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, 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)
June 30, 2001
Assets
Cash and cash equivalents $ 296
Receivables and deposits 81
Restricted escrows 39
Other assets 98
Investment properties:
Land $ 1,013
Buildings and related personal property 8,143
9,156
Less accumulated depreciation (3,048) 6,108
$ 6,622
Liabilities and Partners' (Deficit) Capital
Liabilities
Accounts payable $ 20
Tenant security deposit liabilities 24
Accrued property taxes 134
Other liabilities 156
Mortgage notes payable 5,361
Partners' (Deficit) Capital:
General partner $ (126)
Limited partners (12,425 units issued and
outstanding) 1,053 927
$ 6,622
See Accompanying Notes to Consolidated Financial Statements
b)
ANGELES OPPORTUNITY PROPERTIES, LTD.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(in thousands, except unit data)
Three Months Ended Six Months Ended
June 30, June 30,
2001 2000 2001 2000
Revenues:
Rental income $ 633 $ 586 $ 1,258 $ 1,153
Other income 37 38 76 61
Total revenues 670 624 1,334 1,214
Expenses:
Operating 264 259 509 492
General and administrative 39 58 80 86
Depreciation 89 86 176 171
Interest 108 110 217 214
Property taxes 65 54 130 117
Total expenses 565 567 1,112 1,080
Net income $ 105 $ 57 $ 222 $ 134
Net income allocated to general
partner (1%) $ 1 $ 1 $ 2 $ 1
Net income allocated to limited
partners (99%) 104 56 220 133
$ 105 $ 57 $ 222 $ 134
Net income per limited
partnership unit $ 8.37 $ 4.51 $ 17.71 $10.70
Distributions per limited
partnership unit $ 9.98 $ 45.23 $ 38.07 $71.55
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 -- (8) (473) (481)
Net income for the six months
ended June 30, 2001 -- 2 220 222
Partners' (deficit) capital
at June 30, 2001 12,425 $ (126) $ 1,053 $ 927
See Accompanying Notes to Consolidated Financial Statements
d)
ANGELES OPPORTUNITY PROPERTIES, LTD.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
Six Months Ended
June 30,
2001 2000
Cash flows from operating activities:
Net income $ 222 $ 134
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 176 171
Amortization of loan costs and discount 17 17
Change in accounts:
Receivables and deposits 151 146
Other assets (15) (6)
Accounts payable (40) 5
Tenant security deposit liabilities (3) 1
Accrued property taxes (127) (121)
Other liabilities 68 (98)
Net cash provided by operating activities 449 249
Cash flows from investing activities:
Property improvements and replacements (89) (55)
Net withdrawals from (deposits to) restricted escrows 39 (47)
Net cash used in investing activities (50) (102)
Cash flows from financing activities:
Payments on mortgage notes payable (15) (13)
Distributions to partners (481) (907)
Net cash used in financing activities (496) (920)
Net decrease in cash and cash equivalents (97) (773)
Cash and cash equivalents at beginning of period 393 885
Cash and cash equivalents at end of period $ 296 $ 112
Supplemental disclosure of cash flow information:
Cash paid for interest $ 201 $ 202
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") 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, 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 General
Partner is a subsidiary of Apartment Investment and Management Company
("AIMCO"), a publicly traded real estate investment trust.
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 these partnerships 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 established 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 six months ended June 30, 2001 and 2000:
2001 2000
---- ----
(in thousands)
Property management fees (included in
operating expenses) $ 67 $ 61
Reimbursement for services of affiliates
(included in general and administrative expenses
and investment properties) 44 31
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
$67,000 and $61,000 for the six months ended June 30, 2001 and 2000,
respectively.
An affiliate of the General Partner received reimbursements of accountable
administrative expense amounting to approximately $44,000 and $31,000 for the
six months ended June 30, 2001 and 2000, respectively.
In addition to its indirect ownership of the general partner interest in the
Partnership, AIMCO and its affiliates currently own 5,755 limited partnership
units (the "Units") in the Partnership representing 46.32% 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 46.32% 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 six months ended June 30, 2001, distributions of approximately
$481,000 (approximately $473,000 to the limited partners or $38.07 per limited
partnership unit) were paid to the partners from cash from operations. During
the six months ended June 30, 2000, distributions of $898,000 (approximately
$889,000 to the limited partners or $71.55 per limited partnership unit) were
paid from operations. In conjunction with the transfer of funds from certain
majority-owned sub-tier limited partnerships to the Partnership, approximately
$9,000 was distributed to the general partner of the majority-owned sub-tier
limited partnerships.
