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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 (FEE REQUIRED)
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1994
OR
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
For the transition period from __________________ to____________________
Commission File No. 33-21298
ANGELES PARTICIPATING MORTGAGE TRUST
(Exact name of registrant as specified in its charter)
California 95-6881527
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
340 North Westlake Blvd., Suite 230 91362
Westlake Village, California (Zip Code)
(Address of principal executive offices)
Registrant's telephone number, including area code: (805) 449-1335
Securities registered pursuant to Section 12(b) of the Act:
Name of Exchange on
Title of each class: which registered:
-------------------- --------------------
Class A Shares, $1.00 par American Stock Exchange
value Angeles Participating
Mortgage Trust Units
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 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
--- ----
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein and will not be contained, to the best
of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K.
The aggregate market value of the Class A Shares held by non-affiliates on
February 14, 1995 was approximately $1,297,000.
As of February 14, 1995, there were 2,550,000 Shares of Angeles Participating
Mortgage Trust Class A, $1.00 par value outstanding.
Total Pages 27
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TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
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<S> <C>
PART I................................................................................ 3
ITEM 1. BUSINESS...................................................................... 3
Loan Portfolio....................................................................... 4
Unfunded Commitments................................................................. 4
Employees............................................................................ 4
ITEM 2. PROPERTIES.................................................................... 4
ITEM 3. LEGAL PROCEEDINGS............................................................. 5
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS........................... 5
PART II............................................................................... 6
ITEM 5. MARKET FOR THE TRUST'S COMMON EQUITY AND RELATED SECURITY HOLDER MATTERS...... 6
ITEM 6. SELECTED FINANCIAL DATA...................................................... 7
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF... 8
OPERATIONS..................
General.............................................................................. 8
Fiscal year 1994 compared to 1993.................................................... 9
Fiscal year 1993 compared to 1992.................................................... 10
Liquidity and Capital Resources...................................................... 10
ITEM 8. FINANCIAL STATEMENTS.......................................................... 11
ITEM 9. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.......................... 20
PART III.............................................................................. 21
ITEM 10. TRUSTEES AND EXECUTIVE OFFICERS.............................................. 21
ITEM 11. EXECUTIVE COMPENSATION....................................................... 22
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT............... 23
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS............................... 24
PART IV............................................................................... 25
ITEM 14. EXHIBITS, FINANCIAL STATEMENTS AND REPORTS ON FORM 8-K....................... 25
</TABLE>
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PART I
ITEM 1. BUSINESS
Angeles Participating Mortgage Trust ("APART" or the "Trust") is a California
business trust which qualifies as a real estate investment trust or "REIT" for
Federal income tax purposes. The Trust was formed in April 1988. APART's
capital structure consists of Shares of Class A Common Stock ("Class A Shares")
and Class B Common Stock ("Class B Shares"). The Class A Shares are publicly
traded on the American Stock Exchange. Presently, there are 2,550,000 Class A
Shares outstanding and 1,275,000 Class B Shares (which can be converted into
approximately 26,000 Class A Shares) that are owned by SAHI Partners ("SAHI"), a
Delaware general partnership. The currently outstanding Class B Shares are
entitled to a 1% equity interest and a 33% voting interest in the Trust. Each
of the Class A and Class B Shares are entitled to one vote per share.
APART was formed for the purpose of making and acquiring various types of
mortgage and other loans ("Trust Loans") which were originally intended to be
made principally to affiliated entities of Angeles Funding Corporation
("Affiliated Borrowers"). Angeles Funding Corporation ("AFC") is a wholly owned
subsidiary of Angeles Corporation ("Angeles"). The Trust's objectives were to
invest in Trust Loans which would (i) provide holders of the Trust's Class A
Shares (the "Class A Shareholders") with monthly cash distributions sufficient
to yield at least $2.00 per annum per Class A Share (as noted below, this
objective is not currently being realized and was not realized in 1994 nor in
1993), (ii) maximize cash distributions over the life of the Trust through (a)
mortgage and other loans that allow the Trust to share in the economic benefits
of the properties securing such loans and (b) receipt of loan fees, commitments
fees and other compensation from subsidiaries of Factory Merchant Malls, Inc., a
California corporation and which was a wholly owned subsidiary of Angeles
("FMM") (or other Affiliated Borrowers), (iii) preserve and protect the capital
of the Trust and (iv) provide the potential for liquidity to the extent of
trading activity in Class A Shares on the American Stock Exchange.
At the beginning of 1993, the Trust had four outstanding loans, all of which
had been made to wholly owned subsidiaries of FMM. The FMM subsidiaries owned
and operated factory outlet malls that consisted of retail stores operated by a
diversified group of nationally recognized manufacturers. The FMM subsidiaries
had outstanding Trust Loans with respect to four factory outlet malls located in
Barstow, California (the "Barstow Property"), Branson, Missouri (the "Branson
Property"), Osage Beach, Missouri (the "Osage Beach Property") and Fort
Chiswell, Virginia (the "Fort Chiswell Property"), (collectively, the
"Properties"). The Osage Beach Property was sold by FMM in February 1993 and
the loan was repaid resulting in net cash to the Trust of approximately $14.9
million.
In February 1993, Angeles notified the Trust that it was unable to satisfy
its guaranty obligation that through October 6, 1993, the Trust's Net Cash on a
cumulative basis (as defined in the Declaration of Trust) would be sufficient to
provide Class A shareholders with a minimum annual distribution of $2.00 per
Class A share. Beginning in March of 1993, the FMM subsidiaries failed to meet
their remaining debt obligations under their respective Trust Loans with respect
to the Properties and in November 1993 the remaining Trust Loans were sold to an
unaffiliated trust which resulted in net cash proceeds of approximately $26.1
million. Angeles's inability to satisfy such guaranty obligation was due to
liquidity problems and subsequently, in May 1993, Angeles filed for protection
under Chapter 11 of the federal bankruptcy laws.
The general policies of the Trust and its general supervision are overseen by
a board of four trustees (the "Trustees"), all of whom are unaffiliated with
Angeles or its affiliates. On February 26, 1993, in recognition of the
conflicts of interest between the Trust, Angeles and Angeles' affiliates,
including FMM, a committee was formed consisting solely of Trustees who were not
affiliated with Angeles (the "Independent Committee"). The Independent
Committee was given the authority to make all decisions relating to the Trust's
dealings with Angeles or any of its affiliates, including FMM. During 1993,
AFC's advisory and administrative services to the Trust were terminated and the
two inside trustees who were affiliated with Angeles, resigned from the Board of
Trustees.
As a result of Angeles' financial problems and its inability to pay debt
service on the remaining three loans, the Trust, suspended its monthly dividend
policy after the payment of the April dividend. A significant portion of the
funds used to pay the dividend in March 1993 and all of the funds used to pay
the dividend in April 1993 represented a return of a portion of the proceeds
received from the repayment of the Trust loan with respect to the Osage Beach
Property.
On September 27, 1993, the Trust entered into a Joint Marketing Agreement
with the Official Unsecured Creditors' Committee of Angeles. The Joint
Marketing Agreement, to which Angeles was not a party, set forth procedures
3
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for the Committee and APART to solicit bids for the purchase of both the Factory
Merchants Malls and APART's mortgages secured by these malls. That process
resulted in a November 3, 1993, sale, which included APART's three mortgage
loans, to New Plan Realty Trust, a real estate investment trust listed on the
New York Stock Exchange. APART realized approximately $26.1 million from the
sale of its mortgage portfolio. Angeles, under this agreement, sold FMM and its
interest in the Trust's Class B shares to New Plan Realty. In conjunction with
the sale of the remaining Trust loans, the Trust granted full release to
Angeles, its subsidiaries and its affiliates and further released Angeles of its
Guaranty obligation.
In November 1993, subsequent to the sale of the Trust Loans, the Trust
declared a $14.50 per Class A share distribution ($36,975,000 in total) to
shareholders of record on November 18, 1993, payable on December 3, 1993. The
Trust does not expect to have further cash distributions, if any, to
shareholders until after 1995. In addition, there can be no assurance that the
American Stock Exchange listing will be continued.
