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 0-11766
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)
June 30, 2001
Assets
Cash and cash equivalents $ 453
Receivables and deposits 616
Other assets 140
Investment property:
Land $ 3,998
Buildings and related personal property 29,427
33,425
Less accumulated depreciation (22,607) 10,818
$ 12,027
Liabilities and Partners' Deficit
Liabilities
Accounts payable $ 137
Tenant security deposits 609
Property taxes 336
Other liabilities 327
Mortgage notes payable 29,332
Partners' Deficit
General partners $ (503)
Limited partners (39,627 units issued and
outstanding) (18,211) (18,714)
$ 12,027
See Accompanying Notes to Consolidated Financial Statements
b)
ANGELES PARTNERS XI
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 $ 2,165 $ 1,969 $ 4,248 $ 3,872
Other income 108 209 226 308
Total revenues 2,273 2,178 4,474 4,180
Expenses:
Operating 701 644 1,367 1,312
General and administrative 61 53 124 98
Depreciation 453 394 890 769
Interest 677 684 1,359 1,368
Property taxes 269 209 749 418
Total expenses 2,161 1,984 4,489 3,965
Net income (loss) $ 112 $ 194 $ (15) $ 215
Net income allocated to general partners (1%) $ 1 $ 2 $ -- $ 2
Net income (loss) allocated to limited
partners (99%) 111 192 (15) 213
$ 112 $ 194 $ (15) $ 215
Net income (loss) per limited partnership unit $ 2.80 $ 4.85 $ (.38) $ 5.38
Distributions per limited partnership unit $ -- $ 44.59 $ -- $ 44.59
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 six months
ended June 30, 2001 -- -- (15) (15)
Partners' deficit at June 30, 2001 39,627 $ (503) $ (18,211) $(18,714)
See Accompanying Notes to Consolidated Financial Statements
d)
ANGELES PARTNERS XI
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
Six Months Ended
June 30,
2001 2000
Cash flows from operating activities:
Net (loss) income $ (15) $ 215
Adjustments to reconcile net (loss) income to net cash
provided by operating activities:
Depreciation 890 769
Amortization of loan costs 56 56
Change in accounts:
Receivables and deposits 26 139
Other assets (44) (29)
Accounts payable 20 193
Tenant security deposit liabilities (20) 45
Accrued property taxes 336 --
Other liabilities 177 113
Net cash provided by operating activities 1,426 1,501
Cash flows from investing activities:
Property improvements and replacements (1,201) (936)
Cash flows from financing activities:
Distributions to partners -- (1,785)
Payments on mortgage notes payable (204) (198)
Net cash used in financing activities (204) (1,983)
Net increase (decrease) in cash and cash equivalents 21 (1,418)
Cash and cash equivalents at beginning of period 432 2,118
Cash and cash equivalents at end of period $ 453 $ 700
Supplemental disclosure of cash flow information:
Cash paid for interest $ 1,084 $ 1,090
Included in property improvements and replacements for the six months ended June
30, 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 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 Managing General Partner is an
affiliate of Apartment Investment and Management Company ("AIMCO"), a publicly
traded real estate investment trust.
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-partnership 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 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 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.
The following payments owed to the Managing General Partner and affiliates
during the six months ended June 30, 2001 and 2000 were paid or accrued:
2001 2000
(in thousands)
Property management fees (included in
operating expense) $224 $203
Reimbursement for services of affiliates (included
in general and administrative and operating
expenses and investment property) 112 127
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 $224,000 and
$203,000 for the six months ended June 30, 2001 and 2000, respectively.
An affiliate of the Managing General Partner received reimbursement of
accountable administrative expenses amounting to approximately $112,000 and
$127,000 for the six months ended June 30, 2001 and 2000, respectively. Included
in these expenses at June 30, 2001 and 2000 are reimbursements of approximately
$22,000 and $65,000, respectively, for construction oversight costs.
In addition to its indirect ownership of the general partner interest in the
Partnership, AIMCO and its affiliates owned 24,276 limited partnership units
(the "Units") in the Partnership representing 61.26% of the outstanding Units at
June 30, 2001. 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 61.26% 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 - Distributions
There were no cash distributions during the six months ended June 30, 2001;
however subsequent to June 30, 2001, the Partnership declared and paid a
distribution from operations of approximately $287,000 (approximately $284,000
to the limited partners or $7.17 per limited partnership unit). A distribution
of approximately $1,785,000 (approximately $1,767,000 to the limited partners or
$44.59 per limited partnership unit) was paid from operations during the six
months ended June 30, 2000.
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 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 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 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. 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 Managing 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 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 six
months ended June 30, 2001 and 2000:
Average Occupancy
Property 2001 2000
Fox Run Apartments 95% 95%
Plainsboro, New Jersey
Results from Operations
The Partnership's net loss for the six months ended June 30, 2001 was
approximately $15,000 compared to net income of approximately $215,000 for the
corresponding period in 2000. The net income for the three months ended June 30,
2001 was approximately $112,000 compared to approximately $194,000 for the
corresponding period in 2000. The decrease in net income for the three and six
month periods ended June 30, 2001 as compared to the three and six months ended
June 30, 2000 is primarily due to an increase in total expenses offset by an
increase in total revenues. Total expenses for the three and six months ended
June 30, 2001 increased due to increases in property tax, operating,
depreciation, and general and administrative expenses. Property tax expense
increased due to an increase in the assessed value of the property by the taxing
authorities. Operating expense increased due to increased utility costs,
especially natural gas, and professional expenses relating to the appeal of the
property tax assessment at the Partnership's investment property offset by
decreases in maintenance costs. As a result of its appeal, the assessed value of
the Partnership's investment property was reduced by the taxing authority.
Depreciation increased due to capital improvements and replacements during the
past twelve months which are now being depreciated.
General and administrative expenses increased for the three and six months ended
June 30, 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.
The increase in total revenues was the result of an increase in rental revenue
offset by a decrease in other income. Rental revenue increased due to an
increase in average rental rates at Fox Run Apartments. Other income decreased
due to decreases in corporate housing revenue and interest income. Interest
income decreased due to lower average cash balances in interest bearing
accounts.
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 June 30, 2001, the Partnership had cash and cash equivalents of approximately
$453,000 as compared to approximately $700,000 at June 30, 2000. Cash and cash
equivalents increased approximately $21,000 from December 31, 2000 primarily due
to approximately $1,426,000 of cash provided by operating activities offset by
approximately $1,201,000 and $204,000 of cash used in investing and financing
activities, respectively. 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 for 2001
consisting primarily of cabinet, appliance, and floor covering replacements.
During the six months ended June 30, 2001, the Partnership spent approximately
$895,000 on capital improvements at Fox Run Apartments primarily consisting of
cabinet and floor replacements, parking resurfacing, and water heaters. These
improvements were funded from operating cash flow. 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 $29,332,000 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 six months ended June 30, 2001;
however subsequent to June 30, 2001, the Partnership declared and paid a
distribution from operations of approximately $287,000 (approximately $284,000
to the limited partners or $7.17 per limited partnership unit). A distribution
of approximately $1,785,000 (approximately $1,767,000 to the limited partners or
$44.59 per limited partnership unit) was paid from operations during the six
months ended June 30, 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
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 owned 24,276 limited partnership units
(the "Units") in the Partnership representing 61.26% of the outstanding Units at
June 30, 2001. 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 61.26% 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 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 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 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 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. 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 Managing 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 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: August 2, 2001