<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1997 OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934 FOR THE TRANSITION PERIOD FROM____________TO_____________
Commission File Number 1-10202
ANGELES MORTGAGE INVESTMENT TRUST
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
California 95-6890805
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(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
340 North Westlake Boulevard, Suite 230, Westlake Village, California 91362
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (805) 449-1335
No Change
- --------------------------------------------------------------------------------
Former Name, Former Address and Former Fiscal Year If Changed Since Last Report
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on
which registered
Class A Shares American Stock Exchange
- --------------------------------------------------------------------------------
Securities registered pursuant to Section 12(g) of the Act:
NONE
- --------------------------------------------------------------------------------
(Title of class)
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.
[X] Yes [ ] No
AS OF JULY 31, 1997 ANGELES MORTGAGE INVESTMENT TRUST HAS 2,617,000 CLASS A
SHARES OUTSTANDING.
Total Pages 13
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ANGELES MORTGAGE INVESTMENT TRUST
INDEX
<TABLE>
<CAPTION>
Page No.
--------
<S> <C>
Part I. Financial Information
Item 1. Balance Sheets - June 30, 1997 and December 31, 1996 3
Statements of Operations - For the three and six months
ended June 30, 1997 and 1996 4
Statement of Stockholders' Equity 5
Statements of Cash Flows - For the six months ended
June 30, 1997 and 1996 6
Notes to the Financial Statements 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 9
Part II. Other Information
Item 1. Legal Proceedings 12
Item 6. Exhibits and Reports on Form 8-K 12
</TABLE>
2
<PAGE> 3
ANGELES MORTGAGE INVESTMENT TRUST
BALANCE SHEETS
<TABLE>
<CAPTION>
JUNE 3O DECEMBER 31
1997 1996
------------ ------------
<S> <C> <C>
ASSETS
Notes Receivable
Mortgage notes receivable $ 36,358,000 $ 26,043,000
Promissory notes receivable (primarily due
from affiliates) 11,904,000 14,175,000
------------ ------------
48,262,000 40,218,000
Less: Allowances for estimated losses (11,760,000) (12,100,000)
------------ ------------
36,502,000 28,118,000
Foreclosed real estate held for sale 4,484,000 5,070,000
Cash 2,929,000 9,789,000
Accrued interest receivable 309,000 174,000
Prepaid expenses and other assets 171,000 224,000
------------ ------------
Total assets $ 44,395,000 $ 43,375,000
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Accounts payable and accrued expenses $ 167,000 $ 287,000
------------ ------------
Total liabilities 167,000 287,000
------------ ------------
Shareholders' equity:
Class A Shares (2,617,000 issued and outstanding,
$1.00 par value, unlimited shares authorized) 2,617,000 2,617,000
Class B Shares (1,675,113 issued and outstanding,
$.01 value, unlimited shares authorized) 14,000 14,000
Additional paid-in capital 50,199,000 50,199,000
Accumulated distributions in excess of cumulative net
income (8,602,000) (9,742,000)
------------ ------------
Total shareholders' equity 44,228,000 43,088,000
------------ ------------
Total liabilities and shareholders' equity $ 44,395,000 $ 43,375,000
============ ============
</TABLE>
The accompanying notes are an integral part of the financial statements
3
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ANGELES MORTGAGE INVESTMENT TRUST
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30 JUNE 30
-------------------------- ----------------------------
1997 1996 1997 1996
----------- ----------- ----------- ------------
<S> <C> <C> <C> <C>
REVENUE:
Interest income $1,357,000 $ 621,000 $ 2,525,000 $ 1,339,000
Rental income 32,000 10,000 99,000 76,000
Gain from sale of real property 28,000 - 28,000 184,000
Recovery of bad debts 341,000 - 341,000 186,000
---------- ----------- ----------- -----------