In November 1993, the Trust was notified that SAHI had acquired all of the
Trust's 1,275,000 outstanding Class B Shares from New Plan Realty. Subsequent
to the acquisition of the Class B Shares, SAHI has stated a desire to obtain
control of APART. SAHI along with affiliated entities, has accumulated 244,100
Class A Shares or 9.57% of the total outstanding Class A Shares of the Trust.
On March 15, 1994, the Trust announced that it had entered into an agreement
with SAHI for the sale of a Warrant for the right to purchase five million
shares of the Trust's Class A Shares at a price of $1 per share. SAHI purchased
the Warrant for $100,000, which amount will be applied against the purchase
price for the first Class A Shares purchased pursuant to the Warrant. The
Warrant will not be exercisable unless and until the issuance of the Class A
Shares issuable upon the exercise thereof has been approved by holders of a
majority of the Class A Shares and Class B Shares voting together as a single
class. Upon exercise of the entire Warrant for five million shares, SAHI would
own 69% of the outstanding Class A Shares and, with the voting interest of the
Class B Shares, would control 80% of the voting interest of the Trust.
Assets of APART prior to the sale of its loan portfolio in November 1993,
consisted of $14 million in cash and $24.5 million of mortgage notes receivable.
After the sale of the Trust's mortgage loan portfolio for $26.1 million and the
subsequent shareholder distribution of $37.3 million, the Trust had remaining
assets in excess of $2 million consisting primarily of cash.
The Trust had not, except for investments in securities of the Federal Home
Loan Mortgage Corporation, made any real estate or mortgage loan investments
since its portfolio sale in November 1993. The Trust is currently exploring
investment opportunities with SAHI and expects to present a new business plan to
shareholders in 1995.
The Trust will terminate October 16, 2004, unless extended by the
shareholders.
The Trust's loan portfolio remained without any investments throughout
the 1994 year.
The Trust had no unfunded commitments as of December 31, 1994.
The Trust has three employees. In light of the termination of AFC's
advisory and administrative services to the Trust, the Trust engaged personnel
to advise and administer the operations of the Trust. The Class A Shareholders
have no right to participate in the management or conduct of the Trust's
business and affairs.
ITEM 2. PROPERTIES
None.
4
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ITEM 3. LEGAL PROCEEDINGS
The Trust is unaware of any pending legal proceedings to which it is a
party other than a Proof of Claim it has filed in the Angeles bankruptcy in the
amount of $75,000.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
5
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PART II
ITEM 5. MARKET FOR THE TRUST'S COMMON EQUITY AND RELATED SECURITY HOLDER
MATTERS
The Trust has 2,031 Class A Shareholders as of February 14, 1995. The
Class A Shares are traded on the American Stock Exchange under the symbol APT.
All of the Class B Shares are held by SAHI, Inc. and there is no established
public trading market for these shares.
The following table sets forth the high and low sales prices of the
Trust's Class A Shares for the quarters ended 1994 and 1993.
<TABLE>
<CAPTION>
High Low
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<S> <C> <C>
1994, Quarter ended:
December 31, 1994 $ 1 1/16 $ 9/16
September 30, 1994 $ 1 1/2 $ 3/4
June 30, 1994 $ 1 11/16 $ 1
March 31, 1994 $ 1 3/8 $ 15/16
1993, Quarter ended:
December 31, 1993 $ 15 3/8 $ 3/8/(1)/
September 30, 1993 $ 14 1/2 $ 10 3/8
June 30, 1993 $ 11 1/8 $ 9 1/4
March 31, 1993 $ 17 3/4 $ 8
</TABLE>
(1) The market price of the Trust declined significantly after the
December 3, 1993 shareholder distribution of $14.50 per Class A share.
On February 14, 1995, the last sale price of the Class A Shares as
reported by the American Stock Exchange was $0.56.
It was the policy of the Trust to make monthly distributions of Net Cash,
as defined in the Declaration of Trust. Distributions of Net Cash to Class A
Shareholders for the year ended December 31, 1992, was $2.00 per share paid in
equal monthly installments of $.167 per share. Distributions of Net Cash to
Class A Shareholders for the year ended December 31, 1993 was $15.17 per share,
paid in four equal monthly installments of $.167 per share for the months of
January through April 1993 and $14.50 per share in December 1993. A significant
portion of the funds used to pay dividends paid in March 1993 and all of the
funds used to pay dividends paid in April and December 1993 were derived from
the proceeds of the repayment of the Trust Loan with respect to the Osage Beach
Property in February 1993, and from the sale of the remaining loan portfolio in
November 1993.
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ITEM 6. SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
For the years ended December 31,
------------------------------------------------------
1994 1993 1992 1991 1990
------ ------ ------- ------- -------
<S> <C> <C> <C> <C> <C>
Revenue $ 296 $4,730 $ 5,237 $ 5,448 $ 5,309
Costs and expenses(1) 626 982 5,783 642 651
------ ------ -------- ------- -------
Net income (loss) $ (330) $3,748 $ (546) $ 4,806 $ 4,658
====== ====== ======= ======= =======
Net income (loss)
-per Class A Share (2) $(0.13) $ 1.45 $ (0.21) $ 1.87 $ 1.81
====== ======= ======= ======= =======
Cash distributions
-per Class A Share (3) - $ 15.01 $ 2.00 $ 2.00 $ 2.00
====== ====== ======= ======= =======
Total assets $ 2,372 $ 2,680 $39,909 $44,824 $45,276
====== ======= ======= ======= =======
Shareholders' equity $ 2,290 $ 2,519 $37,410 $43,118 $43,474
======= ======= ======= ======= =======
</TABLE>
(1) Includes a write-down for in-substance foreclosed property of $5,000,000 in
1992.
(2) The net income per Class A Share was based upon 2,550,000 weighted average
shares outstanding during each of five years ended December 31, 1994, after
deduction of the 1% Class B Shares' interest.
(3) Includes a $14.50 per Class A Share distribution paid in December 1993 as a
result of selling APART's remaining three Trust Loans.
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
General
The Trust's source of cash during 1994 was from income earned on its
investments and cash and cash equivalent investments. The Trust's primary
source of cash in years prior to 1994 was from interest or principal payments
received on participating mortgages ("Trust Loans") made to wholly owned
subsidiaries of Factory Merchants Malls, Inc. ("FMM"), an affiliate of Angeles
Funding Corporation ("AFC"). The FMM subsidiaries owned and operated factory
outlet malls that typically consist of retail stores operated by a diversified
group of nationally recognized manufacturers who sell their first-quality goods
at discount prices directly to the consumer. The FMM subsidiaries had
outstanding Trust Loans with respect to four factory outlet malls located in
Barstow, California (the "Barstow Property"), Branson, Missouri (the "Branson
Property"), Osage Beach, Missouri (the "Osage Beach Property") and Fort
Chiswell, Virginia (the "Fort Chiswell Property"), (collectively, the
"Properties").
APART received approximately $14.9 million of proceeds attributable to
repayment of the Trust Loan collateralized by the Osage Beach Property which was
sold in February 1993. The Trust's equity participation with respect to the
sale of the Osage Beach Property, based on increases in value, amounted to
$919,000. The Trust also earned $109,000 as a prepayment penalty because the
loan was paid during the first five years. Of these additional amounts,
$704,000 was retained by the borrower as a repayment of unearned participation
income previously paid to the Trust with respect to the Osage Beach Property
Trust Loan. The proceeds from repayment of this Trust Loan were invested in
government securities and a money market account which earned a rate of return
from approximately 2.3% to 3.0%. In view of the low rate of return that the
Trust was earning with respect to these proceeds and FMM's subsidiaries' failure
to meet their obligations under the outstanding Trust Loans, the Trust's cash
flow was insufficient to fund the Trust's dividends at the historical rate of
$2.00 per Class A share per annum.
Since March 1993, the FMM subsidiaries failed to meet their debt
obligations under their respective Trust Loans with respect to the Properties.
