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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 31,1995
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. 1-10150
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:
Title of each class: Name of Exchange on which registered:
-------------------- -------------------------------------
Class A Shares, $1.00 par
value Angeles Participating American Stock Exchange
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 Regulations 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 13, 1996 was approximately $1,291,000.
As of February 13, 1996, 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>
<CAPTION>
TABLE OF CONTENTS
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.................................................................... 5
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
OPERATIONS............................................................................ 8
General............................................................................. 8
Fiscal year 1995 compared to 1994................................................... 9
Fiscal year 1994 compared to 1993................................................... 9
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>
2
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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 the 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 years 1993-
95), (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 and 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.
3
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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 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 1996.
The Trust will terminate October 16, 2004, unless extended by the
shareholders.
Loan Portfolio
The Trust's loan portfolio remained without any investments throughout
the 1995 and 1994 years.
Unfunded Commitments
The Trust had no unfunded commitments as of December 31, 1995.
Employees
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.
4
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ITEM 2. PROPERTIES
None.
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 had filed in the Angeles bankruptcy in the
amount of $75,000. During 1995 the Trust received $3,150 as full settlement of
this claim.
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
MATTTERS
The Trust has 1,927 Class A Shareholders as of February 13, 1996. 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 1995 and 1994.
<TABLE>
<CAPTION>
High Low
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<S> <C> <C>
1995, Quarter ended:
December 31, 1995 $ 5/8 $ 1/2
September 30, 1995 $ 5/8 $ 1/2
June 30, 1995 $ 11/16 $ 1/2
March 31, 1995 $ 3/4 $ 7/16
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
</TABLE>
On February 13, 1996, the last sale price of the Class A Shares as
reported by the American Stock Exchange was $0.56.
6
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ITEM 6. SELECTED FINANCIAL DATA
(Table in thousands except per share data)
<TABLE>
<CAPTION>
For the years ended December 31,
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1995 1994 1993 1992 1991
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Revenue(1) $ 148 $ 296 $ 2,185 $ 5,237 $ 5,448
Gain from sale of mortgages(2) 0 0 2,545 0 0
Costs and expenses(3) 283 626 982 5,783 642
--------- --------- --------- --------- ---------
Net income (loss) ($135) ($330) $3,748 ($546) $ 4,806
========= ========= ========= ========= =========
Net income (loss)
- - per Class A Share(4) $ (0.05) $ (0.13) $ 1.45 $ (0.21) $ 1.87
========= ========= ========= ========= =========
Cash distributions
- - per Class A Share(5) $ - $ - $ 15.01 $ 2.00 $ 2.00
========= ========= ========= ========= =========
Total assets $ 2,194 $ 2,372 $ 2,680 $ 39,909 $ 44,824
========= ========= ========= ========= =========
Shareholders' equity $ 2,155 $ 2,290 $ 2,519 $ 37,410 $ 43,118
========= ========= ========= ========= =========
</TABLE>
(1) Revenue, primarily interest income, declined in 1995 and 1994 as compared
to 1993 and prior years due to the sale of the Trust's portfolio in 1993.
(2) During 1993, the Trust sold its entire portfolio consisting of four
mortgage loans resulting in proceeds in excess of carrying values and
obligations of $2,545,000.
(3) Includes a write-down for in-substance foreclosed property of $5,000,000
in 1992.
(4) 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, 1995,
after deduction of the 1% Class B Shares' interest.
(5) Includes a $14.50 per Class A Share distribution paid in December 1993 as
a result of selling APART's remaining three Trust Loans.
7
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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
GENERAL
The Trust's source of cash during 1995 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 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 1996. 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, 1995, 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
8
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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
1995. 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 March 1993 dividend 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 1995 COMPARED TO 1994
The Trust's primary source of income during 1995 was income earned on its
cash and cash equivalents and investments in the Federal Home Loan Mortgage
Corporation ("Government Securities"). Investments in Government Securities were
made during 1995 utilizing the $2 million held by the Contingent Claim Trust, in
order to create qualified income for the Trust to maintain its REIT status.
