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 March 31, 2001
[ ] 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 0-16116
ANGELES OPPORTUNITY PROPERTIES, LTD.
(Exact name of small business issuer as specified in its charter)
California 95-4052473
(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 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)
March 31, 2001
Assets
Cash and cash equivalents $ 162
Receivables and deposits 52
Restricted escrows 39
Other assets 116
Investment properties:
Land $ 1,013
Buildings and related personal property 8,102
9,115
Less accumulated depreciation (2,959) 6,156
$ 6,525
Liabilities and Partners' (Deficit) Capital
Liabilities
Accounts payable $ 13
Tenant security deposit liabilities 27
Accrued property taxes 69
Other liabilities 99
Mortgage notes payable 5,367
Partners' (Deficit) Capital:
General partner $ (123)
Limited partners (12,425 units issued and
outstanding) 1,073 950
$ 6,525
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
March 31,
2001 2000
Revenues:
Rental income $ 625 $ 567
Other income 39 23
Total revenues 664 590
Expenses:
Operating 245 233
General and administrative 41 28
Depreciation 87 85
Interest 109 104
Property taxes 65 63
Total expenses 547 513
Net income $ 117 $ 77
Net income allocated to general partner (1%) $ 1 $ 1
Net income allocated to limited partners (99%) 116 76
$ 117 $ 77
Net income per limited partnership unit $9.34 $ 6.12
Distributions per limited partnership unit $28.09 $26.32
See Accompanying Notes to Consolidated Financial Statements
c)
ANGELES OPPORTUNITY PROPERTIES, LTD.
CONSOLIDATED STATEMENT OF CHANGES IN PARTNERS' (DEFICIT) CAPITAL
(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, 2000 12,425 $ (120) $ 1,306 $ 1,186
Distributions to partners -- (4) (349) (353)
Net income for the three months
ended March 31, 2001 -- 1 116 117
Partners' (deficit) capital
at March 31, 2001 12,425 $ (123) $ 1,073 $ 950
See Accompanying Notes to Consolidated Financial Statements
d)
ANGELES OPPORTUNITY PROPERTIES, LTD.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
Three Months Ended
March 31,
2001 2000
Cash flows from operating activities:
Net income $ 117 $ 77
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 87 85
Amortization of loan costs and discount 8 9
Change in accounts:
Receivables and deposits 180 191
Other assets (26) (15)
Accounts payable (47) (4)
Tenant security deposit liabilities -- 1
Accrued property taxes (192) (174)
Other liabilities 11 (124)
Net cash provided by operating activities 138 46
Cash flows from investing activities:
Property improvements and replacements (48) (35)
Net withdrawals from (deposits to) restricted escrows 39 (12)
Net cash used in investing activities (9) (47)
Cash flows from financing activities:
Payments on mortgage notes payable (7) (7)
Distributions to partners (353) (334)
Net cash used in financing activities (360) (341)
Net decrease in cash and cash equivalents (231) (342)
Cash and cash equivalents at beginning of period 393 885
Cash and cash equivalents at end of period $ 162 $ 543
Supplemental disclosure of cash flow information:
Cash paid for interest $ 101 $ 101
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 consolidated financial statements of Angeles
Opportunity Properties, Ltd. (the "Partnership" or the "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 (the
"General Partner" and a subsidiary of Apartment Investment and Management
Company ("AIMCO")), all adjustments (consisting of normal recurring accruals)
considered necessary for a fair presentation have been included. Operating
results for the three month period ended March 31, 2001, are not necessarily
indicative of the results that may be expected for the fiscal year ending
December 31, 2001. 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, 2000.
Principles of Consolidation
The consolidated financial statements of the Partnership include its 99% limited
partnership interests in New Lake Meadows LP and Lakewood AOPL Ltd. The General
Partner of this consolidated partnership is the general partner. The Partnership
may remove the general partner of both of these 99% owned partnerships;
therefore, the partnerships are controlled and consolidated by the Partnership.
All significant interpartnership balances have been eliminated.
Segment Reporting: Statements of Financial Accounting Standards ("SFAS") No.
