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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-K
[ ] 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, 1997
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. 1-10202
ANGELES MORTGAGE INVESTMENT TRUST
(Exact name of registrant as specified in its charter)
California 95-6890805
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification Number)
340 North Westlake Blvd., Suite 230
Westlake Village, California 91362
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (805) 449-1335
Securities registered pursuant to Section 12(b) of the Act:
Name of Exchange on which
Title of each class: registered:
Class A shares, $1.00 par American Stock Exchange
value Angeles Mortgage
Investment Trust
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. YES [X] NO [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]
The aggregate market value of the Class A Shares held by non-affiliates,
based upon a closing price of $18.50 on February 9, 1998, was approximately
$46,235,000.
As of February 9, 1998 there were 2,617,000 shares of Angeles Mortgage
Investment Trust Class A, $1.00 par value outstanding and 1,675,113 shares of
Angeles Mortgage Investment Trust Class B, $0.01 par value outstanding.
DOCUMENTS INCORPORATED BY REFERENCE:
(1) PRELIMINARY PROXY STATEMENT TO BE SENT TO SHAREHOLDERS MID-1998.
Total Pages 51
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<TABLE>
<CAPTION>
TABLE OF CONTENTS
<S> <C>
PART I.......................................................................3
ITEM 1. BUSINESS.........................................................3
Management and Employees...................................................5
Competition................................................................6
Investment Policy..........................................................6
ITEM 2. PROPERTIES.......................................................7
ITEM 3. LEGAL PROCEEDINGS................................................8
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS..............8
PART II......................................................................9
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND
RELATED STOCKHOLDER MATTERS......................................9
General Matters............................................................9
ITEM 6. SELECTED FINANCIAL DATA.........................................11
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS.............................12
General...................................................................12
Fiscal year 1997 compared to 1996.........................................12
Fiscal year 1996 compared to 1995.........................................13
Liquidity and Capital Resources...........................................14
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.....................18
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURES...........................35
PART III....................................................................36
ITEM 10. TRUSTEES AND EXECUTIVE OFFICERS.................................36
Information Regarding the Board of Trustees and Its Committees............37
ITEM 11. EXECUTIVE COMPENSATION..........................................38
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT..................................................39
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS..................41
PART IV.....................................................................42
ITEM 14. EXHIBITS, FINANCIAL STATEMENTS AND SCHEDULES, AND
REPORTS ON FORM 8-K.............................................42
</TABLE>
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Part I
ITEM 1 BUSINESS
Angeles Mortgage Investment Trust ("AMIT" or the "Trust") is an
unincorporated California business trust which was organized to qualify as a
REIT for federal income tax purposes. AMIT was originally organized as a
publicly held limited partnership that began offering limited partnership units
on August 18, 1986 and commenced operations on July 9, 1987. In January 1989,
the holders of a majority of the limited partnership units elected to transfer
all of the partnership's assets to AMIT. Presently AMIT's capital structure
consists of 2,617,000 outstanding AMIT Class A Shares and 1,675,113 outstanding
AMIT Class B Shares. The AMIT Class A Shares are registered under the Exchange
Act and listed on the American Stock Exchange under the symbol "ANM". Each AMIT
Class A Share and each AMIT Class B Share is entitled to one vote with respect
to all matters put before AMIT's shareholders.
Angeles Funding Corporation ("AFC"), a wholly owned subsidiary of
Angeles Corporation ("Angeles") served as advisor to AMIT until February 1993.
Through AFC, AMIT had invested in various types of intermediate-term real estate
loans (the "AMIT Loans"). Prior to December 1996, the majority of the AMIT Loans
were made to partnerships that were once controlled by Angeles and are now
controlled by Insignia Financial Group, Inc., a Delaware corporation, which
through MAE GP, its affiliate, holds the Trust's Class B Shares, (Insignia
Financial Group, Inc. and its affiliates are collectively referred to as
"Insignia" in this document). These partnerships include private and public real
estate limited partnerships which were formed to acquire, own and operate
income-producing real properties. As of December 31, 1997, there were 23 AMIT
Loans outstanding, with an aggregate portfolio balance of approximately $37
million, net of loan loss reserves, and AMIT owned as a result of foreclosures
or receipt of deeds in lieu of foreclosure on certain assets securing certain
AMIT Loans approximately $4.5 million of real property. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations of
AMIT."
By virtue of its ownership of the Class B Shares, Insignia owns a 1%
interest in the profits, losses, credits and distributions of the Trust and 39%
of the Trust's total voting shares. As discussed in Note 7, "Notes to Financial
Statements", the Trust and MAE GP entered into an agreement, effective April
1995, pursuant to which MAE GP granted to the Trust the option to purchase all
the Class B Shares currently owned by MAE GP. The option is exercisable by the
Trust in 2005 for approximately $94,000. During the 10 year period that the
option is outstanding, all of the Class B Shares are required to vote, pursuant
to an irrevocable proxy, with the majority of Class A Shares in connection with
any proposal involving the Trust and Insignia or the election of any Trustee
nominated by MAE GP which is an insider affiliate of MAE GP including Insignia.
Such majority will be determined without consideration of the votes of "Excess
Class A Shares," as defined in the Trust's Declaration of Trust. With respect to
all other matters, MAE GP can vote the Class B Shares without restriction.
Beginning in February 1993, AMIT faced significant liquidity problems
caused by (i) the failure of a significant number of the obligors of the AMIT
Loans (primarily partnerships controlled by MAE) to fully service outstanding
debt obligations under their respective AMIT Loans, and (ii) Angeles' inability
to fully service its debt obligations under its promissory note payable to AMIT
or perform its other obligations to AMIT under its third party loan guarantees
and shareholder distribution guarantees. As of February 1993, approximately 75%
of the AMIT Loans were in payment default. In February 1993, Angeles informed
AMIT that it was unable to perform its obligations under its guarantees because
of liquidity problems caused by its inability to complete sales or refinancings
of real estate assets, its inability to fully realize asset values in a
continuing sluggish and depressed real estate market and the failure of the
obligors of the AMIT Loans to service fully, if at all, their debt obligations
to Angeles. On May 3, 1993, Angeles filed for protection under Chapter 11 of the
federal bankruptcy code. Angeles' failure to perform under its guarantees,
together with the defaults on AMIT Loans, resulted in AMIT's suspension of cash
distributions to the holders of AMIT Class A Shares starting in February 1993
and resuming in February 1996. AMIT filed various claims against Angeles and
eventually reached agreement with Angeles and the Committee of Creditors Holding
Unsecured Claims of Angeles to settle all claims between AMIT and Angeles. The
settlement agreement was approved by the Bankruptcy Court in March 1995. Under
the agreement, AMIT received over $15 million in cash, notes, and AMIT Class A
Shares.
Since February 1993 (when AMIT terminated its advisory agreement with
AFC), AMIT has restructured its loan portfolio and has paid in full its then
outstanding bank loan of $20 million. However, certain AMIT
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Loans, which in the aggregate have a carrying value (net of loan loss reserves)
of approximately $1.3 million (constituting approximately 3% of AMIT's net
investments), are currently in default with respect to debt service obligations.
AMIT's lending is primarily concentrated in secured and, to a lesser extent,
unsecured real estate loans. The realizable value of real estate collateralizing
notes receivable or acquired in loan foreclosure proceedings can only be
determined based upon a sales negotiation with independent third parties in an
arm's length transaction. In addition, considering that, in most cases, it is
the proceeds of sale and/or refinancing which will enable AMIT to receive funds,
the actual proceeds may be significantly impacted by the condition of the real
estate industry at the time the principal amounts become due or properties are
sold. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations of AMIT" beginning on page 7.
In February 1993, AMIT's policy of distributing monthly the net cash
from operations to the holders of AMIT Class A Shares was suspended as a result
of the failure of certain obligors of AMIT Loans, including certain partnerships
controlled by MAE and Angeles to fully service their respective AMIT Loan
obligations and Angeles' inability to fulfill its guarantee of a minimum annual
distribution of $2.00 per AMIT Class A Share through May 1994. AMIT announced on
December 20, 1995 that it had reduced its bank and other debt to zero and had
declared its first dividend payment in three years to holders of AMIT Class A
Shares of record on January 22, 1996 to be payable on February 13, 1996, in the
amount of $0.10 per share. During the twelve months ended December 31, 1996,
AMIT paid total dividends of $0.52 per share to the holders of AMIT Class A
Shares. During the twelve months ended December 31, 1997, AMIT has paid total
dividends of $1.03 per share to the holders of AMIT Class A Shares. In addition,
during the fourth quarter ended December 31, 1997, AMIT declared a first quarter
dividend of $0.32 per AMIT Class A Share to shareholders of record on January
13, 1998 and payable on February 11, 1998.
AMIT will terminate December 31, 2003, unless extended to no later than
December 31, 2015 by vote of the shareholders of AMIT, or by the AMIT Board to
no later than December 31, 2020 without a vote of the shareholders of AMIT if
the AMIT Board believes that termination at such time would result in material
under-realization of the value of AMIT's assets. Upon liquidation of AMIT,
disposition proceeds will be distributed to the shareholders.
An entity will qualify for taxation as a REIT if it satisfies certain
income and assets tests. Among these tests is a requirement that a certain
percentage of assets constitute "real estate assets" and a certain percentage of
income be derived from such assets. AMIT's loan assets are collateralized in a
variety of ways, and some loans have not been collateralized. AMIT has not
requested or obtained an IRS determination that any of its assets qualify as a
"real estate asset", and has not obtained an opinion of counsel that it
currently qualifies as a REIT. If AMIT were to fail to qualify as a REIT in any
taxable year, AMIT would not be allowed a deduction for dividend distributions
in computing taxable income and would be subject to federal income tax on its
taxable income at regular corporate rates. AMIT believes that it has operated in
a manner designed to qualify as a REIT. However, if the Internal Revenue Service
were successfully to challenge the qualification of AMIT's REIT assets, AMIT
would be subject to federal income tax only after the utilization of AMIT's net
operating losses.
On November 26, 1996 a Schedule 13D was filed by Insignia Financial
Group Inc. ("Insignia"), with the Securities and Exchange Commission ("SEC"),
disclosing its ownership of a total of approximately 6% of Class A shares of
Angeles Mortgage Investment Trust (the "Trust") and describing the investment
intentions underlying the ownership. Insignia has filed subsequent amendments to
Schedule 13D and reported that their ownership, from subsequent sales of Class A
shares, was reduced to approximately 5% of the Trust's outstanding Class A
shares. The SEC's rules and regulations require that when a person or entity
acquires more than 5% of a publicly held entities' securities a Schedule 13D
must be filed. In addition to the Class A shares now owned by Insignia, it has
owned 1,675,113 shares of Class B stock of the Trust for approximately four
years. These Class B shares represent approximately 39% of the outstanding votes
while representing a 1% economic interest in the Trust. The Class B Shares are
subject to an irrevocable proxy granted to the Trust to vote all the Class B
Shares with the majority of Class A Shares in connection with any proposal
involving the Trust and Insignia or any affiliate thereof or election of any
Trustee affiliated with Insignia.
During the last two years the Trust has held preliminary discussions
with several unrelated real estate investment trusts and other real estate
companies regarding the Trust's acquisition of those entities' shares or assets.
On October 16, 1996, at Insignia's invitation, the initial meeting between the
Trust's management and a senior member of Insignia's management was held. At
that meeting the subject of combining the Trust and various assets
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held by Insignia was introduced for the first time. Such discussions resulted in
the filing of a preliminary Proxy Statement on Schedule 14A relating to the
proposed merger of a subsidiary of Insignia with the Trust.
On July 18, 1997, AMIT, Insignia Properties Trust ("IPT"), Insignia and
MAE GP entered into the Merger Agreement which, provides for, among other
things, the Merger of AMIT with and into IPT, with IPT surviving the Merger.
Upon consummation of the Merger the separate existence of AMIT will cease. A
Special Meeting of AMIT shareholders will be called to consider and vote, a
proposal, to approve and adopt the Merger Agreement and the transactions
contemplated thereby, including the merger of AMIT with and into IPT, with IPT
being the surviving entity (the "Merger"), and approve the amendment of AMIT's
Declaration of Trust (the "Trust Amendment") to permit AMIT to merge and
consolidate with other entities subject to the required vote of the AMIT Board
and AMIT's shareholders (collectively, the "Merger Proposal"). It is currently
expected that the Special Meeting of Shareholders will convene in mid 1998. A
proxy statement will be circulated to all AMIT shareholders in advance of the
meeting, containing information on the proposed merger.
Pursuant to the Merger Agreement, each outstanding AMIT Class A Share
will be converted into IPT Common shares (the "Class A Exchange Ratio"). The
Class A Exchange Ratio is determined by adjusting the base exchange values set
in the Merger Agreement of $16.25 per AMIT Class A Share and $10.00 per IPT
Common Share to account for dividends paid by AMIT since December 31, 1996 and
by IPT since January 31, 1997. The Class A Exchange Ratio is subject to further
adjustment should either AMIT or IPT declare any additional dividends prior to
the Merger. No fractional IPT Common Shares will be issued. In lieu of any
fractional shares, an AMIT shareholder otherwise entitled to a fractional IPT
Common Share will receive cash from IPT in an amount determined by multiplying
such fractional share amount by the IPT Share Value.
This annual report on Form 10-K contains statements which constitute
"forward-looking statements" within the meaning of the Private Securities
Litigation Reform Act of 1995. These statements appear in a number of places and
can be identified by the use of forward-looking terminology such as "believes,"
"expects," "may," "estimates," "will," "should," "plans," or "anticipates" or
the negative thereof or other variations thereon or comparable terminology, or
by discussions of strategy. Readers are cautioned that any such forward-looking
statements are not guarantees of future performance and involve significant
risks and uncertainties, and that actual results may vary materially from those
in the forward-looking statements as a result of various factors. These factors
include the effectiveness of management's strategies and decisions, general
economic and business conditions, developments in technology, new or modified
statutory or regulatory requirements and changing prices and market conditions.
This report identifies other factors that could cause such differences. No
assurance can be given that these are all of the factors that could cause actual
results to vary materially from the forward-looking statements.
MANAGEMENT AND EMPLOYEES
The general policies and supervision of AMIT are overseen by the AMIT
Board, which consists of four trustees.
AMIT has three employees. Upon the 1993 termination of AFC's advisory
and administrative services, AMIT engaged personnel to advise and administer its
operations. The shareholders of AMIT have no right to participate in the
management or conduct of AMIT's business and affairs.
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COMPETITION
The business in which the Trust is engaged is highly competitive, and
the Trust is not a significant factor in its industry. The Trust competes with
significant numbers of organizations (including banks, savings and loan
associations, insurance companies, other lending institutions and other similar
limited partnerships and trusts) with respect to its financing activities.
INVESTMENT POLICY
AMIT's Declaration of Trust authorizes the AMIT Board to invest in a
wide variety of investments. Investments may be made in various combinations and
may involve participations with other persons, including affiliates. Such
investments may incorporate a variety of real property equity and financing
techniques, including partnerships, joint ventures, purchase and leasebacks, and
mortgages. AMIT may also invest in real property and interests therein.
Notwithstanding this broad authorization, it has always been the principal
investment objective and policy of AMIT to invest primarily in loans secured by
real property. There are no limitations on the geographical area or areas or the
types of loans or of real property securing such loans in which AMIT may invest.
Originally, AMIT invested primarily in second mortgages, however, in recent
years there have been more first mortgage investments. The real properties
securing the AMIT Loans have included raw land, office buildings, apartment
buildings, shopping centers, hotels, industrial and commercial properties and
mobile home parks.
To the extent that AMIT has assets not invested in real property and
interests therein, it may, subject to the prohibitions discussed below, invest
them in obligations of the United States government, any state, territory or
possession, or any agency or political subdivision of any of the above;
evidences of deposits in, or obligations of, banking institutions, state and
federal savings and loan associations, and savings institutions; and other
securities, liquid short term investments and property.
In making investments, AMIT is subject to certain restrictions contained
in its Declaration of Trust. It may not invest more than 10% of the Trust
Proceeds (as defined below) directly in the equity ownership of real estate.
"Trust Proceeds" is the sum of $56,600,000 (the total contributions made to
AMIT's predecessor), AMIT borrowings and the proceeds from AMIT equity and debt
offerings. Since AMIT has never made any equity or debt offerings and it
currently has no borrowings, the Trust Proceeds presently amount to $56,600,000.
AMIT may not acquire or fund any AMIT Loan which provides for an initial term of
more than 15 years unless such longer term is approved by a majority of the AMIT
Board. AMIT loans have typically had a scheduled maturity of three to ten years.
AMIT may not invest in or make a loan to any one borrower if the principal
amount of such loans would exceed, in the aggregate, 40% of the Trust Proceeds
at the time the loan is made. For purposes of this limitation, each affiliate of
Insignia is treated individually and loans to such affiliates are not
aggregated. AMIT may not invest in or make a loan secured by any one property or
asset if the principal amount of such loan would exceed, in the aggregate, an
amount equal to 20% of the Trust Proceeds. AMIT may not invest in or make loans
secured by one property or asset if the aggregate amount of all loans secured by
such property or asset which are equal or senior to the loans, plus the
principal amount of the loans, would exceed an amount equal to 85% of the
estimated value of such property or asset, unless a majority of the AMIT Board
determines that the terms of such loans are reasonable to AMIT.
