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 0-11766
ANGELES PARTNERS XI
(Exact name of small business issuer as specified in its charter)
California 95-3788040
(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 PARTNERS XI
CONSOLIDATED BALANCE SHEET
(Unaudited)
(in thousands, except unit data)
March 31, 2001
Assets
Cash and cash equivalents $ 37
Receivables and deposits 637
Other assets 198
Investment property:
Land $ 3,998
Buildings and related personal property 29,008
33,006
Less accumulated depreciation (22,154) 10,852
$ 11,724
Liabilities and Partners' Deficit
Liabilities
Accounts payable $ 155
Tenant security deposit liabilities 614
Property taxes 273
Other liabilities 92
Mortgage notes payable 29,416
Partners' Deficit
General partners $ (504)
Limited partners (39,627 units issued and
outstanding) (18,322) (18,826)
$ 11,724
See Accompanying Notes to Consolidated Financial Statements
b)
ANGELES PARTNERS XI
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(in thousands, except unit data)
Three Months Ended
March 31,
2001 2000
Revenues:
Rental income $2,083 $1,903
Other income 118 99
Total revenues 2,201 2,002
Expenses:
Operating 666 668
General and administrative 63 45
Depreciation 437 375
Interest 682 684
Property taxes 480 209
Total expenses 2,328 1,981
Net (loss) income $ (127) $ 21
Net (loss) income allocated to general partners (1%) $ (1) $ --
Net (loss) income allocated to limited partners (99%) (126) 21
$ (127) $ 21
Net (loss) income per limited partnership unit $(3.18) $ .53
See Accompanying Notes to Consolidated Financial Statements
c)
ANGELES PARTNERS XI
CONSOLIDATED STATEMENT OF CHANGES IN PARTNERS' DEFICIT
(Unaudited)
(in thousands, except unit data)
Limited
Partnership General Limited
Units Partners Partners Total
Original capital contributions 40,000 $ 30 $ 40,000 $ 40,030
Partners' deficit at
December 31, 2000 39,627 $ (503) $ (18,196) $(18,699)
Net loss for the three months
ended March 31, 2001 -- (1) (126) (127)
Partners' deficit
at March 31, 2001 39,627 $ (504) $ (18,322) $(18,826)
See Accompanying Notes to Consolidated Financial Statements
d)
ANGELES PARTNERS XI
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
Three Months Ended
March 31,
2001 2000
Cash flows from operating activities:
Net (loss) income $ (127) $ 21
Adjustments to reconcile net (loss) income to net cash
provided by operating activities:
Depreciation 437 375
Amortization of loan costs 28 28
Change in accounts:
Receivables and deposits 5 138
Other assets (74) (51)
Accounts payable (69) 61
Tenant security deposit liabilities (15) 8
Accrued property taxes 273 --
Other liabilities (58) 140
Net cash provided by operating activities 400 720
Cash flows used in investing activities:
Property improvements and replacements (675) (146)
Cash flows used in financing activities:
Payments on mortgage notes payable (120) (81)
Net (decrease) increase in cash and cash equivalents (395) 493
Cash and cash equivalents at beginning of period 432 2,118
Cash and cash equivalents at end of period $ 37 $ 2,611
Supplemental disclosure of cash flow information:
Cash paid for interest $ 652 $ 434
Supplemental disclosure of non-cash information:
Property improvements and replacements included in
accounts payable $ 107 $ --
Included in property improvements and replacements for the three months ended
March 31, 2001, are approximately $306,000 of improvements which were included
in accounts payable at December 31, 2000.
See Accompanying Notes to Consolidated Financial Statements
e)
ANGELES PARTNERS XI
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note A - Basis of Presentation
The accompanying unaudited consolidated financial statements of Angeles Partners
XI (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 (the "Managing 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 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. The Managing General Partner is an
affiliate of Apartment Investment and Management Company ("AIMCO").
Principles of Consolidation
The Partnership's consolidated financial statements include all of the accounts
of Fox Run AP XI, L.P., of which the Partnership owns a 99% limited partnership
interest. The general partner of Fox Run AP XI, L.P. is AP XI Fox Run GP, LLC, a
single member limited liability corporation which is wholly-owned by the
Registrant. Thus, these Partnerships are deemed controlled and, therefore,
consolidated by the Partnership. All inter-entity balances have been eliminated.
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 Managing 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 Managing 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.
Note B - Transactions with Affiliated Parties (continued)
The following amounts were paid or accrued to the Managing General Partner and
affiliates during the three months ended March 31, 2001 and 2000:
2001 2000
(in thousands)
Property management fees (included in
operating expense) $112 $ 99
Reimbursement for services of affiliates (included
in general and administrative and operating
expenses and investment property) 68 30
Affiliates of the Managing 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 $112,000 and
$99,000 for the three months ended March 31, 2001 and 2000, respectively.