Although FMM's parent, Angeles had guaranteed that, through October 6, 1993, the
Trust's Net Cash on a cumulative basis (as defined in the Declaration of Trust)
would be sufficient to provide Class A Shareholders with a minimum annual
distribution of $2.00 per Class A Share, Angeles notified the Trust in February
1993 that it was unable to satisfy this guaranty obligation because of liquidity
problems caused by Angeles' inability to complete sales or refinancings of real
estate assets and to fully realize asset values in a continuing sluggish and
depressed real estate market. In February 1993, Angeles also informed the Trust
that it was unable to perform its obligations under its partial guaranty of the
amounts due under the Trust Loan to the Fort Chiswell Property. In March 1993,
the Trust established a committee (the "Independent Committee"), consisting
solely of trustees not affiliated with Angeles, to make all decisions relating
to the Trust's dealings with Angeles or any of its affiliates, including AFC and
FMM. On May 3, 1993, Angeles filed for protection under Chapter 11 of the
federal bankruptcy laws.
On November 3, 1993, the Trust, under the Joint Marketing Agreement
between the Trust and the Official Committee of Unsecured Creditors of Angeles,
completed the sale of the three remaining Trust Loans held in its portfolio to
New Plan Realty Trust ("New Plan"). The Trust received net proceeds of
$26,144,000 in cash from this sale. Angeles, under this agreement, sold its
equity in FMM to New Plan along with 1,275,000 Class B shares of the Trust.
Pursuant to the Joint Marketing Agreement, APART granted full releases to
Angeles, its subsidiaries and its affiliates and further released Angeles of its
guarantee obligations.
In November 1993, subsequent to the sale of the Trust Loans, the Trust
declared a $14.50 per Class A share distribution to shareholders of record on
November 18, 1993, payable on December 3, 1993. The Trust has announced that it
will continue to explore strategic alternatives with third parties who might
have an interest in acquiring an interest in the remaining Trust after the
shareholder distribution discussed above. The Trust is currently exploring
investment opportunities with SAHI and expects to present a new business plan to
shareholders in 1995. In an effort to obtain further value for the Trust
shareholders and to provided for minimal operating costs, liabilities, and
claims the Trust retained over $2 million in cash after the announced
shareholder distribution. As of December 31, 1994, approximately $2,000,000 in
cash and investments, is held by the APART Contingent Claim Trust for the
benefit of APART. Such Contingent Claim Trust was established to provide for
any contingent claims arising from the operations of APART or any liability
under APART's indemnification agreements for its Trustees. The Contingent Claim
Trust
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will terminate on the earlier of December 31, 1996 or the determination by
its trustee that no contingent claims exist. The sole trustee of the Contingent
Claim Trust is Mr. Ronald J. Consiglio, Trustee, Chairman, Chief Executive
Officer and President of APART. The Trust retained no other assets and its
shareholder equity approximates the amount of remaining cash. The Trust does
not expect to have further cash distributions, if any, to shareholders until
after 1994. In addition, there can be no assurance that the American Stock
Exchange listing will be continued.
A significant portion of the funds used to pay the dividend paid in March
1993 and all of the funds used to pay the dividends of April and December 1993
represented a return of a portion of the proceeds received from the repayment of
the Trust Loan with respect to the Osage Beach Property in February 1993 and the
sale of the remaining loan portfolio in November 1993. Assets of APART prior to
the sale of its loan portfolio in November 1993, consisted of $14 million in
cash and $24.5 million of mortgage notes receivable. After the sale of the
Trust's mortgage loan portfolio for $26.1 million and the subsequent shareholder
distribution of $37.3 million, the Trust had remaining assets in excess of $2
million consisting primarily of cash.
On March 15, 1994, the Trust announced that it had entered into an
agreement with SAHI, for the sale of a Warrant for the right to purchase five
million shares of the Trust's Class A Shares at a price of $1 per share and
2,500,000 shares of Class B shares at a price of $.01 per share. SAHI Partners
purchased the Warrant for $101,000, which amount will be applied against the
purchase price for the first Class A and Class B Shares purchased pursuant to
the Warrant. The Warrant will not be exercisable unless and until the issuance
of the Class A and Class B Shares issuable upon the exercise thereof has been
approved by holders of a majority of the Class A Shares and Class B Shares
voting together as a single class. Upon exercise of the entire Warrant for five
million shares, SAHI would own 69% of the outstanding Class A Shares and, with
the voting interest of the Class B Shares, would control 80% of the voting
interest of the Trust.
The initial offering of Angeles Participating Mortgage Trust began in
July 1988, at $20 per Class A Share. Cash distributions began in July 1988 at
the annual rate of $2 per Class A Share until April 1993. In December 1993 a
shareholder distribution of $14.50 per share was paid to Class A shareholders.
Those investors who purchased and have held their APART shares since July 1988
have now received total cash of $23.89 per share from shareholder distributions.
FISCAL YEAR 1994 COMPARED TO 1993
As a result of the Trust selling all of its investment loans during
fiscal 1993, total revenues for fiscal 1994 decreased significantly. The
Trust's only source of income during 1994 was income earned on its cash and cash
equivalents and investments in the Federal Home Loan Mortgage Corporation
("Government Securities"). Such Government Security investments were made
during 1994 utilizing the $2 million held by the Contingent Clam Trust, in order
to create qualified income for the Trust to maintain its REIT status.
In conjunction with investing in the Government Securities the Trust
incurred significant borrowings and interest expense in order to generate REIT
qualified income (income from real estate related activites).
The Trust's general and administrative expense decreased significantly
during fiscal 1994 due primarily to a decrease in legal costs. During 1993, the
Trust incurred significant legal fees to protect its interests as a result of
borower default on all loans made by the Trust.
For the fiscal year ended December 31, 1994, the Trust continues to incur
legal fees as they relate to the preparation of a proxy statement and related
material for the Trust's next shareholders meeting. The proxy statement will
include a business plan and numerous issues which will require shareholder
approval, one of which is the issuance of the warrants for additional Class A
and Class B shares to SAHI. As of December 31, 1994, the Trust used part-time
services from three employees to administer and monitor the Trust operations.
9
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FISCAL YEAR 1993 COMPARED TO 1992
During 1993 the Trust fully liquidated its notes receivable portfolio. In
February 1993 the Osage Beach Property Trust Loan was repaid resulting in net
cash proceeds of $14,900,000 including equity participation of approximately
$919,000 and $109,000 of prepayment penalty income. In November 1993 the Trust
sold the remaining three Trust Loans resulting in net cash proceeds of
$26,100,000 and $2,545,000 of income.
While the liquidation of the Trust's assets created a significant amount of
income to the Trust, 1993 total revenues decreased 10% when compared to 1992
revenues. This decrease is attributable to the failure of the Trust's borrowers
to make required payments with respect to any of the Trust's outstanding loans,
beginning in March 1993. This decrease in revenues was offset by the interest
income earned on cash and cash equivalents. After the Osage Beach Property loan
was paid off, the Trust maintained a cash balance of approximately $14 million
through the end of November 1993, at which time these moneys along with the
proceeds from the sale of the mortgages were used to pay a $14.50 per Class A
share distribution to shareholders.
The Trust's 1993 expenses decreased significantly when compared to 1992 due
to the $5 million write-down of in-substance foreclosed property with respect to
the Fort Chiswell note receivable which was recognized in the fourth quarter of
1992. The general and administrative expenses have increased 25% in 1993 as
compared to such expenses in 1992. Such expenses have increased as a result of
legal and other professional fees incurred to protect the Trust's interests as a
result of Angeles' financial problems and FMM's non-payment of interest due on
the Trust Loans. In addition, in May 1993, the Trust established and opened its
own offices and as of December 31, 1993 had three employees to administer and
monitor the Trust operations. Such increases were partially offset as a result
of the termination of AFC as the advisor to the Trust in February 1993.
