FORM 10-QSB.--QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
Quarterly or Transitional Report
(As last amended by 34-32231, eff. 6/3/93.)
U.S. Securities and Exchange Commission
Washington, D.C. 20549
Form 10-QSB
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1996
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT
For the transition period.........to.........
Commission file number 0-16116
ANGELES OPPORTUNITY PROPERTIES, LTD.
(Exact name of small business issuer as specified in its charter)
California 95-4052473
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
One Insignia Financial Plaza, P.O. Box 1089
Greenville, South Carolina 29602
(Address of principal executive offices) (Zip Code)
Issuer's telephone number (864) 239-1000
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 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
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
a) ANGELES OPPORTUNITY PROPERTIES, LTD.
CONSOLIDATED BALANCE SHEET
(Unaudited)
(in thousands, except unit data)
June 30, 1996
Assets
Cash and cash equivalents:
Unrestricted $ 761
Restricted--tenant security deposits 41
Accounts receivable 4
Escrow for taxes 115
Restricted escrows 119
Other assets 206
Investment in joint venture 789
Investment properties:
Land $ 956
Buildings and related personal property 7,054
8,010
Less accumulated depreciation (1,486) 6,524
$ 8,559
Liabilities and Partners' Capital
Liabilities
Accounts payable $ 28
Tenant security deposits 41
Accrued taxes 103
Other liabilities 76
Mortgage notes payable 4,285
Partners' (Deficit) Capital
General partner $ (63)
Limited partners (12,425 units issued
and outstanding) 4,089 4,026
$ 8,559
See Accompanying Notes to Consolidated Financial Statements
b) ANGELES OPPORTUNITY PROPERTIES, LTD.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(in thousands, except unit data)
Three Months Ended Six Months Ended
June 30, June 30,
1996 1995 1996 1995
Revenues:
Rental income $ 516 $ 530 $ 1,009 $ 1,117
Other income 26 32 54 66
Total revenues 542 562 1,063 1,183
Expenses:
Operating 181 181 360 385
General and administrative 53 68 92 128
Maintenance 116 59 172 107
Depreciation 65 67 130 141
Interest 108 112 218 224
Bad debt recovery (789) -- (789) --
Property taxes 53 45 104 100
Total expenses (213) 532 287 1,085
Income before equity in income
of joint venture, gain on sale
of investment property and
casualty gain 755 30 776 98
Equity in income of joint venture 1 -- 1 --
Gain on sale of investment property -- 466 -- 958
Casualty gain -- 17 -- 21
Net income $ 756 $ 513 $ 777 $ 1,077
Net income allocated
to general partner (1%) $ 8 $ 5 $ 8 $ 11
Net income allocated
to limited partners (99%) 748 508 769 1,066
Net income $ 756 $ 513 $ 777 $ 1,077
Net income per limited
partnership unit $ 60.20 $ 40.89 $ 61.89 $ 85.79
<FN>
See Accompanying Notes to Consolidated Financial Statements
c) ANGELES OPPORTUNITY PROPERTIES, LTD.
CONSOLIDATED STATEMENT OF CHANGES IN PARTNERS' CAPITAL (DEFICIT)
(Unaudited)
(in thousands, except unit data)
Limited
Partnership General Limited
Units Partner Partners Total
Original capital contributions 12,425 $ 1 $12,425 $12,426
Partners' (deficit) capital
at December 31, 1995 12,425 $ (68) $ 3,617 $ 3,549
Distributions to partners -- (3) (297) (300)
Net income for the six
months ended June 30, 1996 -- 8 769 777
Partners' (deficit) capital
at June 30, 1996 12,425 $ (63) $ 4,089 $ 4,026
<FN>
See Accompanying Notes to Consolidated Financial Statements
d) ANGELES OPPORTUNITY PROPERTIES, LTD.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
Six Months Ended
June 30,
1996 1995
Cash flows from operating activities:
Net income $ 777 $ 1,077
Adjustments to reconcile net income to
net cash provided by operating activities:
Equity in income from joint venture (1) --
Depreciation 130 141
Amortization of discounts, loan costs,
and leasing commissions 15 23
Gain on sale of investment property -- (958)
Casualty gain -- (21)
Bad debt recovery (789) --
Change in accounts:
Restricted cash 1 32
Accounts receivable 1 --
Escrows for taxes 105 108
Other assets (33) (16)
Accounts payable (165) 7
Tenant security deposit liabilities (1) (3)
Accrued taxes (95) (89)
Other liabilities (13) (41)
Net cash (used in) provided by
operating activities (68) 260
Cash flows from investing activities:
Property improvements and replacements (18) (160)
Proceeds from sale of investment property -- 3,393
Deposits to restricted escrows (23) (22)
Withdrawals from restricted escrows 155 2
Insurance proceeds -- 41
Net cash provided by
investing activities 114 3,254
Cash flows from financing activities:
Payments on mortgage notes payable (65) (59)
Distributions to partners (300) (3,500)
Net cash used in financing activities (365) (3,559)
Net decrease in cash (319) (45)
Cash and cash equivalents at beginning of period 1,080 1,102
Cash and cash equivalents at end of period $ 761 $ 1,057
Supplemental disclosure of cash flow information:
Cash paid for interest $ 204 $ 210
<FN>
See Accompanying Notes to Consolidated Financial Statements
e) ANGELES OPPORTUNITY PROPERTIES, LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note A - Basis of Presentation
The accompanying unaudited financial statements have been prepared in accordance
with generally accepted accounting principles for interim financial information
and with the instructions to Form 10-QSB and Item 310(b) of Regulation S-B.