Notwithstanding the foregoing limitations or any other provision of
AMIT's Declaration of Trust, when an obligor to AMIT is in default under the
terms of any obligation (including an AMIT Loan), the AMIT Board has the power
to pursue any remedies permitted by law which, in its sole judgment, are in the
interest of AMIT, and the AMIT Board has the power to receive and hold any
investment and to enter into any commitment or obligation on behalf of AMIT in
connection with or in pursuit of such remedies which, in the sole judgment of
the AMIT Board, is necessary or desirable for the purpose of acquiring property
and disposing of property acquired in the pursuit of such remedies. From time to
time, AMIT acquires properties through the exercise of such remedies. All
foreclosed properties are held for sale.
AMIT's Declaration of Trust provides that the AMIT Board shall not
invest in commodities, foreign currencies or bullion except in connection with
investments in other property, engage in any material trading
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activities with respect to any of the assets of AMIT, issue redeemable
securities or engage in the underwriting or public distribution of securities
issued by others.
Subject to the specific limitations set forth above and subject to such
restrictions as may be necessary to qualify AMIT as a REIT under the Code, the
AMIT Board, without the vote or consent of shareholders, may alter the
investment policy of AMIT in light of changes in economic circumstances and
other relevant factors, and the method of implementing AMIT's investment
policies may change, in the discretion of the AMIT Board, as economic and other
conditions change.
ITEM 2. PROPERTIES
The following is a list of properties owned by AMIT and held for sale as
of December 31, 1997.
<TABLE>
<CAPTION>
Date of Type of Carrying
Property Ownership Ownership Use Value
-------- --------- --------- --- -----
<S> <C> <C> <C> <C>
University Center 11/16/95 Fee ownership Warehouse Office $ 1,100,000
Phase I& II 51,200 Sq. Ft.
University Center 12/02/95 Fee ownership Retail Shopping 1,671,000
Phase IV 56,000 Sq. Ft.
Colony Cove 04/15/96 Fee ownership Raw land, 240 acres 1,750,000
& 10/3/97 -----------
$ 4,521,000
===========
</TABLE>
In August 1993, AMIT acquired, through a mortgage loan foreclosure, a
vacant parcel of land located in Houston, Texas and in January 1994, AMIT
acquired, through a mortgage loan foreclosure, a 220-unit apartment complex
located in Decatur, Georgia. The apartment complex was sold in 1994 for $3.4
million. The vacant parcel of land was sold, free and clear of any liens, in
1995 for $1.5 million.
In 1995 AMIT obtained title to three properties through deeds-in-lieu of
foreclosure. Two of these properties are industrial warehouses and are located
in Cleveland, Ohio. One is known as 4851 Van Epps, on which AMIT held a first
trust deed mortgage in the amount of $1,500,000 and the second is known as 4705
Van Epps, on which AMIT obtained a judgment lien through recourse provisions in
a defaulted loan. In October 1995, AMIT sold the 4851 Van Epps property for
$1,370,000 and in March 1996 AMIT sold 4705 Van Epps for $752,000. The third
property, University Center Phase I & II, was obtained through a deed-in-lieu of
foreclosure, through recourse provisions in a defaulted loan. The property
consists of warehouse office space located in Fridley, Minnesota. In December
1995, AMIT foreclosed on its first trust deed mortgage in the original amount of
$1,800,000, held on a retail shopping center known as University Center Phase
IV, located in Fridley, Minnesota.
In April 1996, AMIT foreclosed on a first trust deed mortgage in the
original amount of $1,572,000, held on 200 acres of raw land, know as Colony
Cove, located in Ellenton, Florida, and in October 1997 foreclosed on an
additional 40 acres adjacent to the 200 acres based on recourse provisions
provided in the mortgage. Currently, approximately 224 acres of Colony Cove land
is under contract for sale, which is anticipated to close in the latter part of
1998, although there can be no assurance that such sale will be consummated. In
January 1998, through the recourse provisions of the mortgage, AMIT was
successful in garnishing all cash held by the Colony Cove borrower and received
cash of approximately $160,000, which reduced the carrying basis of the
property. In June 1996, AMIT along with a joint venture partner, foreclosed on a
first trust deed mortgage in the original amount of $1,050,000 (representing
AMIT's 57% joint venture interest in the loan), held on 155 acres of raw land
and an 8,500 square foot strip shopping center known as a Rolling Greens,
located in Ocala, Florida. In June 1997, Rolling Greens was sold for $1,175,000,
of which $665,000 represents AMIT's portion of the joint venture proceeds. In
August 1996, AMIT foreclosed on a second trust deed mortgage in the original
amount of $1,720,000 held on a 443 pad mobile home park community, known as
Springdale Lake Estates Mobile Home Park ("Springdale"), located in Belton,
Missouri. Upon foreclosure, AMIT assumed the first note and trust deed mortgage
held by a third party bank in the amount of $2.8 million. In October 1996, AMIT
sold Springdale for $4 million.
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During 1997 the Trust obtained judgement liens against a 186-unit
apartment complex, Silver Ridge Apartments, located in Maplewood, Minnesota,
based upon recourse provisions on two other Trust loans. As a result of the
judgement liens the Trust was successful in foreclosing on the Silver Ridge
Apartments in October 1997, and after a twelve-month redemption period, the
Trust will hold title to the property. At the time of foreclosure, Silver Ridge
Apartments was encumbered by a first mortgage loan by an independent third party
in the amount of approximately $4.5 million and a second mortgage in the amount
of $375,000, which the Trust purchased in December 1997.
ITEM 3. LEGAL PROCEEDINGS
An action was filed against AMIT, Katten Muchin Zavis and David M. Bass
in Superior Court of the State of California by Jules P. Kirsch on December 26,
1996 alleging that the named defendants had maliciously prosecuted Mr. Kirsch in
certain earlier litigation commenced by AMIT in 1995, which alleged the purchase
by Jules P. Kirsch and several other individuals and corporations of AMIT Class
A Shares through the use of "inside information" and for violations of Sections
13(d) and 14(a) of the Exchange Act and the rules and regulations promulgated
thereunder.
In June 1996, AMIT settled the prior claims with all defendants, except
for Jules P. Kirsch and voluntarily dismissed the claims against Jules P.
Kirsch. The settlement consisted of the Trust receiving cash of $689,000 and a
$75,000 four-year, 8% collateralized promissory note, with semi-annual interest
payments. In addition, the Trust acquired 209,700 Class A shares for $1,730,000,
or $8.25 per Class A share and obtained a standstill agreement and a voting
proxy, controlled by the trustees of the Trust, on approximately 200,000
additional Class A shares until such shares are sold in the open market. The
action commenced by Jules P. Kirsch seeks unspecified amounts for compensatory
and punitive damages.
On January 5, 1998, summary judgment was entered in favor of AMIT and
against Mr. Kirsch on all claims in the malicious prosecution action. On January
30, 1998, Mr. Kirsch filed a Notice of Appeal relating to the judgement.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
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PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
GENERAL MATTERS
The Trust has 1,416 Class A Shareholders of record as of February 9,
1998. The Class A Shares are currently traded on the American Stock Exchange
under the symbol "ANM". All of the Class B Shares are held by MAE GP
Corporation, an affiliate of Insignia.
In November 1996, the Trust's Board of Trustees adopted a Shareholders
Rights Plan and declared a dividend of one Right on each outstanding share of
the Trust's Class A Shares to stockholders of record on November 18, 1996. The
Rights are exercisable if a person or group acquires 20% or more of the Trust's
Class A Shares or announces or commences a tender offer for 20% or more of the
such shares. When a person or group acquires such 20%, each exercisable Right
will entitle its holder (other than such person or group) to purchase, at the
Right's then-current exercise price, a number of the Trust's Class A Shares
having a market value of twice such price. In addition, if the Trust is acquired
in a merger or other business combination transaction after a person has
acquired 20% or more of the Trust's outstanding Class A Shares, each right will
entitle its holder to purchase, at the Right's then-current exercise price, a
number of the acquiring company's common shares having a market value of twice
such price. Prior to the acquisition by a person or group of beneficial
ownership of 20% or more of the Trust's common stock, the Rights are redeemable
for one cent per Right at the option of the Board of Trustees. The Board of
Trustees is also authorized, under certain circumstances, to reduce the 20%
threshold referred to above to not less than 10%. The Rights will expire on
December 31, 2003 unless otherwise extended by the Board of Trustees.
The Trust, as noted in Note 8 in the "Notes to the Financial
Statements", has acquired an option to purchase all of the Class B Shares held
by MAE GP Corporation, an affiliate of Insignia. There is no established public
trading market for these shares.
The following table sets forth the high and low closing sales prices
of the Trust's Class A Shares for the two most recent calendar years:
<TABLE>
<CAPTION>
High Low
1997, Quarter ended:
<S> <C> <C> <C> <C>
December 31, 1997 $19 3/4 $16 1/8
September 30, 1997 $17 3/4 $14 7/8
June 30, 1997 $15 3/4 $13 1/4
March 31, 1997 $14 1/2 $12 5/8
1996, Quarter ended:
December 31, 1996 $13 3/4 $8 7/16
September 30, 1996 $8 5/8 $7 7/8
June 30, 1996 $8 5/8 $7 5/8
March 31, 1996 $9 5/8 $5 5/8
</TABLE>
On February 9, 1998, the last sale price of the AMIT Class A Shares as reported
by the American Stock Exchange was $18 1/2. AMIT paid the following shareholder
distributions on its Class A Shares during 1997:
9
<PAGE> 10
In December 1997, the Board of Trustees of AMIT declared a $.32 per share
dividend payable on February 11, 1998 to Class A shareholders of record on
January 13, 1998. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations of AMIT."
<TABLE>
<CAPTION>
RECORD DATE PAYABLE DATE PER SHARE DIVIDEND
----------- ------------ ------------------
<S> <C> <C>
January 6, 1997 February 3, 1997 $0.22
April 14, 1997 May 5, 1997 0.24
July 14, 1997 August 5, 1997 0.27
October 14, 1997 November 5, 1997 0.30
-----
TOTAL PER CLASS A SHARE DIVIDEND $1.03
=====
</TABLE>
The Board of Trustees of the Trust authorized the Trust to repurchase,
in open market transactions, up to 10% of its Class A Shares. The Trust
repurchased 43,800 shares under this program. There were no purchases in the
open market in 1997, 1996 and 1995, however in 1996, the Trust acquired 209,700
Class A Shares for $1,730,000 less $764,000 in expenses, in settlement of
actions it had brought against certain third parties.
10
<PAGE> 11
ITEM 6. SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31
---------------------------------------------------------------------------
1997 1996 1995 1994 1993
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Revenue (1) $ 7,199,000 $10,050,000 $19,502,000 $ 2,769,000 $ 4,307,000
Costs and expenses (2) 1,650,000 964,000 2,213,000 2,396,000 3,017,000
Extraordinary item (3) -- -- 1,844,000 -- --
----------- ----------- ----------- ----------- -----------
Net income $ 5,549,000 $ 9,086,000 $19,133,000 $ 373,000 $ 1,290,000
----------- ----------- ----------- ----------- -----------
PER CLASS A SHARE (4):
Income before
extraordinary item $ 2.10 $ 3.33 $ 5.77 $ 0.11 $ 0.38
Extraordinary item -- -- 0.61 -- --
----------- ----------- ----------- ----------- -----------
Net income $ 2.10 $ 3.33 $ 6.38 $ 0.11 $ 0.38
----------- ----------- ----------- ----------- -----------
Cash distributions to
shareholders $ 2,695,000 $ 1,407,000 $ -- $ -- $ 573,000
Cash distributions per
Class A Share (5) $ 1.03 $ 0.52 $ -- $ -- $ 0.17
Total assets $46,530,000 $43,375,000 $37,332,000 $35,535,000 $29,327,000
Notes and advances
payable (6) $ -- $ -- $ -- $11,085,000 $17,965,000
Shareholders' equity $45,942,000 $43,088,000 $37,139,000 $22,510,000 $22,137,000
Class A Shares
Outstanding at end of year 2,617,000 2,617,000 2,826,700 3,394,026 3,394,026
Weighted average outstanding 2,617,000 2,704,375 2,968,532 3,394,026 3,394,026
Book value per Class A Share $ 17.38 $ 16.30 $ 13.01 $ 6.57 $ 6.46
</TABLE>
(1) In 1993, revenues decreased significantly as a result of approximately
75% of the Trust's portfolio defaulting in payments to the Trust after
February 1993. In 1995, revenues increased significantly as a result of
$15,954,000 of recovery of bad debts relating primarily to the Angeles
settlement (see Note 10 in the "Notes to the Financial Statements"). In
addition, the 1995 revenues include $435,000 of gain on sale of real
property. In 1996, revenues included $3,126,000 of recovery of bad debts
and $3,481,000 of interest income was recognized relating primarily to
two loans; Lake Arrowhead Joint Venture and Fox Run Apartments. In
addition, the 1996 revenues include $184,000 of gain on sale of real
property. In 1997 revenues include $1,744,000 of recovery of bad debts
and $1,438,000 of interest income was recognized primarily to six loans,
LaSalle, Hospitality Inns Pensacola I, Hospitality Inns Pensacola II,
Hospitality Inns Jacksonville, Brittany Point and Carriage Hills. In
addition, the 1997 revenues include $80,000 of gain on sale of real
property.
(2) Costs and expenses included a provision for loss and write-down of
in-substance foreclosed properties of $35,000,000 in 1992. In 1996,
Costs and expenses were reduced in the amount of $764,000, from a
recovery of legal expenses incurred in connection with the Trust's legal
actions taken against third parties. See Legal Proceedings.
(3) Extraordinary item in 1995 represented the settlement of claims the
Trust had with various partnerships associated with Insignia; the Trust
was able to negotiate the settlement of advances payable at a discount
(see Note 7 in the "Notes to the Financial Statements").
11
<PAGE> 12
(4) The net income per Class A Share was based on the weighted average Class
A shares outstanding during each of the five years in the period ended
December 31, 1997, after deduction of the Class B Shares' 1% interest.
(5) Monthly cash distributions had been paid to the Class A shareholders
from cash generated by the Trust from operations, subject to Angeles'
distribution guarantee of a minimum annual distribution of $2.00 per
Class A Share through May 1994. However, as of February 1993, such
distributions had been temporarily suspended due to the Trust's
liquidity problems and Angeles Corporation's inability to perform its
guaranty obligations or service the promissory note due the Trust. See
"Management's Discussion and Analysis of Financial Condition and Results
of Operations." The Trust resumed cash distributions to the Class A
shareholders in 1996.
(6) Notes and advances decreased significantly in 1995 as a result of the
settlement of the Insignia related advances from partnerships of
$7,595,000 and the full repayment of the Bank loan.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
GENERAL
This section contains statements which constitute "forward-looking
statements" within the meaning of the Private Securities Litigation Reform Act
of 1995. See Item 1. "Business" for cautionary information with respect to such
forward-looking statements.
"The following discussion should be read in conjunction with "Selected
Financial Data" and the "Financial Statements and Supplementary Data".
FISCAL YEAR 1997 COMPARED TO 1996
Total interest income for the year ended December 31, 1997 decreased by
20% when compared to the same period ending in 1996. Such decrease is primarily
due to the restructuring and or repayment of interest income not previously
recorded in the amount of $3.7 million during 1996 verses a total of such
similar interest income of $1.5 million during 1997. During 1997 the Trust
restructured three Hospitality Inn second mortgage loans, which occurred in
April 1997 and the LaSalle loan which was effective in February 1997. In
addition in 1997, the Trust received full repayment of the Carriage Hills note
payable in November 1997 and in December 1997 the reinstatement of the Brittany
Point loan as a current loan. Upon modifying the Hospitality Inns and LaSalle
loans, AMIT 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, 1997, and $409,000 for the LaSalle loan
during the first quarter ended March 31, 1997. During the quarter ended December
31, 1997, in conjunction with the repayment of the Carriage Hills note the Trust
received and realized interest income in the amount of $238,000, which
represented past due interest. Beginning in July 1997 the Trust began receiving
monthly interest payments at the stated interest rate on the Brittany Point loan
and as a result recognized $337,000 of past due interest as income. Recurring
interest income has increased 32% in 1997 when compared to 1996, in the
approximate amounts of $3,603,000 and $2,719,000, respectively, 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.
AMIT recognized additional income for the year ended December 31,
1997 relating to recovery of bad debt. During the three months ended June 30,
1997, AMIT received a partial principal repayment of $340,500 on a loan for
which an allowance for estimated loss has been previously provided and during
the quarter ended December 31, 1997 as discussed above, the Trust received full
repayment of principal on the Carriage Hills loan in the amount of $1,404,000
for which an allowance for estimated loss had been previously provided. In
addition, AMIT recognized a gain from the sale of its joint venture interest in
the Rolling Greens property in the amount of $80,000, which occurred in June
1997.