An affiliate of the Managing General Partner received reimbursement of
accountable administrative expenses amounting to approximately $68,000 and
$30,000 for the three months ended March 31, 2001 and 2000, respectively.
Approximately $29,000 of these fees were accrued at March 31, 2001.
In addition to its indirect ownership of the general partner interest in the
Partnership, AIMCO and its affiliates currently own 23,882 limited partnership
units (the "Units") in the Partnership representing 60.27% 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
acquire additional limited partnership interests in the Partnership for cash or
in exchange for units in the operating partnership of AIMCO either through
private purchases or tender offers. 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 Managing
General Partner. As a result of its ownership of 60.27% 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 Managing General
Partner because of its affiliation with the Managing General Partner.
Note C - 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 Managing 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 Managing General Partner
filed a motion seeking dismissal of the action. In lieu of responding to the
motion, the plaintiffs filed an amended complaint. The Managing 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 Managing 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 Managing 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 Managing General Partner does not
anticipate that costs associated with this case will be material to the
Partnership's overall operations.
The Partnership also is a party to certain legal actions resulting from its
operating activities. These actions are routine litigation and administrative
proceedings arising in the ordinary course of business, none of which are
expected to have a material adverse effect on the consolidated financial
condition or results of operations of the Partnership.
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 disclosure
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 operations. 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
Fox Run Apartments 95% 93%
Plainsboro, New Jersey
Results from Operations
The Partnership's net loss for the three months ended March 31, 2001 was
approximately $127,000 compared to net income of approximately $21,000 for the
corresponding period in 2000. The increase in net loss is primarily due to the
increase in total expenses which was offset by an increase in total revenues.
The increase in total revenues was the result of increases in rental and other
income. Other income increased due to increases in lease cancellation fees,
cable TV income and cleaning and damage fees. Rental income increased due to an
increase in occupancy and average rental rates at Fox Run Apartments.
Total expenses for the three months ended March 31, 2001 increased primarily due
to increases in depreciation, property tax and general and administrative
expenses. Depreciation increased due to capital improvements and replacements
during the past twelve months which are now being depreciated. Property tax
expense increased due to an increase in the assessed value of the property as it
was recently reassessed by the taxing authorities.
General and administrative expense increased for the three months ended March
31, 2001 due to an increase in the cost of services included in the management
reimbursements to the Managing 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 Managing 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 Managing 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
Managing 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 $37,000 as compared to approximately $2,611,000 at March 31, 2000.
Cash and cash equivalents decreased approximately $395,000 for the three months
ended March 31, 2001, from the Registrant's fiscal year-end which is primarily
due to approximately $675,000 and $120,000 of cash used in investing and
financing activities, respectively, which was partially offset by approximately
$400,000 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 mortgages
encumbering Fox Run Apartments. The Registrant 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 property to adequately maintain the physical assets
and other operating needs of the Partnership and to comply with Federal, state,
and local legal and regulatory requirements. The Partnership has budgeted
approximately $2,832,000 for capital improvements for the property during 2001
consisting primarily of cabinet, appliance and floor covering replacements.
During the three months ended March 31, 2001, the Partnership spent
approximately $476,000 on capital improvements at Fox Run Apartments, primarily
consisting of floor covering and cabinet replacements, water heaters, and HVAC
upgrades. The additional improvements planned for 2001 at the Partnership's
property will be incurred only if cash is available from operations. To the
extent that such budgeted capital improvements are completed, the Registrant'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 $29,416,000 encumbering Fox Run Apartments is
being amortized over periods ranging from 15 to 27 years with balloon payments
of $29,108,000 due January 2002. The Managing 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
Partnership will risk losing such property through foreclosure.
There were no cash distributions during the three months ended March 31, 2001,
or 2000. 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 maturities, refinancings and/or sale of the property. The Partnership's
distribution policy is reviewed on a quarterly basis. There can be no assurance
that the Partnership will generate sufficient funds from operations, after
required capital improvement expenditures, to permit 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 23,882 limited partnership
units (the "Units") in the Partnership representing 60.27% 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
acquire additional limited partnership interests in the Partnership for cash or
in exchange for units in the operating partnership of AIMCO either through
private purchases or tender offers. 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 Managing
General Partner. As a result of its ownership of 60.27% 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 Managing General
Partner because of its affiliation with the Managing 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 Managing 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 Managing General Partner
filed a motion seeking dismissal of the action. In lieu of responding to the
motion, the plaintiffs filed an amended complaint. The Managing 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 Managing 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 Managing 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 Managing 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 Section 13 or 15(d) of the Exchange Act, the Registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
ANGELES PARTNERS XI
By: Angeles Realty Corporation II
Managing 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 14, 2001