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 0-11767
ANGELES INCOME PROPERTIES, LTD. II
(Exact name of small business issuer as specified in its charter)
California 95-3793526
(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 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 INCOME PROPERTIES, LTD. II
CONSOLIDATED BALANCE SHEET
(Unaudited)
(in thousands, except unit data)
June 30, 2001
Assets
Cash and cash equivalents $ 7,518
Receivables and deposits 911
Restricted escrows 155
Other assets 594
Investment properties:
Land $ 1,984
Buildings and related personal property 32,273
34,257
Less accumulated depreciation (25,227) 9,030
$ 18,208
Liabilities and Partners' Deficit
Liabilities
Accounts payable $ 146
Tenant security deposit liabilities 276
Accrued property taxes 261
Other liabilities 221
Due to affiliates 138
Mortgage notes payable 25,194
Partners' Deficit
General partners $ (520)
Limited partners (99,784 units issued and
outstanding) (7,508) (8,028)
$ 18,208
See Accompanying Notes to Consolidated Financial Statements
b)
ANGELES INCOME PROPERTIES, LTD. II
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 $ 1,705 $ 1,610 $ 3,382 $ 3,215
Other income 115 158 204 244
Casualty gain 25 -- 25 --
Total revenues 1,845 1,768 3,611 3,459
Expenses:
Operating 531 550 1,073 1,076
General and administrative 76 50 172 162
Depreciation 464 443 912 866
Interest 358 335 707 686
Property taxes 187 107 365 247
Total expenses 1,616 1,485 3,229 3,037
Income from continuing operations 229 283 382 422
Income from discontinued operation -- 55 -- 116
Gain on sale of discontinued operation
(Note C) -- -- -- 2,060
Income before extraordinary item 229 338 382 2,598
Extraordinary loss on early extinguishment
of debt (Note E) (57) -- (57) --
Net income $ 172 $ 338 $ 325 $ 2,598
Net income allocated to general partners $ 2 $ 3 $ 3 $ 111
Net income allocated to limited partners 170 335 322 2,487
$ 172 $ 338 $ 325 $ 2,598
Per limited partnership unit:
Income before discontinued operation and
extraordinary item $ 2.26 $ 2.81 $ 3.79 $ 4.19
Income from discontinued operation -- 0.55 -- 1.15
Gain on sale of discontinued operation -- -- -- 19.58
Extraordinary loss on early extinguishment
of debt (0.56) -- (0.56) --
Net income $ 1.70 $ 3.36 $ 3.23 $ 24.92
Distributions per limited partnership unit $ 3.19 $ 51.19 $ 8.50 $ 51.19
See Accompanying Notes to Consolidated Financial Statements
c)
ANGELES INCOME PROPERTIES, LTD. II
CONSOLIDATED STATEMENT OF CHANGES IN PARTNERS' DEFICIT
(Unaudited)
(in thousands, except unit data)
Limited
Partnership General Limited
Units Partners Partners Total
Original capital contributions 100,000 $ 1 $50,000 $50,001
Partners' deficit at
December 31, 2000 99,784 $ (514) $(6,982) $(7,496)
Distributions to partners -- (9) (848) (857)
Net income for the six months
ended June 30, 2001 -- 3 322 325
Partners' deficit at
June 30, 2001 99,784 $ (520) $(7,508) $(8,028)
See Accompanying Notes to Consolidated Financial Statements
d)
ANGELES INCOME PROPERTIES, LTD. II
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
Six Months Ended
June 30,
2001 2000
Cash flows from operating activities:
Net income $ 325 $ 2,598
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation 912 866
Amortization of discounts, loan costs and lease
commissions 40 45
Casualty gain -- (2,060)
Extraordinary loss on early extinguishment of debt 57 --
Casualty gain (25) --
Change in accounts:
Receivables and deposits (583) (218)
Other assets (52) 158
Accounts payable 42 78
Tenant security deposit liabilities (14) (7)
Accrued property taxes 148 37
Due to affiliates (81) (206)
Other liabilities (75) (225)
Net cash provided by operating activities 694 1,066
Cash flows from investing activities:
Property improvements and replacements (698) (757)
Net (deposits to) withdrawals from restricted escrows (12) 32
Net proceeds from sale of investment property -- 2,746
Insurance proceeds received 28 --
Net cash (used in) provided by investing activities (682) 2,021
Cash flows from financing activities:
Payments on mortgage notes payable (128) (120)
Distributions to partners (857) (6,660)
Proceeds from mortgage note payable 13,750 --
Repayment of mortgage note payable (5,985) --
Loan costs paid (249) --
Net cash provided by (used in) financing activities 6,531 (6,780)
Net increase (decrease) in cash and cash equivalents 6,543 (3,693)
Cash and cash equivalents at beginning of period 975 4,229
Cash and cash equivalents at end of period $ 7,518 $ 536
Supplemental disclosure of cash flow information:
Cash paid for interest $ 704 $ 664
At December 31, 2000 and 1999, approximately $150,000 and $157,000,
respectively, of property improvements and replacements were included in
accounts payable.
