UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2009
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _________to _________
Commission file number 0-16210
(Exact Name of Registrant as Specified in Its Charter)
California | 95-4106139 |
(State or other jurisdiction of | (I.R.S. Employer |
incorporation or organization) | Identification No.) |
55 Beattie Place, PO Box 1089
Greenville, South Carolina 29602
(Address of principal executive offices)
(864) 239-1000
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
[X] Yes [ ] No
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). [ ] Yes [ ] No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer [ ] | Accelerated filer [ ] |
Non-accelerated filer [ ] (Do not check if a smaller reporting company) | Smaller reporting company [X] |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). [ ] Yes [X] No
ITEM 1. FINANCIAL STATEMENTS
ANGELES INCOME PROPERTIES, LTD. 6
CONSOLIDATED BALANCE SHEETS
(in thousands, except unit data)
| March 31, | December 31, |
|
| 2009 | 2008 |
|
| (Unaudited) | (Note) |
|
Assets |
|
| |
Cash and cash equivalents | $ 293 | $ 253 | |
Receivables and deposits | 196 | 136 | |
Other assets | 438 | 458 | |
Investment properties: |
|
| |
Land | 1,398 | 1,398 | |
Buildings and related personal property | 14,719 | 14,720 | |
| 16,117 | 16,118 | |
Less accumulated depreciation | (9,361) | (9,238) | |
| 6,756 | 6,880 | |
| $ 7,683 | $ 7,727 | |
|
|
| |
Liabilities and Partners' Deficit |
|
| |
Liabilities |
|
| |
Accounts payable | $ 127 | $ 24 | |
Tenant security deposit liabilities | 88 | 89 | |
Other liabilities | 173 | 121 | |
Accrued property taxes | 67 | 20 | |
Due to affiliates (Note B) | 250 | 215 | |
Mortgage notes payable | 11,657 | 11,747 | |
| 12,362 | 12,216 | |
|
|
| |
Partners' Deficit |
|
| |
General partner | (299) | (294) | |
Limited partners (47,311 units issued |
|
| |
and outstanding) | (4,380) | (4,195) | |
| (4,679) | (4,489) | |
| $ 7,683 | $ 7,727 | |
Note: The consolidated balance sheet at December 31, 2008 has been derived from the audited financial statements at that date but does not include all the information and footnotes required by generally accepted accounting principles for complete financial statements.
See Accompanying Notes to Consolidated Financial Statements
ANGELES INCOME PROPERTIES, LTD. 6
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(in thousands, except per unit data)
| Three Months Ended | |
| March 31, | |
| 2009 | 2008 |
Revenues: |
|
|
Rental income | $ 950 | $ 947 |
Other income | 179 | 171 |
Total revenues | 1,129 | 1,118 |
|
|
|
Expenses: |
|
|
Operating | 445 | 437 |
General and administrative | 71 | 55 |
Depreciation | 137 | 131 |
Interest | 185 | 197 |
Property tax | 114 | 110 |
Total expenses | 952 | 930 |
|
|
|
Casualty gain (Note C) | 36 | - -- |
|
|
|
Net income | $ 213 | $ 188 |
|
|
|
Net income allocated to general partner (1%) | $ 2 | $ 2 |
Net income allocated to limited partners (99%) | 211 | 186 |
|
|
|
| $ 213 | $ 188 |
|
|
|
Net income per limited partnership unit | $ 4.46 | $ 3.93 |
|
|
|
Distributions per limited partnership unit | $ 8.37 | $ - -- |
See Accompanying Notes to Consolidated Financial Statements
ANGELES INCOME PROPERTIES, LTD. 6
CONSOLIDATED STATEMENT OF CHANGES IN PARTNERS'deficit
(Unaudited)
(in thousands, except unit data)
| Limited |
|
|
|
| Partnership | General | Limited |
|
| Units | Partner | Partners | Total |
|
|
|
|
|
Original capital contributions | 47,384 | $ 1 | $47,384 | $47,385 |
|
|
|
|
|
Partners' deficit at |
|
|
|
|
December 31, 2008 | 47,311 | $ (294) | $(4,195) | $(4,489) |
|
|
|
|
|
Net income for the three months |
|
|
|
|
ended March 31, 2009 | -- | 2 | 211 | 213 |
|
|
|
|
|
Distributions to partners | -- | (7) | (396) | (403) |
|
|
|
|
|
Partners' deficit at |
|
|
|
|
March 31, 2009 | 47,311 | $ (299) | $(4,380) | $(4,679) |
See Accompanying Notes to Consolidated Financial Statements
ANGELES INCOME PROPERTIES, LTD. 6
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