LIQUIDITY AND CAPITAL RESOURCES
The Trust's primary source of cash is from interest earned on investments and
cash and cash equivalents. Of the Trust's approximately $2.3 million and $2.5
million of investments and/or cash as of December 31, 1994 and December 31,
1993, respectively, $2 million is held by the APART Contingent Claim Trust for
the benefit of APART. Such Contingent Claim Trust was established to provide
for any contingent claims arising from the operations of APART or any liability
under APART's indemnification agreements for it's Trustees. The Contingent
Claim Trust will terminate on the earlier of December 31, 1996 or the
determination by its trustee that no contingent claims exist.
The Trust distributed the majority of its assets, $36,975,000 to Class A
shareholders of record on November 18, 1993 payable December 3, 1993. Remaining
funds, approximately $2.5 million, were retained by the Trust to provide for
potential liabilities or claims, minimal operating costs and the possibility of
obtaining further value for shareholders from potential strategic alternatives
with third parties who might wish to acquire an interest in the remaining Trust.
The amount and timing of any future cash dividends, if any, is impossible to
predict at this time. Since APART has no other assets, shareholder equity
approximates the amount of remaining cash.
Based upon the Trust's cash and cash equivalent balance at December 31, 1994,
management believes it has sufficient cash to operate as a going concern through
the coming 1995 fiscal year. Additional sources of assets to the Trust may
result from the exercise of Warrants by SAHI.
10
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ITEM 8. FINANCIAL STATEMENTS
ANGELES PARTICIPATING MORTGAGE TRUST
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Page
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<S> <C>
Independent Auditors' Report 12
Financial Statements - The financial statements of the Trust required to be included in Item 8
are listed below:
Balance Sheets at December 31, 1994 and 1993 13
Statements of Operations for each of the three years in the period ended
December 31, 1994 14
Statements of Changes in Shareholders' Equity for each of the three years
in the period ended December 31, 1994 15
Statements of Cash Flows for each of the three years in the period ended
December 31, 1994 16
Notes to Financial Statements 17
</TABLE>
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INDEPENDENT AUDITORS' REPORT
----------------------------
To the Shareholders of Angeles Participating Mortgage Trust:
We have audited the financial statements of Angeles Participating Mortgage
Trust (the "Trust"), listed at Item 8. These financial statements are the
responsibility of the Trust's management. Our responsibility is to express an
opinion on the financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform our audits to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, such financial statements present fairly, in all material
respects, the financial position of the Trust as of December 31, 1994 and 1993
and the results of its operations and its cash flows for each of the three years
in the period ended December 31, 1994, in conformity with generally accepted
accounting principles.
DELOITTE & TOUCHE LLP
Los Angeles, California
January 25, 1995
12
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Angeles Participating Mortgage Trust
Balance Sheets
<TABLE>
<CAPTION>
December 31
------------------------------------
Notes 1994 1993
----- ------------ ------------
<S> <C> <C> <C>
ASSETS
Cash and cash equivalents 2 $ 872,000 $ 2,539,000
Investments (at cost, market value
approximates $1,355,000) 3 1,371,000
Other receivables 16,000 -
Other assets 113,000 141,000
------------ ------------
Total assets $ 2,372,000 $ 2,680,000
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Accounts payable and accrued expenses 82,000 161,000
------------ ------------
Total liabilities 82,000 161,000
------------ ------------
Shareholders' equity: 7
Class A Shares (2,550,000 shares issued and outstanding,
$1.00 par value, unlimited shares authorized) 2,550,000 2,550,000
Class B Shares (1,275,000 shares issued and outstanding,
$ .01 par value, unlimited shares authorized) 13,000 13,000
Additional paid in capital 42,329,000 42,228,000
Accumulated undistributed net realized gain from sale of
mortgages 2,545,000 2,545,000
Accumulated distributions in excess of cumulative net income
other than gain from sale of mortgages (45,147,000) (44,817,000)
------------ ------------
Total shareholders' equity 2,290,000 2,519,000
------------ ------------
Total liabilities and shareholders' equity $ 2,372,000 $ 2,680,000
============ ============
</TABLE>
The accompanying notes are an integral part of the financial statements
13
<PAGE>
Angeles Participating Mortgage Trust
Statements of Operations
<TABLE>
<CAPTION>
Years ended December 31
-----------------------------------------
Notes 1994 1993 1992
----- ---------- ----------- ----------
<S> <C> <C> <C> <C>
Revenue:
Income from early retirement of mortgage 5 $ - $1,028,000 $ -
Interest income from loans 4 - 789,000 5,237,000
Interest income from investments 296,000 368,000 -
---------- ---------- ----------
Total revenue 296,000 2,185,000 5,237,000
---------- ---------- ----------
Costs and expenses:
Write-down for in-substance foreclosure 1, 2, 4 - - 5,000,000
Interest expense 270,000 - -
General and administrative 356,000 982,000 783,000
---------- ---------- ----------
Total costs and expenses 626,000 982,000 5,783,000
---------- ---------- ----------
Income or loss before gain on sale of
mortgages $ (330,000) $1,203,000 $ (546,000)
Gain from sale of mortgages 5 - 2,545,000 -
---------- ---------- ----------
Net income (loss) 2 $ (330,000) $3,748,000 $ (546,000)
========== ========== ==========
Net income (loss) per Class A Share $ (0.13) $ 1.45 $ (0.21)
========== ========== ==========
Cash distributions per Class A Share $ - $ 15.01 $ 2.00
========== ========== ==========
Weighted average number of Class A
Shares outstanding 2,550,000 2,550,000 2,550,000
========== ========== ==========
</TABLE>
The accompanying notes are an integral part of the financial statements.
14
<PAGE>
Angeles Participating Mortgage Trust
Statements of Changes in Shareholders' Equity
<TABLE>
<CAPTION>
Accumulated
Distributions
Additional in Excess of
Class A Class B Paid-In Cumulative
Shares Shares Capital Net Income(1) Total
---------- -------- ----------- ------------- ------------
<S> <C> <C> <C> <C> <C>
Balance at January 1, 1992 $2,550,000 $13,000 $42,228,000 $ (1,673,000) $ 43,118,000
Net loss - - - (546,000) (546,000)
Cash distributions - - - (5,162,000) (5,162,000)
---------- -------- ----------- ------------ ------------
Balance at December 31, 1992 2,550,000 13,000 42,228,000 (7,381,000) 37,410,000
Income before gain on sale of
mortgages 1,203,000 1,203,000
Gain from sale of mortgages - - - 2,545,000 2,545,000
Cash distributions - - - (38,639,000) (38,639,000)
---------- -------- ----------- ------------ ------------
Balance at December 31, 1993 2,550,000 13,000 42,228,000 (42,272,000 2,519,000
Net loss - - - (330,000) (330,000)
Proceeds from sale of warrants
(Note 1) - - 101,000 - 101,000
---------- ------- ----------- ------------ ------------
Balance at December 31, 1994 $2,550,000 $13,000 $42,329,000 $(42,602,000) $ 2,290,000
========== ======= =========== ============ ============
</TABLE>
(1) Balances as of December 31, 1993 and 1994 include accumulated undistributed
net realized gain from sale of mortgages of $2,545,000.
The accompanying notes are an integral part of the financial statements.