12
<PAGE> 13
The 253% increase in legal fee expenses for the year ended
December 31, 1997 when compared to the previous same period, is due to the
settlement in June 1996 of the state and federal claims AMIT brought against
others relating to the use of non-public information by a group of investors. In
conjunction with this settlement, AMIT offset $764,000 in settlement proceeds
against legal expenses in June 1996. In addition during the year ended December
31, 1997 AMIT incurred legal expenses defending itself against a malicious
prosecution case brought against AMIT by one of the defendants in the state and
federal insider trading claims described above. In October 1997 the malicious
prosecution case was dismissed in favor of AMIT on summary judgment.
General and administrative expenses increased by 12% in 1997 when
compared to 1996. This increase is primarily due to the Trust no longer sharing
its office administrative expenses, effective November 1, 1996, with another
trust, Angeles Participating Mortgage Trust.
FISCAL YEAR 1996 COMPARED TO 1995
For the year ended December 31, 1996 total revenue decreased
significantly as compared to total revenue for the same period in 1995. The
decrease is due to the Angeles bankruptcy settlement of $12,844,000 which was
effective March 31, 1995. Simultaneous with the Angeles settlement, the Trust
settled its claims with the various partnerships associated with Insignia, which
resulted in extraordinary income of $1,844,000 resulting from the Trust being
able to negotiate the settlement of these claims at a discount. Total revenue
for the year ended December 31, 1996 represents a significant decrease from the
same period ended 1995 due to the two 1995 settlement transactions referred to
above.
Interest income for the year ended December 31, 1996 increased by
approximately 73% when compared to the year ended December 31, 1995. This
increase in 1996 is primarily due to the restructuring of the Trust's Arrowhead
loan, for which the Trust recognized approximately $2.8 million of interest
income and the pay off of the Fox Run and Harbour Landing loans for which the
Trust recognized approximately $900,000 of interest income not previous recorded
due to the doubtful nature of their collectability. Rental income grew during
1996 as the two University Center properties achieved greater occupancy in 1996
over that of 1995.
In conjunction with the modification of the Arrowhead loan, the Trust
held a $1.2 million preferred partnership distribution interest which it
received in the Angeles bankruptcy settlement. At that time the Trust valued
this interest at zero as it had an indeterminable value when it was acquired.
Upon modifying the Arrowhead loan this preferred interest was rolled into the
principal of the restructured loan, and as a result the Trust recognized
additional interest income of $1.2 million. In addition, $2 million was recorded
as recovery of bad debt upon the full repayment of the $6.7 million Fox Run loan
in December 1996.
Interest expense to the Bank decreased as the Trust had no borrowings on
the bank line of credit for the year ending December 31, 1996, and only borrowed
$430,000 for a three-day period in June 1996. The Trust had an average month end
borrowing on the bank line of credit of $2,075,000 in 1995.
During 1996 the Trust paid $9,000 for 1995 Minnesota state taxes due to
the fact that the Trust owns properties in that state and $10,000 and $120,000
in alternative minimum tax for the 1995 and 1996 tax year, respectively, as the
Trust utilized its net operating losses to offset its 1995 and 1996 taxable
income. Prior to October 1996 the Trust shared its office administrative
expenses along with a portion of the salaries of its employees with another
trust, Angeles Participating Mortgage Trust. Effective, October 1996, the Trust
employees no longer provide any services to Angeles Participating Mortgage Trust
nor does it operate in the same offices as the Trust. As a result beginning in
October 1996 the Trust no longer receives reimbursement of employee salary or
general office expenses and expects general and administrative expenses to
increase by approximately 14% during 1997.
Legal expenses for the year ended December 31, 1996 decreased
significantly when compared to the same period in 1995 as the Trust reached an
agreement to settle pending litigation in State and Federal courts with all but
one defendant, relating to the Trust's complaint for damages arising from the
use of non-public information to acquire the Trust's Class A shares and alleged
violations of Federal securities laws. The Trust, in settlement, received cash
of $689,000 and a $75,000 four-year, 8% collateralized promissory note, with
semi-annual interest payments. This $764,000 portion of the settlement was
recognized by the Trust as income by offsetting legal expenses incurred by the
Trust relating to the lawsuit. In addition, the Trust acquired 209,700 Class A
shares for $1,730,000, or $8.25 per Class A share and obtained a standstill
agreement and a voting proxy, controlled by the
13
<PAGE> 14
trustees of the Trust, on approximately 200,000 additional Class A shares until
such shares are sold in the open market.
LIQUIDITY AND CAPITAL RESOURCES
Until December 1996, AMIT invested in loans which were made principally
to partnerships that were affiliated with Angeles, the parent company to AMIT's
prior advisor, AFC, but the majority of which are now controlled by MAE.
In May 1997, AMIT's line of credit, in the amount of $5 million, was
renewed through October 1997, with the ability to renew for an additional six
months to April 1998 at AMIT's option. The line of credit allows AMIT to draw on
such line to facilitate the foreclosure process on AMIT Loans. The line of
credit requires monthly interest only payments based upon prime plus 1/2% and a
$12,500 commitment fee paid quarterly. In October 1997 AMIT exercised its option
to renew the line of credit through April 1998 upon payment of an additional
$12,500 commitment fee to be paid in two quarterly installments. During the year
ended December 31, 1997, AMIT did not draw on the line of credit.
AMIT'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 obligors of the AMIT Loans, including certain
partnerships controlled by MAE, failed to service their debt obligations under
AMIT Loans. AMIT has since completed the process of restructuring the AMIT
Loans. Certain of the restructured loan terms include a reduction in the
interest 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.
Loans having a carrying value (net of loan loss reserves) of
approximately $1.3 million (or 3% of AMIT's net investments) are currently in
default with respect to debt service obligations. AMIT's lending is primarily
concentrated in secured and, to a lesser extent, unsecured real estate loans.
The realizable value of real estate collateralizing notes receivable or owned
from Loan foreclosures, can only be determined based upon a sales negotiation
between independent third parties in an arm's length transaction. In addition,
considering that, in most cases, it is the proceeds of sale and/or refinancing
which will enable AMIT to receive such funds, the actual proceeds may be
significantly impacted by the condition of the real estate industry at the time
the principal amounts become due or properties sold.
During 1996 AMIT modified five loans referred to as Brittany Point, Fox
Crest, Carriage Hills, Vista Hills and Angeles Partners XIV-Waterford. In
connection with the modifications, AMIT extended the maturity dates on all of
the loans except for Angeles Partners XIV-Waterford, to December 31, 2000, March
1, 2003, September 1, 2000 and September 1, 2002, respectively, and capitalized
approximately $320,000, $1,765,000, $204,000, $230,000 and $134,000,
respectively, of past due interest into principal. The modified notes require
payments only out of cash flows provided by the properties. AMIT did not
recognize any interest income in connection with these loan modifications.
AMIT received full and partial paydowns as follows:
<TABLE>
<CAPTION>
Number of Paydown in
Year Loans millions
- ---- ----- --------
<S> <C> <C>
1995 6 $9.0
1996 10 $10.3
1997 11 $7.6
</TABLE>
During the last quarter of 1996, AMIT modified and received a
significant repayment on two of AMIT's largest loans. In October 1996, the
Arrowhead Joint Venture $6 million loan (which was previously secured only by a
partnership interest), along with a related $1.2 million unsecured preferred
partnership distribution interest ("Preferred Interest"), was restructured to a
$9 million first trust deed mortgage, with a current effective interest rate of
10.02% reducing to a 9.8% rate upon repayment of $1.5 million which is expected
to occur in late 1998. The restructuring has resulted in AMIT significantly
strengthening the collateral on this loan along with increasing the annual debt
service on this loan by approximately $400,000. The $1.2 million Preferred
Interest was acquired in the settlement with Angeles and was initially valued at
zero as it had an indeterminable value when it was acquired. In
14
<PAGE> 15
addition, AMIT capitalized approximately $1.7 million in deferred interest that
was not previously recognized in income, as full recovery of such interest was,
until the modification, considered doubtful.
In December 1996, AMIT received approximately $7 million from its three
Fox Run mortgages as a result of the borrower refinancing the property. The $7
million of cash proceeds represented the full repayment of approximately $6.7
million of principal on these three loans with the remainder representing a
portion of the accrued interest associated with the loans. In addition to this
repayment, AMIT took back a new third mortgage on the Fox Run property in the
amount of $875,000. The $875,000 is comprised of approximately $425,000 of the
remaining accrued interest from the three Fox Run loans and approximately
$450,000 of accrued interest and principal on the Angeles Partners XI-Harbour
Landing promissory note. AMIT recognized $2 million of bad debt recovery on this
transaction, and approximately $900,000 of interest income from accrued interest
not previously recognized, as full recovery of such interest was indeterminable
until the repayment.
In December 1996, AMIT acquired, at par, three first mortgage loans from
an unaffiliated third party for approximately $2.9 million. These mortgages are
on three properties known as Hospitality Inns (three separate properties and
locations) on which AMIT also holds three second mortgages. All of these six
mortgages matured in October 1996, and AMIT entered into negotiations with the
borrowers that culminated in the restructure of the indebtedness in mid-1997.
The six loans were restructured into three loans secured by first priority
mortgages on the hotel properties owned by the various borrowers as well as
cross-collateralization of one of the loans by a second priority mortgage on the
hotel property owned by one of the other two borrowers. The borrowers continued
making debt service payments to AMIT throughout the negotiation process.
In February 1997, AMIT 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, AMIT made a second new loan in
the amount of $2,950,000 secured by a first deed of 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 AMIT made
a new first mortgage loan in the amount of $1,900,000 secured by four
manufactured home parks located in Wyoming. The new loan requires interest only
payments of 9.07% and matures in December 2003. In December 1997 AMIT made three
first mortgage loans in the amounts and terms as follows: $1,300,500 on a
144,000 square foot office/warehouse facility located in Houston, Texas with an
8% interest rate, interest only payable monthly; $531,250 on a 56,080 square
foot industrial/warehouse located in Aiken, South Carolina with an 8% interest
rate, principal and interest payable monthly, with principal amortized over 20
years; and $2,185,000 on a 335,000 square foot industrial facility located in
Jackson, Tennessee, initially monthly interest only payable at a rate of 10 1/2
%, with the interest rated reduced to 230 basis points over ten-year Treasuries
upon the debt coverage ratio increasing to a stipulated level. All three of
these December 1997 first mortgage loans mature in December 2007.
In December 1997 the Trust purchased a second mortgage loan with a face
amount of $375,000 for $384,000. This second mortgage loan is on a 186-unit
apartment complex, Silver Ridge Apartments, located in Maplewood, Minnesota. The
Silver Ridge second mortgage has an interest rate of 10% and default rate of 12%
and matured December 31, 1997. In addition, during 1997 the Trust obtained
judgement liens against the Silver Ridge Apartments property based upon recourse
provisions on other Trust loans. Through one of these judgement liens the Trust
successfully foreclosed on the property in October 1997 and will be the owner of
the property after a twelve-month redemption period that ends in October 1998.
On January 30, 1998, the Trust received title to Silver Ridge Apartments through
deed-in-lieu of foreclosure as a result of provisions in the second mortgage
held by the Trust. In connection with the taking title to Silver Ridge
Apartments the Trust assumed a first trust deed mortgage from a third party in
the amount of $4,525,000. This first mortgage provides for a variable interest
rate not to exceed 12%, interest only paid monthly, with a current interest rate
of 3 1/2%. The loan matures in July 2023
During 1995 AMIT foreclosed on University Center Phase IV and took title
to three properties through deeds-in-lieu of foreclosure. These properties
include 4851 Van Epps for which AMIT had commenced foreclosure action in 1994.
In October 1995, AMIT sold this property for $1,370,000, receiving net cash
proceeds of $580,000 and a first trust deed on the property for $700,000. In
addition, AMIT obtained title, through deeds-in-lieu of foreclosure as a result
of recourse provisions in a defaulted loan, on 4705 Van Epps, an industrial
warehouse located in Cleveland, Ohio and on University Center I and II, office
industrial property located in Fridley, Minnesota. In addition, AMIT sold a
parcel of land located in Houston, Texas for $1,500,000, resulting in net cash
proceeds of approximately $1,400,000. During 1996, AMIT sold the 4705 Van Epps
property in March 1996 for a sale price of $752,000 and received net cash
proceeds of approximately $677,000. In addition, AMIT foreclosed on three
15
<PAGE> 16
properties during 1996, which included; Colony Cove a 200-acre parcel of raw
land; Rolling Greens, in which AMIT has a 57% joint venture interest in a
155-acre parcel of raw land and an 8,500 square foot strip shopping center and
Springdale a 443 pad mobile home park. In October 1996, AMIT sold Springdale for
a $4 million sale price and received net cash proceeds of approximately $1.1
million. In addition, during 1996, AMIT began the foreclosure process on five
properties, which include a first mortgage referred to as LaSalle Warehouse
(which was subsequently restructured and paid in full during the quarter ended
December 31, 1997), a second mortgage referred to as Southgate Apartments and
three industrial properties located in Cleveland, Ohio. AMIT's interests in the
Cleveland, Ohio properties were obtained from judgment liens relating to
recourse provisions on a defaulted second mortgage loan held by AMIT. AMIT
anticipates that the foreclosure process will be completed during 1998.
The settlement between AMIT and Angeles represented over $15 million in
various assets including $6 million in cash and a collateralized note. The
collateralized note was due December 31, 1998 and carried interest at prime plus
one percent with a maximum interest rate of 8.5%. The note was paid in full in
December 1997.
AMIT's management on a quarterly basis reviews the carrying value of the
AMIT 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 cost 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 December 31, 1997 was approximately $8.8 million. However, the provision for
loss is an estimate that is inherently uncertain and depends on the outcome of
future events. AMIT's estimates are based on an analysis of the loan portfolio,
composition of the loan portfolio, the value of collateral and current economic
conditions.
AMIT believes that its current cash flow from operations is sufficient
to provide for payment of its operating costs and provide for distributions to
shareholders.
During the year ended December 31, 1997, four AMIT loans prepaid the
total outstanding principal balances of approximately, $6,800,000 and another
loan, referred to by the Trust as Northprior, made a substantial repayment in
the amount of $340,000. The four loans which made full repayments are referred
to by AMIT as Angeles Partners X ($614,000), Angeles Corporation ($3,450,000),
Carriage Hills ($1,404,000) and LaSalle ($1,334,000).
In February 1998 one AMIT first mortgage loan referred to by AMIT as
Lake Arrowhead Resort, prepaid the total outstanding principal balance of
approximately $9,004,000.
As of December 31, 1997, AMIT has signed and proposed commitments to
fund approximately $1 million of new loans. On January 16, 1998 the Trust funded
this $1 million commitment in the form a first mortgage loan on a 125,000 square
foot warehouse facility located in Memphis, Tennessee. The loan provides for
interest only payments at a rate of 8% and matures in January 2008.
In October 1997 AMIT foreclosed on a additional 40-acres of raw land
adjacent to the 200-acre parcel of land foreclosed on in April 1996, referred to
as Colony Cove, in Ellenton, Florida. AMIT held a first trust deed in the amount
of $1,572,000 on the 200-acres and had recourse, through provisions on the
mortgage note, allowing for the foreclosure on the adjacent 40 acres. In
conjunction with the foreclosures, AMIT incurred approximately $178,000 in
expenses, which was capitalized into the cost of the property. AMIT did not
recognize any income or loss from such foreclosures. During 1997 the Trust
entered into a contract to sell approximately 224 acres of this property zoned
residential, for $8,500 per acre. The contract requires the sale to close in the
latter part of 1998, although there can be no assurances that this transaction
will occur. Subsequent to 1997 in January 1998 the Trust received cash of
approximately $160,000 through garnishment of all of the borrowers bank
accounts, this amount reduced the carrying value of the Colony Cove property.
In June 1997 the Rolling Greens property was sold for $1,175,000 of
which $665,000 represented AMIT's portion of the 57% joint venture proceeds of
the sale and cash held by the joint venture partnership.
In December 1997 the Trust wrote-off a promissory note, with a principal
outstanding balance of $1,530,000 referred to by the Trust as Vista Hills. Based
upon the Trust's evaluation of the property operations and discussions with the
borrower regarding the likelihood of foreclosure by the first lien holder in
1998, the Trust believed there would be no recovery in the future. The Borrower
had indicated to the Trust that the property would
16
<PAGE> 17
most likely be foreclosed upon by the first lien holder during 1998. The Trust
had previously fully provided for loan loss reserves for this loan and did not
realize any loss or gain from the sale.
17
<PAGE> 18
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
ANGELES MORTGAGE INVESTMENT TRUST
Index to Audited Financial Statements and Supplemental Schedules
<TABLE>
<CAPTION>
Page No.
--------
<S> <C>
Report of Independent Certified Public
Accountants - BDO Seidman, LLP 19
Audited Financial Statements and Supplemental Schedules -
The financial statements and supplemental schedules of the
Trust required to be included in Item 8 are listed below:
Balance Sheets at December 31, 1997 and 1996 20
Statements of Operations for the years ended
December 31, 1997, 1996 and 1995 21
Statements of Changes in Shareholders' Equity
for the years ended December 31, 1997,
1996 and 1995 22
Statements of Cash Flows for the years ended
December 31, 1997, 1996 and 1995 23
Notes to Financial Statements 24
Supplemental Schedule III - Real Estate and
Accumulated Depreciation 45
Supplemental Schedule IV - Mortgage Loans on
Real Estate 46
</TABLE>
All other supplemental schedules are omitted because they are not required or
because the required information is shown in the financial statements.