Interest income from investments decreased significantly from 1994 to 1995
and correspondingly interest expense decreased when compared to the same period
because during the fourth quarter of 1994 the Trust incurred significant
borrowings to generate sufficient REIT qualified income in order to maintain its
REIT status. During 1995 the Trust did not borrow any funds.
During the year ended December 31, 1995 the Trust received a minor amount
of interest income from loans in the amount of approximately $3,000. This income
is the result of a $75,000 claim filed with the Angeles bankruptcy relating to
additional interest the Trust believed it should have received on one of its
loans during 1993. The $3,000 of income received during 1995 represents a final
settlement for such claim.
The Trust's general and administrative expense decreased significantly
during fiscal 1995 due primarily to a decrease in legal costs. During 1994, the
Trust incurred greater legal fees in conjunction with the preparation of a proxy
statement and related material for a Trust shareholder meeting.
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
9
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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 Claim 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 activities).
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
borrower 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.
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 $2.1
million and $2.2 million of investments and cash and cash equivalents as of
December 31, 1995 and December 31, 1994, respectively, approximately $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.
During 1994, in order to maintain the Trust's REIT status, the Trust
borrowed approximately $28 million and invested the proceeds from such
borrowings along with other cash into securities of the Federal Home Loan
Mortgage Corporation. Such securities were pledged as collateral on the
borrowing. The Trust did not enter into a similar transaction in 1995, although
the Trust did invest in securities of the Federal Home Loan Mortgage Corporation
in order to maintain its REIT status.
The Trust distributed the majority of its assets, $36,975,000 to Class
A shareholders of record on November 18, 1993, on 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 and investments.
Based upon the Trust's cash and cash equivalent balance at December
31, 1995, management believes it has sufficient cash to operate as a going
concern through the 1996 fiscal year. Additional sources of assets to the Trust
may result from the exercise of Warrants by SAHI.
The Trust expects to maintain its REIT status throughout 1996 by
investing in securities of the Federal Home Loan Mortgage Corporation until it
invests directly in real estate or mortgage loan investments.
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, 1995 and 1994 13
Statements of Operations for each of the three years in the period ended
December 31, 1995 14
Statements of Changes in Shareholders' Equity for each of the three years
in the period ended December 31, 1995 15
Statements of Cash Flows for each of the three years in the period ended
December 31, 1995 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, 1995 and 1994
and the results of its operations and its cash flows for each of the three years
in the period ended December 31, 1995, in conformity with generally accepted
accounting principles.
DELOITTE & TOUCHE LLP
Los Angeles, California
January 17, 1996
12
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ANGELES PARTICIPATING MORTGAGE TRUST
BALANCE SHEETS
<TABLE>
<CAPTION>
December 31,
-------------------------
NOTES 1995 1994
--------- ------------ -----------
<S> <C> <C> <C>
ASSETS
Cash and cash equivalents 2 $ 863,000 $ 872,000
Investments 3 1,196,000 1,371,000
Other receivables 10,000 16,000
Other assets 125,000 113,000
------------ ------------
Total assets $ 2,194,000 $ 2,372,000
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Accounts payable and accrued expenses $ 39,000 $ 82,000
------------ ------------
Total liabilities 39,000 82,000
------------ ------------
Shareholders' equity: 6
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 42,329,000
Accumulated undistributed net realized gain from sale of
mortgages 5 2,545,000 2,545,000
Accumulated distributions in excess of cumulative net
income other than gain from sale of mortgages (45,282,000) (45,147,000)
------------ ------------
Total shareholders' equity 2,155,000 2,290,000
------------ ------------
Total liabilities and shareholders' equity $ 2,194,000 $ 2,372,000
============ ============
