FORM 10-QSB--QUARTERLY OR TRANSITIONAL REPORT UNDER SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
Quarterly or Transitional Report
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-QSB
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended June 30, 2000
[ ] 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 0-14283
ANGELES INCOME PROPERTIES, LTD. IV
(Exact name of small business issuer as specified in its charter)
California 95-3974194
(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
(Issuer's telephone number)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act 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___
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
a)
ANGELES INCOME PROPERTIES, LTD. IV
CONSOLIDATED BALANCE SHEET
(Unaudited)
(in thousands, except unit data)
June 30, 2000
Assets
Cash and cash equivalents $ 427
Receivables and deposits, net of $293 allowance
for doubtful accounts 351
Restricted escrows 730
Other assets 415
Investment property:
Land $ 2,414
Buildings and related personal property 18,113
20,527
Less accumulated depreciation (12,876) 7,651
$ 9,574
Liabilities and Partners' Deficit
Liabilities
Accounts payable $ 28
Tenant security deposit liabilities 16
Accrued property taxes 239
Other liabilities 198
Mortgage note payable 14,749
Partners' Deficit
General partner $ (129)
Limited partners (131,585 units issued and
outstanding) (5,527) (5,656)
$ 9,574
See Accompanying Notes to Consolidated Financial Statements
b)
ANGELES INCOME PROPERTIES, LTD. IV
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(in thousands, except unit data)
Three Months Ended Six Months Ended
June 30, June 30,
2000 1999 2000 1999
Revenues:
Rental income $ 810 $ 894 $ 1,741 $ 1,966
Other income 20 62 42 117
Gain on sale of property -- 3,565 -- 3,565
Total revenues 830 4,521 1,783 5,648
Expenses:
Operating 362 409 759 847
General and administrative 33 42 80 87
Depreciation 237 262 474 531
Interest 355 372 726 748
Property taxes 38 51 78 111
Bad debt expense 54 120 69 256
Total expenses 1,079 1,256 2,186 2,580
Net (loss) income $ (249) $ 3,265 $ (403) $ 3,068
Net (loss) income allocated to
general partner (5) 1,330 (8) 1,326
Net (loss) income allocated to
limited partners (244) 1,935 (395) 1,742
$ (249) $ 3,265 $ (403) $ 3,068
Net (loss) income per limited
partnership unit $ (1.85) $ 14.71 $ (3.00) $ 13.24
Distributions per limited partnership
unit $ 7.08 $ -- $ 7.08 $ --
See Accompanying Notes to Consolidated Financial Statements
c)
ANGELES INCOME PROPERTIES, LTD. IV
CONSOLIDATED STATEMENT OF CHANGES IN PARTNERS' DEFICIT
(Unaudited)
(in thousands, except unit data)
Limited
Partnership General Limited
Units Partner Partners Total
Original capital contributions 131,800 $ 1 $65,900 $65,901
Partners' deficit at
December 31, 1999 131,585 $ (102) $(4,201) $(4,303)
Distributions to partners -- (19) (931) (950)
Net loss for the six months
ended June 30, 2000 -- (8) (395) (403)
Partners' deficit at
June 30, 2000 131,585 $ (129) $(5,527) $(5,656)
See Accompanying Notes to Consolidated Financial Statements
d)
ANGELES INCOME PROPERTIES, LTD. IV
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
Six Months Ended
June 30,
2000 1999
Cash flows from operating activities:
Net (loss) income $ (403) $ 3,068
Adjustments to reconcile net (loss) income to net
cash provided by (used in) operating activities:
Gain on sale of property -- (3,565)
Depreciation 474 531
Amortization of loan costs and leasing commissions 59 62
Bad debt expense 69 256
Change in accounts:
Receivables and deposits 166 (40)
Other assets (3) 69
Accounts payable (7) 5
Tenant security deposit liabilities 10 (2)
Accrued property taxes 78 (64)
Other liabilities (31) (417)
Net cash provided by (used in) operating
activities 412 (97)
Cash flows from investing activities:
Lease commissions paid -- (27)
Property improvements and replacements (9) --
Net deposits to restricted escrows (81) (49)
Net proceeds from sale of investment property -- 4,588
Net cash (used in) provided by investing activities (90) 4,512
Cash flows from financing activities:
Payments on mortgage note payable (115) (92)
Distribution to partners (950) --
Net cash used in financing activities (1,065) (92)
Net (decrease) increase in cash and cash equivalents (743) 4,323
Cash and cash equivalents at beginning of period 1,170 3,637
Cash and cash equivalents at end of period $ 427 $ 7,960
Supplemental disclosure of cash flow information:
Cash paid for interest $ 709 $ 731
Supplemental disclosure of non-cash transaction:
Distribution payable to limited partners $ -- $ 144
See Accompanying Notes to Consolidated Financial Statements
e)
ANGELES INCOME PROPERTIES, LTD. IV
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note A - Basis of Presentation
The accompanying unaudited consolidated financial statements of Angeles Income
Properties, Ltd. IV (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-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 Angeles Realty Corporation II ("ARC II"
or the "General Partner"), all adjustments (consisting of normal recurring
accruals) considered necessary for a fair presentation have been included.