18
<PAGE> 19
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Board of Trustees of
Angeles Mortgage Investment Trust
We have audited the accompanying balance sheets of Angeles Mortgage Investment
Trust (the "Trust") as of December 31, 1997 and 1996, and the related statements
of operations, changes in shareholders' equity and cash flows for each of the
three years in the period ended December 31, 1997. We have also audited the
schedules listed at Item 8. These financial statements and schedules are the
responsibility of the Trust's management. Our responsibility is to express an
opinion on the financial statements and schedules based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and schedules are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements and
schedules. An audit also includes assessing the accounting principles used and
significant estimates made by the Trust's management, as well as evaluating the
overall presentation of the financial statements and schedules. We believe that
our audits provide a reasonable basis for our opinion.
At December 31, 1997, 50 percent of the Trust's notes receivable are due from
partnerships which affiliates of Insignia Financial Group, Inc. ("Insignia") are
the general partner. As discussed in Note 10, the Trust and an Insignia
affiliate (Insignia Properties Trust) have executed a merger agreement subject
to the approval of the Trust shareholders. If the merger is approved, the
Trust's business activities as it relates to these related party notes
receivable may be impacted due to overlapping management.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of the Trust at December 31, 1997
and 1996, and the results of its operations and its cash flows for each of the
three years in the period ended December 31, 1997, in conformity with generally
accepted accounting principles.
Also, in our opinion the schedules present fairly, in all material respects, the
information set forth therein.
BDO Seidman, LLP
Dallas, Texas
January 15, 1998
19
<PAGE> 20
ANGELES MORTGAGE INVESTMENT TRUST
BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31
----------------------------
NOTES 1997 1996
-------- ----------- ------------
ASSETS
<S> <C> <C> <C>
Notes receivable 2,3,5,6
Mortgage notes receivable, (including
$16,344,000 and $16,791,000 due from
affiliates in 1997 and 1996) $39,347,000 $ 26,043,000
Promissory notes receivable, (including
$6,714,000 and $10,650,000 due from
affiliates in 1997 and 1996) 6,789,000 14,175,000
----------- ------------
46,136,000 40,218,000
Allowance for estimated losses (8,826,000) (12,100,000)
----------- ------------
37,310,000 28,118,000
Foreclosed real estate held for sale 4 4,521,000 5,070,000
Cash and cash equivalents 3,947,000 9,789,000
Accrued interest receivable 654,000 174,000
Prepaid expenses and other 98,000 224,000
----------- ------------
Total assets $46,530,000 $ 43,375,000
=========== ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Accounts payable and accrued expenses $ 588,000 $ 287,000
----------- ------------
Total liabilities 588,000 287,000
----------- ------------
Commitments and contingencies 1,2,3,4,6,10 -- --
Shareholders' equity: 8,9
Class A Shares (2,617,000 in 1997 and 1996,
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 (6,888,000) (9,742,000)
----------- ------------
Total shareholders' equity 45,942,000 43,088,000
----------- ------------
Total liabilities and shareholders' equity $46,530,000 $ 43,375,000
=========== ============
</TABLE>
The accompanying notes are an integral part of the financial statements.
20
<PAGE> 21
ANGELES MORTGAGE INVESTMENT TRUST
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31
-----------------------------------------------
1997 1996 1995
------------ ------------ ------------
<S> <C> <C> <C>
REVENUE:
Interest income (including $2,954,000, $2,405,000, and
$1,710,000 from affiliates in 1997, 1996 and 1995,
respectively) $ 5,109,000 $ 6,419,000 $ 3,017,000
Rental income 266,000 321,000 96,000
Gain from sale of real property 80,000 184,000 435,000
Recovery of bad debt from Angeles Corporation settlement -- -- 12,844,000
Recovery of other bad debts 1,744,000 3,126,000 3,110,000
------------ ------------ ------------
Total revenue 7,199,000 10,050,000 19,502,000
------------ ------------ ------------
COSTS AND EXPENSES:
Property operating expenses 56,000 180,000 262,000
Loss from sale of real property -- -- 3,000
Interest expense to bank -- -- 227,000
Legal expenses 393,000 (257,000) 851,000
General and administrative 958,000 858,000 835,000
Amortization 63,000 44,000 35,000
Income taxes 180,000 139,000 --
------------ ------------ ------------
Total costs and expenses 1,650,000 964,000 2,213,000
------------ ------------ ------------
INCOME BEFORE EXTRAORDINARY ITEM 5,549,000 9,086,000 17,289,000
EXTRAORDINARY ITEM - Debt forgiveness -- -- 1,844,000
------------ ------------ ------------
NET INCOME $ 5,549,000 $ 9,086,000 $ 19,133,000
============ ============ ============
PER CLASS A SHARE:
Net income before extraordinary $ 2.10 $ 3.33 $ 5.77
Extraordinary item -- -- 0.61
------------ ------------ ------------
Net income $ 2.10 $ 3.33 $ 6.38
============ ============ ============
Cash distributions $ 1.03 $ 0.52 $ --
============ ============ ============
Weighted average Class A Shares 2,617,000 2,704,375 2,968,532
============ ============ ============
</TABLE>
The accompanying notes are an integral part of the financial statements.
21
<PAGE> 22
ANGELES MORTGAGE INVESTMENT TRUST
STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
<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 January 1, 1995 $ 3,394,000 $ 14,000 $ 55,656,000 $(36,554,000) $ 22,510,000
Class A Shares received (567,000) -- (3,687,000) -- (4,254,000)
from Angeles Corporation
settlement
Purchase of Class B Share -- -- (250,000) -- (250,000)
Option
Net income -- -- -- 19,133,000 19,133,000
------------ ------------ ------------ ------------ ------------
Balance at December 31, 1995 2,827,000 14,000 51,719,000 (17,421,000) 37,139,000
Purchase of Class A Shares (210,000) -- (1,520,000) -- (1,730,000)
Net income -- -- -- 9,086,000 9,086,000
Cash distributions -- -- -- (1,407,000) (1,407,000)
------------ ------------ ------------ ------------ ------------
Balance at December 31, 1996 2,617,000 14,000 50,199,000 (9,742,000) 43,088,000
Net income -- -- -- 5,549,000 5,549,000
Cash distributions -- -- -- (2,695,000) (2,695,000)
------------ ------------ ------------ ------------ ------------
Balance at December 31, 1997 $ 2,617,000 $ 14,000 $ 50,199,000 $ (6,888,000) $ 45,942,000
------------ ------------ ------------ ------------ ------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
22
<PAGE> 23
ANGELES MORTGAGE INVESTMENT TRUST
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31
--------------------------------------------------
1997 1996 1995
------------ ------------ ------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 5,549,000 $ 9,086,000 19,133,000
ADJUSTMENTS TO RECONCILE NET INCOME TO
CASH FLOWS FROM OPERATING ACTIVITIES:
Net gain from sale of real property (80,000) (184,000) (432,000)
Amortization 63,000 44,000 35,000
Recovery of bad debt (1,744,000) (3,126,000) (15,954,000)
Interest income in exchange of notes receiveable or (864,000) (3,708,000) (501,000)
real property
Extraordinary gain -- -- (1,844,000)
Decrease (increase) in interest receivable (480,000) 87,000 (108,000)
Decrease (increase) in prepaid expenses and other 64,000 215,000 (326,000)
(Decrease) increase in accounts payable and accrued 301,000 94,000 (61,000)
expenses
Increase (decrease) in unearned loan fee income 115,000 56,000 (38,000)
------------ ------------ ------------
Cash flows from (used in) operating activities 2,924,000 2,564,000 (96,000)
------------ ------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Cost of foreclosed real estate (37,000) -- (355,000)
Funding of notes receivable (14,251,000) (2,968,000) --
Principal collections of notes receivable 7,552,000 10,256,000 9,056,000
Proceeds from sale of real estate 665,000 1,845,000 1,952,000
Investment in securities -- (979,000) --
Principal collections of investment in securities -- 979,000 --
------------ ------------ ------------
Cash flows from (used in) investing activities (6,071,000) 9,133,000 10,653,000
------------ ------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Draw on bank line of credit -- 430,000 --
Repayment of bank line of credit (430,000) (3,500,000)
Repayment of cash advances from affiliate -- -- (6,682,000)
partnerships
Purchase of Class B share option -- -- (250,000)
Distributions to shareholders (2,695,000) (1,407,000) --
Purchase of Class A shares -- (1,730,000) --
------------ ------------ ------------
Cash flows used in financing activities (2,695,000) (3,137,000) (10,432,000)
------------ ------------ ------------
Increase (decrease) in cash and cash equivalents (5,842,000) 8,560,000 125,000
Cash and cash equivalents:
At beginning of period 9,789,000 1,229,000 1,104,000
------------ ------------ ------------
At end of period $ 3,947,000 $ 9,789,000 $ 1,229,000
============ ============ ============
Supplemental operating cash flow disclosure:
Cash received for interest $ 3,765,000 $ 2,798,000 $ 2,213,000
Cash paid for interest -- -- 312,000
Schedule of noncash financing and investing
activities:
Carrying value of real estate in satisfaction of $ -- $ 2,019,000 $ 3,969,000
notes receivable with carrying values of $2,622,000
in 1996 and $3,580,000 in 1995
Mortgage notes receivable from sale of real estate -- -- 700,000
Restructuring of past due interest into notes
receivable -- 2,625,000 1,914,000
Notes receivable from lawsuit settlement -- 75,000 --
Recovery of Class A stock in connection with
Angeles Settlement -- -- 4,254,000
Write-off of fully reserved note receivable 1,530,000 -- --
</TABLE>
The accompanying notes are an integral part of the financial statements.
23
<PAGE> 24
ANGELES MORTGAGE INVESTMENT TRUST
NOTES TO FINANCIAL STATEMENTS
NOTE 1 - ORGANIZATION, BUSINESS ACTIVITIES AND SIGNIFICANT EVENTS
Angeles Mortgage Investment Trust ("AMIT" or the "Trust") is an
unincorporated California business trust, which was organized to qualify as a
REIT for federal income tax purposes. AMIT was originally organized as a
publicly held limited partnership that began offering limited partnership units
on August 18, 1986 and commenced operations on July 9, 1987. In January 1989,
the holders of a majority of the limited partnership units elected to transfer
all of the partnership's assets to AMIT. Presently AMIT's capital structure
consists of 2,617,000 outstanding AMIT Class A Shares and 1,675,113 outstanding
AMIT Class B Shares. The AMIT Class A Shares are registered under the Exchange
Act and listed on the American Stock Exchange under the symbol "ANM". Each AMIT
Class A Share and each AMIT Class B Share is entitled to one vote with respect
to all matters put before AMIT's shareholders.
Angeles Funding Corporation ("AFC"), a wholly owned subsidiary of
Angeles Corporation ("Angeles") served as advisor to AMIT until February 1993.
Through AFC, AMIT had invested in various types of intermediate-term real estate
loans (the "AMIT Loans"). Prior to December 1996, the majority of the AMIT Loans
were made to partnerships that were once controlled by Angeles and are now
controlled by Insignia Financial Group, Inc., a Delaware corporation, which
through MAE GP, its affiliate, holds the Trust's Class B Shares, (Insignia
Financial Group, Inc. and its affiliates are collectively referred to as
"Insignia" in this document). These partnerships include private and public real
estate limited partnerships which were formed to acquire, own and operate
income-producing real properties. As of December 31, 1997, there were 23 AMIT
Loans outstanding, with an aggregate portfolio balance of approximately $37
million, net of loan loss reserves, and AMIT owned as a result of foreclosures
or receipt of deeds in lieu of foreclosure on certain assets securing certain
AMIT Loans approximately $4.5 million of real property. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations of
AMIT."
By virtue of its ownership of the Class B Shares, Insignia owns a 1%
interest in the profits, losses, credits and distributions of the Trust and 39%
of the Trust's total voting shares. As discussed in Note 7, "Notes to Financial
Statements", the Trust and MAE GP entered into an agreement, effective April
1995, pursuant to which MAE GP granted to the Trust the option to purchase all
the Class B Shares currently owned by MAE GP. The option is exercisable by the
Trust in 2005 for approximately $94,000. During the 10 year period that the
option is outstanding, all of the Class B Shares are required to vote, pursuant
to an irrevocable proxy, with the majority of Class A Shares in connection with
any proposal involving the Trust and Insignia or the election of any Trustee
nominated by MAE GP which is an insider affiliate of MAE GP including Insignia.
Such majority will be determined without consideration of the votes of "Excess
Class A Shares," as defined in the Trust's Declaration of Trust. With respect to
all other matters, MAE GP can vote the Class B Shares without restriction.
Beginning in February 1993, AMIT faced significant liquidity problems
caused by (i) the failure of a significant number of the obligors of the AMIT
Loans (primarily partnerships controlled by MAE) to fully service outstanding
debt obligations under their respective AMIT Loans, and (ii) Angeles' inability
to fully service its debt obligations under its promissory note payable to AMIT
or perform its other obligations to AMIT under its third party loan guarantees
and shareholder distribution guarantees. As of February 1993, approximately 75%
of the AMIT Loans were in payment default. In February 1993, Angeles informed
AMIT that it was unable to perform its obligations under its guarantees because
of liquidity problems caused by its inability to complete sales or refinancings
of real estate assets, its inability to fully realize asset values in a
continuing sluggish and depressed real estate market and the failure of the
obligors of the AMIT Loans to service fully, if at all, their debt obligations
to Angeles. On May 3, 1993, Angeles filed for protection under Chapter 11 of the
federal bankruptcy code. Angeles' failure to perform under its guarantees,
together with the defaults on AMIT Loans, resulted in AMIT's suspension of cash
distributions to the holders of AMIT Class A Shares starting in February 1993
and resuming in February 1996. AMIT filed various claims against Angeles and
eventually reached agreement with Angeles and the Committee of Creditors Holding
Unsecured Claims of Angeles to settle all claims between AMIT and Angeles. The
settlement agreement was approved by the Bankruptcy Court in March 1995. Under
the agreement, AMIT received over $15 million in cash, notes and AMIT Class A
Shares.
24
<PAGE> 25
Since February 1993 (when AMIT terminated its advisory agreement with
AFC), AMIT has restructured its loan portfolio and has paid in full its then
outstanding bank loan of $20 million. However, certain AMIT Loans, which in the
aggregate have a carrying value (net of loan loss reserves) of approximately
$1.3 million (constituting approximately 3% of AMIT's net investments), are
currently in default with respect to debt service obligations. AMIT's lending is
primarily concentrated in secured and, to a lesser extent, unsecured real estate
loans. The realizable value of real estate collateralizing notes receivable or
acquired in loan foreclosure proceedings can only be determined based upon a
sales negotiation between independent third parties in an arm's length
transaction. In addition, considering that, in most cases, it is the proceeds of
sale and/or refinancing which will enable AMIT to receive funds, the actual
proceeds may be significantly impacted by the condition of the real estate
industry at the time the principal amounts become due or properties sold. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations of AMIT."
AMIT will terminate December 31, 2003, unless extended to no later than
December 31, 2015 by vote of the shareholders of AMIT, or by the AMIT Board to
no later than December 31, 2020 without a vote of the shareholders of AMIT if
the AMIT Board believes that termination at such time would result in material
under-realization of the value of AMIT's assets. Upon liquidation of AMIT,
disposition proceeds will be distributed to the shareholders.
An entity will qualify for taxation as a REIT if it satisfies certain
income and asset tests. Among these tests is a requirement that a certain
percentage of assets constitute "real estate assets" and a certain percentage of
income be derived from such assets. AMIT's loan assets are collateralized in a
variety of ways, and some loans have not been collateralized. AMIT has not
requested nor obtained an IRS determination that any of its assets qualify as a
"real estate asset", and has not obtained an opinion of counsel that it
currently qualifies as a REIT. If AMIT were to fail to qualify as a REIT in any
taxable year, AMIT would not be allowed a deduction for dividend distributions
in computing taxable income and would be subject to federal income tax on its
taxable income at regular corporate rates. AMIT believes that it has operated in
a manner designed to qualify as a REIT. However, if the Internal Revenue Service
were successfully to challenge the qualification of AMIT's REIT assets, AMIT
would be subject to federal income tax only after the utilization of AMIT's net
operating losses.
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. The preparation of the 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 period. Actual results could differ from these estimates. Certain
prior years amounts have been reclassified to conform to current year
classifications.
CASH AND CASH EQUIVALENTS - For financial reporting purposes, the Trust
considers cash and cash equivalents to include cash on deposit and amounts
invested in money market funds with original maturity terms of less than 90
days.
INTEREST RECOGNITION ON NOTES RECEIVABLE - Interest income is recorded
as earned in accordance with the terms of the loans. Interest income is not
recorded on individual loans if the carrying value of the receivable exceeds the
realizable value of the underlying collateral or if payments are in default in
excess of two months.