Total revenue 1,758,000 631,000 2,993,000 1,785,000
---------- ----------- ----------- -----------
COSTS AND EXPENSES:
Property operating expenses - 54,000 - 63,000
Legal fees 136,000 (617,000) 196,000 (426,000)
General and administrative 147,000 154,000 422,000 391,000
Amortization 13,000 7,000 31,000 13,000
---------- ----------- ----------- -----------
Total costs and expenses 296,000 (402,000) 649,000 41,000
---------- ----------- ----------- -----------
NET INCOME $1,462,000 $ 1,033,000 $ 2,344,000 $ 1,744,000
========== =========== =========== ===========
NET INCOME PER CLASS A SHARE $ 0.55 $ 0.37 $ 0.89 $ 0.62
========== =========== =========== ===========
CASH DISTRIBUTIONS PER CLASS A SHARE $ 0.24 $ 0.12 $ 0.46 $ 0.22
========== =========== =========== ===========
WEIGHTED AVERAGE CLASS A SHARES
OUTSTANDING 2,617,000 2,756,800 2,617,000 2,791,750
========== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
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ANGELES MORTGAGE INVESTMENT TRUST
STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
ACCUMULATED
DISTRIBUTIONS IN
ADDITIONAL EXCESS OF
CLASS A CLASS B PAID-IN CUMULATIVE NET
SHARES SHARES CAPITAL INCOME TOTAL
------ ------ ---------- ---------------- -----
<S> <C> <C> <C> <C> <C>
Balance at December 31, 1996 $2,617,000 $14,000 $ 50,199,000 ($ 9,742,000) $ 43,088,000
Distributions paid to Class A Shareholders - - - (1,204,000) (1,204,000)
Net income - - - 2,344,000 2,344,000
---------- ------- ------------ ------------ ------------
Balance at June 30, 1997 $2,617,000 $14,000 $ 50,199,000 ($ 8,602,000) $ 44,228,000
========== ======= ============ ============ ============
</TABLE>
The accompanying notes are an integral part of the financial statements
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ANGELES MORTGAGE INVESTMENT TRUST
STATEMENTS OF CASH FLOW
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30
----------------------------
1997 1996
----------- -----------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 2,344,000 $ 1,744,000
Adjustments to reconcile net income to cash
flows from operating activities:
Gain from sale of real estate (28,000) (184,000)
Recovery of bad debt (341,000) (186,000)
Interest income in exchange for notes receivable (864,000) -
Amortization of loan fees 31,000 13,000
Decrease (increase) in interest receivable (135,000) 99,000
Decrease in prepaid expenses and other assets 24,000 259,000
Decrease in accounts payable and
accrued expenses (120,000) (57,000)
Increase (decrease) in unearned loan fee income 66,000 (18,000)
----------- -----------
Cash flows from operating activities 977,000 1,670,000
----------- -----------
Cash flows from investing activities:
Funding of notes receivable (9,850,000) (4,000)
Principal collections of notes receivable 2,604,000 425,000
Proceeds from sale of real property 613,000 607,000
Investment in securities - (979,000)
Principal collections of investment securities - 979,000
----------- -----------
Cash flows from investing activities (6,633,000) 1,028,000
----------- -----------
Cash flows from financing activities:
Draw on bank line of credit - 430,000
Repayment of bank line of credit - (430,000)
Purchase of Class A Shares - (1,730,000)
Distributions to Class A Shareholders (1,204,000) (622,000)
----------- -----------
Cash flows used in financing activities (1,204,000) (2,352,000)
----------- -----------
Increase (decrease) in cash and cash equivalents (6,860,000) 346,000
Cash and cash equivalents
At beginning of period 9,789,000 1,229,000
----------- -----------
At end of period $ 2,929,000 $ 1,575,000
=========== ===========
Schedule of noncash financing and investing activities:
Carrying value of real estate acquired in satisfaction of
notes receivable with carrying values of $1,877,000 $ - $ 2,019,000
Recast past due interest into principal on notes receivable - 2,454,000
Note receivable received via lawsuit settlement - 75,000
</TABLE>
The accompanying notes are an integral part of the financial statements.