</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 1995 1994 1993
--------- ------------ ----------- --------------
<S> <C> <C> <C> <C>
Revenue:
Income from early retirement of mortgage 5 $ - $ - $ 1,028,000
Interest income from loans 4 3,000 - 789,000
Interest income from investments 145,000 296,000 368,000
------------ ------------ --------------
Total revenue 148,000 296,000 2,185,000
------------ ------------ --------------
Costs and Expenses:
Interest expense - 270,000 -
General and administrative 283,000 356,000 982,000
------------ ------------ --------------
Total costs and expenses 283,000 626,000 982,000
------------ ------------ --------------
INCOME OR LOSS BEFORE GAIN ON SALE OF MORTGAGES (135,000) (330,000) 1,203,000
GAIN FROM SALE OF MORTGAGES 5 - - 2,545,000
------------ ------------ --------------
NET INCOME (LOSS) 2 $ (135,000) $ (330,000) $ 3,748,000
============ ============ ==============
NET INCOME (LOSS) PER CLASS A SHARE $ (0.05) $ (0.13) $ 1.45
============ ============ ==============
CASH DISTRIBUTIONS PER CLASS A SHARE $ - $ - $ 15.01
============ ============ ==============
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, 1993 $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
Net loss - - - (135,000) (135,000)
---------- ------- ----------- ------------ ------------
Balance at December 31, 1995 $2,550,000 $13,000 $42,329,000 ($42,737,000) $ 2,155,000
========== ======= =========== ============ ============
</TABLE>
(1) Balances as of December 31, 1993, 1994, and 1995 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,
----------------------------------------
1995 1994 1993
--------- ------------ ------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income (loss) $(135,000) $ (330,000) $ 3,748,000
Adjustments to reconcile net income (loss) to cash flows
from operating activities:
Decrease in interest receivable - - 573,000
Decrease (increase) in other receivables 6,000 (16,000) 25,000
Decrease (increase) in other assets (12,000) 28,000 (126,000)
Increase (decrease) in accounts payable and accrued expenses (43,000) (79,000) 70,000
Decrease in unearned loan fee income - - (215,000)
Decrease in unearned participation income - - (1,544,000)
--------- ------------ ------------
Cash flows provided (used) by operating activities (184,000) (397,000) 2,531,000
--------- ------------ ------------
Cash flows from investing activities:
Investments in securities (165,000) (30,914,000) -
Principal collections of investment securities 340,000 - -
Sale of investment securities - 29,543,000 -
Collection of notes receivable - - 39,400,000
--------- ------------ ------------
Cash flows provided (used) by investing activities 175,000 (1,371,000) 39,400,000
--------- ------------ ------------
Cash flows from financing activities:
Decrease in cash distributions payable - - (430,000)
Increase (decrease) in advances under yield guarantee - - (434,000)
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)
--------- ------------ ------------
Cash flows provided (used) by financing activities - 101,000 (39,503,000)
--------- ------------ ------------
Increase (decrease) in cash and cash equivalents (9,000) (1,667,000) 2,428,000
Cash and cash equivalents at beginning of period 872,000 2,539,000 111,000
--------- ------------ ------------
Cash and cash equivalents at end of period $ 863,000 $ 872,000 $ 2,539,000
========= ============ ============
</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.
During 1993 Angeles and AFC filed for protection under Chapter 11 of the federal
bankruptcy laws.
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. Such prices
approximated market value as of March 15, 1994. 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 1996.
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, 1995, management believes it has
sufficient cash to operate as a going concern through the 1996 fiscal year.
Certain prior years amounts have been reclassified to conform to current year
classifications.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
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,
1995, approximately $823,000, 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.
The Trust includes the assets of the Contingent Claim Trust in its
balance sheet as it has not received any claims and does not expect to receive
any claims. All of the assets of the Contingent Claim Trust are expected to be
returned to the Trust on or before December 31, 1996.
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 years ended December 31, 1995 and 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. The investment of $1,196,000 is held by the APART
Contingent Claim Trust for the benefit of APART.