Operating results for the three and six month periods ended June 30, 2000, are
not necessarily indicative of the results that may be expected for the fiscal
year ending December 31, 2000. For further information, refer to the
consolidated financial statements and footnotes thereto included in the
Partnership's Annual Report on Form 10-KSB for the fiscal year ended December
31, 1999.
Principles of Consolidation
The consolidated financial statements of the Partnership include its
wholly-owned limited partnership interest in Factory Merchants, AIP IV, L.P. and
AIP IV GP, LP. The Partnership may remove the general partner of Factory
Merchants, AIP IV, L.P. and AIP IV GP, LP; therefore, the partnerships are
controlled and consolidated by the Partnership. All significant interpartnership
balances have been eliminated. Minority interest is immaterial and not shown
separately in the consolidated financial statements.
Note B - Transfer of Control
Pursuant to a series of transactions which closed on October 1, 1998 and
February 26, 1999, Insignia Financial Group, Inc. and Insignia Properties Trust
merged into Apartment Investment and Management Company ("AIMCO"), a publicly
traded real estate investment trust, with AIMCO being the surviving corporation
(the "Insignia Merger"). As a result, AIMCO acquired 100% ownership interest in
the General Partner. The General Partner does not believe that this transaction
has had or will have a material effect on the affairs and operations of the
Partnership.
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 certain payments to affiliates for
services and reimbursement of certain expenses incurred by affiliates on behalf
of the Partnership.
The following amounts were paid to the General Partner and affiliates during the
six months ended June 30, 2000 and 1999:
2000 1999
(in thousands)
Reimbursement for services of affiliates (included
in general and administrative expense) $ 14 $ 34
An affiliate of the General Partner received reimbursement of accountable
administrative expenses amounting to approximately $14,000 and $34,000 for the
six months ended June 30, 2000 and 1999, 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, during the six months ended June 30,
1999, the Partnership declared a distribution of approximately $144,000 payable
to the General Partner related to the sale of Eastgate Mall. However, this fee
is subordinate to the limited partners receiving a preferred return, as
specified in the Partnership Agreement.
AIMCO and its affiliates currently own 28,012 limited partnership units in the
Partnership representing 21.288% of the outstanding units. 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 make one or more additional
offers to acquire additional limited partnership interests in the Partnership
for cash or in exchange for units in the operating partnership of AIMCO. Under
the Partnership Agreement, unitholders holding a majority of the Units are
entitled to take action with respect to a variety of matters. When voting on
matters, AIMCO would in all likelihood vote the Units it acquired in a manner
favorable to the interest of the General Partner because of their affiliation
with the General Partner.
Note D - Distribution
During the six months ended June 30, 2000, the Partnership declared a cash
distribution from operations of approximately $950,000, of which approximately
$931,000 ($7.08 per limited partnership unit) was paid to the limited partners.
Note E - Sale of Investment Property
On June 16, 1999, the Partnership sold Eastgate Mall to Pearce-Woodfield
Development Co., LLC, an unrelated party, for net proceeds of approximately
$4,588,000 after payment of closing costs. The Partnership recognized a gain of
approximately $3,565,000 on the sale during the second quarter of 1999.