| Three Months Ended | |
| March 31, | |
| 2009 | 2008 |
Cash flows from operating activities: |
|
|
Net income | $ 213 | $ 188 |
Adjustments to reconcile net income to net cash |
|
|
provided by operating activities: |
|
|
Depreciation | 137 | 131 |
Amortization of loan costs | 5 | 5 |
Casualty gain | (36) | - -- |
Change in accounts: |
|
|
Receivables and deposits | (60) | (76) |
Other assets | 15 | 12 |
Accounts payable | 102 | 22 |
Tenant security deposit liabilities | (1) | 2 |
Other liabilities | 52 | 14 |
Accrued property taxes | 47 | 48 |
Due to affiliates | 35 | 4 |
Net cash provided by operating activities | 509 | 350 |
|
|
|
Cash flows from investing activities: |
|
|
Property improvements and replacements | (26) | (187) |
Insurance proceeds received | 50 | - -- |
Net cash provided by (used in) investing activities | 24 | (187) |
|
|
|
Cash flows from financing activities: |
|
|
Distribution to partners | (403) | - -- |
Payments on mortgage notes payable | (90) | (127) |
Net cash used in financing activities | (493) | (127) |
|
|
|
Net increase in cash and cash equivalents | 40 | 36 |
|
|
|
Cash and cash equivalents at beginning of period | 253 | 382 |
Cash and cash equivalents at end of period | $ 293 | $ 418 |
|
|
|
Supplemental disclosure of cash flow information: |
|
|
Cash paid for interest | $ 122 | $ 192 |
|
|
|
Supplemental disclosure of non-cash activity: |
|
|
Property improvements and replacements in accounts |
|
|
payable | $ 5 | $ 3 |
At December 31, 2008 and 2007, approximately $4,000 and $57,000 of property improvements and replacements were included in accounts payable and are included in property improvements and replacements at March 31, 2009 and 2008, respectively.
See Accompanying Notes to Consolidated Financial Statements
ANGELES INCOME PROPERTIES, LTD. 6
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
The accompanying unaudited consolidated financial statements of Angeles Income Properties, Ltd. 6 (the "Partnership" or "Registrant") have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 8-03 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. The Partnership's general partner is Angeles Realty Corporation II ("ARC II" or the "General Partner"). In the opinion of the General Partner, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three months ended March 31, 2009, are not necessarily indicative of the results that may be expected for the fiscal year ending December 31, 2009. For further information, refer to the consolidated financial statements and footnotes thereto included in the Partnership's Annual Report on Form 10-K for the fiscal year ended December 31, 2008. The General Partner is an affiliate of Apartment Investment and Management Company (“AIMCO”), a publicly traded real estate investment trust.
The Partnership has no employees and depends on the General Partner and its affiliates for the management and administration of all Partnership activities. The Partnership Agreement provides for certain payments to affiliates for services and as reimbursement of certain expenses incurred by affiliates on behalf of the Partnership.
Affiliates of the General Partner receive 5% of gross receipts from both of the Partnership's properties as compensation for providing property management services. The Partnership paid to such affiliates approximately $54,000 and $52,000 for the three months ended March 31, 2009 and 2008, respectively, which is included in operating expenses.
Affiliates of the General Partner charged the Partnership for reimbursement of accountable administrative expenses amounting to approximately $21,000 and $40,000 for the three months ended March 31, 2009 and 2008, respectively, which is included in general and administrative expenses and investment properties. The portion of these reimbursements included in investment properties for the three months ended March 31, 2009 and 2008 are construction management services provided by an affiliate of the General Partner of approximately $1,000 and $17,000, respectively.