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 three
years ending December 31, 1995, after deduction of the 1% Class B Shares'
interest (see Note 6).
NOTE 3 - INVESTMENTS
The Trust entered into one investment in 1995 and two investments in 1994
to preserve its REIT status. In 1994 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 and a $133,000 trading
loss which is included with interest expense. The Trust, as of December 31,
1995, continues to hold two investments in securities of the Federal Home Loan
Mortgage Corporation. The investments, held in the Contingent Claim Trust (see
Note 2, Cash and Cash Equivalents, above), have an 8.5% coupon and mature on
January 1, 1996 and June 1, 1996. The Trust maintains these investments at its
original cost which approximates market value.
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 services to the Trust were terminated. The amount
paid to AFC or its affiliate for the one month period ended February 1, 1993
were as follows:
<TABLE>
<CAPTION>
1993
----
<S> <C>
Advisory fees $11,000
Non-accountable expense allowance $ 8,000
Administrative expenses $ 6,000
</TABLE>
The Trust did not pay any fees to Angeles or affiliated entities in 1994
and 1995.
18
<PAGE>
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>
<CAPTION>
<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
-----------
Gain 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
----------------------------------------------------
1995 12/31/95 9/30/95 6/30/95 3/31/95
----------- ---------- ---------- ---------
<S> <C> <C> <C> <C>
Revenue $38 $41 $36 $33
Net (loss) ($38) ($8) ($44) ($45)
Net (loss) per Class A Share ($0.01) $0.00 ($0.02) ($0.02)
Weighted average Class A Shares outstanding 2,550 2,550 2,550 2,550
<CAPTION>
1994 12/31/94 9/30/94 6/30/94 3/31/94
----------- ---------- ---------- ---------
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>
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> <C>
Ronald J. Consiglio 52 Trustee, Chairman, Chief Executive
Officer and President
Jack E. McDonald (1) 55 Trustee
J. D'Arcy Chisholm (1) 64 Trustee
Barry S. Sternlicht 35 Trustee
Anna Merguerian 40 Vice President, Chief Financial Officer
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 served as
Chief Financial Officer from May 1993 to December 1995. As of December 1995 Mr.
McDonald is Chairman of the Audit and Compensation Committee. 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. 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 education 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
Shareholders Capital Corporation, the predecessor company of 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
committees.
21
<PAGE>
Mr. Sternlicht became a Trustee in March 1994. In mid-1993, he founded
Starwood Capital Group, L.P., ("Starwood") a privately owned real estate
investment firm, 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 one of 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 ("HOT"), 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 HOT.
Ms. Merguerian became the Vice President and Secretary of the Trust in
March 1994 and Chief Financial Officer of the Trust in December 1995. 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
McDonald serve on the Audit and Compensation Committee with Mr. McDonald serving
as Chairman.
BOARD OF TRUSTEES AND COMMITTEE MEETINGS. During the fiscal year
ending December 31, 1995, the Trust's Board of Trustees held one regular
meeting.
ITEM 11. EXECUTIVE COMPENSATION
RENUMERATION 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.