FORECLOSED REAL ESTATE HELD FOR SALE - Foreclosed real estate is
initially recorded at new cost, defined as the lower of original cost or fair
value minus estimated costs of sale. After foreclosure, the excess of new cost,
if any, over fair value minus estimated costs of sale is recognized in a
valuation allowance. Subsequent changes in fair value either increases or
decreases such valuation allowance. See "Allowance for Estimated Losses" below.
ALLOWANCE FOR ESTIMATED LOSSES - Valuation allowances are established by
the Trust for estimated losses on notes receivable and properties held for sale
to the extent that the investment in notes or properties exceeds the Trust's
estimate of net realizable values of the property or collateral securing each
note, or fair value if foreclosure is probable. The provision for losses is
based on estimates using the direct capitalization of net operating income
25
<PAGE> 26
for the underlying properties. Capitalization rates have been determined by
using micro and macro economic factors. Actual losses may vary from current
estimates. Such estimates are reviewed periodically and any additional provision
determined to be necessary is charged against earnings in the period in which it
becomes reasonably estimated.
REVENUE RECOGNITION ON SALE OF REAL ESTATE - Sales of real estate are
recognized when and to the extent permitted by Statement of Financial Accounting
Standards No. 66, "Accounting for Sales of Real Estate."
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. As of December 31, 1997 the Trust had no tax loss
carryforwards.
NET INCOME PER CLASS A SHARE - The net income per Class A Share was
based on 2,617,000, 2,704,375, and 2,968,532 weighted average Class A Shares
outstanding during the years ended December 31, 1997, 1996 and 1995,
respectively, after deduction of the Class B Shares' 1% interest. The Trust
adopted Statement of Financial Accounting Standards No. 128 during 1997 and it
had no effect on the financial statements.
AMORTIZATION - The Trust amortizes loan fees to interest income over the
lives of the related Trust Loans. Loan fees and refinancing expenses paid by the
Trust are amortized over the life of the relevant loans. The Trust amortizes
leasing commissions to leasing commission expense over the term of the related
leases.
CONCENTRATION OF CREDIT RISK - Financial instruments which potentially
expose the Trust to concentrations of credit risk are primarily temporary cash
investments and mortgage and promissory notes receivable. The Trust places its
temporary cash investments with major financial institutions and, by policy,
limits the amount of credit exposure to any one financial institution. Of all
notes receivable, 50% are with partnerships who have previously defaulted on
their obligations (see Note 3).
INVESTMENT IN JOINT VENTURE - The Trust's investment in joint venture is
accounted for using the equity method since it is the Trust's intention to
dispose of the joint venture interest.
MARKET VALUE OF FINANCIAL INSTRUMENTS - The Trust used the following
assumptions in estimating the fair value of its notes receivable. For performing
notes receivable, the fair value was estimated by discounting future cash flows
using current interest rates for similar loans. For nonperforming notes
receivable, the estimated fair value of the Trust's interest in the collateral
property was used. The market value of notes receivable can only be determined
based upon a sales negotiation between independent third parties in an arm's
length transaction. Actual proceeds may be significantly impacted by the
condition of the real estate industry at the time the principal amounts become
due.
NOTE 3 - NOTES AND INTEREST RECEIVABLE
Notes receivable are collateralized by real property owned by the
borrowers of such Trust Loans, or by an assignment of the limited partnership
interest in the limited partnership that owns the property (but not the specific
underlying property) or by a general obligation of the limited partnership that
owns the property. All of the Trust's notes receivable collateralize the Trust's
line of credit with a third party lender (see Note 6).
Activity in the allowance for estimated loan losses was as follows:
<TABLE>
<CAPTION>
1997 1996 1995
------------ ------------ ------------
<S> <C> <C> <C>
Balance at beginning of period $ 12,100,000 $ 13,598,000 $ 26,595,000
Provisions for losses -- 4,334,000 2,350,000
Deductions (3,274,000) (5,832,000) (15,347,000)
------------ ------------ ------------
Balance at end of period $ 8,826,000 $ 12,100,000 $ 13,598,000
============ ============ ============
</TABLE>
26
<PAGE> 27
The provisions for losses for 1996 and 1995 relate to debt modifications
whereby unrecorded past due interest receivable was restructured as principal
(see below).
The deductions to the estimated loan losses relate primarily to the full
or partial repayment of Trust loans and foreclosure of properties by either the
Trust or the first lien holder, where the Trust is in a second position. During
1995 the Trust modified the Fox Run loans and capitalized approximately
$1,914,000 of past due interest and default interest into the principal of the
loans. The Trust reversed $1,800,000 of allowance for estimated loss relating to
the Fox Run loans, based upon improved property performance, the commencement of
modified debt service in the fourth quarter of 1995 and an anticipated
refinancing of the mortgages on the property. In 1996 approximately $660,000 of
deductions were due to the significant improvement of property performance
underlying certain of the Trust loans.
Included in the Trust's allowances for estimated losses on notes
receivable is approximately $4.8 million relating to one loan, -- a promissory
note on a Waukegan, Illinois apartment complex, referred to as Fox Crest. The
property has continued to improve in operations since February 1993, which may
lead to some future recovery of some portion of this promissory note. The
property still needs maintenance and capital improvements and has not provided
the Trust with any debt service since February 1993 and no debt service is
anticipated in the near future. The Trust has not reduced the allowance. There
can be no assurances that the value in this property will exceed the first
mortgage debt.
During the quarter ended March 31, 1997 the Trust restructured a first
mortgage referred to as LaSalle, on which the Trust had began foreclosure
proceedings in 1996. In connection with the related loan modification, the Trust
capitalized and recognized as interest income, approximately $409,000 of past
due interest, late fees, default interest along with approximately $14,000 of
out-of-pocket costs incurred by the Trust during the foreclosure process. The
restructured loan required monthly interest only payments based upon the stated
note rate of 11.5% on the reconstituted loan balance. In October 1997 this loan
was paid in full.
During the year ended December 31, 1997, four AMIT loans prepaid the
total outstanding principal balances of approximately, $6,800,000 and another
loan, referred to by the Trust as Northprior, made a substantial repayment in
the amount of $340,000. The four loans, which made full repayments, are referred
to by AMIT as Angeles Partners X ($614,000), Angeles Corporation ($3,450,000),
Carriage Hills ($1,404,000) and LaSalle ($1,334,000). The Northprior and
Carriage Hill loans had been previously fully reserved for loan loss and as a
result of the principal repayments AMIT realized recovery of bad debt in the
amounts of $340,000 and $1404,000, respectively. In addition, the Carriage Hills
loan repaid all past due interest in the amount of $237,000 which the Trust
recognized as interest income in November 1997.
During 1997 the Trust began receiving debt service on two loans which
had been previously restructured in 1996, the Angeles Partners XIV and Brittany
Point loans. The Angeles Partners XIV loan in October 1997 paid all past due
interest in the amount of $82,000 and made a partial principal repayment of
$48,000. During the first six months of 1997 the Brittany Point loan began
making cash flow interest payments to the Trust and effective July 1997 began
making monthly interest only payments at the stated interest rate of 12 1/2%. As
a result of the commencement of monthly debt service and significant improvement
of the property operations for the Brittany Point loan, the Trust in December
1997 realized as interest income $337,000 of past due interest.
In December 1997 the Trust wrote-off a promissory note, with a principal
outstanding balance of $1,530,000 referred to by the Trust as Vista Hills. Based
upon the Trust's evaluation of the property operations and discussions with the
borrower regarding the likelihood of foreclosure by the first lien holder in
1998 the Trust believed there would be no recovery in the future. The Borrower
had indicated to the Trust that the property would most likely be foreclosed
upon the first lien holder during 1998. The Trust had previously fully provided
for loan loss reserves for this loan and did not realize any loss or gain from
the sale.
In February 1997, AMIT 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, AMIT made a second new loan in
the amount of $2,950,000 secured by a first deed of 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 AMIT made
a
27
<PAGE> 28
new first mortgage loan in the amount of $1,900,000 secured by four manufactured
home parks located in Wyoming. The new loan requires interest only payments of
9.07% and matures in December 2003. In December 1997 AMIT made three first
mortgage loans in the amounts and terms as follows: $1,300,500 on a 144,000
square foot office/warehouse facility located in Houston, Texas with an 8%
interest rate, interest only payable monthly; $531,250 on a 56,080 square foot
industrial/warehouse located in Aiken, South Carolina with an 8% interest rate,
principal and interest payable monthly, with principal amortized over 20 years;
and $2,185,000 on a 335,000 square foot industrial facility located in Jackson,
Tennessee, initially monthly interest only payable at a rate of 10 1/2 %, with
the interest rated reduced to 230 basis points over ten-year Treasuries upon the
debt coverage ratio increasing to a stipulated level. All three of these
December 1997 first mortgage loans mature in December 2007.
In December 1997 the Trust purchased a second mortgage loan for
$384,000. This second mortgage loan is on a 186-unit apartment complex, Silver
Ridge Apartments, located in Maplewood, Minnesota. The Silver Ridge second
mortgage has a contract interest rate of 10% and a default rate of 12% and
matured December 31, 1997. In addition, during 1997 the Trust obtained judgement
liens against the Silver Ridge Apartments property based upon recourse
provisions on other Trust loans. Through one of these judgement liens the Trust
successfully foreclosed on the property in October 1997 and will be the owner of
the property after a twelve-month redemption period which ends in October 1998.
Silver Ridge Apartments is also encumbered by a $4.5 million first mortgage held
by an independent third party.
As of December 31, 1997, the Trust has signed and proposed commitments
to fund approximately $1 million of new loans.
During 1996, the Trust began foreclosure proceedings on three industrial
properties in Cleveland, Ohio that represent additional collateral available to
the Trust through recourse provisions of a failed loan referred to as Marina
Plaza. Although the properties are heavily indebted and in need of maintenance
and capital improvements, the Trust has received early indications of sales
value from potential purchasers that may provide recovery of approximately
$300,000 which would be recognized as income after foreclosure and sale of these
properties.
As reported by the Trust in 1995, the Trust loan referred to as North
Prior defaulted on its obligation to the Trust as well as to the senior lender
on the property. The property was sold just prior to foreclosure with proceeds
sufficient to pay the senior lender the full amount of the senior obligation.
Proceeds above the senior obligation were escrowed for potential use in an
environmental remediation that occurred prior to the foreclosure and sale.
Approximately $870,000 remains in the escrow and in January 1998 a site closure
letter was received from the state environmental government authority. The Trust
will recognized income for amounts, when and if, received from escrow, which is
anticipated to occur in 1998.
During 1996 the Trust modified five loans referred to as Brittany Point,
Fox Crest, Carriage Hills, Vista Hills and Angeles Partners XIV-Waterford. In
connection, with the modifications, the Trust extended the maturity dates on all
of the loans except for Angeles Partners XIV-Waterford, to December 31, 2000,
March 1, 2003, September 1, 2000 and September 1, 2002, respectively, and
capitalized approximately $320,000, $1,765,000, $204,000, $230,000 and $134,000,
respectively, of past due interest into principal. The modified notes require
payments only out of cash flows provided by the properties. The Trust did not
recognize any interest income in connection with these loan modifications.
During the last quarter of 1996 the Trust modified and received a
significant repayment on two of the Trust's largest loans. In October 1996, the
Arrowhead Joint Venture $6 million loan (which was previously secured only by a
partnership interest), along with a related $1.2 million unsecured preferred
partnership distribution interest ("Preferred Interest"), was restructured to a
$9 million first trust deed mortgage, with a current effective interest rate of
10.20% reducing to a 9.8% rate upon repayment of $1.5 million which is scheduled
to occur in late 1998. The restructuring has resulted in the Trust significantly
strengthening the collateral on this loan along with increasing the annual debt
service on this loan by approximately $400,000. The $1.2 million Preferred
Interest was originally acquired in the settlement with Angeles (see Note 9 of
Notes to Financial Statements) and was previously valued at zero as it had an
indeterminable value when it was acquired. In addition, the Trust capitalized
approximately $1.7 million in deferred interest that was not previously
recognized in income, as full recovery of such interest was until the
modification, considered doubtful.
28
<PAGE> 29
In December 1996, the Trust received approximately $7 million from its
three Fox Run mortgages as a result of the borrower refinancing the property.
The $7 million of cash proceeds represented the full repayment of approximately
$6.7 million of principal on these three loans with the remainder representing a
portion of the accrued interest associated with the loans. In addition to this
repayment, the Trust took back a new third mortgage on the Fox Run property in
the amount of $875,000. The $875,000 is comprised of approximately $425,000 of
the remaining accrued interest from the three Fox Run loans and approximately
$450,000 of accrued interest and principal on the Angeles Partners XI-Harbour
Landing promissory note. The Trust recognized $2 million of bad debt recovery on
this transaction, and approximately $900,000 of interest income from accrued
interest not previously recognized, as full recovery of such interest was not
reasonably assured until the repayment.
In addition, in December 1996 the Trust acquired, at par, three first
mortgage loans from an unaffiliated third party for approximately $2.9 million.
These mortgages are on three properties known as Hospitality Inns (three
separate properties and locations) on which the Trust held three second
mortgages. All of these six mortgages matured in October 1996. The Trust
restructured the first and second mortgage loans on these three properties
effective 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.
Notes receivable are summarized as follows:
<TABLE>
<CAPTION>
DECEMBER 31
--------------------------------------------------------------
1997 1996
--------------------------- ----------------------------
ESTIMATED ESTIMATED
FAIR VALUE BOOK VALUE FAIR VALUE BOOK VALUE
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
MORTGAGE NOTES RECEIVABLE:
First trust deeds, primarily requiring $ 34,510,000 $ 33,038,000 $ 18,385,000 $ 17,868,000
monthly interest only payments ranging from
8% to 12.5%, maturing through December 2007
Second trust deeds, requiring monthly 4,113,000 5,680,000 4,790,000 7,427,000
interest only payments ranging from 10% to
12.5%, maturing through December 2000
Third trust deed, requiring monthly interest 872,000 872,000 875,000 875,000
and principal payments of 11.25%, maturing
January 2002
------------ ------------ ------------ ------------
39,495,000 39,590,000 24,050,000 26,170,000
Less: Unearned loan fees (243,000) (127,000)
------------ ------------
Net mortgage notes receivable 39,347,000 26,043,000
PROMISSORY NOTES RECEIVABLE:
Promissory notes receivable, requiring 2,697,000 6,789,000 7,314,000 14,175,000
monthly interest payments ranging from 8% to
12.5%, maturing through March 2003
(See Note 5)
------------ ------------ ------------ ------------
NOTES RECEIVABLE $ 42,192,000 $ 46,136,000 $ 31,364,000 $ 40,218,000
============ ============ ============ ============
</TABLE>
At December 31, 1997 mortgage notes receivable of $3,735,000 and
promissory notes receivable of $1,539,000, all of which are due from affiliates,
are in default.
29
<PAGE> 30
With respect to the promissory notes receivable as of December 31, 1997,
$4,764,000 is secured by partnership interests and other loans and $2,024,000
are general obligations of partnerships or individuals. The underlying
properties are not collateral for such loans.
During year ended December 31, 1995, debt holders senior to the debts of
the Trust foreclosed upon two Trust Loans referred to as Marina Plaza and
Burnhamthorpe, respectively. Both loans had been fully reserved for loss.
However, due to recourse provisions on the Marina Plaza loan, the Trust was able
to obtain title to a property having an estimated value of $300,000.
Scheduled maturities of notes receivable due subsequent to December 31,
1997 are, $5,236,000 in 1998, $7,504,000 in 1999, $1,645,000 in 2000, $1,567,000
in 2001, $6,081,000 in 2002 and $19,072,000 thereafter. It is likely that the
scheduled maturity dates, for certain of the notes, will be extended.
NOTE 4 - REAL ESTATE HELD FOR SALE
In August 1993, the Trust foreclosed on a parcel of land located in
Houston, Texas, referred to by the Trust as "Martinique", for which it held a
first trust deed mortgage. The Trust did not recognize a loss on foreclosure in
1993 in excess of the reserve of $600,000 previously provided. The property was
sold in December 1995, for $1.5 million and the Trust received net cash proceeds
of approximately $1,371,000. The Trust realized a $3,000 loss on the sale.
In 1994, the Trust began a foreclosure action on a $1,500,000 first
trust deed mortgage held on a property referred to as 4851 Van Epps, an
industrial warehouse located in Cleveland, Ohio. The Trust had previously
provided a loss reserve of $600,000 on this loan. In September 1995 the Trust
obtained title to the property through a deed-in-lieu of foreclosure. In October
1995 the Trust sold the property for $1,370,000, taking back a $700,000 first
trust deed mortgage on the property and received net cash proceeds of
approximately $580,000. The Trust realized income of $435,000 from the sale.
In January 1994, the Trust acquired, through a foreclosure on its loan
of $3,600,000, a 220-unit apartment complex located in Decatur, Georgia. The
foreclosure resulted in no loss in 1994 as the reserve of $430,000 had been
previously provided. See Note 3. In April 1994, the Trust sold the property and
received net cash proceeds of approximately $3.3 million. The Trust recognized
income of $2,000 from the sale.