Note F - Segment Reporting
Description of the types of products and services from which reportable segment
derives its revenues:
The Partnership has one reportable segment: commercial properties. The
Partnership's commercial property segment consists of one retail shopping center
in Tennessee at June 30, 2000. This property leases space to various specialty
retail outlets and fast food enterprises at terms ranging from 1 to 9 years. The
Partnership's other commercial property was sold on June 16, 1999.
Measurement of segment profit or loss:
The Partnership evaluates performance based on segment profit (loss) before
depreciation. The accounting policies of the reportable segment are the same as
those of the Partnership as described in the Partnership's Annual Report on Form
10-KSB for the fiscal year ended December 31, 1999.
Segment information for the three and six month periods ended June 30, 2000 and
1999 is shown in the tables below (in thousands). The "Other" column includes
Partnership administration related items and income and expense not allocated to
the reportable segment.
Three months ended June 30, 2000 Commercial Other Totals
Rental income $ 810 $ -- $ 810
Other income 9 11 20
Interest expense 355 -- 355
Depreciation 237 -- 237
General and administrative expense -- 33 33
Segment loss (227) (22) (249)
Six months ended June 30, 2000 Commercial Other Totals
Rental income $ 1,741 $ -- $ 1,741
Other income 21 21 42
Interest expense 726 -- 726
Depreciation 474 -- 474
General and administrative expense -- 80 80
Segment loss (344) (59) (403)
Total assets 9,415 159 9,574
Capital expenditures for investment
property 9 -- 9
Three months ended June 30, 1999 Commercial Other Totals
Rental income $ 894 $ -- $ 894
Other income 33 29 62
Interest expense 372 -- 372
Depreciation 262 -- 262
General and administrative expense -- 42 42
Gain on sale of property 3,565 -- 3,565
Segment profit (loss) 3,278 (13) 3,265
Six months ended June 30, 1999 Commercial Other Totals
Rental income $ 1,966 $ -- $ 1,966
Other income 58 59 117
Interest expense 748 -- 748
Depreciation 531 -- 531
General and administrative expense -- 87 87
Gain on sale of property 3,565 -- 3,565
Segment profit (loss) 3,096 (28) 3,068
Total assets 10,216 7,773 17,989
Note G - Legal Proceedings
In March 1998, several putative unit holders of limited partnership units of the
Partnership commenced an action entitled Rosalie Nuanes, et al. v. Insignia
Financial Group, Inc., et al. in the Superior Court of the State of California
for the County of San Mateo. The plaintiffs named as defendants, among others,
the Partnership, its General Partner and several of their affiliated
partnerships and corporate entities. The action purports to assert claims on
behalf of a class of limited partners and derivatively on behalf of a number of
limited partnerships (including the Partnership) which are named as nominal
defendants, challenging the acquisition of interests in certain general partner
entities by Insignia Financial Group, Inc. ("Insignia") and entities which were,
at one time, affiliates of Insignia; past tender offers by the Insignia
affiliates to acquire limited partnership units; the management of partnerships
by the Insignia affiliates; and the Insignia Merger. The plaintiffs seek
monetary damages and equitable relief, including judicial dissolution of the
Partnership. On June 25, 1998, the General Partner filed a motion seeking
dismissal of the action. In lieu of responding to the motion, the plaintiffs
have filed an amended complaint. The General Partner filed demurrers to the
amended complaint which were heard February 1999.
Pending the ruling on such demurrers, settlement negotiations commenced. On
November 2, 1999, the parties executed and filed a Stipulation of Settlement,
settling claims, subject to final court approval, on behalf of the Partnership
and all limited partners who owned units as of November 3, 1999. Preliminary
approval of the settlement was obtained on November 3, 1999 from the Court, at
which time the Court set a final approval hearing for December 10, 1999. Prior
to the December 10, 1999 hearing, the Court received various objections to the
settlement, including a challenge to the Court's preliminary approval based upon
the alleged lack of authority of prior lead counsel to enter the settlement. On
December 14, 1999, the General Partner and its affiliates terminated the
proposed settlement. In February 2000, counsel for some of the named plaintiffs
filed a motion to disqualify plaintiff's lead and liaison counsel who negotiated
the settlement. On June 27, 2000, the Court entered an order disqualifying them
from the case. The Court will entertain applications for lead counsel which must
be filed by August 4, 2000. The Court has scheduled a hearing on August 21, 2000
to address the issue of appointing lead counsel. The General Partner does not
anticipate that costs associated with this case will be material to the
Partnership's overall operations.