Pursuant to the Partnership Agreement, the General Partner is entitled to receive a distribution equal to 3% of the aggregate disposition price of sold properties. Pursuant to this provision, the Partnership paid total distributions to the General Partner of approximately $731,000 in prior years related to property sales as follows: 1997 sale of LaSalle Warehouse, 1998 sale of Whispering Pines, 1999 sale of Mesa Dunes Mobile Home Park, 2000 sale of Wakonda Shopping Center and Town and Country Shopping Center and the 2001 sale of Casa Granada Apartments. These distributions are subordinate to the limited partners receiving a preferred return, as specified in the Partnership Agreement. If the limited partners have not received their preferred return when the Partnership terminates, the General Partner will be required to return this amount to the Partnership.
Pursuant to the Partnership Agreement for managing the affairs of the Partnership, the General Partner is entitled to receive a Partnership Management Fee equal to 10% of the Partnership's net cash from operations. During the three months ended March 31, 2009 and 2008, the amount accrued for the allowable fee was approximately $35,000 and $5,000, respectively. The total amount due at March 31, 2009 andDecember 31, 2008 is approximately $250,000 and $215,000, respectively, and is included in due to affiliates on the accompanying consolidated balance sheets. Payment of the Partnership Management Fee is restricted to distributable net proceeds as defined in the Partnership Agreement. The cumulative unpaid partnership management fees earned for the years 2003 through 2008 and the three months ended March 31, 2009, of approximately $250,000 will remain accrued until such time as the Partnership has additional distributable net proceeds.
The Partnership insures its properties up to certain limits through coverage provided by AIMCO which is generally self-insured for a portion of losses and liabilities related to workers compensation, property casualty, general liability and vehicle liability. The Partnership insures its properties above the AIMCO limits through insurance policies obtained by AIMCO from insurers unaffiliated with the General Partner. During the three months ended March 31, 2009, the Partnership was charged by AIMCO and its affiliates approximately $27,000 for hazard insurance coverage and fees associated with policy claims administration. Additional charges will be incurred by the Partnership during 2009 as other insurance policies renew later in the year. The Partnership was charged by AIMCO and its affiliates approximately $70,000 for insurance coverage and fees associated with policy claims administration during the year ended December 31, 2008.
Note C – Casualty Gain
In June 2008, Lazy Hollow Apartments suffered damage to several of its apartment units as a result of high winds and falling trees. The Partnership incurred approximately $67,000 to repair the damaged units during 2008, including approximately $17,000 for clean-up costs, which were incurred during 2008 and were included in operating expense. During the three months ended March 31, 2009, the Partnership received approximately $64,000 in insurance proceeds, including approximately $14,000 for emergency expenses. The Partnership recognized a casualty gain of approximately $36,000 during the three months ended March 31, 2009 as a result of the write-off of undepreciated damaged assets of approximately $14,000. The insurance proceeds related to clean-up costs are included as a reduction of operating expenses for the three months ended March 31, 2009. The Partnership does not expect to receive any additional proceeds related to this event.
As previously disclosed, AIMCO Properties, L.P. and NHP Management Company, both affiliates of the General Partner, were defendants in a lawsuit, filed as a collective action in August 2003 in the United States District Court for the District of Columbia, alleging that they willfully violated the Fair Labor Standards Act (“FLSA”) by failing to pay maintenance workers overtime for time worked in excess of 40 hours per week (“overtime claims”). The plaintiffs also contended that AIMCO Properties, L.P. and NHP Management Company failed to compensate maintenance workers for time that they were required to be "on-call" (“on-call claims”). In March 2007, the court in the District of Columbia decertified the collective action. In July 2007, plaintiffs’ counsel filed individual cases in Federal court in 22 jurisdictions. In the second quarter 2008, AIMCO Properties, L.P. settled the overtime cases involving 652 plaintiffs and established a framework for resolving the 88 remaining “on-call” claims and the attorneys’ fees claimed by plaintiffs’ counsel. As a result, the lawsuits asserted in the 22 Federal courts will be dismissed. During the fourth quarter of 2008, the Partnership paid approximately $1,000 for settlement amounts for alleged unpaid overtime to employees who had worked at the Partnership’s investment properties. At this time, the 88 remaining “on-call” claims and the attorneys’ fees claimed by plaintiffs’ counsel are not resolved. The General Partner is uncertain as to the amount of any additional loss that may be allocable to the Partnership. Therefore, the Partnership cannot estimate whether any additional loss will occur or a potential range of loss.