The Trust obtained title to the 4705 Van Epps property through a
deed-in-lieu of foreclosure in August 1995. The Trust had obtained a judgment
lien of approximately $2.7 million on this property as a result of recourse
provisions in the $2 million note referred to as Marina Plaza. In consideration
of the deed-in-lieu of foreclosure, the Trust agreed to reduce the judgment lien
by $500,000 and a payment of $5,000. The 4705 Van Epps property had a $343,000
delinquent first mortgage from an independent financial institution which the
Trust was required to pay upon transfer of title to the Trust. The Trust
recorded this property at $500,000 and recognized approximately $151,000 as
recovery of bad debt. The property was sold in February 1996 for $752,000,
received net cash proceeds of approximately $677,000 and realized a $184,000
gain on the sale.
In August 1996, the Trust foreclosed on a 443 unit mobile home park
located in Belton, Missouri, referred to by the Trust as Springdale Lake Estates
MHP ("Springdale"), for which it held a second trust deed mortgage in the amount
of $1,720,000 and had capitalized foreclosure costs of approximately $2,000.
Upon taking title to Springdale, the Trust assumed a first mortgage on the
property in the amount of approximately $2,800,000. The Trust did not recognize
any loss from the foreclosure as a reserve of $531,000 had been previously
provided. In October 1996, the Trust sold Springdale for $4,000,000 and received
net cash proceeds of approximately $1,112,000 with no gain or loss recognized on
the sale.
As of December 31, 1997, the Trust owned three real estate properties
held for sale, referred to as University Center Phase IV a 56,000 square foot
retail center and University Center Phase I & II, a 51,200 square foot warehouse
office space, both of these properties are located in Fridley, Minnesota, and a
240-acre parcel of raw land referred to as Colony Cove located in Ellenton,
Florida.
30
<PAGE> 31
The Trust foreclosed on University Center Phase IV in December 1995, on
which it held a $1,800,00 first trust deed mortgage. This note contained
recourse provisions, accordingly, the Trust received as a function of the
foreclosure action, a judgment lien in the amount of $464,000 on a property
called University Center Phase I & II. As the Trust had two additional loans
with the same borrower, the borrower agreed to deed-in-lieu of foreclosure the
University Center Phase I & II property in consideration of reducing the
principal loan balance by $880,000 on a second trust deed mortgage held by the
Trust in the original amount of $2,600,000, known as Springdale Lake Estates.
The Trust recorded the University Center Phase I and II property at $1,100,000,
its estimated fair market value.
In October 1997 and previously in April 1996, the Trust foreclosed on a
40 and an adjacent 200 acre parcel of land, respectively, located in Ellenton,
Florida, referred to by the Trust as "Colony Cove", for which it held a first
trust deed mortgage in the amount of $1,572,000 on the 200-acres and had
recourse, through provisions on the mortgage note, allowing the foreclosure on
the adjacent 40-acres. In conjunction with the foreclosures, the Trust incurred
approximately $178,000 in expenses, which have been capitalized into the cost of
the property. The Trust did not recognize any income or loss from the
foreclosure. During 1997 the Trust entered into a contract to sell approximately
224 acres of this property zoned residential for $8,500 per acre. The contract
requires the sale to close in the latter part of 1998, although there can be no
assurances that this transaction will occur. Subsequent to 1997, in January 1998
the Trust garnished cash of approximately $160,000 held by the borrower based
upon the recourse provisions of the mortgage note. The $160,000 reduced the
capitalized cost of the property.
In June 1996, the Trust obtained through foreclosure a 57% joint venture
interest in a 160-acre parcel of land in Ocala, Florida. This 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. This property was sold in 1997 and the
Trust received approximately $665,000 and realized a gain of $80,000 on the
sale.
NOTE 5 - ANGELES PROMISSORY NOTE RECEIVABLE
The Trust had provided Angeles with a $10,000,000 promissory note
receivable secured by real estate, expiring May 31, 1993. At December 31, 1994,
outstanding borrowings on the note were $9,255,000. As a result of the Angeles
settlement as discussed in Note 9 the Trust received over $15 million in cash,
notes and stock to settle this note along with other matters. The new note in
the amount of $6,100,000 received from Angeles in the settlement was fully
repaid during 1997.
NOTE 6 - NOTE PAYABLE TO BANK
The Trust's line of credit with the Bank, in the amount of $5 million
requires monthly interest only payments based upon prime plus 1/2% and matures
April 30, 1998. The line of credit with the Bank allows the Trust to draw on
such line to facilitate the foreclosure process on Trust Loans. In August 1995
the Trust drew down on such line of credit in the amount of $343,000 in order to
pay-off the first trust deed on a property obtained through a deed-in-lieu of
foreclosure (see Note 4). As of December 5, 1995, the Trust paid off the
remaining outstanding balance on the line of credit. In June 1996, the Trust
drew down for a three day period of time $480,000. During 1997 the Trust did not
draw on the line of credit and as of December 31, 1997 the Trust has no
outstanding borrowings with the Bank.
The Trust's average month-end borrowings on the working capital line of
credit were $0 in 1997 and 1996. In conjunction with the financing, the Trust
paid loan fees of $25,000, $19,000, and $43,000 in 1997, 1996 and 1995,
respectively.
31
<PAGE> 32
NOTE 7 - RECORDED CASH ADVANCES FROM AFFILIATED PARTNERSHIPS AND PROPOSED
SETTLEMENT WITH INSIGNIA
In July 1993, the Trust had filed a lawsuit challenging the Trust's
indebtedness and any liability for principal and interest relating to funds
allegedly loaned to the Trust by eight partnerships. The balance outstanding on
these alleged loans, as of December 31, 1994, was $7,585,000 along with accrued
interest of approximately $941,000. Cross complaints were filed against the
Trust by certain of the lending partnerships in this same lawsuit seeking, among
other things, repayment in full of the alleged loans. Effective March 31, 1995,
the following settlement was consummated between the Trust and seven
partnerships, Insignia and affiliates of Insignia. Funds were paid to such
entities on April 14, 1995 as follows:
o the Trust paid approximately, $5,752,000 in cash;
o the Trust purchased, for $250,000, an option from MAE GP Corporation,
an affiliate of Insignia, to purchase all the Class B Shares of the
Trust currently owned by the affiliate. Such holdings represent 100% of
the Trust's outstanding Class B Shares. The option is exercisable by
the Trust in 10 years for approximately $94,000. During the 10 year
period the option is outstanding all of the Class B Shares will be
voted, pursuant to an irrevocable proxy, with the majority of Class A
Shares in connection with any proposal involving the Trust and Insignia
or any affiliate thereof or election of any Trustee nominated by or
affiliated with Insignia. Such majority will be determined without
consideration of the votes of "Excess Class A Shares," as defined in
the Trust's Declaration of Trust. With respect to all other matters the
affiliate of Insignia can vote the Class B Shares without restriction.
In addition, one partnership, not affiliated with Insignia, having an
alleged loan to the Trust of $1,150,000 along with accrued interest of
approximately $145,000 as of March 31, 1995, reached an agreement with the Trust
for a settlement of all claims between the Trust and the partnership. Pursuant
to this agreement the Trust paid a total of $930,000 of cash on May 9, 1995,
upon execution of the settlement agreement.
As a result of this settlement the Trust recognized an extraordinary gain
of $1,844,000 summarized as follows:
<TABLE>
<CAPTION>
<S> <C>
Recorded cash advances from affiliated partnerships $ 7,585,000
Accrued interest on recorded cash advances through 12/31/94 941,000
-----------
Total recorded liabilities relating to recorded cash advances 8,526,000
Less:
Settlement of principal and interest on Insignia related partnerships (5,686,000)
Additional interest due on settlement of Insignia related partnerships (66,000)
Settlement of principal on non-Insignia related partnership (930,000)
-----------
Extraordinary gain $ 1,844,000
===========
</TABLE>
NOTE 8 - 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 A and Class B Shares are each entitled to one vote
per share with respect to the election of Trustees and other matters.
In 1995, the Trust purchased, for $250,000, an option from MAE GP
Corporation, an affiliate of Insignia to purchase all the Class B Shares of the
Trust currently owned by the affiliate. Such holdings represent 100% of the
Trust's outstanding Class B Shares. The option is exercisable by the Trust in 10
years for approximately $94,000. During the 10 year period the option is
outstanding, all of the Class B Shares will be voted, pursuant to an irrevocable
proxy, with majority of Class A Shares in connection with any proposal involving
the Trust and Insignia or any affiliate thereof or election of any Trustee
nominated by or affiliated with Insignia. The majority will be determined
without consideration of the votes of "Excess Class A Shares," as defined in the
Trust's Declaration of Trust. With respect to all other matters, the affiliate
of Insignia can vote the Class B Shares without restriction.
32
<PAGE> 33
In November 1996, the Trust's Board of Trustees adopted a Shareholders
Rights Plan and declared a dividend of one Right on each outstanding share of
the Trust's Class A Shares to stockholders of record on November 18, 1996. The
Rights are exercisable if a person or group acquires 20% or more of the Trust's
Class A Shares or announces or commences a tender offer for 20% or more of the
such shares. When a person or group acquires such 20%, each exercisable Right
will entitle its holder (other than such person or group) to purchase, at the
Right's then-current exercise price, a number of the Trust's Class A Shares
having a market value of twice such price. In addition, if the Trust is acquired
in a merger or other business combination transaction after a person has
acquired 20% or more of the Trust's outstanding Class A Shares, each right will
entitle its holder to purchase, at the Right's then-current exercise price, a
number of the acquiring company's common shares having a market value of twice
such price. Prior to the acquisition by a person or group of beneficial
ownership of 20% or more of the Trust's common stock, the Rights are redeemable
for one cent per Right at the option of the Board of Trustees. The Board of
Trustees is also authorized, under certain circumstances, to reduce the 20%
threshold referred to above to not less than 10%. The Rights will expire on
December 31, 2003 unless otherwise extended by the Board of Trustees.
The Board of Trustees of the Trust has authorized the Trust to
repurchase, in open market transactions, up to 10% of its Class A Shares. The
Trust has repurchased 43,800 shares under this program. There were no purchases
in the open market in 1997, 1996 and 1995 however the Trust acquired 209,700
Class A Shares for $1,730,000 less $764,000 in expenses, in settlement of
actions it had brought against certain third parties.
In February 1993, the Trust's policy of distributing monthly the net
cash from operations to its Class A shareholders was temporarily suspended as a
result of the failure of the Insignia Partnerships and partnerships affiliated
with Angeles to fully service their Trust Loan obligations and Angeles'
inability to perform its guarantee of a minimum annual distribution of $2.00 per
Class A Share through May 1994 or meet its obligations under its promissory note
receivable with the Trust because of its own liquidity problems. The Trust made
shareholder distributions aggregating $1.03 and $0.52 per share in 1997 and
1996, respectively, and made no distributions in 1995. In December 1997, the
Board of Trustees of the Trust declared a $.32 per share dividend payable on
February 11, 1998, to shareholders of record on January 13, 1998.
NOTE 9 - SETTLEMENT WITH ANGELES CORPORATION
Angeles had been unable to service its debt obligations under its
promissory note receivable with the Trust or perform its obligations under its
guarantees of the Trust's Loans. In May 1993 Angeles filed for protection under
Chapter 11 of the federal bankruptcy code. Angeles's failure to perform under
its debt obligations and guarantees with the Trust together with other matters,
resulted in the March 1994 filing by the Trustees, on behalf of the Trust, of
substantial claims against Angeles in a proof of claim in the Angeles
bankruptcy.
The Trust reached agreement with Angeles and the Committee of Creditors
Holding Unsecured Claims of Angeles to settlement of all claims between the
Trust and Angeles. The settlement agreement was approved by the Bankruptcy Court
under a plan of reorganization and the Trust received on April 14, 1995, after
the effective date of Court approval (March 31, 1995), the following:
o cash of $6.0 million;
o collateralized note payable of $6,100,000 due December 31, 1998, interest
paid quarterly at prime plus 1% not to exceed 8.5%;
o 567,326 Class A Shares of the Trust, owned by Angeles, representing 16% of
the then total outstanding Class A Shares of the Trust;
o payment of $1 million on a third party claim;
o assignment of a third party preferred interest with a face value of $1.2
million; and
o a release of all claims on behalf of Angeles against the
Trust.
The $6.1 million note is collateralized with a pledge of Angeles's limited
partnership interest in a limited partnership whose assets are comprised of
notes and receivables from various real estate investment partnerships. This
note was paid in full during 1997.
33
<PAGE> 34
The third party $1.2 million preferred interest received in the settlement
had an indeterminable value when acquired and therefore was recorded at zero.
The settlement transaction with Angeles resulted in the Trust recording
$12,844,000 as recovery of bad debt, summarized as follows:
<TABLE>
<CAPTION>
<S> <C>
Consideration received in settlement:
Cash $ 6,000,000
Collateralized note 6,100,000
Third party subordinated note 1,200,000
Reimbursement for third party claim 1,000,000
567,326 Class A Trust Shares (valued as of
effective date of settlement, $7.50/Class A share) 4,254,000
Other 745,000
------------
Total 19,299,000
Less:
Repayment of Angeles note receivable, net of reserve (4,255,000)
Reserve for third party subordinated note (1,200,000)
Payment of third party claim (1,000,000)
------------
Recovery of bad debt from Angeles Settlement $ 12,844,000
============
</TABLE>
NOTE 10 - PROPOSED MERGER
On July 18, 1997, AMIT, IPT, Insignia and MAE GP entered into the Merger
Agreement which, provides for, among other things, the Merger of AMIT with and
into IPT, with IPT surviving the Merger. Upon consummation of the Merger the
separate existence of AMIT will cease. A Special Meeting of AMIT shareholders
will be called to consider and vote, a proposal, to approve and adopt the Merger
Agreement and the transactions contemplated thereby, including the merger of
AMIT with and into IPT, with IPT being the surviving entity (the "Merger"), and
approve the amendment of AMIT's Declaration of Trust (the "Trust Amendment") to
permit AMIT to merge and consolidate with other entities subject to the required
vote of the AMIT Board and AMIT's shareholders (collectively, the "Merger
Proposal"). It is currently expected that the Special Meeting of Shareholders
will convene in mid 1998. A proxy statement will be circulated to all AMIT
shareholders in advance of the meeting, containing information on the proposed
merger.
Pursuant to the Merger Agreement, each outstanding AMIT Class A Share
will be converted into IPT Common shares (the "Class A Exchange Ratio"). The
Class A Exchange Ratio is determined by adjusting the base exchange values set
in the Merger Agreement of $16.25 per AMIT Class A Share and $10.00 per IPT
Common Share to account for dividends paid by AMIT since December 31, 1996 and
by IPT since January 31, 1997. The Class A Exchange Ratio is subject to further
adjustment should either AMIT or IPT declare any additional dividends prior to
the Merger. No fractional IPT Common Shares will be issued. In lieu of any
fractional shares, an AMIT shareholder otherwise entitled to a fractional IPT
Common Share will receive cash from IPT in an amount determined by multiplying
such fractional share amount by the IPT Share Value.
34
<PAGE> 35
During the year ending December 31, 1997, Insignia paid approximately $1
million for professional and legal fees on behalf of the Trust with regard to
the proposed merger.
NOTE 11 - 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 ENDING
-----------------------------------------
1997 12/31/97 9/30/97 6/30/97 3/31/97
- ---- -------- ------- ------- --------
<S> <C> <C> <C> <C>
Revenue $3,118 $1,088 $1,758 $1,235
Net income $2,427 $ 778 $1,462 $ 882
PER CLASS A SHARE
Net income $ 0.92 $ 0.29 $ 0.55 $ 0.33
Weighted average Class A 2,617 2,617 2,617 2,617
Shares outstanding
QUARTER ENDING
-----------------------------------------
1996 12/31/97 9/30/97 6/30/97 3/31/97
- ---- -------- ------- ------- --------
Revenue $7,387 $ 878 $ 631 $1,154
Net income $6,780 $ 562 $1,033 $ 711
PER CLASS A SHARE
Net income $ 2.56 $ 0.21 $ 0.37 $ 0.25
Weighted average Class A 2,617 2,617 2,757 2,827
Shares outstanding
</TABLE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURES
None.
35
<PAGE> 36
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>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Ronald J. Consiglio(1) 54 Trustee, Chairman, Chief Executive Officer
and President
J. D'Arcy Chisholm
(1)(2)(3) 66 Trustee
Bryan L. Herrmann (1)(3) 62 Trustee
Curtis J. Crivelli (2) 55 Trustee
Anna Merguerian 42 Vice President, Secretary, and Chief
Financial Officer
</TABLE>
(1) Member of Executive Committee
(2) Member of Audit Committee
(3) Member of 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. In
addition, Mr. Consiglio was the Chairman of the Trust's Audit Committee in 1993
and became the Chairman of the Independent Committee upon its formation in
February 1993. Upon formation of the Trust's Executive Committee in May 1995,
Mr. Consiglio serves as its Chairman. 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 a trustee of Angeles Participating Mortgage Trust and is a
business consultant.
Mr. Chisholm has been a Trustee of the Trust since September 1989 and is
a member of the Audit, Compensation and Executive Committees and serves as the
Chairman of the Audit Committee. He has been a consultant to real estate,
business and educational entities in San Francisco, California, currently and in
Minneapolis, Minnesota since 1989. From 1980 until September 1989, Mr. Chisholm
was associated with the Institute for Pastoral and Social Ministry at the
University of Notre Dame, initially as a volunteer, then as an assistant
director from 1982 until 1986 and finally as an associate director from 1986
until 1989. From 1971 until 1980, Mr. Chisholm served in several capacities for
Angeles and its subsidiaries, including president of its property management
company and president of its property sales company. Before 1971, Mr. Chisholm
was employed at the following real estate related firms; Real Estate Research
Corporation, Del E. Webb Corporation and Milton Meyer Company. He holds a B.A.
degree from the University of Notre Dame and is a graduate of the Executive
Program, Graduate School of Business, UCLA. Mr. Chisholm also serves as a
trustee of Angeles Participating Mortgage Trust.
Mr. Herrmann has been trustee since December 1994 and is a member of the
Compensation and Executive Committees and serves as the Chairman of the
Compensation Committee. Mr. Herrmann is an investment banker by background and
currently is Chairman and Chief Executive Officer of Base Camp 9 Corp. and has
been in that position since 1990. In addition to his duties at Base Camp 9
Corp., from 1992 to 1994, Mr. Herrmann served as Chief Executive officer of
Spaulding Composites Company. Since 1984, Mr. Herrmann has been the general
36
<PAGE> 37
partner of MOKG 1984 Investment Partners Ltd. Mr. Herrmann is a member of the
board of directors of Wynn's International, Inc., a New York Stock Exchange
company.
Mr. Crivelli has been a Trustee since March 1996, and became a member of
the Audit Committee in March 1996. Mr. Crivelli , prior to his recent retirement
from the banking industry, was an executive with Great Western Bank from 1987
through 1995. Mr. Crivelli's responsibilities at Great Western, as Executive
Vice President, included the management of the Bank's retail banking division
along with securities operation and marketing departments. From 1982 through
1987 Mr. Crivelli was President and Chief Executive Officer of Encino Savings
Bank. Mr. Crivelli currently serves on the Board of Directors of ACCO, Inc.
Ms. Merguerian became the Vice President and Secretary of the Trust in
December 1993 and the Chief Financial Officer in December 1994. Prior to joining
the Trust in May 1993, she was employed by Angeles from June 1981 through April
1993. Her last position with Angeles and its subsidiaries was as a Senior Vice
President of the Asset Management Group. From September 1977 to May 1981, she
served as a Senior Accountant at 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
AUDIT COMMITTEE. The Board of Trustees has delegated a portion of its
authority to an Audit Committee comprised of only 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. Additionally, the Committee reviews and
monitors non-audit services provided by the independent auditors. The Committee
is kept apprised by management of the Trust's internal control procedures.
Messrs. Chisholm and Crivelli served on the Audit Committee with Mr. Chisholm
serving as Chairman.
COMPENSATION COMMITTEES. During 1995 the Audit and Compensation
Committee was split into two separate committees. The Compensation Committee
oversees, reviews and approves the compensation of the Trustees and officers of
the Trust. Messrs. Chisholm and Herrmann serve on the Compensation Committee
with Mr. Herrmann serving as Chairman.
EXECUTIVE COMMITTEE. In May 1995 the Board of Trustees delegated a
portion of its authority to the Executive Committee comprised of Mr. Consiglio,
Mr. Chisholm and Mr. Herrmann, with Mr. Consiglio serving as Chairman. The
purpose of establishing the Executive Committee was the expectation that the
Board of Trustees would expand in size due to the contemplated expansion of the
Trust's asset portfolio. Therefore, in order to facilitate efficient management
of the Trust without having to arrange for meetings for a larger group of
Trustees, the Executive Committee was formed as provided in the Trust's
Declaration of Trust. The Executive Committee has all of the powers and
authority of the board of trustees with certain specific restrictions.
BOARD OF TRUSTEES AND COMMITTEE MEETINGS. During the fiscal year ended
December 31, 1997, the Trust's Board of Trustees held four regular meetings with
all Trustees attending in person or by telephone and two special meetings with
all Trustees attending in person or by telephone. The Audit Committee met twice
during fiscal year 1997 and each committee member attended either in person or
by telephone. The Compensation Committee met once in 1997 and each committee
member attended either in person or by telephone. The Executive Committee met
one time during 1997 and each committee member attended either in person or by
telephone.
37
<PAGE> 38
ITEM 11. EXECUTIVE COMPENSATION
COMPENSATION OF EXECUTIVE OFFICERS AND TRUSTEES
REMUNERATION OF TRUSTEES. Each Trustee receives a retainer fee of
$12,000 per year, which is paid quarterly and (except for Mr. Consiglio) a 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, Compensation and Executive 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. During the year ended December 31, 1997, Mr.
Crivelli received $1,460 and Mr. Herrmann received $24,000 in consulting fees
from the Trust for independent services provided to the Trust.
EXECUTIVE OFFICERS' COMPENSATION. During the year ended December 31,
1997, Mr. Consiglio received a total of $276,000 for his services as President
and Chief Executive Officer of the Trust plus a bonus of $100,000 relating to
services performed in 1997, and an additional $12,000 as compensation for
serving on the Board of Trustees. Mr. Consiglio drives an automobile leased by
the Trust with a monthly rental of $732 (aggregating $8,000 in 1997) and
reimburses the Trust for his personal use of the automobile which aggregated $60
per month for a total of $720 in 1997. For the year ended December 31, 1997, Ms.
Merguerian was paid $100,000 for her services as Chief Financial Officer of the
Trust and was paid a bonus of $75,000 relating to services performed in 1997.
The table below sets forth information concerning the compensation for
services in all capacities to the Trust for the fiscal years 1997, 1996 and
1995, those persons who at any time during the fiscal years served as Chief
Executive Officer and the most highly compensated officers ("Executive
Officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL ALL OTHER
COMPENSATION ANNUAL
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION
- --------------------------- ---- ------ ----- ------------
<S> <C> <C> <C> <C>
Ronald J. Consiglio, Trustee, 1997 $276,000 $100,000(6) $ 12,000(1)
Chairman, Chief Executive
Officer and President(4) 1996 $252,360 $ 56,000(5) $ 12,000(1)
1995 $281,200 $ 40,000(3) $ 12,000(1)
Anna Merguerian, Chief Financial 1997 $100,000 $ 75,000(6) $ -0-
Officer (2)
1996 $ 79,400 $ 45,000(5) $ -0-
1995 $ 62,500 $ 15,000(3) $ -0-
</TABLE>
(1) Represents compensation for serving on the Board of Trustees.
(2) Ms. Merguerian became Chief Financial Officer in December 1994. Ms.
Merguerian is paid a salary of $100,000 for which the Trust contributed
$62,500 to such salary in 1995 and $79,400 in 1996 and another trust,
Angeles Participating Mortgage Trust, contributed $37,500 and $20,600,
respectively. In addition, in December 1995 the Trust entered into a
renewable Employment Agreement with Ms. Merguerian with an eighteen-month
term. The Employment Agreement provides for an annual salary of $100,000 to
be paid to Ms. Merguerian and allows for Ms. Merguerian to provide services
to Angeles Participating Mortgage Trust for which the Trust is reimbursed
for specific time spent on such trust. Effective October 1996, Ms.
Merguerian no longer provides any services to Angeles Participating Mortgage
Trust.
(3) Represents bonus paid in 1996 for the year ended December 31, 1995.
(4) Mr. Consiglio is paid a salary of $276,000 for which the Trust contributed
$252,360 to such salary in 1996 and another trust, Angeles Participating
Mortgage Trust, contributed the remaining amount. In addition, in January
1996 the Trust entered into a renewable Employment Agreement with Mr.
Consiglio with a two-year term. The Employment Agreement provides for an
annual salary of $276,000 to be paid to Mr. Consiglio and allows for Mr.
Consiglio to provide executive services to Angeles Participating Mortgage
Trust for which the Trust is reimbursed for specific time, if any, spent on
such trust. No such services were provided in 1997.
38
<PAGE> 39
(5) Represents bonus paid in 1997 for the year ended December 31, 1996.
(6) Represents bonus paid in 1998 for the year ended December 31, 1997.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee is responsible for recommending to the Board
appropriate compensation of the Trust's executive officers and key employees.
The Compensation Committee's compensation policy for the last fiscal
year was to recommend salaries at levels and establish cash incentive benefits
the Board believes will attract, retain and motivate highly competent
individuals. In December 1995 the Trust entered into a renewable eighteen-month
employment contract with Ms. Merguerian and in January 1996 entered into a
renewable two-year employment contract with Mr. Consiglio. The terms of the
contracts were based upon a comparison of comparable positions in the REIT
industry and the Compensation Committee obtained the advise and opinion as to
the fairness of the contracts from a REIT executive compensation/recruitment
firm. In determining the salary of Mr. Consiglio, the Compensation Committee
considered the responsibilities of Mr. Consiglio as the Chief Executive Officer,
President, Trustee and Chairman of the Board of Trustees of the Trust, Mr.
Consiglio's experience and the salaries paid in the competitive marketplace for
executive talent, including a comparison of the salaries and other perquisites
for comparable positions at other companies.
The Compensation Committee currently intends for all compensation paid
to the Trust's executive officers to be tax deductible to the Trust pursuant to
Section 162(m) of the Internal Revenue Code ("Section 162(m)"). Section 162(m)
provides that compensation paid to executive officers in excess of $1,000,000
cannot be deducted by the Trust for federal income tax purposes unless, in
general, such compensation is performance based, is established by an
independent committee of Trustees, is objective and the plan or agreement
providing for such performance based compensation had been approved in advance
by the shareholders. In the future, however, if, in the judgment of the
Compensation Committee, the benefits to the Trust of a compensation program that
does not satisfy the arbitrary and inflexible conditions of Section 162(m)
outweigh the costs to the Trust of failure to satisfy these conditions, the
Committee may adopt such a program.
COMPENSATION COMMITTEE
J. D'Arcy Chisholm
Bryan L. Herrmann
SECTION 16 MATTERS
Section 16 (a) of the Securities Exchange Act of 1934, as amended,
requires the Trust's officers, trustees and persons who own greater than ten
percent of a registered class of the Trust's equity securities to file reports
of ownership and changes in ownership with the Securities and Exchange
Commission and the American Stock Exchange, and to furnish the Trust with copies
of all Section 16(a) forms they file. Based solely on representations from such
persons, the Trust believes that during the fiscal year ended December 31, 1997
all Section 16(a) filing requirements applicable to its Trustees, officers and
10% beneficial holders were complied with.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information as of February 9, 1998, with
respect to any Class A Shares and Class B Shares owned by Trustees and nominees
as Trustees of the Trust 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
shares or Class B shares, and there is no other shareholders known to be the
beneficial owner of more than 5% of the issued and outstanding Class A Shares.
The Trust had 1,416 Class A shareholders of record as of February 9, 1998. All
of the issued and outstanding Class B Shares (a total of 1,675,113 shares) are
owned by MAE GP Corporation, which is affiliated with Insignia.
39
<PAGE> 40
<TABLE>
<CAPTION>
SHARES BENEFICIALLY OWNED(1)
NAME AND ADDRESS OF TITLE OF ---------------------------------
BENEFICIAL HOLDER CLASS NUMBER OF SHARES PERCENT OF CLASS
- ----------------------------------- --------- ---------------------------------
<S> <C> <C> <C>
Insignia Financial Group, Inc., Class A 96,800 3.70%(2)(3)
Andrew L. Farkas and Liquidity
Assistance L.L.C
One Insignia Financial Plaza
Greenville, SC 29602
Gotham Partners, L.P. and Class A 242,949 9.28%(4)
Gotham Partners II, L.P.
110 East 42nd Street, 18th Floor
New York, New York 10017
Wayne M. Cooperman and Class A 214,700 8.20%(5)
Ricky C. Sandler
237 Park Avenue, Suite 801
New York, New York 10012
Fusion Partners, LP Class A 166,900 6.38%(5)
237 Park Avenue, Suite 801
New York, New York 10012
Ronald J. Consiglio Class A 14,750 0.60%
Bryan L. Herrmann Class A 4,550 0.20%
J. D'Arcy Chisholm Class A 1,728 *
MAE GP Class B 1,675,113 100%(3)(6)
All trustees and executive Class A 21,028 0.80%
officers as a group (3 persons)
All trustees and executive Class B -- 0.00%
officers as a group (3 persons)
</TABLE>
(1) Except as otherwise indicated and subject to applicable community property
laws and similar statutes and subject to the B Share Proxy and related
Option Agreement pertaining to the B Shares, the person listed as beneficial
owner of shares has sole voting power and/or dispositive power with respect
to the shares.
(2) On January 31, 1997, Insignia Financial Group, Inc., Andrew L. Farkas,
Liquidity Assistance L.L.C. (collectively referred to as "Insignia"), filed
Amendment No. 4 to Schedule 13D. In the aforementioned Amendment and in
prior amendments the filing parties disclose their possible intention to
acquire control of AMIT which could involve replacing the Board of Trustees
and/or proposing a business combination transaction with AMIT. Such other
plans or proposals Insignia is considering include (1) a sale or transfer of
a material amount of assets of the Trust, (2) a material change in the
present capitalization or dividend policy of AMIT, (3) material changes to
AMIT's business or trust structure, (4) changes in AMIT's Declaration of
Trust or Trustees' Regulations and (5) redemption or judicial invalidation
of rights to purchase Class A shares (the "Purchase Rights").
(3) An affiliate of Insignia.
(4) On June 26, 1997, Gotham Partners, L.P. and Gotham Partners II, L.P.
(collectively referred to as "Gotham"), filed Amendment No. 3 to Schedule
13D. In the aforementioned Amendment and in prior amendments the filing
parties disclose that they acquired the Class A shares for investment
purposes.
(5) On February 5, 1998, Wayne M. Cooperman, Ricky C. Sandler and Fusion
Partners, Ltd. (collectively referred to as "Fusion"), filed Amendment No. 2
to Schedule 13D. The Class A shares are held through Fusion Partners Ltd., a
limited partnership of which the individuals are the general partners. In
the aforementioned Amendment and in the initial Schedule 13D filing, the
filing parties disclose that they acquired the Class A shares for investment
purposes.
(6) The AMIT Class B shares held by MAE GP are subject to the Class B Voting
Proxy and the Stock Option Agreement. The 1,675,113 Class B shares
outstanding equals 39% of the total voting power of the AMIT.
* Less than .1%.
40
<PAGE> 41
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
A significant portion of the outstanding Trust Loans have been made to
the partnerships affiliated with MAE GP, the sole holder of the Class B Shares
and Insignia the owner of 3.7% of the Class A Shares.
41
<PAGE> 42
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENTS AND SCHEDULES, AND
REPORTS ON FORM 8-K
(a) Listed below are all financial statements and supplemental schedules filed
as part of this 10-K and herein included.
Page No
- --------------------------------------------------------------------------------
Balance Sheets at December 31, 1997 and 1996 20
Statements of Operations for the years ended
December 31, 1997, 1996 and 1995 21
Statements of Changes in Shareholders' Equity for the
years ended December 31, 1997, 1996 and 1995 ??
Statements of Cash Flows for the years ended
December 31, 1997, 1996 and 1995 23
Notes to Financial Statements 24
Supplemental Schedule III - Real Estate and Accumulated Depreciation 45
Supplemental Schedule IV - Mortgage Loans on Real Estate 46
(b) No reports on Form 8-K were filed during the last quarter of the period
ended December 31, 1997
(c) Exhibits required by Item 601 of Regulation S-K: Refer to Exhibit Index of
this report.
(d) Other Financial Statements required by Regulation S-X are not applicable
or because the required information is shown in the financial statement.
All other supplemental schedules are omitted because they are not required or
because the required information is shown in the financial statements.
42
<PAGE> 43
ANGELES MORTGAGE INVESTMENT TRUST
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NUMBER DESCRIPTION OF EXHIBIT
-------------- ----------------------
<S> <C>
3.1 Declaration of the Trust dated September 1, 1988.(1)
10.20 Amendment to Agreement and Mutual Release dated April 10, 1995
between the Trust, Angeles Corporation and the Committee of
Creditors Holding Unsecured Claims. (2)
10.21 Amendment to Settlement Agreement dated December 20, 1994 between
the Trust and the Insignia Parties. (2)
10.22 Second Amendment to Settlement Agreement dated March 29, 1995
between the Trust and the Insignia Parties. (2)
10.23 Third Amendment to Settlement Agreement dated April 12, 1995 between
the Trust and the Insignia Parties. (2)
10.24 Settlement Agreement dated May 5, 1995 between the Trust and
Satellite Communication Partners, Ltd. (2)
10.25 Seconded Amended and Restated Loan and Security Agreement dated July
25, 1995 between the Trust and Imperial Bank. (2)
10.26 Employment Agreement dated December 1, 1995 between the Trust and
Anna Merguerian. (2)
10.27 Employment Agreement dated January 1, 1996 between the Trust and
Ronald J. Consiglio. (3)
10.28 Amendment No. 1 to Second Amended and Restated Loan and Security
Agreement and Note dated September 3, 1996 between the Trust and
Imperial Bank. (3)
10.29 Amendment No. 2 to Second Amended and Restated Loan and Security
Agreement and Note dated September 3, 1996 between the Trust and
Imperial Bank.
10.30 Agreement and Plan of Merger dated July 18, 1997 between the Trust
and Insignia Properties Trust, Insignia Financial Group, Inc. and
MAE GP Corporation. (4)
19.1 Form of Indemnification Agreement dated as of January 3, 1989
between the Trust and the Trustees.
</TABLE>
(1) Filed as an exhibit to the Trust's Registration Statement dated December 14,
1988, and incorporated herein by reference.
(2) Filed as an exhibit to the Trust's Form 10-K dated December 31, 1995, and
incorporated herein by reference.
(3) Filed as an exhibit to the Trust's Form 10-K dated December 31, 1996, and
incorporated herein by reference.
(4) Filed as an exhibit to the Trusts Preliminary Schedule 14A on November 14,
1997, and incorporated herein by reference.
43
<PAGE> 44
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 MORTGAGE INVESTMENT TRUST
------------------------------------------------
Registrant
Date February 27, 1998 /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 27, 1998 /s/ Ronald J. Consiglio
------------------------------------------------
Ronald J. Consiglio
Trustee, President and Chief Executive Officer
(Principal Executive Officer)
Date February 27, 1998 /s/ J. D'Arcy Chisholm
------------------------------------------------
J. D'Arcy Chisholm
Trustee
Date February 27, 1998 /s/ Bryan L. Herrmann
------------------------------------------------
Bryan L. Herrmann
Trustee
Date February 27, 1998 /s/ Curtis J. Crivelli
------------------------------------------------
Curtis J. Crivelli
Trustee
Date February 27, 1998 /s/ Anna Merguerian
------------------------------------------------
Anna Merguerian
Vice President, Chief Financial Officer and
Secretary (Principal Financial and Accounting
Officer)
44
<PAGE> 45
ANGELES MORTGAGE INVESTMENT TRUST
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER 31, 1997
<TABLE>
<CAPTION>
Initial Cost capitalized Life on
Cost to subsequent to which
Trust acquisition depreciation
-------------------------------- Gross amount at in latest
Building Improve- Carrying which carried Date of income
Encum- and land ments costs at close of Accumulated con- Date statements
Description brances improvements period(1)(2) Depreciation struction acquired is computed
- --------------------- -------- ------------ -------- -------- -------------- ------------ --------- -------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
University Center $1,800,000 -- -- $1,671,000 0 1975 Dec.-'95 N/A
Phase IV
Retail Shopping
Friedly, Minnesota
University Center Phase 1,100,000 -- -- 1,100,000 0 1975 Nov.-'95 N/A
I & II
Warehouse Office
Friedly, Minnesota
Colony Cove 1,714,000 -- -- 1,750,000 0 N/A Apr.-'96 N/A
& Oct.-'97
Raw Land
Ellenton, Florida ---------------------------------------------------------------------------
Total $0 $4,614,000 $0 $0 $4,521,000 $ 0
===========================================================================
</TABLE>
FOOTNOTES TO SCHEDULE XI - REAL ESTATE AND ACCUMULATED DEPRECIATION
<TABLE>
<CAPTION>
(1) Reconcilation of real property investment:
<S> <C>
Balance at January 1, 1995 $ 1,400,000
Additions during period:
Acquisition through foreclosure $ 4,312,000
Deductions during period $ (2,312,000)
-------------
Balance at December 31, 1995 $ 3,400,000
-------------
Additions during period:
Acquisition through foreclosure $ 3,490,000
Deductions during period $ (1,820,000)
-------------
Balance at December 31, 1996 $ 5,070,000
-------------
Additions during period:
Acquisition through foreclosure $ 36,000
Deductions during period $ (585,000)
-------------
Balance at December 31, 1997 $ 4,521,000
=============
</TABLE>
(2) The carrying value for federal income tax purposes is $4,521,000.
45
<PAGE> 46
ANGELES MORTGAGE INVESTMENT TRUST
SCHEDULE IV- MORTGAGE LOANS ON REAL ESTATE
DECEMBER 31, 1997
(IN THOUSANDS)
<TABLE>
<CAPTION>
FINAL PERIODIC FACE CARRYING PRINCIPAL AMOUNT OF LOANS
INTEREST MATURITY PAYMENT PRIOR AMOUNT OF AMOUNT OF SUBJECT TO DELINQUENT
DESCRIPTION RATE DATE TERMS LIENS MORTGAGES MORTGAGES(2)(3) PRINCIPAL OR INTEREST
----------- ---- ---- ----- ----- --------- ---------------- -------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
FIRST TRUST DEEDS
Lake Arrowhead Resort
Hotel
Lake Arrowhead, California 10.20% Nov-99 (1)(9) - 9,004 9,004 --
Mesa Dunes, Wakonda, Town &
Country
Retail Stores, 9.00% Dec-03 (4) - 5,000 3,390 --
Cedar Rapids / Des
Moines, Iowa
Princeton Meadows Joint Venture
Golf Course,
Princeton Meadows, New Jersey 12.50% Sep-01 (1) - 1,280 1,567 --
Virginia Industrial Capital, LLC
Warehouse,
Martinsville, Virginia 11.00% Apr-98 (1) - 2,950 2,950 --
Hospitality Inn
Hotel,
Pensacola, Florida 11.25% Nov-02 (4) - 1,652 1,648 --
Hospitality Inn
Hotel,
Pensacola, Florida 11.00% Nov-02 (4) - 1,297 1,294 --
Hospitality Inn
Hotel,
Jacksonville, Florida 11.00% Nov-02 (4) - 2,274 2,268 --
</TABLE>
46
<PAGE> 47
ANGELES MORTGAGE INVESTMENT TRUST
SCHEDULE IV- MORTGAGE LOANS ON REAL ESTATE
DECEMBER 31, 1997
(IN THOUSANDS)
<TABLE>
<CAPTION>
FINAL PERIODIC FACE CARRYING PRINCIPAL AMOUNT OF LOANS
INTEREST MATURITY PAYMENT PRIOR AMOUNT OF AMOUNT OF SUBJECT TO DELINQUENT
DESCRIPTION RATE DATE TERMS LIENS MORTGAGES MORTGAGES(2)(3) PRINCIPAL OR INTEREST
----------- ---- ---- ----- ----- --------- ---------------- -------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
FIRST TRUST DEEDS (CONTINUED)
Affordable Residential
Communities, LP I
Three manufactured home parks
Denton and Tyler, Texas 8.90% Dec-03 (1) -- 5,000 5,000 --
JJ & T Enterprises, Inc.
Four manufactured home parks
Cheyenne, Wyoming 9.07% Dec-03 (1) -- 1,900 1,900 --
American Industrial Capital, LLC
Office/warehouse
Houston, Texas 8.00% Dec-07 (1) -- 1,301 1,301 --
American Industrial Capital, LLC
Industrial warehouse
Aiken, South Carolina 8.00% Dec-07 (4) -- 531 531 --
American Industrial Capital, LLC
Industrial warehouse
Jackson, Tennessee 10.50% Dec-07 (1) -- 2,185 2,185 --
-----------------------------------------------------------------
TOTAL FIRST TRUST DEEDS 0 34,374 33,038 0
</TABLE>
47
<PAGE> 48
ANGELES MORTGAGE INVESTMENT TRUST
SCHEDULE IV- MORTGAGE LOANS ON REAL ESTATE
DECEMBER 31, 1997
(IN THOUSANDS)
<TABLE>
<CAPTION>
FINAL PERIODIC FACE CARRYING PRINCIPAL AMOUNT OF LOANS
INTEREST MATURITY PAYMENT PRIOR AMOUNT OF AMOUNT OF SUBJECT TO DELINQUENT
DESCRIPTION RATE DATE TERMS LIENS MORTGAGES MORTGAGES(2)(3) PRINCIPAL OR INTEREST
----------- ---- ---- ----- ----- --------- ---------------- -------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
SECOND TRUST DEEDS
Silver Ridge
Apartments
Maplewood, Minnesota 10.00% Dec-97 (1) 4,525 375 385 385
Bercado Shores
Apartments,
South Bend, Indiana 12.50% Jun-95 (1) 4,307 1,350 1,350 1,350
Brittany Point
Apartments,
Huntsville, Alabama 12.50% Dec-00 (1) 9,536 1,570 1,570 --
Nolana Apartments, Inc.
Los Angeles, California 12.00% Sep-98 (1) 1,873 455 375 --
Southgate
Apartments,
Bedford Heights, Ohio 11.50% Mar-95 (1) 2,723 2,000 2,000 2,000
----------------------------------------------------------------
TOTAL SECOND TRUST DEEDS 22,964 5,750 5,680 3,735
</TABLE>
48
<PAGE> 49
ANGELES MORTGAGE INVESTMENT TRUST
SCHEDULE IV- MORTGAGE LOANS ON REAL ESTATE
DECEMBER 31, 1997
(IN THOUSANDS)
<TABLE>
<CAPTION>
FINAL PERIODIC FACE CARRYING PRINCIPAL AMOUNT OF LOANS
INTEREST MATURITY PAYMENT PRIOR AMOUNT OF AMOUNT OF SUBJECT TO DELINQUENT
DESCRIPTION RATE DATE TERMS LIENS MORTGAGES MORTGAGES(2)(3) PRINCIPAL OR INTEREST
----------- ---- ---- ----- ----- --------- ---------------- -------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
THIRD TRUST DEEDS
Fox Run (A) 11.25% Jan-02 (4) 30,400 875 872 --
Apartments,
Plainsboro, New Jersey
------------------------------------------------------------------
TOTAL THIRD TRUST DEEDS 30,400 875 872 0
PROMISSORY NOTES RECEIVABLE
North Prior 12.25% Jun-96 (1) -- 2,000 679 679
Warehouse Complex,
St. Paul, Minnesota
J. Schultz 8.00% May-00 (1) -- 75 75 --
An Individual
Angeles Partners 16 12.50% Jun-97 (1) -- 860 860 860
California Limited Partnership
Angeles Partners XIV 12.00% Feb-98 (1) -- 459 411 --
California Limited Partnership
Fox Crest 12.50% Mar-03 (1) 6,682 4,764 4,764 --
Apartments,
Waukegan, Illinois
------------------------------------------------------------------
TOTAL PROMISSORY NOTES RECEIVABLE 6,682 8,158 6,789 1,539
------ ------ ------ ------
</TABLE>
49
<PAGE> 50
ANGELES MORTGAGE INVESTMENT TRUST
SCHEDULE IV- MORTGAGE LOANS ON REAL ESTATE
DECEMBER 31, 1997
(IN THOUSANDS)
<TABLE>
<CAPTION>
FACE CARRYING PRINCIPAL AMOUNT OF LOANS
PRIOR AMOUNT OF AMOUNT OF MORT- SUBJECT TO DELINQUENT
DESCRIPTION LIENS MORTGAGES GAGES(2)(3) PRINCIPAL OR INTEREST
----------- ----- --------- ----------- ---------------------
<S> <C> <C> <C> <C>
SUMMARY
TOTAL FIRST TRUST DEEDS 0 34,374 33,038 0
TOTAL SECOND TRUST DEEDS 22,964 5,750 5,680 3,735
TOTAL THIRD TRUST DEEDS 30,400 875 872 0
TOTAL PROMISSORY NOTES RECEIVABLE 6,682 8,158 6,789 1,539
-------- -------- -------- --------
TOTAL $ 60,046 $ 49,157 46,379 $ 5,274
======== ======== ========
UNEARNED LOAN FEES (243)
--------
46,136
ALLOWANCE FOR ESTIMATED LOSSES (8,826)
--------
$ 37,310
========
</TABLE>
50
<PAGE> 51
ANGELES MORTGAGE INVESTMENT TRUST
FOOTNOTES TO SCHEDULE IV - MORTGAGE LOANS ON REAL ESTATE
December 31, 1997
(1) Note requires periodic interest only payments through maturity, when the
principal balance is due.
(2) Reconciliation of notes receivable:
<TABLE>
<CAPTION>
<S> <C>
Balance at January 1, 1996 $ 45,369,000
Additions:
New mortgage loans (5) 15,574,000
Deductions:
Principal collections (6) (16,256,000)
Foreclosures (4,342,000)
------------
Balance at December 31, 1996 $ 40,345,000
Additions:
New mortgage loans (7) 15,116,000
Deductions:
Principal collections (7,552,000)
Write-off of loan (8) (1,530,000)
------------
Balance at December 31, 1997 $ 46,379,000
============
</TABLE>
(3) The carrying amount for Federal income tax purposes is approximately
$42,245,000.
(4) Note requires monthly interest and principal payments through maturity,
when the principal balance is due.
(5) Amount includes modified loans in which accrued but unrecorded interest
income was recast as principal for the following loans; Lake Arrowhead -
$9,004,000, Fox Run - $875,000, Fox Crest - $1,764,000, Brittany - $291,000
and Angeles Partners XIV - $134,000.
(6) Amount includes the refinancing of the Lake Arrowhead promissory note of $6
million.
(7) Amount includes modified loans in which accrued but unrecorded interest
income was recast as principal for the following loans; Hospitality Inns
Pensacola I - $237,000, Hospitality Inns Pensacola II - $97,000,
Hospitality Inns Jacksonville - $106,000 and LaSalle - $423,000.
(8) Amount repreents write-off of Vista Hills promissory note of $1,530,000.
(9) Requires a principal repayment of $1,500,000 in November 1998 with the
remaining outstanding principal balance due in 1999.
51
<PAGE> 1
EXHIBIT 10.29
AMENDMENT NO. 2 TO SECOND AMENDED AND RESTATED
LOAN AND SECURITY AGREEMENT
RE: EXTENSION
(ANGELES MORTGAGE INVESTMENT TRUST)
This Amendment No. 2 ("Amendment No. 2") is entered into as of April
30, 1997, by and between Imperial Bank, a California banking corporation
("Bank"), and Angeles Mortgage Investment Trust, a California business trust
("Borrower"), with reference to the following:
The Termination Date is currently April 30, 1997, and Borrower and Bank
desire to extend the Termination Date and modify the Loan Agreement to extend
the maturity, give the Borrower an option to further extend the maturity and
change the interest rate and fees as hereinafter provided.
Now, therefore, subject to the terms and conditions set forth herein,
the parties hereto agree to amend the Loan Agreement as follows:
ARTICLE I
AMENDMENT TO LOAN AGREEMENT
1.1 The definition of "Termination Date" in Section 1.1 is hereby
deleted and the following is hereby inserted in lieu thereof: "Termination Date"
means October 30, 1997. At Borrower option, on thirty days prior written notice,
the Termination Date shall be April 30, 1998.
1.2 Interest on all Advances pursuant to Section 2.6 of the Loan
Agreement shall be equal to the Prime Rate plus one half of one percentage
points (P+1/2%) from the date of this Amendment No. 2 through the Termination
Date as amended and as provided in the Loan Agreement
1.3 In connection with this Amendment No. 2, Section 2.10 is amended to
provide that an extension fee in the amount of $12,500 shall be earned as of the
date hereof and shall be due and payable in two (2) quarterly installments of
$6,250 on April 30, 1997, and July 31, 1997, and an additional $12,500 upon the
exercise of the option in 1.1 in installments of $6,250 on October 30, 1997, and
January 30, 1998.
<PAGE> 2
ARTICLE II
STATUS OF LOAN AGREEMENT
Except as modified hereby, the Loan Agreement remains in full force and
effect and is hereby ratified and confirmed by Borrower.
In witness whereof the parties have executed this Amendment No. 2 by
duly authorized representatives as of the date first above written.
ANGELES MORTGAGE INVESTMENT
TRUST, a California business trust
By: /s/ RONALD J. CONSIGLIO
---------------------------------
Ronald J. Consiglio, Trustee
IMPERIAL BANK,
a California banking corporation
By: /s/ NUNILO B. SOLER
---------------------------------
Nunilo B. Soler, Vice President
By: /s/ GERRY C. BARREDO
---------------------------------
Gerry C. Barredo, Regional Vice
President
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM BALANCE
SHEET AND STATEMENT OF OPERATIONS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE
TO SUCH FORM 10-K
</LEGEND>
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<EXCHANGE-RATE> 1
<CASH> 3,947,000
<SECURITIES> 0
<RECEIVABLES> 51,409,000<F1>
<ALLOWANCES> (8,826,000)
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 46,530,000
<CURRENT-LIABILITIES> 588,000
<BONDS> 0
0
0
<COMMON> 45,942,000
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 46,530,000
<SALES> 7,199,000
<TOTAL-REVENUES> 7,199,000
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 1,650,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 5,549,000
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5,549,000
<EPS-PRIMARY> 2.10
<EPS-DILUTED> 2.10
<FN>
<F1>Includes Notes Receivable of $46,136,000, Foreclosed real estate held for sale
of $4,521,000, Accrued interest receivable of $654,000 and $98,000 of Prepaid
expenses and other.
</FN>
</TABLE>