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PART I. FINANCIAL INFORMATION
ANGELES MORTGAGE INVESTMENT TRUST
NOTES TO FINANCIAL STATEMENTS
NOTE 1 - The accompanying financial statements have not been audited by
independent certified accountants, but in the opinion of management, all of the
adjustments necessary to present fairly the financial position of Angeles
Mortgage Investment Trust (the "Trust") and the results of its operations and
its cash flows at the dates and for the periods indicated have been included.
Certain prior year amounts have been reclassified to conform to current year
classifications.
The accompanying financial statements have been prepared in conformity
with generally accepted accounting principles for interim financial information
and with the instructions to Form 10-Q and Article 10 of Regulation S-X.
Accordingly they do not include all the information and footnotes required by
generally accepted accounting principals for complete financial statements.
Operating results for the three and six month periods ended June 30,
1997 are not indicative of the results that may be expected for the year ending
December 31, 1997.
For further information, refer to the financial statements and notes
thereto included in the Trust's annual report on Form 10-K for the year ended
December 31, 1996.
NOTE 2 - The net income per Class A Share was based on 2,617,000 and 2,756,800
weighted average Class A Shares outstanding during the three months ended June
30, 1997 and 1996, respectively and 2,617,000 and 2,791,750 weighted average
Class A Shares outstanding during the six months ended June 30, 1997 and 1996,
respectively, after deduction of the 1% interest for Class B Shares.
NOTE 3 - In May 1997 the Trust's $5 million line of credit was renewed through
October 1997 with the ability to extend the line of credit through April 1998 at
the Trust's option. The line of credit requires monthly interest only payments
based upon prime plus 1/2% and a $12,500 commitment fee paid quarterly. During
the three and six months ended June 30, 1997, the Trust did not draw on the line
of credit.
NOTE 4 - During the second quarter ended June 30, 1997, the Trust recorded
$340,500 recovery of bad debt which represents proceeds received from the loan
referred to by the Trust as "Northprior," for which an allowance for estimated
loss had been established. The Trust may
7
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receive additional proceeds from the Northprior loan from excess amounts, if
any, held in an escrow account to remediate environmental problems at the
property.
NOTE 5 - In June 1996, the Trust obtained through foreclosure a 57% joint
venture interest in a 160-acre parcel of land in Ocala, Florida. The property
was collateral for a Trust loan in the amount of $1,050,000, referred to as
"Rolling Greens." The Trust did not recognize any loss on the foreclosure as a
reserve of $465,000 had been previously provided. The property was sold in June
1997, for $1,175,000, of which $672,000 of the sale price represented the Trusts
57% joint venture interest in the property. The Trust received net cash proceeds
of approximately $613,000 realizing a $28,000 gain on the sale.
NOTE 6 - During the quarter ended June 30, 1997, the Trust restructured the
first and second mortgage loans it holds on three properties known as
Hospitality Inns (three separate properties and locations). All six mortgages
had matured in October 1996; however, the borrowers have maintained the monthly
debt service current through the effective date of the restructuring of the
loans, April 30, 1997. The loan modifications for each property provided that
the first and second mortgages be combined into one first mortgage loan. In
addition to combining the first and second mortgages on each property, the Trust
also capitalized and recognized as interest income, a total of approximately
$440,000 of accrued interest and late fees for all three loans. Each
restructured loan requires monthly principal and interest based upon the stated
note rate of 11% for two of the loans and 11.25% for the third loan on the
reconstituted loan balance, with principal paid based on a 30 year amortization.
The current monthly debt service the Trust receives from this restructuring is
$50,000. The Trust also received a one-point loan fee in conjunction with the
loan restructuring totaling approximately $52,000.
NOTE 7 - On July 21, 1997, the Trust announced that it had executed a definitive
merger agreement to merge with Insignia Properties Trust ("IPT"), a REIT
majority owned by Insignia Financial Group, Inc., and its affiliates. The
definitive agreement provides that each Trust Class A share will be valued at
$16.25 per share and exchanged for 1.625 shares of IPT Common Stock valued at
$10.00 per share. The exchange ratio will be adjusted to reflect dividends and
earnings of the respective trusts from December 31, 1996 through the closing of
the transaction. The proposed transaction is contingent upon, among other
conditions, the Trust's receipt of a fairness opinion and the approval of the
proposed transaction by certain governmental authorities and by the shareholders
of the Trust and IPT.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES
The Trust has invested in loans (the "Trust Loans") which were made
principally to partnerships that were affiliated with Angeles Corporation
("Angeles"), parent company to the Trust's prior advisor, Angeles Funding
Corporation (the "Advisor" or "AFC"), but the majority of which are now
controlled by Insignia Financial Group, Inc. ("Insignia").
In February 1993, the Trust's policy of distributing monthly the Net
Cash from operations to its Class A Shareholders was suspended as a result of
the failure of the Insignia partnerships and entities affiliated with Angeles to
fully service their respective Trust Loan obligations and Angeles' inability to
fulfill its guarantee of a minimum annual distribution of $2.00 per Class A
Share through May 1994. The Trust announced on December 20, 1995 that it had
reduced its bank and other debt to zero and scheduled its first dividend payment
in three years to Class A Shareholders of record on January 22, 1996 which was
paid on February 13, 1996, in the amount of $0.10 per Class A Share. During the
twelve months ended December 31, 1996 the Trust paid total dividends of $0.52
per share to Class A shareholders. A second quarter dividend of $0.24 per Class
A Share was paid on May 5, 1997, to shareholders of record on April 14, 1997. In
addition, during the second quarter ended June 30, 1997 the Trust declared a
third quarter dividend of $0.27 per Class A share to shareholders of record on
July 14, 1997 and payable on August 5, 1997.
In May 1997, the Trust's $5 million line of credit with the Bank was
renewed through October 1997, with the ability to renew for an additional six
months to April 1998 at the Trust's option. The line of credit with the Bank
allows the Trust to draw on such line to facilitate the foreclosure process on
Trust loans. The line of credit requires monthly interest only payments based
upon prime plus 1/2% and a $12,500 commitment fee paid quarterly. During the six
month period ended June 30, 1997, the Trust did not draw on the line of credit.
The Trust's liquidity is dependent upon its borrowers having sufficient
cash to pay interest and principal payments as they become due. In February
1993, a significant number of the Insignia Partnerships failed to service their
debt obligations under the Trust Loans. The Trust has since completed the
process of restructuring the majority of the Trust Loans. The restructured loan
terms typically include a reduction in the interest pay rate, an extension of
the loan term, payment of at least net cash flow from the operation of the
relevant property on a current basis and a modest increase in the principal
balance of the loan as consideration for the modification.
In February 1997, the Trust made its first new loan since January 1993,
in the amount of $5,000,000 secured by first deeds of trust on three
manufactured home parks located in Texas. This new loan requires interest only
payments at 8.9% and matures in December 2003. In April 1997, the Trust made a
second new loan in the amount of $2,950,000 secured by a first deed of
9
<PAGE> 10
trust on a 628,000 square foot industrial warehouse located in Martinsville,
Virginia. This loan requires interest only payments at 11% and matures in April
1998. In June 1997 the Trust made a new loan in the amount of $1,900,000 secured
by a first deed of trust on four manufactured home parks located in Wyoming.
This new loan requires interest only payments at 9.07% and matures in December
2003.
The Trust's management, on a quarterly basis, reviews the carrying
value of the Trust's Loans and properties held for sale. Generally accepted
accounting principles require that the carrying values of a note receivable or
property held for sale cannot exceed the lower of its carrying amount or its
estimated net realizable value. The estimate of net realizable value is based on
management's review and evaluation of the collateral properties as well as
recourse provisions included in certain notes receivable. The allowance for loan
loss as of June 30, 1997 was approximately $12 million. However, the provision
for loss is an estimate which is inherently uncertain and depends on the outcome
of future events. The Trust's estimates are based on an analysis of the loan
portfolio, composition of the loan portfolio, the value of collateral and
current economic conditions.
The Trust believes that its current cash flow from operations is
sufficient to provide for payment of its operating costs and provide for
distributions to shareholders.
As previously announced in a press release on July 21, 1997, the Trust
has executed a definitive merger agreement to merge with Insignia Properties
Trust ("IPT"), a REIT majority owned by Insignia and its affiliates. The
definitive agreement provides that each Trust Class A share will be valued at
$16.25 per share and exchanged for 1.625 shares of IPT Common Stock valued at
$10.00 per share. The exchange ratio will be adjusted to reflect dividends and
earnings of the respective trusts from December 31, 1996 through the closing of
the transaction. The proposed transaction is contingent upon, among other
conditions, the Trust's receipt of a fairness opinion and the approval of the
proposed transaction by certain governmental authorities and by the shareholders
of the Trust and IPT. IPT's business consists primarily of acquiring and owning
interests in multifamily residential properties through ownership of limited and
general partner interests in limited partnerships, which hold such real estate
properties. IPT and its affiliated operating limited partnership own an
aggregate of from 1% to 54% of the ownership interests of entities which own, in
the aggregate, approximately 195 properties containing approximately 41,800
residential units and approximately 4,673,000 square feet of commercial space.
RESULTS OF OPERATIONS
Interest income for the three and six months ended June 30, 1997
increased significantly when compared to the same periods ending in 1996. Such
increase is primarily due to the restructuring of the three Hospitality Inn
second mortgage loans, which occurred in April 1997 and the LaSalle loan which
was effective in February 1997. Upon modifying these loans the Trust capitalized
into principal accrued interest and late fees of approximately $440,000 relating
to the three Hospitality Inn second mortgage loans, during the quarter ended
June 30,
10
<PAGE> 11
1997, and $409,000 for the LaSalle loan during the first quarter ended
March 31, 1997. In addition, interest income has increased significantly in 1997
due to previously modified loans which are now paying debt service either at the
stated interest rate or on a cash flow basis and newly funded loans during the
six months ended June 30, 1997 in the amount of $9,850,000. Funds for such new
loans came from the repayment of non-performing loans and loans paying at a
lower rate of interest and from the sale of a property obtained through
foreclosure. Rental income increased for the three and six months ended June 30,
1997 when compared to the same periods in 1996 due to improved occupancies.
The Trust recognized additional income for the three months ended June
30, 1997 relating to recovery of bad debt. During the three months ended June
30, 1997, the Trust received a partial principal repayment of $340,500 on a loan
for which an allowance for estimated loss has been previously provided. In
addition during the three months ended June 30, 1997, the Trust recognized a
gain from the sale of its joint venture interest in the Rolling Greens property
in the amount of $28,000.
The increase in legal fee expenses for the three months ended June 30,
1997 when compared to the previous same period, is due to the settlement in June
1996 of the State and Federal claims the Trust brought against others relating
to the use of non-public information by a group of investors. In conjunction
with this settlement, the Trust offset $764,000 in settlement proceeds against
legal expenses in June 1996.
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PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
No significant changes have occurred relating to the lawsuit as
reported in the Trust's December 31, 1996 Form 10-K.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a. EXHIBITS
None.
b. REPORTS ON FORM 8-K
None.
Note: All items required under Part II of Form 10-Q which are applicable have
been reported herein.
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SIGNATURES
Pursuant to the requirements 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 MORTGAGE INVESTMENT TRUST
By /s/ Anna Merguerian
-------------------------------------
Anna Merguerian
Chief Financial Officer
Date: August 6, 1997
13
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
<CASH> 2,929,000
<SECURITIES> 0
<RECEIVABLES> 53,226,000
<ALLOWANCES> (11,760,000)
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 44,395,000
<CURRENT-LIABILITIES> 167,000
<BONDS> 0
0
0
<COMMON> 44,228,000
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 44,395,000
<SALES> 0
<TOTAL-REVENUES> 2,993,000
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 649,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 2,344,000
<INCOME-TAX> 0
<INCOME-CONTINUING> 2,344,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,344,000
<EPS-PRIMARY> 0.89
<EPS-DILUTED> 0.89
</TABLE>