At June 30, 2000, due to affiliates and distributions to partners were adjusted
by approximately $86,000 due to the general partner distribution on the sale of
Atlanta Crossing Shopping Center.
Distributions to partners of approximately $1,500,000 were declared at December
31, 1999 and paid in January 2000.
At June 30, 2001, due to affiliates and loan costs paid were adjusted by
approximately $138,000 related to the refinancing of Deer Creek.
See Accompanying Notes to Consolidated Financial Statements
e)
ANGELES INCOME PROPERTIES, LTD. II
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note A - Basis of Presentation
The accompanying unaudited consolidated financial statements of Angeles Income
Properties, Ltd. II (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 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 consolidated financial statements of the Partnership include all accounts of
the Partnership and its 99% limited partnership interest in Georgetown AIP II,
LP and its 100% owned limited liability corporation in AIPL II GP, LLC. Although
legal ownership of the respective asset remains with these entities, the
Partnership retains all economic benefits from the properties. As a result, the
Partnership consolidates its interests in these two entities, whereby all
accounts are included in the consolidated financial statements of the
Partnership with all inter-entity accounts being eliminated.
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 certain payments
to affiliates for services and reimbursement of certain expenses incurred by
affiliates on behalf of the Partnership. The following payments were paid or
accrued to the Managing General Partner and affiliates during the six months
ended June 30, 2001 and 2000:
2001 2000
(in thousands)
Property management fees (included in
operating expenses) $ 179 $ 169
Reimbursement for services of affiliates
(included in operating expense, general and
administrative expense and investment properties) 124 81
Due to affiliate 138 108
Disposition fee (included in general partner
distribution) -- 86
Refinancing fee (included in other assets) 138 --
During the six months ended June 30, 2001 and 2000, affiliates of the Managing
General Partner were entitled to receive 5% of gross receipts from all of the
Registrant's residential properties for providing property management services.
The Registrant paid to such affiliates approximately $179,000 and $169,000 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 $124,000 and
$81,000 for the six months ended June 30, 2001 and 2000, respectively.
The Partnership Agreement provides for a fee equal to 10% of "Net cash flow from
operations," as defined in the Partnership Agreement to be paid to the Managing
General Partner for executive and administrative management services. The amount
of the fee for the six months ended June 30, 2000 was $22,000. There was no fee
earned for the six months ended June 30, 2001.
Pursuant to the Partnership Agreement, the Managing General Partner is entitled
to receive a distribution equal to 3% of the aggregate disposition price of sold
properties. The Partnership paid a distribution of approximately $86,000 to the
Managing General Partner related to the sale of Atlanta Crossing Shopping Center
in September 2000. This amount is subordinate to the limited partners receiving
their original capital contributions plus a cumulative preferred return of 6%
per annum of their adjusted capital investment, as defined in the Partnership
Agreement. If the limited partners have not received these returns when the
Partnership terminates, the Managing General Partner will return this amount to
the Partnership.
In addition to reimbursement for services of affiliates, the Partnership accrued
approximately $138,000 for loan costs related to the refinance of Deer Creek
Apartments during the six months ended June 30, 2001 which is payable to an
affiliate of the Managing General Partner. These costs were capitalized and are
included in other assets and due to affiliates on the consolidated balance
sheet.
In addition to its indirect ownership of the general partner interest in the
Partnership, AIMCO and its affiliates currently own 59,002 limited partnership
units in the Partnership representing 59.13% 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 59.13% 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
their affiliation with the Managing General Partner.
Note C - Sale of Discontinued Operation
In March 2000, Atlanta Crossing Shopping Center, located in Montgomery, Alabama,
was sold to an unaffiliated party for $2,875,000. After payment of closing
expenses, the net sales proceeds received by the Partnership were approximately
$2,746,000. The sale resulted in a gain of approximately $2,060,000, which was
recognized during the six months ended June 30, 2000.
Atlanta Crossing Shopping Center was the only commercial property owned by the
Partnership and represented one segment of the Partnership's operations. Due to
the sale of this property, the results of the commercial segment have been shown
as income from discontinued operation on the consolidated statement of
operations. Revenues of this property were approximately $59,000 and $195,000
for the three and six months ended June 30, 2000, respectively. Income from
operations was approximately $55,000 and $116,000 for the three and six months
ended June 30, 2000, respectively.