131, "Disclosure about Segments of an Enterprise and Related Information"
established standards for the way that public business enterprises report
information about operating segments in annual financial statements and requires
that those enterprises report selected information about operating segments in
interim financial reports. It also establishes standards for related disclosures
about products and services, geographic areas, and major customers. As defined
in SFAS No. 131, the Partnership has only one reportable segment. The General
Partner believes that segment-based disclosures will not result in a more
meaningful presentation than the consolidated financial statements as currently
presented.
Note B - 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 transactions with the General Partner and its affiliates were
incurred during the three months ended March 31, 2001 and 2000:
2001 2000
(in thousands)
Property management fees (included in
operating expenses) $ 34 $ 30
Reimbursement for services of affiliates
(included in general and administrative expenses) 22 14
Affiliates of the General Partner are entitled to 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
$34,000 and $30,000 for the three months ended March 31, 2001 and 2000,
respectively.
An affiliate of the General Partner received reimbursements of accountable
administrative expense amounting to approximately $22,000 and $14,000 for the
three months ended March 31, 2001 and 2000, respectively.
In addition to its indirect ownership of the general partner interest in the
Partnership, AIMCO and its affiliates currently own 5,738 limited partnership
units (the "Units") in the Partnership representing 46.18% 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, which would include without limitation, voting on certain amendments to
the Partnership Agreement and voting to remove the General Partner. As a result
of its ownership of 46.18% of the outstanding units, AIMCO is in a position to
significantly influence all voting decisions with respect to the Registrant.
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 its
affiliation with the General Partner.
Note C - Distributions
During the three months ended March 31, 2001, distributions of approximately
$353,000 (approximately $349,000 to the limited partners or $28.09 per limited
partnership unit) was paid to the partners from cash from operations. During the
three months ended March 31, 2000, a distribution of $334,000 (approximately
$327,000 to the limited partners or $26.32 per limited partnership unit) was
paid from operations. Subsequent to March 31, 2001, a distribution was declared
and paid from operations of approximately $68,000 (approximately $67,000 to the
limited partners or $5.39 per limited partnership unit).
Note D - 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, among other things, 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; management of
the 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 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 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 and an appeal was taken from the order on October 5, 2000. On
December 4, 2000, the Court appointed the law firm of Lieff Cabraser Heimann &
Bernstein LLP as new lead counsel for plaintiffs and the putative class.
Plaintiffs filed a third amended complaint on January 19, 2001. On March 2,
2001, the General Partner and its affiliates filed a demurrer to the third
amended complaint. The demurrer is scheduled to be heard on May 14, 2001. The
Court has also scheduled a hearing on a motion for class certification for
August 27, 2001. Plaintiffs must file their motion for class certification no
later than June 15, 2001. 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 OPERATIONS
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 Partnership from time to time.
The discussions of the Partnership'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 Partnership'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 properties consist of two apartment complexes. The
following table sets forth the average occupancy for each of the properties for
the three months ended March 31, 2001 and 2000:
Average Occupancy
Property 2001 2000
Lake Meadows Apartments 97% 98%
Garland, Texas
Lakewood Apartments (1) 95% 88%
Tomball, Texas
(1) Occupancy at Lakewood Apartments increased due to increased marketing
efforts at the property and an upturn in the economy in the Houston
metropolitan area.
Results from Operations
The Partnership reported net income of approximately $117,000 and $77,000 for
the three months ended March 31, 2001 and 2000, respectively. The increase in
net income is attributable to an increase in total revenues partially offset by
an increase in total expenses. The increase in total revenues is due to
increases in rental income and other income. Rental income increased due to an
increase in occupancy at Lakewood Apartments as well as increases in rental
rates at both of the Partnership's properties. Other income increased due to
increases in lease cancellation fees and tenant charges at Lakewood Apartments.
Total expenses increased due to increases in operating and general and
administrative expenses. Operating expenses increased due to increases in
utility costs at Lakewood Apartments. General and administrative expenses
increased due to an increase in the cost of services included in the management
reimbursements to the General Partner as allowed under the Partnership
Agreement. 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 in general and
administrative expenses.
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, 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 March 31, 2001, the Partnership had cash and cash equivalents of
approximately $162,000 compared to approximately $543,000 at March 31, 2000.