The Partnership is unaware of any other pending or outstanding litigation that
is not of a routine nature arising in the ordinary course of business.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
The matters discussed in this Form 10-QSB contain certain forward-looking
statements and involve risks and uncertainties (including changing market
conditions, competitive and regulatory matters, etc.) detailed in the
disclosures contained in this Form 10-QSB and the other filings with the
Securities and Exchange Commission made by the Registrant from time to time. The
discussions of the Registrant's business and results of operations, including
forward-looking statements pertaining to such matters, does not take into
account the effects of any changes to the Registrant's business and results of
operation. Accordingly, actual results could differ materially from those
projected in the forward-looking statements as a result of a number of factors,
including those identified herein.
The Partnership's investment property consists of one commercial property. The
following table sets forth the average occupancy of the property for the six
months ended June 30, 2000 and 1999:
Average Occupancy
Property 2000 1999
Factory Merchants Mall 89% 91%
Pigeon Forge, Tennessee
Results from Operations
The Partnership realized a net loss of approximately $403,000 for the six months
ended June 30, 2000 as compared to a net income of approximately $3,068,000 for
the comparable period in 1999. The Partnership realized a net loss of
approximately $249,000 for the three months ended June 30, 2000, as compared to
net income of approximately $3,265,000 for the comparable period in 1999. The
increase in net loss for the three and six months ended June 30, 2000 is
primarily due to the gain recognized on the sale of Eastgate Mall of
approximately $3,565,000 in June 1999. Excluding Eastgate Mall's operations,
total expenses and total revenues decreased at Factory Merchant Mall, the
Partnership's remaining investment property, for the three and six months ended
June 30, 2000.
Total revenues for Factory Merchant Mall decreased due to a decrease in other
income, partially offset by an increase in rental income. Other income decreased
due to decreased late charges and a decrease in interest income due to lower
cash balances in interest bearing accounts. Rental revenue increased primarily
due to an increase in percentage rent, partially offset by a decrease in rent
revenue. Total expenses decreased primarily due to a decrease in general and
administrative expenses and property tax expense. General and administrative
expenses decreased primarily due to a decrease in reimbursements to the General
Partner, partially offset by an increase in professional fees related to the
administration of the Partnership. The decrease in property tax expense is
primarily due to the timing of the receipt of the tax bill which affected the
accrual recorded in 1999.
Included in general and administrative expenses for the six months ended June
30, 2000 and 1999, are reimbursements to the General Partner allowed under the
Partnership Agreement associated with its management of the Partnership. In
addition, costs associated with the quarterly and annual communications with
investors and regulatory agencies and the annual audit required by the
Partnership Agreement are also included.
On June 16, 1999, the Partnership sold Eastgate Mall to Pearce-Woodfield
Development Co., LLC, an unrelated party, for net proceeds of approximately
$4,588,000 after payment of closing costs. The Partnership recognized a gain of
approximately $3,565,000 on the sale during the second quarter of 1999.
As part of the ongoing business plan of the Partnership, the General Partner
monitors the rental market environment of its investment property 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.
Liquidity and Capital Resources
At June 30, 2000, the Partnership had cash and cash equivalents of approximately
$427,000 as compared to approximately $7,960,000 at June 30, 1999. For the six
months ended June 30, 2000, cash and cash equivalents decreased approximately
$743,000 from the Partnership's year ended December 31, 1999. This decrease in
cash and cash equivalents is due to approximately $1,065,000 of cash used in
financing activities and approximately $90,000 of cash used in investing
activities partially offset by approximately $412,000 of cash provided by
operating activities. Cash used in financing activities consists of distribution
to the partners and, to a lesser extent, payments of principal made on the
mortgage encumbering Factory Merchants Mall. The cash used in investing
activities consists of net deposits to restricted escrows maintained by the
mortgage lender, as well as property improvements and replacements. The
Partnership invests its working capital reserves in a money market account.
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 property to adequately maintain the physical asset
and other operating needs of the Registrant and to comply with Federal, state,
and local legal and regulatory requirements. Capital improvements planned for
the Partnership's property are detailed below.