Note D - Distributions
During the six months ended June 30, 2001, the Partnership declared and paid
distributions of approximately $857,000 (approximately $848,000 to the limited
partners or $8.50 per limited partnership unit) from operations. Subsequent to
June 30, 2001, the Partnership declared and paid a distribution of approximately
$7,270,000 (approximately $7,197,000 to the limited partners or $72.13 per
limited partnership unit) from proceeds of the refinance of Deer Creek
Apartments. During the six months ended June 30, 2000, the Partnership paid a
distribution that was accrued in December 1999 of approximately $1,500,000 of
which approximately $1,074,000 (approximately $1,063,000 to the limited partners
or $10.65 per limited partnership unit) was from operations and approximately
$426,000 (approximately $422,000 to the limited partners or $4.23 per limited
partnership unit) was from proceeds from the sale of Princeton Meadows Golf
Course Joint Venture during 1999. During the six months ended June 30, 2000, the
Partnership declared and paid distributions of approximately $5,246,000
(approximately $5,108,000 to the limited partners or $51.19 per limited
partnership unit) of which approximately $2,450,000 (approximately $2,426,000 to
the limited partners or $24.31 per limited partnership unit) is from operations
and approximately $2,796,000 (approximately $2,682,000 to the limited partners
or $26.88 per limited partnership unit) is from proceeds of the sale of Atlanta
Crossing Shopping Center. Pursuant to the Partnership Agreement, the Partnership
accrued a distribution of approximately $86,000 to the Managing General Partner
related to the sale of Atlanta Crossing Shopping Center in March 2000. This
amount is subordinate to the limited partners receiving their original capital
contributions plus a cumulative preferred return of 6% per annum of their
adjusted capital investment, as defined in the Partnership Agreement. This
distribution was paid during the third quarter of 2000 even though the required
returns had not been met. If the limited partners have not received these
returns when the Partnership terminates, the Managing General Partner will
return this amount to the Partnership.
Note E - Refinancing of Mortgage Note Payable
On June 27, 2001, the Partnership refinanced the mortgage encumbering Deer Creek
Apartments. The refinancing replaced indebtedness of approximately $5,985,000
with a new mortgage of $13,750,000. The new mortgage carries a stated interest
rate of 7.43% as compared to the 7.33% interest rate on the old mortgage.
Payments on the mortgage loan are due monthly until the loan matures on July 1,
2021. Total capitalized loan costs were approximately $387,000. These costs
included $138,000 in fees payable to the Managing General Partner and paid
subsequent to June 30, 2001. The Partnership recognized an extraordinary loss on
the early extinguishment of debt of approximately $57,000 due to the write-off
of unamortized loan costs.
Note F - Casualties
During the six months ended June 30, 2001, a net casualty gain was recorded at
Georgetown Apartments. The casualty gain related to ice damage in January 2001.
The gain was the result of insurance proceeds of approximately $28,000 less the
net book value of the damaged property of approximately $3,000.
Additionally, during the six months ended June 30, 2001, Landmark Apartments
suffered two fires which damaged certain apartment units. Repairs on the damaged
units are under way and no casualty loss is expected related to these
casualties.
Note G - Segment Reporting
Description of the types of products and services from which the reportable
segment derives its revenues: The Partnership had two reportable segments:
residential properties and commercial properties. The Partnership's residential
property segment consists of three apartment complexes, one each in New Jersey,
Indiana, and North Carolina. The Partnership rents apartment units to tenants
for terms that are typically twelve months or less. The commercial property
segment consisted of a retail shopping center located in Montgomery, Alabama.
This property leased space to a discount store, various specialty retail
outlets, and several restaurants at terms ranging from twelve months to twenty
years. The commercial property was sold on March 15, 2000 (see "Note C").
Therefore, the commercial segment is reflected as discontinued operations.
Measurement of segment profit or loss: The Partnership evaluates performance
based on segment profit (loss) before depreciation. The accounting policies of
the reportable segments are the same as those of the Partnership as described in
the Partnership's Annual Report on Form 10-KSB for the year ended December 31,
2000.
Factors management used to identify the enterprise's reportable segment: The
Partnership's reportable segments are investment properties that offer different
products and services. The reportable segments are each managed separately
because they provide distinct services with different types of products and
customers.
Segment information for the three and six month periods ended June 30, 2001 and
2000 is shown in the tables below (in thousands). The "Other" column includes
Partnership administration related items and income and expense not allocated to
the reportable segments.