EXECUTIVE OFFICERS' COMPENSATION. During the year ended December 31,
1995, Mr. Consiglio received a total of $31,500 for his services as President
and Chief Executive Officer of the Trust, and an additional $12,000 as
22
<PAGE>
compensation for serving on the Board of Trustees. For the year ended December
31, 1995, Mr. McDonald was paid no compensation for his services as Chief
Financial Officer of the Trust, and $9,000 as compensation for serving on the
Board of Trustees.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information as of February 13, 1996
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 1,927 Class
A Shareholders of record as of February 13, 1996. 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
- ------------------------ ------------------------------------------------------------- ------------------ -------
<S> <C> <C> <C>
Class A Shares SAHI Partners, Three Pickwick Plaza, Suite 250, Greenwich, CT 26,020 (2) 1.0%
06830
Class A Shares SAHI Partners 244,100 9.6%
Class A Shares SAHI, Inc., Three Pickwick Plaza, Suite 250, Greenwich, CT 270,120 (3) 10.6%
06830
Class A Shares SWL Acquisition Partners, L.P., Three Pickwick Plaza, Suite 270,120 (3) 10.6%
250, Greenwich, CT 06830
Class A Shares SWL Mortgage Investors, Inc., Three Pickwick Plaza, Suite 250, 270,120 (3) 10.6%
Greenwich, CT 06830
Class A Shares Angelo, Gordon & Co., L.P., 245 Park Avenue, New York, NY 254,700 (4) 9.9%
10167
Class A Shares Pure World, Inc. (formerly American Holdings, Inc.) 376 Main 246,400 (5) 9.7%
Street, Bedminster, NJ 07921
Class A Shares The TCW Group, Inc., 865 S. Figueroa Street, Los Angeles, CA 139,200 (6) 5.4%
90017
Class A Shares J. D'Arcy Chisholm, 340 N. Westlake Blvd., Suite 230, Westlake 733 - (7)
Village, CA 91362
Class A Shares Barry Sternlicht, Three Pickwick Plaza, Suite 250, Greenwich, 270,120 (3) 10.6%
CT 06830
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 (7 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 power 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
23
<PAGE>
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, Amendment 4, filed by Pure World, Inc.,
(formerly American Holdings, Inc.), on February 12, 1996.
(6) As reported on the Schedule 13G filed by the TCW Group, Inc., on February
12, 1996.
(7) Less than .01% of the class (a total of 2,550,000 Class A Shares are
issued and outstanding).
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 were as follows:
<TABLE>
<CAPTION>
1993
----
<S> <C>
Advisory fees $11,000
Non-accountable expense allowance $8,000
Administrative expenses $6,000
</TABLE>
The Trust did not pay any fees to Angeles or affiliated entities in
1994 and 1995.
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 as December 31, 1995 and 1994 13
Statements of Operations for each of the three years in
the period ended December 31, 1995 14
Statements of Changes in Shareholders' Equity for each
of the three years in the period ended
December 31, 1995 15
Statements of Cash Flows for each of the three years in
the period ended December 31, 1995 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, 1995 as follows:
NONE.
(c) Exhibits required by Item 601 of Regulation S-K:
Refer to Exhibit Index of 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
- -------------------------------------------------------------------------
<S> <C>
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)
(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.
</TABLE>
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 February 23, 1996 /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
Trust and in the capacities and on the dates indicated.
Date February 23, 1996 /s/ Ronald J. Consiglio
------------------------------------
Ronald J. Consiglio
Trustee, President and Chief Executive Officer
(Chief Executive Officer)
Date February 23, 1996 /s/ J. D'Arcy Chisholm
------------------------------------
J. D'Arcy Chisholm
Trustee
Date February 23, 1996 /s/ Barry S. Sternlicht
------------------------------------
Barry S. Sternlicht
Trustee
Date February 23, 1996 /s/ Jack E. McDonald
------------------------------------
Jack E. McDonald
Trustee
Date February 23, 1996 /s/ Anna Merguerian
------------------------------------
Anna Merguerian
Vice President, Chief Financial Officer and Secretary
(Principal Financial and Accounting Officer)
27
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM DECEMBER 31,
1995 FORM 10-K AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<CASH> 863,000
<SECURITIES> 1,196,000
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 135,000
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 2,194,000
<CURRENT-LIABILITIES> 39,000
<BONDS> 0
0
0
<COMMON> 2,563,000
<OTHER-SE> (408,000)
<TOTAL-LIABILITY-AND-EQUITY> 2,194,000
<SALES> 148,000
<TOTAL-REVENUES> 148,000
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 283,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (135,000)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (135,000)
<EPS-PRIMARY> (0.05)
<EPS-DILUTED> (0.05)
</TABLE>