Note D - Legal Proceedings
In March 1998, several putative unitholders 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 series of transactions
which closed on October 1, 1998 and February 26, 1999 whereby Insignia and
Insignia Properties Trust, respectively, were merged into AIMCO. 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. On May 14, 2001, the Court heard the demurrer to the third
amended complaint. On July 10, 2001, the Court issued an order sustaining
defendants' demurrer on certain grounds. Plaintiffs have until August 16, 2001
to file a fourth amended complaint. The General Partner does not anticipate that
any costs, whether legal or settlement 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 six months ended June 30, 2001 and 2000:
Average Occupancy
Property 2001 2000
Lake Meadows Apartments 96% 98%
Garland, Texas
Lakewood Apartments (1) 95% 90%
Tomball, Texas
(1) Occupancy at Lakewood Apartments increased due to an upturn in the economy
in the Houston metropolitan area.
Results of Operations
The Partnership had net income of approximately $222,000 for the six months
ended June 30, 2001, as compared to net income of approximately $134,000 for the
six months ended June 30, 2000. The Partnership had net income of approximately
$105,000 for the three months ended June 30, 2001, as compared to net income of
approximately $57,000 for the three months ended June 30, 2000. The increase in
net income for the six months ended June 30, 2001 was due to an increase in
total revenues offset by an increase in total expenses. For the three months
ended June 30, 2001 the increase in net income was due to an increase in total
revenues and a slight decrease in total expenses. The increase in total revenues
for the comparable six month periods was due to an increase in rental revenue
and other income. Rental revenue increased due to an increase in occupancy at
Lakewood Apartments and an increase in average annual rental rates at both
investment properties. Other income increased due to increases in utility
reimbursements, tenant charges and lease cancellation fees at Lakewood
Apartments. For the three month periods, total revenues increased due to an
increase in occupancy at Lakewood Apartments and an increase in average annual
rental rates at both investment properties.
Total expenses for the six month periods increased due to increases in operating
and property tax expenses, offset by a decrease in general and administrative
expenses. Total expenses for the three month periods decreased due to a decrease
in general and administrative expenses, offset by an increase in operating and
property tax expenses. Operating expenses for both periods increased due to
increases in utility costs at Lakewood Apartments. Property tax expense for both
periods increased due to an increase in the assessed value of Lakewood
Apartments as it was reassessed by the taxing authorities. General and
administrative expenses decreased due to a decrease in legal fees, offset by an
increase in the cost of services included in the management reimbursements to
the General Partner as allowed under the Partnership Agreement. In addition to
these reimbursements, 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 June 30, 2001, the Partnership had cash and cash equivalents of approximately
$296,000 compared to approximately $112,000 for the corresponding period in
2000. Cash and cash equivalents decreased approximately $97,000 from December
31, 2000 due to approximately $496,000 and $50,000 of cash used in financing and
investing activities, respectively, partially offset by approximately $449,000
of cash provided by operating activities. Cash used in financing activities
consisted of distributions to the partners and, to a lesser extent, principal
payments made on the mortgage encumbering Lake Meadows Apartments. Cash used in
investing activities consisted of property improvements and replacements,
slightly 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 $32,000 was budgeted for capital improvements for the year 2001 at
Lake Meadows Apartments consisting primarily of floor covering, appliance and
air conditioning unit replacements and swimming pool improvements. During the
six months ended June 30, 2001, the Partnership completed approximately $43,000
of capital improvements at Lake Meadows Apartments, consisting primarily of
floor covering and appliance replacements and swimming pool improvements. These
improvements were funded from operating cash flow.
Lakewood Apartments
Approximately $75,000 was budgeted for capital improvements for the year 2001 at
Lakewood Apartments consisting primarily of floor covering, air conditioning
unit and appliance replacements and parking lot resurfacing. During the six
months ended June 30, 2001, the Partnership completed approximately $46,000 of
such budgeted capital improvements at the property, consisting primarily of
floor covering and appliance replacements. These improvements were funded from
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
encumbering Lakewood Apartments of $3,750,000 is interest only with a balloon
payment due at its maturity in November 2003. The mortgages encumbering Lake
Meadows Apartments of approximately $1,611,000 net of discount, is being
amortized over 343 months with balloon payments of $1,543,000 due at its
maturity in October 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 six months ended June 30, 2001, distributions of approximately
$481,000 (approximately $473,000 to the limited partners or $38.07 per limited
partnership unit) were paid to the partners from cash from operations. During
the six months ended June 30, 2000, distributions of $898,000 (approximately
$889,000 to the limited partners or $71.55 per limited partnership unit) were
paid from operations. In conjunction with the transfer of funds from certain
majority-owned sub-tier limited partnerships to the Partnership, approximately
$9,000 was distributed to the general partner of the majority-owned sub-tier
limited partnerships. 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 5,755 limited partnership
units (the "Units") in the Partnership representing 46.32% 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 46.32% 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 unitholders 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 series of transactions
which closed on October 1, 1998 and February 26, 1999 whereby Insignia and
Insignia Properties Trust, respectively, were merged into AIMCO. 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. On May 14, 2001, the Court heard the demurrer to the third
amended complaint. Only July 10, 2001, the Court issued an order sustaining
defendants' demurrer on certain grounds. Plaintiffs have until August 16, 2001
to file a fourth amended complaint. The General Partner does not anticipate that
any costs, whether legal or settlement 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 June 30, 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: August 2, 2001