The Partnership is unaware of any other pending or outstanding litigation matters involving it or its investment properties that are not of a routine nature arising in the ordinary course of business.
Various Federal, state and local laws subject property owners or operators to liability for management, and the costs of removal or remediation, of certain hazardous substances present on a property, including lead-based paint. Such laws often impose liability without regard to whether the owner or operator knew of, or was responsible for, the release or presence of the hazardous substances. The presence of, or the failure to manage or remedy properly, hazardous substances may adversely affect occupancy at affected apartment communities and the ability to sell or finance affected properties. In addition to the costs associated with investigation and remediation actions brought by government agencies, and potential fines or penalties imposed by such agencies in connection therewith, the presence of hazardous substances on a property could result in claims by private plaintiffs for personal injury, disease, disability or other infirmities. Various laws also impose liability for the cost of removal, remediation or disposal of hazardous substances through a licensed disposal or treatment facility. Anyone who arranges for the disposal or treatment of hazardous substances is potentially liable under such laws. These laws often impose liability whether or not the person arranging for the disposal ever owned or operated the disposal facility. In connection with the ownership, operation and management of its properties, the Partnership could potentially be liable for environmental liabilities or costs associated with its properties.
Mold
The Partnership is aware of lawsuits against owners and managers of multifamily properties asserting claims of personal injury and property damage caused by the presence of mold, some of which have resulted in substantial monetary judgments or settlements. The Partnership has only limited insurance coverage for property damage loss claims arising from the presence of mold and for personal injury claims related to mold exposure. Affiliates of the General Partner have implemented policies, procedures, third-party audits and training and the General Partner believes that these measures will prevent or eliminate mold exposure and will minimize the effects that mold may have on residents. To date, the Partnership has not incurred any material costs or liabilities relating to claims of mold exposure or to abate mold conditions. Because the law regarding mold is unsettled and subject to change the General Partner can make no assurance that liabilities resulting from the presence of or exposure to mold will not have a material adverse effect on the Partnership’s consolidated financial condition or results of operations.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The Private Securities Litigation Reform Act of 1995 provides a “safe harbor” for forward-looking statements in certain circumstances. Certain information included in this Quarterly Report contains or may contain information that is forward-looking, including, without limitation, statements regarding the effect of redevelopments, the Partnership’s future financial performance, including the Partnership’s ability to maintain current or meet projected occupancy and rent levels, and the effect of government regulations. Actual results may differ materially from those described in these forward-looking statements and, in addition, will be affected by a variety of risks and factors some of which are beyond the Partnership’s control including, without limitation: financing risks, including the availability and cost of financing and the risk that the Partnership’s cash flows from operations may be insufficient to meet required payments of principal and interest; natural disasters and severe weather such as hurricanes; national and local economic conditions; the general level of interest rates; energy costs; the terms of governmental regulations that affect the Partnership’s properties and interpretations of those regulations; the competitive environment in which the Partnership operates; real estate risks, including fluctuations inreal estate values and the general economic climate in local markets and competition for tenants in such markets; insurance risk; development risks; litigation, including costs associated with prosecuting or defending claims and any adverse outcomes; and possible environmental liabilities, including costs, fines or penalties that may be incurred due to necessary remediation of contamination of properties presently owned or previously owned by the Partnership. Readers should carefully review the Partnership’s consolidated financial statements and the notes thereto, as well as the risk factors described in the other documents the Partnership files from time to time with the Securities and Exchange Commission.
The Partnership's investment properties consist of two apartment complexes. The following table sets forth the average occupancy of the properties for the three months ended March 31, 2009 and 2008:
| Average Occupancy | |
Property | 2009 | 2008 |
|
|
|
Lazy Hollow Apartments | 96% | 96% |
Columbia, Maryland |
|
|
Homestead Apartments | 97% | 96% |
East Lansing, Michigan |
|
|
The Partnership’s financial results depend upon a number of factors including the ability to attract and maintain tenants at the investment properties, interest rates on mortgage loans, costs incurred to operate the investment properties, general economic conditions and weather. As part of the ongoing business plan of the Partnership, the General Partner monitors the rental market environment of its investment properties to assess the feasibility of increasing rents, maintaining or increasing occupancy levels and protecting the Partnership from increases in expenses. As part of this plan, the General Partner attempts to protect the Partnership from the burden of inflation-related increases in expenses by increasing rents and maintaining a high overall occupancy level. However, the General Partner may use rental concessions and rental rate reductions to offset the softening market conditions, accordingly, there is no guarantee that the General Partner will be able to sustain such a plan. Further, a number of factors that are outside the control of the Partnership such as the local economic climate and weather can adversely or positively affect the Partnership’s financial results.
Results from Operations
The Partnership’s net income for the three months ended March 31, 2009 and 2008 was approximately $213,000 and $188,000, respectively. The increase in net income isdue to an increase in total revenues and the recognition of a casualty gain partially offset by an increase in total expenses. Total revenues increased due to an increase in other income. Other income increased due to an increase in resident utility reimbursements at Homestead Apartments and ancillary services and lease cancellation fees at both investment properties, partially offset by decreased utility reimbursements at Lazy Hollow Apartments. Rental income remained relatively constant for the comparable periods as an increase in the average occupancy and average rental rate at Homestead Apartments was partially offset by a decrease in the average rental rate at Lazy Hollow Apartments.
In June 2008, Lazy Hollow Apartments suffered damage to several of its apartment units as a result of high winds and falling trees. The Partnership incurred approximately $67,000 to repair the damaged units during 2008, including approximately $17,000 for clean-up costs, which were incurred during 2008 and were included in operating expense. During the three months ended March 31, 2009, the Partnership received approximately $64,000 in insurance proceeds, including approximately $14,000 for emergency expenses. The Partnership recognized a casualty gain of approximately $36,000 during the three months ended March 31, 2009 as a result of the write-off of undepreciated damaged assets of approximately $14,000. The insurance proceeds related to clean-up costs are included as a reduction of operating expenses for the three months ended March 31, 2009. The Partnership does not expect to receive any additional proceeds related to this event.
Total expenses increased for the three months ended March 31, 2009 due to increases in operating expense, general and administrative expense and depreciation expense partially offset by a decrease in interest expense. Property tax expense remained relatively constant for the comparable period. Operating expense primarily increased due to increases in advertising, property and administrative expenses partially offset by a decrease in maintenance expenses. Advertising expense primarily increased due to an increase in periodical expense at Lazy Hollow Apartments. Property expense increased due to increases in payroll costs at Homestead Apartments, partially offset by decreased utilities at Lazy Hollow Apartments. Administrative expense increased due to increased business license and permit costs at Homestead Apartments. Maintenance expense decreased as a result of the receipt of insurance proceeds during the three months ended March 31, 2009 related to clean-up costs incurred during 2008 at Lazy Hollow Apartments, as discussed above, partially offset by an increase in snow removal costs. Depreciation expense increased due to assets being placed into service, primarily at Lazy Hollow Apartments, over the past twelve months. Interest expense decreased due to scheduled payments of principal resulting in lower carrying balances of the mortgages encumbering both of the investment properties.
General and administrative expense increased primarily due to an increase in the Partnership management fee which is based on the Partnership’s net cash from operations, partially offset by a decrease in the Michigan business tax charged to the Partnership. Included in general and administrative expense for the three months ended March 31, 2009 and 2008 are management reimbursements to the General Partner as allowed under the Partnership Agreement. Also included in general and administrative expense are costs associated with the quarterly and annual communications with the investors and regulatory agencies and the annual audit required by the Partnership Agreement.
Liquidity and Capital Resources
At March 31, 2009, the Partnership had cash and cash equivalents of approximately $293,000 compared to approximately $418,000 at March 31, 2008. For the three months ended March 31, 2009, cash and cash equivalents increased by approximately $40,000 from December 31, 2008 due to approximately $509,000 and $24,000 of cash provided by operating and investing activities, respectively, partially offset by approximately $493,000 of cash used in financing activities. Cash provided by investing activities consisted of insurance proceeds received, partially offset by property improvements and replacements. Cash used in financing activities consisted of principal payments on the mortgages encumbering the Partnership’s investment properties anddistributions to partners. The Partnership invests its working capital reserves in interest-bearing accounts.
The sufficiency of existing liquid assets to meet future liquidity and capital expenditure requirements is directly related to the level of capital expenditures required at the properties to adequately maintain the physical assets and other operating needs of the Partnership and to comply with Federal, state, and local legal and regulatory requirements. The General Partner monitors developments in the area of legal and regulatory compliance. Capital improvements planned for each of the Partnership’s properties are detailed below.
Lazy Hollow Apartments
During the three months ended March 31, 2009, the Partnership completed approximately $19,000 of capital improvements at Lazy Hollow Apartments consisting primarily of building improvements, appliance replacements and floor covering replacements. These improvements were funded from operating cash flow and insurance proceeds. The Partnership regularly evaluates the capital improvement needs of the property. While the Partnership has no material commitments for property improvements and replacements, certain routine capital expenditures are anticipated during the remainder of 2009. Such capital expenditures will depend on the physical condition of the property as well as anticipated cash flow generated by the property.
Homestead Apartments
During the three months ended March 31, 2009, the Partnership completed approximately $8,000 of capital improvements at Homestead Apartments consisting primarily of floor covering replacements. These improvements were funded from operating cash flow. The Partnership regularly evaluates the capital improvement needs of the property. While the Partnership has no material commitments for property improvements and replacements, certain routine capital expenditures are anticipated during the remainder of 2009. Such capital expenditures will depend on the physical condition of the property as well as anticipated cash flow generated by the property.
Additional capital expenditures will be incurred only if cash is available from operations or from Partnership reserves. To the extent that such capital improvements are completed, the Partnership's distributable cash flow, if any, may be adversely affected at least in the short term.
The Partnership’s assets are thought to be sufficient for any near-term needs (exclusive of capital improvements) of the Partnership. The mortgage indebtedness encumbering both of the Partnership’s properties of approximately $11,657,000 has maturity dates of November 2021 and April 2023 at which time the loans are scheduled to be fully amortized.
The Partnership distributed the following amounts during the three months ended March 31, 2009 and 2008 (in thousands, except per unit data):
|
| Per Limited |
| Per Limited |
| Three Months Ended | Partnership | Three Months Ended | Partnership |
March 31, 2009 | Unit | March 31, 2008 | Unit | |
|
|
|
|
|
Operations | $ 400 | $ 8.37 | $ - -- | $ - -- |
In conjunction with the transfer of funds from the majority owned sub-tier limited partnership to the Partnership, approximately $3,000 was distributed to the general partner of the majority owned sub-tier limited partnership during the three months ended March 31, 2009. There were no such distributions during the three months ended March 31, 2008.
Future cash distributions will depend on the level of net cash generated from operations, the timing of the debt maturities, refinancings, and/or property sales. The Partnership's cash available for distribution is reviewed on a monthly basis. There can be no assurance, however, that the Partnership will generate sufficient funds from operations after capital expenditures to permit any additional distributions to its partners in 2009 or subsequent periods.
Other
In addition to its indirect ownership of the general partner interest in the Partnership, AIMCO and its affiliates owned 27,739 limited partnership units (the "Units") in the Partnership representing 58.63% of the outstanding Units at March 31, 2009. A number of these Units were acquired pursuant to tender offers made by AIMCO or its affiliates. It is possible that AIMCO or its affiliates will acquire additional Units in exchange for cash or a combination of cash and units in AIMCO Properties, L.P., the operating partnership of AIMCO, either through private purchases or tender offers. Pursuant to the Partnership Agreement, unitholders holding a majority of the Units are entitled to take action with respect to a variety of matters that include, but are not limited to, voting on certain amendments to the Partnership Agreement and voting to remove the General Partner. As a result of its ownership of 58.63% of the outstanding Units, AIMCO and its affiliates are in a position to control all such voting decisions with respect to the Partnership. Although the General Partner owes fiduciary duties to the limited partners of the Partnership, the General Partner also owes fiduciary duties to AIMCO as its sole stockholder. As a result, the duties of the General Partner, as general partner, to the Partnership and its limited partners may come into conflict with the duties of the General Partner to AIMCO as its sole stockholder.
Critical Accounting Policies and Estimates
The consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States, which require the Partnership to make estimates and assumptions. The Partnership believes that of its significant accounting policies, the following may involve a higher degree of judgment and complexity.
Impairment of Long-Lived Assets
Investment properties are recorded at cost, less accumulated depreciation, unless the carrying amount of the asset is not recoverable. If events or circumstances indicate that the carrying amount of a property may not be recoverable, the Partnership will make an assessment of its recoverability by comparing the carrying amount to the Partnership’s estimate of the undiscounted future cash flows, excluding interest charges, of the property. If the carrying amount exceeds the aggregate undiscounted future cash flows, the Partnership would recognize an impairment loss to the extent the carrying amount exceeds the estimated fair value of the property.
Real property investment is subject to varying degrees of risk. Several factors may adversely affect the economic performance and value of the Partnership’s investment properties. These factors include, but are not limited to, general economic climate; competition from other apartment communities and other housing options; local conditions, such as loss of jobs or an increase in the supply of apartments that might adversely affect apartment occupancy or rental rates; changes in governmental regulations and the related cost of compliance; increases in operating costs (including real estate taxes) due to inflation and other factors, which may not be offset by increased rents; and changes in tax laws and housing laws, including the enactment of rent control laws or other laws regulating multi-family housing. Any adverse changes in these factors could cause impairment of the Partnership’s assets.
The Partnership generally leases apartment units for twelve-month terms or less. The Partnership will offer rental concessions during particularly slow months or in response to heavy competition from other similar complexes in the area. Rental income attributable to leases, net of any concessions, is recognized on a straight-line basis over the term of the lease. The Partnership evaluates all accounts receivable from residents and establishes an allowance, after the application of security deposits, for accounts greater than 30 days past due on current tenants and all receivables due from former tenants.
Item 4T. CONTROLS AND PROCEDURES
(a) Disclosure Controls and Procedures.
The Partnership’s management, with the participation of the principal executive officer and principal financial officer of the General Partner, who are the equivalent of the Partnership’s principal executive officer and principal financial officer, respectively, has evaluated the effectiveness of the Partnership’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) as of the end of the period covered by this report. Based on such evaluation, the principal executive officer and principal financial officer of the General Partner, who are the equivalent of the Partnership’s principal executive officer and principal financial officer, respectively, have concluded that, as of the end of such period, the Partnership’s disclosure controls and procedures are effective.
(b) Changes in Internal Control Over Financial Reporting.
There has been no change in the Partnership’s internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the fiscal quarter to which this report relates that has materially affected, or is reasonably likely to materially affect, the Partnership’s internal control over financial reporting.