Cash and cash equivalents decreased approximately $231,000 from December 31,
2000 due to approximately $360,000 and $9,000 of cash used in financing and
investing activities, respectively, offset by approximately $138,000 of cash
provided by operating activities. Cash used in financing activities consisted
primarily of distributions to the partners and, to a lesser extent, principal
payments made on the mortgages encumbering Lake Meadows Apartments. Cash used in
investing activities consisted of property improvements and replacements
partially offset by net withdrawals from restricted escrows maintained by the
mortgage lenders. 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. Capital improvements for
each of the Partnership's properties are detailed below.
Lake Meadows Apartments
Approximately $28,000 was budgeted for capital improvements for the year 2001 at
Lake Meadows Apartments consisting primarily of floor covering and air
conditioning unit replacements. During the three months ended March 31, 2001,
the Partnership completed approximately $22,000 of such budgeted capital
improvements at Lake Meadows Apartments consisting primarily of office equipment
and floor covering and appliance replacements. These improvements were funded
from operating cash flow.
Lakewood Apartments
Approximately $73,000 was budgeted for capital improvements for the year 2001 at
Lakewood Apartments for normal, recurring items. During the three months ended
March 31, 2001, the Partnership completed approximately $26,000 of such budgeted
capital improvements at the property, consisting primarily of carpet and tile
replacements, appliance replacements, interior decoration and structural
upgrades. These improvements were funded from operating cash flow and
replacement reserves.
Additional capital expenditures will be incurred only to the extent of cash
available from operations and from the Partnership's reserves. To the extent
that such budgeted 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 current assets are thought to be sufficient for any near-term
needs (exclusive of capital improvements) of the Partnership. The mortgage
indebtedness of approximately $5,367,000, net of discount, is interest only or
is being amortized over 343 months with balloon payments due at maturity dates
of October and November 2003. The General Partner will attempt to refinance such
indebtedness and/or sell the properties prior to such maturity dates. If the
properties cannot be refinanced or sold for a sufficient amount, the Partnership
will risk losing such properties through foreclosure.
During the three months ended March 31, 2001, distributions of approximately
$353,000 (approximately $349,000 to the limited partners or $28.09 per limited
partnership unit) was paid to the partners from cash from operations. During the
three months ended March 31, 2000, a distribution of $334,000 (approximately
$327,000 to the limited partners or $26.32 per limited partnership unit) was
paid from operations. Subsequent to March 31, 2001, a distribution was declared
and paid from operations of approximately $68,000 (approximately $67,000 to the
limited partners or $5.39 per limited partnership unit). The Partnership's
distribution policy is reviewed on a quarterly basis. Future cash distributions
will depend on the levels of net cash generated from operations, the
availability of cash reserves, and the timing of debt maturities, refinancings,
and/or property sales. There can be no assurance that the Partnership will
generate sufficient funds from operations after required capital expenditures to
permit further distributions to its partners for the remainder of 2001 or
subsequent periods.
In addition to its indirect ownership of the general partner interest in the
Partnership, AIMCO and its affiliates currently own 5,738 limited partnership
units (the "Units") in the Partnership representing 46.18% 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, which would include without limitation, voting on certain amendments to
the Partnership Agreement and voting to remove the General Partner. As a result
of its ownership of 46.18% of the outstanding units, AIMCO is in a position to
significantly influence all voting decisions with respect to the Registrant.
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 its
affiliation with the General Partner.
PART II - OTHER INFORMATION
ITEM 1. 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, among other things, 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; management of
the 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 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 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 and an appeal was taken from the order on October 5, 2000. On
December 4, 2000, the Court appointed the law firm of Lieff Cabraser Heimann &
Bernstein LLP as new lead counsel for plaintiffs and the putative class.
Plaintiffs filed a third amended complaint on January 19, 2001. On March 2,
2001, the General Partner and its affiliates filed a demurrer to the third
amended complaint. The demurrer is scheduled to be heard on May 14, 2001. The
Court has also scheduled a hearing on a motion for class certification for
August 27, 2001. Plaintiffs must file their motion for class certification no
later than June 15, 2001. 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:
None.
b) Reports on Form 8-K:
None filed during the quarter ended March 31, 2001.
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/Patrick J. Foye
Patrick J. Foye
Executive Vice President
By: /s/Martha L. Long
Martha L. Long
Senior Vice President
and Controller
Date: May 11, 2001