Factory Merchants Mall
During the six months ended June 30, 2000, the Partnership expended
approximately $9,000 for budgeted capital improvements consisting of tenant
improvements and roof replacement. These improvements were funded from operating
cash flow. Capital improvements budgeted for 2000 are expected to be $138,000,
which include, but are not limited to, tenant improvements, parking lot
improvements, roof replacement, and signage. As the property is currently being
marketed for sale, capital improvements will be made only as needed.
The Registrant's current assets are thought to be sufficient for any near-term
needs (exclusive of capital improvements) of the Registrant. The mortgage
indebtedness of approximately $14,749,000 matures in October 2006. The General
Partner will attempt to refinance such indebtedness and/or sell the property
prior to such maturity date. Although the property is currently being marketed
for sale, there is no guarantee when, or if, a buyer and the Partnership will
agree to terms that are mutually acceptable to complete a sale transaction. If
the property cannot be refinanced or sold for a sufficient amount, the
Registrant will risk losing such property through foreclosure.
During the six months ended June 30, 2000, the Partnership paid a cash
distribution from operations of approximately $950,000, of which approximately
$931,000 ($7.08 per limited partnership unit) was paid to the limited partners.
The Registrant's distribution policy is reviewed on a semi-annual basis. Future
cash distributions will depend on the levels of net cash generated from
operations, the availability of cash reserves, and the timing of the debt
maturity, refinancing and/or property sale. There can be no assurance, however,
that the Registrant will generate sufficient funds from operations after
required capital expenditures to permit additional distributions to its partners
during the remainder of 2000 or subsequent periods.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEDINGS
In March 1998, several putative unit holders of limited partnership units of the
Partnership commenced an action entitled Rosalie Nuanes, et al. v. Insignia
Financial Group, Inc., et al. in the Superior Court of the State of California
for the County of San Mateo. The plaintiffs named as defendants, among others,
the Partnership, its General Partner and several of their affiliated
partnerships and corporate entities. The action purports to assert claims on
behalf of a class of limited partners and derivatively on behalf of a number of
limited partnerships (including the Partnership) which are named as nominal
defendants, challenging the acquisition of interests in certain general partner
entities by Insignia Financial Group, Inc. ("Insignia") and entities which were,
at one time, affiliates of Insignia; past tender offers by the Insignia
affiliates to acquire limited partnership units; the management of partnerships
by the Insignia affiliates; and the Insignia Merger. The plaintiffs seek
monetary damages and equitable relief, including judicial dissolution of the
Partnership. On June 25, 1998, the General Partner filed a motion seeking
dismissal of the action. In lieu of responding to the motion, the plaintiffs
have filed an amended complaint. The General Partner filed demurrers to the
amended complaint which were heard February 1999.
Pending the ruling on such demurrers, settlement negotiations commenced. On
November 2, 1999, the parties executed and filed a Stipulation of Settlement,
settling claims, subject to final court approval, on behalf of the Partnership
and all limited partners who owned units as of November 3, 1999. Preliminary
approval of the settlement was obtained on November 3, 1999 from the Court, at
which time the Court set a final approval hearing for December 10, 1999. Prior
to the December 10, 1999 hearing, the Court received various objections to the
settlement, including a challenge to the Court's preliminary approval based upon
the alleged lack of authority of prior lead counsel to enter the settlement. On
December 14, 1999, the General Partner and its affiliates terminated the
proposed settlement. In February 2000, counsel for some of the named plaintiffs
filed a motion to disqualify plaintiff's lead and liaison counsel who negotiated
the settlement. On June 27, 2000, the Court entered an order disqualifying them
from the case. The Court will entertain applications for lead counsel which must
be filed by August 4, 2000. The Court has scheduled a hearing on August 21, 2000
to address the issue of appointing lead counsel. The General Partner does not
anticipate that costs associated with this case will be material to the
Partnership's overall operations.
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, 2000.
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 INCOME PROPERTIES, LTD. IV
By: Angeles Realty Corporation II
General Partner
By: /s/Patrick J. Foye
Patrick J. Foye
Executive Vice President
By: /s/Martha L. Long
Martha L. Long
Senior Vice President
and Controller
Date: