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 0-8851
ANGELES PARTNERS VII
(Exact name of small business issuer as specified in its charter)
California 95-3215214
(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 past 12 months (or for such shorter
period that the Partnership 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 PARTNERS VII
BALANCE SHEET
(Unaudited)
(in thousands, except unit data)
March 31, 2001
Assets
Cash and cash equivalents $ 92
Receivables and deposits 28
Other assets 33
Investment property:
Land $ 366
Buildings and related personal property 5,829
6,195
Less accumulated depreciation (4,802) 1,393
$ 1,546
Liabilities and Partners' Capital (Deficit)
Liabilities
Accounts payable $ 19
Tenant security deposit liabilities 24
Accrued property taxes 10
Other liabilities 94
Mortgage note payable 1,891
Partners' Capital (Deficit)
General partner $ 291
Limited partners (8,669 units issued and
outstanding) (783) (492)
$ 1,546
See Accompanying Notes to Financial Statements
b)
ANGELES PARTNERS VII
STATEMENTS OF OPERATIONS
(Unaudited)
(in thousands, except unit data)
Three Months Ended
March 31,
2001 2000
Revenues:
Rental income $ 351 $ 330
Other income 20 15
Total revenues 371 345
Expenses:
Operating 114 125
General and administrative 27 19
Depreciation 69 71
Interest 44 47
Property taxes 10 11
Total expenses 264 273
Net income $ 107 $ 72
Net income allocated to general partner (1%) $ 1 $ 1
Net income allocated to limited partners (99%) 106 71
Net income $ 107 $ 72
Net income per limited partnership unit $ 12.23 $ 8.19
Distributions per limited partnership unit $ 15.92 $ --
See Accompanying Notes to Financial Statements
c)
ANGELES PARTNERS VII
STATEMENT OF CHANGES IN PARTNERS' CAPITAL (DEFICIT)
(Unaudited)
(in thousands, except unit data)
Limited
Partnership General Limited
Units Partner Partners Total
Original capital contributions 8,674 $ 88 $ 8,674 $ 8,762
Partners' capital (deficit) at
December 31, 2000 8,669 $ 291 $ (751) $ (460)
Distributions to partners -- (1) (138) (139)
Net income for the three months
ended March 31, 2001 -- 1 106 107
Partners' capital (deficit)
at March 31, 2001 8,669 $ 291 $ (783) $ (492)
See Accompanying Notes to Financial Statements
d)
ANGELES PARTNERS VII
STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
Three Months Ended
March 31,
2001 2000
Cash flows from operating activities:
Net income $ 107 $ 72
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 69 71
Change in accounts:
Receivables and deposits 6 55
Other assets (17) (12)
Accounts payable (35) (2)
Tenant security deposit liabilities (2) (3)
Accrued property taxes 10 11
Other liabilities 5 (22)
Net cash provided by operating activities 143 170
Cash flows used in investing activities:
Property improvements and replacements (83) (13)
Cash flows from financing activities:
Payments on mortgage note payable (39) (36)
Distributions to partners (139) --
Net cash used in financing activities (178) (36)
Net (decrease) increase in cash and cash equivalents (118) 121
Cash and cash equivalents at beginning of period 210 356
Cash and cash equivalents at end of period $ 92 $ 477
Supplemental disclosure of cash flow information:
Cash paid for interest $ 44 $ 47
See Accompanying Notes to Financial Statements
e)
ANGELES PARTNERS VII
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
Note A - Basis of Presentation
The accompanying unaudited financial statements of Angeles Partners VII (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 (the "General Partner"), 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 year ending December 31, 2001. For further information, refer
to the financial statements and footnotes thereto included in the Partnership's
Annual Report on Form 10-KSB for the year ended December 31, 2000. The General
Partner is a wholly owned subsidiary of Apartment Investment and Management
Company ("AIMCO").
Segment Reporting: Statement 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 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 (i) certain payments to affiliates for
services and (ii) 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 three months ended March 31, 2001 and 2000:
2001 2000
(in thousands)
Property management fees (included in
operating expenses) $ 19 $ 17
Reimbursement for services of affiliates
(included in general and administrative expenses) 13 8
Affiliates of the General Partner are entitled to receive 5% of gross receipts
from the Registrant's property for providing property management services. The
Registrant paid to such affiliates approximately $19,000 and $17,000 for the
three months ended March 31, 2001 and 2000, respectively.
An affiliate of the General Partner received reimbursement of accountable
administrative expenses amounting to approximately $13,000 and $8,000 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 5,848 limited partnership
units (the "Units") in the Partnership representing 67.46% 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 67.46% of the outstanding Units, AIMCO is in a position to
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, the Partnership declared and paid
distributions of approximately $139,000 (approximately $138,000 paid to the
limited partners or $15.92 per limited partnership unit) from operations. No
distributions were made during the three months ended March 31, 2000.
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 and defendants
are scheduled to respond to the complaint by March 2, 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 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
discussion 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 apartment complex. The
following table sets forth the average occupancy of the property for the three
months ended March 31, 2001 and 2000:
Average Occupancy
Property 2001 2000
Cedarwood Apartments 95% 97%
Gretna, Louisiana
Results of Operations
The Partnership's net income for the three months ended March 31, 2001 and 2000
was approximately $107,000 and $72,000, respectively. The increase in net income
is due to an increase in total revenues and a slight decrease in total expenses.
Total revenues increased primarily due to an increase in rental income. The
increase in rental income is due to an increase in the average rental rate at
the Partnership's investment property offset by a decrease in occupancy.
Expenses for the Partnership remained relatively constant for the three months
ended March 31, 2001 as compared to the corresponding period in 2000.
Included in general and administrative expense at both March 31, 2001 and 2000
are management reimbursements to the General Partner 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.
As part of the ongoing business plan of the Registrant, 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 Registrant from increases in expense. As part of this plan, the
General Partner attempts to protect the Registrant 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 needed 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 $92,000 as compared to approximately $477,000 at March 31, 2000.
The decrease in cash and cash equivalents of approximately $118,000 for the
three months ended March 31, 2001, from the Partnership's calendar year end, is
primarily due to approximately $178,000 and $83,000 of cash used in financing
and investing activities, respectively, which was partially offset by
approximately $143,000 of cash provided by operating activities. Cash used in
investing activities consisted of property improvements and replacements. Cash
used in financing activities consisted of principal payments made on the
mortgage encumbering the Registrant's property and distributions to the
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 investment property to adequately maintain the
physical assets and other operating needs of the Registrant and to comply with
Federal, state, local, legal and regulatory requirements. Capital improvements
planned for the Partnership's property are detailed below.
Cedarwood Apartments: For 2001, the Partnership has budgeted approximately
$100,000 for capital improvements, consisting primarily of plumbing upgrades,
swimming pool upgrades and floor covering and appliance replacements. The
Partnership completed approximately $83,000 in capital expenditures at Cedarwood
Apartments as of March 31, 2001, consisting primarily of fencing, structural
improvements, pool upgrades, major landscaping and appliance and floor covering
replacements. These improvements were funded from operations.
The additional capital expenditures will be incurred only if cash is available
from operations or from the Partnership 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 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 $1,891,000 is amortized over 28 years with a
maturity date of May 2007. The General Partner may attempt to refinance such
indebtedness and/or sell the property prior to such maturity date. If the
property cannot be refinanced or sold for a sufficient amount, the Registrant
will risk losing such property through foreclosure.
During the three months ended March 31, 2001, the Partnership declared and paid
distributions of approximately $139,000 (approximately $138,000 paid to the
limited partners or $15.92 per limited partnership unit) from operations. No
distributions were made during the three months ended March 31, 2000. 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 the debt maturity,
refinancing, and/or the sale of the property. There can be no assurance that the
Partnership will generate sufficient funds from operations, after required
capital improvement expenditures, to permit any additional distributions to its
partners during 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 5,848 limited partnership
units (the "Units") in the Partnership representing 67.46% 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 67.46% of the outstanding Units, AIMCO is in a position to
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 and defendants
are scheduled to respond to the complaint by March 2, 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 PARTNERS VII
By: Angeles Realty Corporation
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