Three Months Ended
June 30, 2001 Residential Other Totals
Rental income $ 1,705 $ -- $ 1,705
Other income 112 3 115
Casualty gain 25 -- 25
Interest expense 358 -- 358
Depreciation 464 -- 464
General and administrative
expense -- 76 76
Extraordinary loss on early
extinguishment of debt (57) -- (57)
Segment profit (loss) 245 (73) 172
Six Months Ended
June 30, 2001 Residential Other Totals
Rental income $ 3,382 $ -- $ 3,382
Other income 200 4 204
Casualty gain 25 -- 25
Interest expense 707 -- 707
Depreciation 912 -- 912
General and administrative
expense -- 172 172
Extraordinary loss on early
extinguishment of debt (57) -- (57)
Segment profit (loss) 493 (168) 325
Total assets 10,797 7,367 18,164
Capital expenditures for
investment properties 548 -- 548
Three Months Ended
June 30, 2000 Residential Commercial Other Totals
(discontinued)
Rental income $ 1,610 $ -- $ -- $ 1,610
Other income 126 -- 32 158
Interest expense 335 -- -- 335
Depreciation 443 -- -- 443
General and administrative
expense -- -- 50 50
Income from discontinued
operation -- 55 -- 55
Segment profit (loss) 301 55 (18) 338
Six Months Ended
June 30, 2000 Residential Commercial Other Totals
(discontinued)
Rental income $ 3,215 $ -- $ -- $ 3,215
Other income 202 -- 42 244
Interest expense 686 -- -- 686
Depreciation 866 -- -- 866
General and administrative
expense -- -- 162 162
Income from discontinued
operation -- 116 -- 116
Gain on sale of discontinued
operation -- 2,060 -- 2,060
Segment profit (loss) 542 2,176 (120) 2,598
Total assets 11,020 -- 136 11,156
Capital expenditures for
investment properties 594 6 -- 600
Note H - 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 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 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 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 properties consist of three apartment complexes.
The following table sets forth the average occupancy of the properties for both
of the six months ended June 30, 2001 and 2000:
Average Occupancy
Property 2001 2000
Deer Creek Apartments 96% 98%
Plainsboro, New Jersey
Georgetown Apartments 96% 96%
South Bend, Indiana
Landmark Apartments 92% 89%
Raleigh, North Carolina
The Managing General Partner attributes the increase in occupancy at Landmark
Apartments to increased marketing efforts.
Results of Operations
The Partnership's net income for the six months ended June 30, 2001 was
approximately $325,000 compared to approximately $2,598,000 for the six months
ended June 30, 2000. The Partnership's net income for the three month period
ended June 30, 2001 was approximately $172,000 compared to approximately
$338,000 for the three month period ended June 30, 2000. The decrease in net
income for the three and six month periods ended June 30, 2001 is primarily
attributable to the sale of Atlanta Crossing Shopping Center in March 2000 (see
discussion below).
Excluding the operations of and the gain on the sale of the discontinued
operation and the extraordinary loss on the early extinguishment of debt, the
Partnership had income from continuing operations of approximately $382,000 for
the six months ended June 30, 2001, compared to approximately $422,000 for the
six months ended June 30, 2000. Excluding the operations of and the gain on the
sale of the discontinued operation and the extraordinary loss on the early
extinguishment of debt, the Partnership had income from continuing operations of
approximately $229,000 for the three month period ended June 30, 2001, compared
to approximately $283,000 for the three month period ended June 30, 2000. The
extraordinary loss on early extinguishment of debt relates to the refinancing of
the mortgage at Deer Creek Apartments (see discussion in "Liquidity and Capital
Resources"). The decrease in net income for three and six month periods ended
June 30, 2001 is due to an increase in total expenses partially offset by an
increase in total revenues.
The increase in total revenues for the three and six month periods ended June
30, 2001 is due to an increase in rental income and the casualty gain at
Georgetown Apartments due to an ice storm in January 2001 which was partially
offset by a decrease in other income. The increase in rental income is the
result of increased average rental rates at all of the Partnership's properties
and an increase in occupancy at Landmark Apartments which was partially offset
by a decrease in occupancy at Deer Creek Apartments and an increase in rental
concessions and military discounts primarily at Landmark Apartments. The
decrease in other income is primarily due to a decrease in interest income as a
result of a lower cash balance in interest bearing accounts which was partially
offset by an increase in tenant reimbursements at all of the Partnership's
properties.
Total expenses increased for the three and six month periods ended June 30, 2001
due to increases in depreciation, interest, property tax and general and
administrative expenses partially offset by a decrease in operating expenses.
Depreciation expense increased for the three and six month periods ended June
30, 2001 due to capital improvements completed during the past twelve months.