15
<PAGE>
Angeles Participating Mortgage Trust
Statements of Cash Flows
<TABLE>
<CAPTION>
Years ended December 31,
-----------------------------------------------
1994 1993 1992
------------ ------------ -----------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income (loss) $ (330,000) $ 3,748,000 $ (546,000)
Adjustments to reconcile net income (loss) to cash flows
from operating activities:
Write-down for in-substance foreclosure - - 5,000,000
Decrease in interest receivable - 573,000 -
Decrease (increase) in other receivables (16,000) 25,000 -
Decrease (increase) in other assets 28,000 (126,000) 47,000
Increase (decrease) in accounts payable and accrued
expenses (79,000) 70,000 25,000
Decrease in due to affiliates - - (38,000)
Decrease in unearned loan fee income - (215,000) (67,000)
Increase (decrease) in unearned participation income - (1,544,000) 436,000
------------ ------------ -----------
Cash flows provided (used) by operating activities (397,000) 2,531,000 4,857,000
------------ ------------ -----------
Cash flows from investing activities:
Investments in investment securites (30,914,000) - -
Sale of investment securities 29,543,000 - -
Collection of notes receivable - 39,400,000 -
------------ ------------ -----------
Cash flows provided (used) by investing activities (1,371,000) 39,400,000 0
------------ ------------ -----------
Cash flows from financing activities:
Decrease in cash distributions payable - (430,000) -
Increase (decrease) in advances under yield guarantee - (434,000) 355,000
Borrowings related to investment security purchases 27,939,000 - -
Repayment of borrowings related to investment security
purchases (27,939,000) - -
Proceeds from sale of warrants 101,000 - -
Cash distributions to shareholders - (38,639,000) (5,162,000)
------------ ------------ -----------
Cash flows provided (used) by financing activities 101,000 (39,503,000) (4,807,000)
------------ ------------ -----------
Increase (decrease) in cash and cash equivalents (1,667,000) 2,428,000 50,000
Cash and cash equivalents at beginning of period 2,539,000 111,000 61,000
------------ ------------ -----------
Cash and cash equivalents at end of period $ 872,000 $ 2,539,000 $ 111,000
============ ============ ===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
16
<PAGE>
ANGELES PARTICIPATING MORTGAGE TRUST
NOTES TO FINANCIAL STATEMENTS
NOTE 1 - HISTORY, BUSINESS ACTIVITIES AND SIGNIFICANT EVENTS
Angeles Participating Mortgage Trust (the "Trust" or "APART") was
organized for the purpose of making and acquiring various types of mortgage and
other loans ("Trust Loans"), which were made to affiliated entities of Angeles
Corporation ("Angeles"). Angeles Funding Corporation ("AFC") a wholly-owned
subsidiary of Angeles served as the Trust's Advisor until February 1993. The
Trust had invested primarily in first mortgage loans and junior or other
subordinated mortgage loans containing income and/or equity participations.
The Trust's primary source of cash in years prior to 1994 was from
interest or principal payments received on participating mortgages ("Trust
Loans") made to Factory Merchant Malls, Inc., a California corporation and which
was a wholly-owned subsidiary of Angeles ("FMM") or subsidiaries of FMM. The
FMM subsidiaries owned and operated factory outlet malls that typically consist
of retail stores operated by a diversified group of nationally recognized
manufacturers.
APART received approximately $14.9 million of proceeds attributable to
repayment of the Trust Loan collateralized by one property which was sold in
February 1993. On November 3, 1993, the Trust, under the Joint Marketing
Agreement between the Trust and the Official Committee of Unsecured Creditors of
Angeles, completed the sale of the three remaining Trust Loans held in its
portfolio to New Plan Realty Trust ("New Plan"). The Trust received net
proceeds of $26,144,000 in cash from this sale. Angeles, under this agreement,
sold its equity in FMM to New Plan along with 1,275,000 Class B shares of the
Trust. Pursuant to the Joint Marketing Agreement, APART granted full releases
to Angeles, its subsidiaries and its affiliates and further released Angeles of
its guarantee obligations.
In November 1993, subsequent to the sale of the Trust Loans, the Trust
declared a $14.50 per Class A share distribution ($36,975,000 in total) to
shareholders of record on November 18, 1993, payable on December 3, 1993. The
Trust does not expect to have further cash distributions, if any, to
shareholders until after 1995. In addition, there can be no assurance that the
American Stock Exchange listing will be continued.
In November 1993, the Trust was notified that SAHI Partners ("SAHI") acquired
all of the Trust's 1,275,000 outstanding Class B Shares. Subsequent to the
acquisition of the Class B Shares, SAHI stated a desire to obtain control of
APART and SAHI along with affiliated entities, has accumulated 244,100 Class A
Shares or 9.57% of the total outstanding Class A Shares of the Trust.
On March 15, 1994, the Trust announced that it had entered into an agreement
with SAHI, for the sale of a Warrant for the right to purchase five million
shares of the Trust's Class A Shares at a price of $1 per share and 2,500,000
shares of Class B shares at a price of $.01 per share. SAHI purchased the
Warrant for $101,000, which amount will be applied against the purchase price
for the first Class A and Class B Shares purchased pursuant to the Warrant. The
Warrant will not be exercisable unless and until the issuance of the Class A and
Class B Shares issuable upon the exercise thereof has been approved by holders
of a majority of the Class A Shares and Class B Shares voting together as a
single class. Upon exercise of the entire Warrant for five million shares, SAHI
would own 69% of the outstanding Class A Shares and, with the voting interest of
the Class B Shares, would control 80% of the voting interest of the Trust. The
Trust is currently exploring investment opportunities with SAHI and expects to
present a new business plan to shareholders in 1995.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF ACCOUNTING - The financial statements of the Trust are prepared on
the accrual basis and, therefore, revenue is recorded as earned and costs and
expenses are recorded as incurred. Based upon the Trust's cash and cash
equivalent balance at December 31, 1994, management believes it has sufficient
cash to operate as a going concern through the coming 1995 fiscal year. Certain
prior years amounts have been reclassified to conform to current year
classifications.
17
<PAGE>
CASH AND CASH EQUIVALENTS - Cash and cash equivalents include cash held in
bank or invested in money market funds with original maturity terms of less than
90 days. Of the cash and cash equivalents balance at December 31, 1994,
approximately $579,000 is held by the APART Contingent Claim Trust for the
benefit of APART. Such Contingent Claim Trust was established to provide for
any contingent claims arising from the operations of APART or any liability
under APART's indemnification agreements for its Trustees. The Contingent Claim
Trust will terminate on the earlier of December 31, 1996 or the determination by
its trustee that no contingent claims exist. The sole trustee of the Contingent
Claim Trust is Mr. Ronald J. Consiglio, Trustee, Chairman, Chief Executive
Officer and President of APART.
INVESTMENTS - The Trust has adopted Statement of Financial Accounting
Standards No. 115, "Accounting for certain Investments in Debt and Equity
Securities" (SFAS 115"), for the year ended December 31, 1994. There was no
cumulative effect of adopting SFAS 115. In accordance with SFAS 115, management
determines the appropriate classification of its investments in debt and equity
securities at the date of purchase between "Held-to-Maturity", "Available-for-
Sale" and "Trading". Management re-evaluates such classification at each
balance sheet date. At December 31, 1994, the Trust had no investments that
qualified as Trading or Available for Sale. The investment of $1,371,000 is
held by the APART Contingent Claim Trust for the benefit of APART.
NOTES RECEIVABLE AND INTEREST INCOME - Notes receivable are recorded at the
lower of cost or estimated net realizable value net of unearned loan fees which
are amortized over the lives of the respective loans. Interest income is
recorded as earned in accordance with the terms of the loans. The loans
included participatory and payment features which resulted in the Trust
receiving interest in advance of its having been earned. Such unearned interest
was deferred and subsequently recognized as earned or upon the sale of the notes
receivable. Interest income is recorded as earned in accordance with the terms
of the loans. Interest income is not recorded on individual loans that have
been classified as loans foreclosed in substance or if payments are in default
in excess of two months.
LOANS FORECLOSED IN-SUBSTANCE - Loans foreclosed in-substance consist of
loans accounted for as foreclosed property even though actual foreclosure has
not occurred. The carrying value of such loans were reduced to the estimated
fair value of the underlying collateral.
INCOME TAXES - The Trust has elected to be taxed as a Real Estate
Investment Trust ("REIT") under the Internal Revenue Code for each taxable year
of operations. As a qualified REIT, the Trust is subject to income taxation at
corporate rates on its REIT taxable income. However, the Trust is allowed a
deduction for the amount of dividends paid to its shareholders, thereby
subjecting the distributed net income of the Trust to taxation at the
shareholder level only. For income tax purposes, the Trust reports revenue and
expenses on the accrual method. No income tax provision has been shown in the
accompanying statement of operations since, in the opinion of management, the
Trust qualifies as a REIT under Sections 856 through 860 of the Internal Revenue
Code.
NET INCOME PER CLASS A SHARE - The net income per Class A Share was based
on 2,550,000 weighted average shares outstanding during each of the five years
ending December 31, 1994, after deduction of the 1% Class B Shares' interest
(see Note 7).
NOTE 3 - INVESTMENT
The Trust entered into two investments in 1994 to preserve its REIT status.
The Trust purchased and subsequently sold $30 million in Federal Home Loan
Mortgage Corporation securities which resulted in interest income, before
financing costs, of $226,000. The Trust, as of December 31, 1994, continues to
hold a second investment in securities of the Federal Home Loan Mortgage
Corporation. The investment, held in the the Contingent Claim Trust (see Note
2, Cash and Cash Equivalents, above), has a cost of $1,371,000 and an
approximate market value of $1,355,000 as of December 31, 1994. The investment
has an 8.5% coupon and matures on June 1, 1996. The Trust maintains this
investment at its original cost as it is its intention to hold this investment
until maturity.
NOTE 4 - FEES AND OTHER PAYMENTS TO THE TRUST'S PRIOR ADVISOR AND ITS AFFILIATES
Until February 1, 1993, the Trust paid AFC monthly advisory fees for trust
administration and for non-accountable expenses equal to .25% and .20% per annum
of Trust proceeds, respectively. The Trust also reimbursed an affiliate of AFC
for administrative expenses incurred on its behalf. In February 1993, AFC's
advisory and administrative
18
<PAGE>
services to the Trust were terminated. The amount paid to AFC or its affiliate
for the one month period ended February 1, 1993 and for the year ended December
31, 1992 were as follows:
<TABLE>
<CAPTION>
1993 1992
------- --------
<S> <C> <C>
Advisory fees $11,000 $128,000
Non-accountable expense allowance $ 8,000 $102,000
Administrative expenses $ 6,000 $121,000
</TABLE>
The Trust did not pay any fees to Angeles or affiliated entities in 1994.
NOTE 4 - LOAN PORTFOLIO
During February 1993, FMM sold the Osage property and repaid APART's note
receivable (see Note 5) and in November 1993, the Trust sold the three remaining
Trust Loans held in its portfolio (see Note 5).
NOTE 5 - REPAYMENT OF AND SALE OF TRUST LOANS
In February 1993, APART received $14,900,000 of net proceeds attributable
to the repayment of a Trust loan with respect to the Osage Beach property.
In November 1993, the Trust sold its remaining three Trust Loans on the
Barstow, Branson and Fort Chiswell Properties and received $26,144,000 of net
proceeds from the sale. In conjunction with the sale (see Note 1) APART and
Angeles along with Angeles' subsidiaries and its affiliates granted mutual full
releases of any obligations that may exist. As a result of the full releases,
the Trust recognized in the fourth quarter of 1993, $791,000 of Unearned
Participation Income and $110,000 of Advances Under Yield Guarantee.
The resulting income generated from this sale transaction is as follows:
<TABLE>
<S> <C> <C>
Net Proceeds from Sale of Trust Loans $ 26,144,000
Principal Balance of Notes Receivable, Net:
Barstow Property $ 7,000,000
Branson Property 12,500,000
Ft. Chiswell Property 5,000,000 (24,500,000)
-----------
Angeles and Affiliate Obligations Released
In Connection with the Sale:
Unearned Participation Income 791,000
Advances Under Yield Guarantee 110,000
------------
Income from Sale of Mortgages $ 2,545,000
============
</TABLE>
NOTE 6 - SHAREHOLDERS' EQUITY
The shares of the Trust are of two classes: Class A Shares (par value
$1.00 per share) and Class B Shares (par value $.01 per share). There is no
limit on the number of either Class A or Class B Shares which the Trust is
authorized to issue. Class B Shares in an amount equal to one-half of the
number of Class A Shares outstanding have been issued by the Trust. Class A and
Class B Shares are each entitled to one vote per share with respect to the
election of Trustees and other matters. Commencing in 1990, the Class B Shares
are convertible at the option of the Class B Shareholder into Class A Shares on
the basis of 49 Class B Shares for one Class A Share; provided that no more than
20% of the original amount of outstanding Class B Shares (on a cumulative basis)
is so convertible in any year. All distributions of Net Cash will be
distributed 99% to the Class A Shareholders and 1% to the Class B Shareholder.
19
<PAGE>
NOTE 7 - QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
The following table sets forth the selected quarterly financial data for
the Trust (in thousands except for per share amounts).
<TABLE>
<CAPTION>
QUARTER ENDED
-------------------------------------
1994 12/31/94 9/30/94 6/30/94 3/31/94
-------- ------- ------- -------
<S> <C> <C> <C> <C>
Revenue $242 $23 $16 $15
Net (loss) ($93) ($29) ($110) ($98)
Net (loss) per Class A share ($0.04) ($0.01) ($0.04) ($0.04)
Weighted average Class A Shares outstanding 2,550 2,550 2,550 2,550
</TABLE>
<TABLE>
<CAPTION>
QUARTER ENDED
-------------------------------------
1993 12/31/93 9/30/93 6/30/93 3/31/93
-------- ------- ------- -------
<S> <C> <C> <C> <C>
Revenue $2,791 $312 $124 $1,503
Net (loss) $2,445 $65 ($156) $1,394
Net (loss) per Class A share $0.94 $0.03 ($0.06) $0.54
Weighted average Class A Shares outstanding 2,550 2,550 2,550 2,550
</TABLE>
ITEM 9. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None
20
<PAGE>
PART III
ITEM 10. TRUSTEES AND EXECUTIVE OFFICERS
The current executive officers and Trustees of the Trust are listed below,
together with their ages and all Trust positions held by them:
<TABLE>
<S> <C> <C>
Ronald J. Consiglio 51 Trustee, Chairman, Chief Executive
Officer and President
Jack E. McDonald 54 Trustee and Chief Financial Officer
J. D'Arcy Chisholm (1) 63 Trustee
Barry S. Sternlicht (1) 34 Trustee
Anna Merguerian 39 Vice President and Secretary
</TABLE>
(1) Member of Audit and Compensation Committee
Mr. Consiglio has been a Trustee since April 1988 and has served as the
Chairman, Chief Executive Officer and President of the Trust since May 1993.
From January 1993 through June 1993, Mr. Consiglio served as Executive Vice
President and Chief Administrative Officer of Reynolds Kendrick Stratton, Inc.,
a Los Angeles based securities brokerage firm. From 1990 through 1992, Mr.
Consiglio was the Senior Vice President and Chief Financial Officer of Cantor
Fitzgerald & Co., Inc. where he was responsible for operations, administration
and finance. From 1988 through 1990 he was the Senior Vice President of the
investment banking firm of Wedbush Morgan Securities, Inc. ("WMS"), and from
1984 through 1988 he was Executive Vice President of a predecessor firm, Morgan,
Olmstead, Kennedy & Gardner Incorporation. He was responsible for WMS's
investment banking activities, as well as many of the administrative and
operation functions of the firm. He is a certified public accountant and was a
partner in Deloitte Haskins & Sells from 1977 to June 1984. In 1992, Mr.
Consiglio served as the District Chairman of the National Association of
Securities Dealers' District Business Conduct Committee. Mr. Consiglio is also
an executive officer and trustee of Angeles Mortgage Investment Trust ("AMIT")
and is a business consultant.
Mr. McDonald has been a Trustee of the Trust since April 1988 and has
served as Chief Financial Officer since May 1993. He has been Chief Executive
Officer of JEM Diversified Management Company, Inc., a Los Angeles-based
business consulting firm since 1989. Mr. McDonald is a certified public
accountant, certified financial planner and tax and business consultant. Mr.
McDonald served in the tax department of Ernst & Ernst for five years before
forming a certified public accounting firm that specialized in real estate in
1974. Mr. McDonald is a founder and former director of a California savings and
loan association and past Chapter President of the National Association of
Accountants. He is an active member of the American Institute of Certified
Public Accountants and California Society of Certified Public Accountants. Mr.
McDonald also serves as a trustee of AMIT and serves on AMIT's Audit and
Compensation Committee.
Mr. Bryant who had been a Trustee since February 1990 died in August 1994
and the trustee position left vacant from his death has not been filled.
Mr. Chisholm has been a Trustee of the Trust since September 1989 and is a
member of the Audit and Compensation Committee. He has been a consultant to
real estate, business and educational entities in San Francisco, California,
currently and in Minneapolis, Minnesota since 1989. From 1980 until September
1989, Mr. Chisholm was associated with the Institute for Pastoral and Social
Ministry at the University of Notre Dame, initially as a volunteer, then as an
assistant director from 1982 until 1986 and finally as an associate director
from 1986 until 1989. From 1971 until 1980, Mr. Chisholm served in several
capacities for Angeles and its subsidiaries, including president of its property
management company and president of its property sales company. Prior to 1971,
Mr. Chisholm was employed at the following real estate related firms; Real
Estate Research Corporation, Del E. Webb Corporation and Milton Meyer Company.
Mr. Chisholm also serves as a trustee of AMIT and serves on AMIT's audit and
compensation committee.
Mr. Sternlicht became a Trustee and Chairman of the Audit and Compensation
Committee of the Trust in March 1994. In mid-1993, he founded Starwood Capital
Group, L.P., ("Starwood") a privately owned real estate investment firm,
21
<PAGE>
and has been president and chief executive officer since that time. In 1991, he
founded Starwood Capital Partners, L.P., a privately owned real estate
investment firm, and has been its president since inception. Starwood, SAHI,
Inc. and SAHI Partners are under common control. In addition, Starwood is the
general partner of the investment partnership that owns substantially all of the
beneficial interests of SAHI Partners. From 1986 to 1991, Mr. Sternlicht was
employed by JMB Realty, most recently as Senior Vice President in its
acquisition group. Mr. Sternlicht serves on the Board of Trustees of Equity
Residential Properties Trust, currently the largest multi-family REIT in the
United States trading under the symbol "EQR" on the New York Stock Exchange.
Affiliates of Starwood constitute the second largest partnership group that has
contributed assets to the UPREIT partnership controlled by Equity Residential
Properties Trust. Mr. Sternlicht is also the Chairman and Chief Executive
Officer of Starwood Lodging Trust ("SLT"), a New York Stock Exchange listed REIT
that owns hotel related equity and debt interests, as well as being director
elect of Starwood Lodging Corporation, a hotel management company the shares of
which are "paired" with those of SLT.
Ms. Merguerian became the Vice President and Secretary of the Trust in
March 1994. Prior to joining the Trust in May 1993, she was employed by Angeles
from June 1981 through April 1993. Her last position with Angeles and its
subsidiaries was as a Senior Vice President of the Asset Management Group. From
September 1977 to May 1981, she served as a Senior Accountant with Ernst & Young
(which was formerly known as Ernst & Whinney). Ms. Merguerian is a certified
public accountant.
INFORMATION REGARDING THE BOARD OF TRUSTEES AND ITS COMMITTEES
INDEPENDENT COMMITTEE. On February 26, 1993, in recognition of the
conflicts of interest between the Trust and Angeles, a committee was formed
consisting solely of Trustees who are not affiliated with Angeles. The
Independent Committee was given the authority to evaluate, negotiate and
implement the Restructuring of the Trust's assets and liabilities, and to make
all decisions relating to the Trust's dealings with Angeles or any of its
affiliates. An independent firm of valuation consultants and independent
counsel were engaged to assist the Independent Committee. Messrs. Consiglio,
Bryant, Chisholm and McDonald served on the Independent Committee with Mr.
Consiglio serving as Chairman. In November 1993, the Independent Committee
ceased to exist upon the resignation of the remaining Angeles affiliated
Trustee.
AUDIT AND COMPENSATION COMMITTEE. The Board of Trustees has delegated a
portion of its authority to a two-member Audit and Compensation Committee
comprising independent trustees. This Committee makes recommendations to the
Board of Trustees concerning the selection of the Trust's independent auditors,
oversees the financial reporting process, develops and approves plans for the
annual duties of the Trust, reviews fees charged by the independent auditors,
reviews the scope and results of the auditors' reports and reviews and monitors
the implementation of suggestions made by the independent auditors. The
Committee is kept apprised by management of the Trust's internal control
procedures. Additionally, the Committee reviews and monitors non-audit services
provided by the independent auditors and oversees, reviews and approves the
compensation of the trustees and officers of the Trust. Messrs. Chisholm, and
Sternlicht serve on the Audit and Compensation Committee with Mr. Sternlicht
serving as Chairman.
BOARD OF TRUSTEES AND COMMITTEE MEETINGS. During the fiscal year ending
December 31, 1994, the Trust's Board of Trustees held two regular meetings.
ITEM 11. EXECUTIVE COMPENSATION
REMUNERATION OF TRUSTEES. Each Trustee who is not also an officer of
Angeles or of any of its subsidiaries, receives a fee of $12,000 per year, which
is paid quarterly. Each of the unaffiliated Trustees also receives an
additional fee of $1,000 for each meeting of the Board of Trustees which he
attends in person, $750 for each meeting of the Board of Trustees which he
attends telephonically, and $500 for each Audit Committee or Independent
Committee meeting which he attends, either personally or telephonically.
Trustees are also reimbursed for any expenses incurred in attending such
meetings or incurred as a result of other work performed for the Trust. The
Trustees who are affiliated with Angeles and its subsidiaries do not receive any
compensation from the Trust.
EXECUTIVE OFFICERS' COMPENSATION. During the year ended December 31, 1994,
Mr. Consiglio received a total of $41,850 for his services as President and
Chief Executive Officer of the Trust, and an additional $12,000 as compensation
for serving on the Board of Trustees. For the year ended December 31, 1994, Mr.
McDonald was paid no
22
<PAGE>
compensation for his services as Chief Financial Officer of the Trust, and
$13,000 as compensation for serving on the Board of Trustees. Officers who were
affiliates of Angeles during the period received compensation from Angeles or
one of its subsidiaries.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information as of March 15, 1995 with
respect to any Class A Shares owned by the Trustees and individual shareholders
known to be the beneficial owner of more than 5% of the issued and outstanding
Class A shares. There are no other trustees or officers of the Trust who
beneficially own either Class A or Class B Shares. The Trust had 2,031 Class A
Shareholders of record as of February 14, 1995. All of the issued and
outstanding Class B Shares (a total of 1,275,000 Shares) are owned by SAHI
Partners.
<TABLE>
<CAPTION>
Amount and
Nature of Percent
Beneficial of
Title of Class Name of Beneficial Owner Ownership (1) Class
-------------- ---------------------------------------------------------------- ------------- ---------
<C> <S> <C> <C>
Class A Shares SAHI Partners 26,020(2) 1.0%
Class A Shares SAHI Partners 244,100 9.6%
Class A Shares SAHI, Inc. 270,120(3) 10.6%
Class A Shares SWL Acquisition Partners, L.P. 270,120(3) 10.6%
Class A Shares SWL Mortgage Investors, Inc. 270,120(3) 10.6%
Class A Shares Angelo, Gordon & Co., L.P. 254,700(4) 9.9%
Class A Shares American Holdings, Inc. 165,900(5) 6.5%
Class A Shares J. D'Arcy Chisholm 773 (6)
Class A Shares Barry Sternlicht 270,120(3) 10.6%
Class B Shares SAHI Partners 1,275,000(3) 100%
Class B Shares Barry Sternlicht 1,275,000(3) 100%
Class B Shares SAHI, Inc. 270,120(3) 10.6%
Class B Shares SWL Acquisition Partners, L.P. 270,120(3) 10.6%
Class B Shares SWL Mortgage Investors, Inc. 1,275,000(3) 100%
Class A Shares All Executive Officers and Directors as a group (6 persons) 270,893(3) 10.6%
Class B Shares All Executive Officers and Directors as a group (6 persons) 1,275,000(3) 100%
</TABLE>
-----------------------------
(1) Except as otherwise indicated and subject to applicable community property
laws and similar statutes, the person listed as beneficial owner of shares
has sole voting poser and dispositive power with respect to the shares.
(2) Represents 1,275,000 Class B Shares which are presently convertible into
26,020 Class A Shares.
(3) Represents 244,100 Class A shares currently held by SAHI Partners and
1,275,000 Class B Shares currently held by SAHI Partners which are presently
convertible into 26,020 Class A Shares. SAHI, Inc. and SWL Acquisition
Partners, L.P., a Delaware limited partnership ("SWL Partners"), are the
sole general partners of SAHI Partners. SWL Mortgage Investors, Inc., a
Delaware corporation ("SWL Mortgage"), is the sole general partner of SWL
Partners. Mr. Sternlicht is the sole stockholder of SWL Mortgage and the
controlling stockholder of SAHI, Inc. By virtue of such holdings and
relationships, Mr. Sternlicht, SAHI, Inc., SWL Partners and SWL Mortgage may
be deemed to have an indirect pecuniary interest in the Class A Shares and
Class B Shares held by SAHI Partners to the extent of his or its
proportionate direct or indirect partnership interest, as the case may be;
however, Mr. Sternlicht, SAHI, Inc., and SWL Mortgage have expressly
disclaimed such beneficial ownership.
(4) As reported on the Schedule 13G filed by Angelo, Gordon & Co., L.P. on
February 8, 1995.
(5) As reported on the Schedule 13D filed by American Holdings, Inc., on
March 15, 1995.
(6) Less than .01% of the class (a total of 2,550,000 Class A Shares are issued
and outstanding).
23
<PAGE>
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Until February 1, 1993, the Trust paid AFC monthly advisory fees for trust
administration and for non-accountable expenses equal to .25% and .20% per annum
of Trust Proceeds, respectively. The Trust also reimbursed an affiliate of AFC
for administrative expenses incurred on its behalf. In February 1993, AFC's
advisory services to the Trust were terminated. The amounts paid to AFC or its
affiliate for the one month period ended February 1, 1993 and for the year ended
December 31, 1992 were as follows:
<TABLE>
<CAPTION>
1993 1992
------- --------
<S> <C> <C>
Advisory fees $11,000 $128,000
Non-accountable expense allowance $ 8,000 $102,000
Administrative expenses $ 6,000 $121,000
</TABLE>
The Trust did not pay any fees to Angeles or affiliated entities in 1994.
24
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENTS AND REPORTS ON FORM 8-K
(a) Listed below are all financial statements filed as part of this 10-K and
herein included.
<TABLE>
<CAPTION>
Page No.
--------
<S> <C>
Balance Sheets at December 31, 1994 and 1993 13
Statements of Operations for each of the three years in the
period ended December 31, 1994 14
Statements of Changes in Shareholders' Equity for each of
the three years in the period ended December 31, 1994 15
Statements of Cash Flows for each of the three years in the
period ended December 31, 1994 16
Notes to Financial Statements 17
</TABLE>
(b) A report on Form 8-K was filed during the last quarter of the year
ending December 31, 1994 as follows:
NONE.
(c) Exhibits required by Item 601 of Regulation S-K:
Refer to Exhibit Index on page 26 of this report.
(d) Supplemental schedules required by Regulation S-X are omitted because they
are not applicable or because the required information is shown in the
financial statements.
25
<PAGE>
ANGELES PARTICIPATING MORTGAGE TRUST
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit Number Description of Exhibit
-------------- -----------------------------------------------------------
<C> <S>
3.1 Declaration of the Trust dated July 15, 1988.(1)
10.1 Promissory Note, Secured Mortgage and Other Security
relating to the Factory Merchants Venture.(2)
10.2 Promissory Note Secured by Deed of Trust relating to the
Branson property.(3)
10.3 Promissory Note Secured by Security Agreement relating to
the Factory Merchant Venture.(3)
10.4 Promissory Note Secured by Security Agreement relating to
the Wytheville Factory Merchant Venture.(4)
10.5 Agreement to extend Promissory Note Secured by Security
Agreement for Factory Merchant Venture from January 31,
1990 to February 28, 1990.(4)
10.6 Agreement to extend Promissory Note Secured by Security
Agreement for Factory Merchant Venture from
February 28, 1990 to March 31, 1990.(4)
10.7 Agreement to extend Promissory Note Secured by Security
Agreement for Factory Merchant Venture from March 31,
1990 to June 30, 1991.(4)
10.8 Promissory Note Secured by Deed of Trust dated September 20,
1991 relating to Factory Merchants Barstow property.(5)
10.9 Promissory Note Secured by Deed of Trust dated September 20,
1991 relating to Factory Merchants Barstow and
Branson properties.(5)
10.10 Promissory Note Secured by Deed of Trust dated September 20,
1991 relating to Factory Merchants Fort Chiswell
(formerly Wytheville Factory Merchants, Ltd.)
property.(5)
10.11 Bi-Party Agreement dated August 25, 1993, between the Trust
and the Committee of Creditors Holding Unsecured
Claims for Angeles Corporation. (6)
10.12 Trust Agreement dated November 23, 1993 between the Trust
and Ronald J. Consiglio, as trustee. (7)
10.13 Amendment to Trust Agreement dated March 14, 1994 between
the Trust and Ronald J. Consiglio, as trustee. (7)
10.14 Class A Share Purchase Warrant dated March 15, 1994 issued
by the Trust to SAHI Partners. (7)
10.15 Class B Share Purchase Warrant dated March 15, 1994 issued
by the Trust to SAHI Inc. (7)
10.16 Shareholders Agreement dated as of March 15, 1994 by and
among the Trust, SAHI Partners and SAHI Inc. (7)
</TABLE>
----------------------------------
(1) Filed as an exhibit to the Trust's Registration Statement dated July 18,
1988, and incorporated herein by reference.
(2) Filed as an exhibit to the Trust's Form 8-K dated February 3, 1989, and
incorporated herein by reference.
(3) Filed as an exhibit to the Trust's Form 10-K dated December 31, 1989, and
incorporated herein by reference.
(4) Filed as an exhibit to the Trust's Form 10-K dated December 31, 1990 and
incorporated herein by reference.
(5) Filed as an exhibit to the Trust's Form 10-K dated December 31, 1991 and
incorporated herein by reference.
(6) Filed as an exhibit to the Trust's Form 8-K dated November 3, 1993 and
incorporated herein by reference.
(7) Filed as an exhibit to the Trust's Form 10-K dated December 31, 1993 and
incorporated herein by reference.
26
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Trust has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
ANGELES PARTICIPATING MORTGAGE TRUST
------------------------------------
Registrant
Date March 24, 1995 /s/ Ronald J. Consiglio
------------------------------------
Ronald J. Consiglio
Chairman of the Board of Trustees
Pursuant to the requirements of the Securities Exchange Act of 1934 this
report has been signed below by the following persons on behalf of the
Partnership and in the capacities and on the dates indicated.
Date March 24, 1995 /s/ Ronald J. Consiglio
------------------------------------
Ronald J. Consiglio
Trustee, President and Chief Executive Officer
(Chief Executive Officer)
Date March 24, 1995 /s/ J. D'Arcy Chisholm
-------------------------------------
J. D'Arcy Chisholm
Trustee
Date March 24, 1995 /s/ Barry S. Sternlicht
--------------------------------------
Barry S. Sternlicht
Trustee
Date March 24, 1995 /s/ Jack E. McDonald
------------------------------------
Jack E. McDonald
Trustee and Chief Financial Officer
(Principal Financial Officer and
Accounting Officer)
27
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-START> JAN-01-1994
<PERIOD-END> DEC-31-1994
<EXCHANGE-RATE> 1
<CASH> 872
<SECURITIES> 1,371
<RECEIVABLES> 129
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 2,372
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 2,372
<CURRENT-LIABILITIES> 82
<BONDS> 0
<COMMON> 2,703
0
0
<OTHER-SE> (413)
<TOTAL-LIABILITY-AND-EQUITY> 2,372
<SALES> 296
<TOTAL-REVENUES> 296
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 356
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 270
<INCOME-PRETAX> (330)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (330)
<EPS-PRIMARY> (0.13)
<EPS-DILUTED> (0.13)
</TABLE>