Accordingly, they do not include all of the information and footnotes required
by generally accepted accounting principles for complete financial statements.
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 six month period ended June 30, 1996, are
not necessarily indicative of the results that may be expected for the fiscal
year ending December 31, 1996. For further information, refer to the financial
statements and footnotes thereto included in the Angeles Opportunity Properties,
Ltd.'s (the "Partnership") annual report on Form 10-KSB for the fiscal year
ended December 31, 1995.
Certain reclassifications have been made to the 1995 information to conform to
the 1996 presentation.
Note B - Note Receivable
Until 1993, the Partnership's assets included a note receivable ("Note") of
$1,850,000 from Rolling Greens Communities, Ltd. ("Borrower") collateralized by
a first trust deed on undeveloped commercial and mobile home park land adjacent
to Rolling Green Communities ("Rolling Greens"). The note required interest
only payments computed at a 12.5% rate per annum with a maturity date of June
1997. The note was in default due to nonpayment and had been written down in
1993 to $1,070,000, which is the estimated value of the collateral less the
estimated cost to dispose of such collateral.
During 1992, a refinancing of the first mortgage on Rolling Greens was
consummated. As a concession to the new first mortgage holder, Angeles
Corporation ("Angeles"), a former affiliate of the General Partner and/or its
affiliates, released or caused to be released a lien on the developed portion of
the mobile home park, retaining a lien upon undeveloped commercial and park
zoned land as security for the Note. The Partnership was informed and believes
that the release of the lien was without consideration to the Partnership.
Proceeds from the refinanced first mortgage and an additional $450,000 that the
Partnership advanced to the Borrower in 1992 under this Note included in the
note amount of $1,850,000 were used by the Borrower to pay off (i) third trust
deed financing that had been provided by Angeles Mortgage Investment Trust
("AMIT"), a real estate investment trust, and (ii) unsecured advances payable to
Angeles. Subsequent to the refinancing of the first mortgage discussed above,
the developed portion of Rolling Greens was sold to a third party and a note
receivable was received by the Partnership as consideration. AMIT continues to
have loans outstanding to the Partnership that owns the interest in the
Borrower.
Note B - Note Receivable - (continued)
On April 29, 1994, the Partnership, the Borrower and AMIT entered into an
agreement as to the distribution of the sales proceeds generated by the sale of
certain real estate owned by the Borrower. On August 29, 1994, the Partnership
received $1,061,440 in proceeds as a partial settlement from the above described
Note.
During the first quarter of 1995, the Partnership and an affiliate of AMIT
initiated foreclosure proceedings under the terms of the Note, against the
Borrower, relating to the remaining security for the Note. On June 6, 1996, the
collateralized property was foreclosed upon and the Partnership and AMIT became
joint owners of an approximately 8,000 square foot retail strip shopping center
and over 150 acres of land with 42.82% and 57.18% ownership, respectively (see
"Note D" for further information).
MAE GP Corporation ("MAE GP"), an affiliate of the General Partner, owns
1,675,113 Class B Shares of AMIT. MAE GP has the option to convert these Class
B Shares, in whole or in part, into Class A Shares on the basis of 1 Class A
Share for every 49 Class B Shares. These Class B Shares entitle MAE GP to
receive 1.2% of the distributions of net cash distributed by AMIT. These Class
B Shares also entitle MAE GP to vote on the same basis as Class A Shares which
allows MAE GP to vote approximately 37% of the total shares (unless and until
converted to Class A Shares at which time the percentage of the vote controlled
represented by the shares held by MAE GP would approximate 1.2% of the vote).
Between the date of acquisition of these shares on November 24, 1992, and March
31, 1995, MAE GP declined to vote these shares. Since that date, MAE GP voted
its shares at the 1995 annual meeting in connection with the election of
trustees and other matters. MAE GP has not exerted, and continues to decline to
exert, any management control over or participate in the management of AMIT.
MAE GP may choose to vote these shares as it deems appropriate in the future.
In addition, Liquidity Assistance, LLC, ("LAC"), an affiliate of the General
Partner and an affiliate of Insignia Financial Group, Inc., which provides
property management and partnership administration services to the Partnership,
owns 63,200 Class A Shares of AMIT. These Class A Shares entitle LAC to vote
approximately 1.5% of the total shares.
As part of a settlement of certain disputes with AMIT, MAE GP granted to AMIT an
option to acquire the Class B shares owned by it. This option can be exercised
at the end of 10 years or when all loans made by AMIT to partnerships affiliated
with MAE GP as of November 9, 1994, (which is the date of execution of a
definitive Settlement Agreement) have been paid in full, but in no event prior
to November 9, 1997. AMIT delivered to MAE GP cash in the sum of $250,000 at
closing, which occurred April 14, 1995, as payment for the option. Upon
exercise of the option, AMIT would remit to MAE GP an additional $94,000.
Note B - Note Receivable - (continued)
Simultaneously with the execution of the option, MAE GP executed an irrevocable
proxy in favor of AMIT the result of which is MAE GP will be able to vote the
Class B shares on all matters except those involving transactions between AMIT
and MAE GP affiliated borrowers or the election of any MAE GP affiliate as an
officer or trustee of AMIT. On those matters, MAE GP granted to the AMIT
trustees, in their capacity as trustees of AMIT, proxies with regard to the
Class B shares in accordance with the vote of the majority of the Class A shares
voting to be determined without consideration of the votes of "Excess Class A
Shares" as defined in Section 6.13 of the Declaration of Trust of AMIT.
Note C - Transactions with Affiliated Parties
The Partnership has no employees and is dependent on the General Partner and its
affiliates for the management and administration of all Partnership activities.
The Partnership Agreement provides for payments to affiliates for services and
as reimbursement of certain expenses incurred by affiliates on behalf of the
Partnership. The following payments were made to the General Partner and
affiliates during the six months ended June 30, 1996 and 1995:
1996 1995
(in thousands)
Property management fees $52 $55
Reimbursement for services of affiliates 67 78
The Partnership insures its properties under a master policy through an agency
and insurer unaffiliated with the General Partner. An affiliate of the General
Partner acquired, in the acquisition of a business, certain financial
obligations from an insurance agency which was later acquired by the agent who
placed the current year's master policy. The current agent assumed the
financial obligations to the affiliate of the General Partner who receives
payment on these obligations from the agent. The amount of the Partnership's
insurance premiums accruing to the benefit of the affiliate of the General
Partner by virtue of the agent's obligations is not significant.
Note D - Investment in Joint Venture
The Partnership has a 42.82% interest in a property owned jointly by the
Partnership and an affiliate of AMIT ("Joint Venture") effective June 6, 1996.
The Partnership accounts for its investment in this property using the equity
method of accounting.
The balance sheet of the Joint Venture is summarized as follows:
June 30, 1996
(in thousands)
Assets
Cash $ 1
Other assets 91
Investment properties, net 1,764
Total $ 1,856
Liabilities and Partners' Capital
Other liabilities $ 15
Partners' capital 1,841
Total $ 1,856
The statements of operations of the Joint Venture are summarized as follows:
Six Months Ended
June 30,
1996
(in thousands)
Revenue $ 4
Costs and expenses (2)
Net income $ 2
The Partnership's equity interest in income of the Joint Venture for the six
months ended June 30, 1996, was $1,000.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS
The Partnership's investment properties consist of two apartment complexes. The
following table sets forth the average occupancy of the properties for the six
months ended June 30, 1996 and 1995:
Average
Occupancy
Property 1996 1995
Lake Meadows Apartments
Garland, Texas 94% 94%
Lakewood Apartments
Tomball, Texas 92% 96%
For the three and six months ended June 30, 1996, the Partnership generated net
income of $756,000 and $777,000, respectively, as compared to net income for the
three and six months ended June 30, 1995, of $513,000 and $1,077,000,
respectively. The decrease in net income for the first six months of 1996
versus the first six months of 1995 can be attributed to the $958,000 gain
recognized on the sale of Oquendo Warehouse during 1995 (See discussion below).
However, net income for the three and six months ended June 30, 1996, increased
due to the $789,000 bad debt recovery recorded by the Partnership as a result of
the foreclosure of the property owned by Rolling Greens Communities, Ltd. (see
discussion at "Note B" and "Note D" for further detail).
The decrease in rental income, operating expense and depreciation expense for
the first six months of 1996, versus the first six months of 1995, can be
attributed to the sale of Oquendo Warehouse (See discussion below). General and
administrative expenses decreased primarily due to decreased partnership
accounting, investor relations, and asset management cost reimbursements. The
increase in maintenance expense can be attributed to increases in contract
repairs at Lake Meadows Apartments due to this property being without a
maintenance technician for part of the year. The increase in maintenance
expense can also be attributed to exterior painting at the Lakewood Apartments
property in order to enhance the appearance of the property.
On January 20, 1995, the Partnership sold one building at Oquendo Warehouse,
located at 3550 W. Quail Avenue in Las Vegas, Nevada, to the tenant occupying
the building, Czarnowski Display Service, Inc. Total consideration was
$1,325,000 resulting in a gain on sale of the property of $492,000. On May 5,
1995, the Partnership sold the remaining two buildings at Oquendo Warehouse,
located at 3655 W. Quail and 3600 W. Oquendo in Las Vegas, Nevada, to an
unrelated third party. Total consideration was $2,250,000 resulting in a gain
on the sale of the property of $466,000. Due to the above transactions, a total
gain on sale of the property of $958,000 was realized for the six months ended
June 30, 1995. The General Partner believed that the sale of the property was
in the best interest of the Partnership.
On March 27, 1995, Lake Meadows Apartments sustained damage to the roofs of the
apartment units due to a severe hailstorm. This casualty was covered by
insurance. The casualty gain of $21,000 resulted from the excess insurance
proceeds over the book value of the roofs written-off.
As part of the ongoing business plan of the Partnership, the General Partner
monitors the rental market environment of each 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, due to changing market
conditions, which can result in the use of rental concessions and rental
reductions to offset softening market conditions, there is no guarantee that the
General Partner will be able to sustain such a plan.
At June 30, 1996, the Partnership had unrestricted cash of $761,000 as compared
to $1,057,000 at June 30, 1995. Net cash provided by operating activities
decreased primarily due to the decreased net income for the six months ended
June 30, 1996, versus the six months ended June 30, 1995, and due to the pay-
down of accounts payable for fixed asset additions from 1995. Net cash provided
by investing activities decreased due to the cash proceeds received relating to
the sale of Oquendo Warehouse during the first six months of 1995. Also, net
cash used in financing activities decreased due to the decreased cash
distribution to partners from 1995 to 1996.
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 various properties to adequately maintain the
physical assets and other operating needs of the Partnership. Such assets are
currently thought to be sufficient for any near-term needs of the Partnership.
The mortgage indebtedness of $4,285,000, net of discount, is amortized over 10
years and 37 years with maturity dates of October 2003 and March 2008, at which
time the properties will either be refinanced or sold. Total cash distributed
was $3,500,000 for the six months ended June 30, 1995. Total cash distributed
was $300,000 for the six months ended June 30, 1996. Future cash distributions
will depend on the levels of net cash generated from operations, property sales,
and the availability of cash reserves.
The General Partner is currently negotiating a refinance of the mortgage secured
by Lakewood Apartments in an effort to obtain a lower interest rate. However,
the General Partner can give no assurances that a refinance will be successful.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Registrant is unaware of any pending or outstanding litigation that is not
of a routine nature. The General Partner of the Registrant believes that all
such pending or outstanding litigation will be resolved without a material
adverse effect upon the business, financial condition, or operations of the
Partnership.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a) Exhibits -
Exhibit 27, Financial Data Schedule, is filed as an exhibit to this
report.
b) Reports on Form 8-K:
None filed during the quarter ended June 30, 1996.
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
ANGELES OPPORTUNITY PROPERTIES, LTD.
By: Angeles Realty Corporation II
General Partner
By: /s/Carroll D. Vinson
Carroll D. Vinson
President
By: /s/Robert D. Long, Jr.
Robert D. Long, Jr.
Vice President/CAO
Date: August 8, 1996