements at Town and Country Shopping Center
for tenant improvements. These improvements were funded from cash flow from
operations. This property was sold on May 16, 2000.
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,
2000, the mortgage indebtedness of approximately $6,927,000 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, 2000, the Partnership distributed
approximately $1,500,000 (approximately $1,485,000 to limited partners or $31.39
per limited partnership unit) from the Town and Country and Wakonda Shopping
Center sale proceeds and approximately $223,000 (approximately $221,000 to
limited partners or $4.67 per limited partnership unit) from operations and
approximately $27,000 (approximately $26,000 to limited partners or $0.55 per
limited partnership unit) from the Casa Granada refinance proceeds. In addition,
the Partnership paid a distribution of $174,000 and $285,000 to the General
Partner representing the disposition fee relating to the sales of both Wakonda
and Town and Country Shopping Center and Mesa Dunes Mobile Home Park during the
nine months ended September 30, 2000 and 1999, respectively. However, this fee
is subordinate to the limited partners receiving a preferred return, as
specified in the Partnership Agreement. Subsequent to September 30, 2000 the
Partnership declared and paid a distribution of approximately $1,233,000 to the
partners. Of this amount approximately $807,000 was from operations
(approximately $798,000 to limited partners or $16.87 per limited partnership
unit) and approximately $426,000 was from the sale of Casa Granada Apartments
(approximately $422,000 to limited partners or $8.92 per limited partnership
unit). In addition, the General Partner is entitled to a distribution of
approximately $60,000 representing the disposition fee related to the sale of
Casa Granada. 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 2000 or subsequent periods.
<PAGE>
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, its General Partner and several of their affiliated
partnerships and corporate entities. The action 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 of interests in certain general partner
entities by Insignia Financial Group, Inc. and entities which were, at one time,
affiliates of Insignia; past tender offers by the Insignia affiliates to acquire
limited partnership units; the management of partnerships by the Insignia
affiliates; and the Insignia Merger. The plaintiffs seek 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,
settling claims, subject to final court approval, on behalf of the Partnership
and all limited partners who owned units as of November 3, 1999. Preliminary
approval of the settlement was obtained on November 3, 1999 from the Court, at
which time the Court set a final approval hearing for December 10, 1999. Prior
to the December 10, 1999 hearing, the Court received various objections to the
settlement, including a challenge to the Court's preliminary approval based upon
the alleged lack of authority of prior lead counsel to enter the settlement. On
December 14, 1999, the General Partner and its affiliates terminated the
proposed settlement. In February 2000, counsel for some of the named plaintiffs
filed a motion to disqualify plaintiff's lead and liaison counsel who negotiated
the settlement. On June 27, 2000, the Court entered an order disqualifying them
from the case. The Court is considering applications for lead counsel and has
currently scheduled a hearing on the matter for November 20, 2000. The General
Partner does not anticipate that costs associated with this case will be
material to the Partnership's overall operations.
<PAGE>
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, 2000.
<PAGE>
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: November 13, 2000