ITEM 1. LEGAL PROCEEDINGS
As previously disclosed, AIMCO Properties, L.P. and NHP Management Company, both affiliates of the General Partner, were defendants in a lawsuit, filed as a collective action in August 2003 in the United States District Court for the District of Columbia, alleging that they willfully violated the Fair Labor Standards Act (“FLSA”) by failing to pay maintenance workers overtime for time worked in excess of 40 hours per week (“overtime claims”). The plaintiffs also contended that AIMCO Properties, L.P. and NHP Management Company failed to compensate maintenance workers for time that they were required to be "on-call" (“on-call claims”). In March 2007, the court in the District of Columbia decertified the collective action. In July 2007, plaintiffs’ counsel filed individual cases in Federal court in 22 jurisdictions. In the second quarter 2008, AIMCO Properties, L.P. settled the overtime cases involving 652 plaintiffs and established a framework for resolving the 88 remaining “on-call” claims and the attorneys’ fees claimed by plaintiffs’ counsel. As a result, the lawsuits asserted in the 22 Federal courts will be dismissed. During the fourth quarter of 2008, the Partnership paid approximately $1,000 for settlement amounts for alleged unpaid overtime to employees who had worked at the Partnership’s investment properties. At this time, the 88 remaining “on-call” claims and the attorneys’ fees claimed by plaintiffs’ counsel are not resolved. The General Partner is uncertain as to the amount of any additional loss that may be allocable to the Partnership. Therefore, the Partnership cannot estimate whether any additional loss will occur or a potential range of loss.
ITEM 6. EXHIBITS
See Exhibit Index.
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| ANGELES INCOME PROPERTIES, LTD. 6 |
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| By: Angeles Realty Corporation II |
| General Partner |
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Date: May 14, 2009 | By: /s/Steven D. Cordes |
| Steven D. Cordes |
| Senior Vice President |
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Date: May 14, 2009 | By: /s/Stephen B. Waters |
| Stephen B. Waters |
| Vice President |
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ANGELES INCOME PROPERTIES, LTD. 6
EXHIBIT INDEX
Exhibit
3.1 Amended Certificate and Agreement of the Limited Partnership filed in the Partnership's Prospectus dated June 11, 1987 which is incorporated herein by reference.
3.2 Second Amended and Restated Bylaws of IPT, dated October 2, 1998 incorporated by reference to Registrant's Current Report on Form 8-K, dated October 1, 1998.
10.7 Agreement of Purchase and Sale of Real Property with Exhibits – Homestead Apartments filed in the Registrant’s Current Report on Form 8-K dated November 10, 1988 which is incorporated herein by reference.
10.9 Agreement of Purchase and Sale of Real Property and Exhibits – Lazy Hollow Apartments filed in the Registrant’s Current Report on Form 8-K dated December 1989, which is incorporated herein by reference.
10.12 Stock Purchase Agreement dated November 24, 1992 showing the purchase of 100% of the outstanding stock of Angeles Realty Corporation II by IAP GP Corporation, a subsidiary of MAE GP Corporation, filed in the Registrant’s Current Report on Form 8-K dated December 31, 1992, which is incorporated herein by reference.
10.34 Multifamily Note between GMAC Commercial Mortgage Corporation and Angeles Income Properties, Ltd. 6 for the refinance of Homestead Apartments filed in the Registrant’s Current Report on Form 8-K dated September 6, 2001, which is incorporated herein by reference.
10.35 Multifamily Note dated March 31, 2003 between Lazy Hollow Partners, a California general partnership, and Reilly Mortgage Group, Inc., a District of Columbia corporation filed in Form 10-KSB dated March 26, 2004, which is incorporated herein by reference.
10.36 Limited Guaranty dated March 31, 2003 between Lazy Hollow Partners, a California general partnership, and Reilly Mortgage Group, Inc., a District of Columbia corporation filed in Form 10-KSB dated March 26, 2004, which is incorporated herein by reference.
10.37 Multifamily Deed of Trust, Assignment of Rents and Security Agreement dated March 31, 2003 between Lazy Hollow Partners, a California general partnership, and Reilly Mortgage Group, Inc., a District of Columbia corporation filed in Form 10-KSB dated March 26, 2004 which is incorporated herein by reference.
10.38 Replacement Reserve Agreement dated March 31, 2003 between Lazy Hollow Partners, a California general partnership, and Reilly Mortgage Group, Inc., a District of Columbia corporation filed in Form 10-KSB dated March 26, 2004 which is incorporated herein by reference.
31.1 Certification of equivalent of Chief Executive Officer pursuant to Securities Exchange Act Rules 13a-14(a)/15d-14(a), as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2 Certification of equivalent of Chief Financial Officer pursuant to Securities Exchange Act Rules 13a-14(a)/15d-14(a), as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1 Certification of the equivalent of the Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