Interest expense increased for the three and six month periods ended June 30,
2001 due to the refinancing of Deer Creek Apartments, which increased the debt
balance at the property, as discussed in Liquidity and Capital Resources.
Property tax expense increased for the three and six month periods ended June
30, 2001 due to an increase in the tax rate at Deer Creek Apartments, an
increase in the assessed value at Landmark Apartments and the timing of the
receipt of tax bills at Georgetown Apartments. General and administrative
expenses increased for the three and six month periods ended June 30, 2001 due
to an increase in the cost of services included in the management reimbursements
paid to the Managing General Partner as allowed under the Partnership Agreement
and an increase in professional fees associated with the administration of the
Partnership partially offset by a decrease in legal expenses. Also included in
general and administrative expenses at both June 30, 2001 and 2000 are costs
associated with the quarterly and annual communications with investors and
regulatory agencies and the annual audit required by the Partnership Agreement.
Operating expenses decreased for the three and six month periods ended June 30,
2001 due to reduced maintenance and payroll related expenses at Deer Creek
Apartments and Landmark Apartments. These decreases were partially offset by
increased insurance expense at all the Partnership's properties.
In March 2000, Atlanta Crossing Shopping Center, located in Montgomery, Alabama,
was sold to an unaffiliated party for $2,875,000. After payment of closing
expenses, the net sales proceeds received by the Partnership were approximately
$2,746,000. The sale resulted in a gain of approximately $2,060,000, which was
recognized during the six months ended June 30, 2000.
Atlanta Crossing Shopping Center was the only commercial property owned by the
Partnership and represented one segment of the Partnership's operations. Due to
the sale of this property, the results of the commercial segment have been shown
as income from discontinued operation on the consolidated statement of
operations. Revenues of this property were approximately $59,000 and $195,000
for the three and six months ended June 30, 2000, respectively. Income from
operations was approximately $55,000 and $116,000 for the three and six months
ended June 30, 2000, respectively.
As part of the ongoing business plan of the Partnership, the Managing General
Partner monitors the rental market environment of each of its investment
properties to assess the feasibility of increasing rents, maintaining or
increasing occupancy levels and protecting the Partnership from increases in
expense. 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
$7,518,000 compared to approximately $536,000 at June 30, 2000. The increase in
cash and cash equivalents of approximately $6,543,000 since December 31, 2000 is
due to approximately $6,591,000 of cash provided by financing activities and
approximately $694,000 of cash provided by operating activities partially offset
by approximately $682,000 of cash used in investing activities. Cash provided by
financing activities consisted primarily of proceeds received from the
refinancing of Deer Creek Apartments partially offset by the repayment of the
mortgage encumbering Deer Creek Apartments, loan costs paid, distributions to
the partners, and payments of principal made on the mortgages encumbering the
Partnership's properties. Cash used in investing activities consisted primarily
of property improvements and replacements, and to a lesser extent, net deposits
to escrow accounts maintained by the mortgage lenders partially offset by
insurance proceeds received. The Partnership invests its working capital
reserves in interest bearing accounts.
On June 27, 2001, the Partnership refinanced the mortgage encumbering Deer Creek
Apartments. The refinancing replaced indebtedness of approximately $5,985,000
with a new mortgage of $13,750,000. The new mortgage carries a stated interest
rate of 7.43% as compared to the 7.33% interest rate on the old mortgage.
Payments on the mortgage loan are due monthly until the loan matures on July 1,
2021. Total capitalized loan costs were approximately $387,000. These costs
included $138,000 in fees payable to the Managing General Partner and paid
subsequent to June 30, 2001. The Partnership recognized an extraordinary loss on
the early extinguishment of debt of approximately $57,000 due to the write-off
of unamortized loan costs.
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 various 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 planned for each of the Registrant's properties are detailed below.
Deer Creek
During the six months ended June 30, 2001, the Partnership spent approximately
$318,000 on capital improvements consisting primarily of swimming pool
improvements, carpet and vinyl replacements, maintenance equipment, cabinet
replacements, and water submetering. These improvements were funded from
Partnership reserves and operating cash flow. The Partnership has evaluated the
capital improvement needs of the property for the year 2001. The amount budgeted
is approximately $917,000, consisting primarily of cabinets, appliances, and
water submetering. Additional improvements may be considered and will depend on
the physical condition of the property as well as replacement reserves and
anticipated cash flow generated by the property.
Georgetown
During the six months ended June 30, 2001, the Partnership spent approximately
$121,000 on budgeted and non-budgeted capital improvements consisting primarily
of buildings, carpet replacements, and appliances. These improvements were
funded from Partnership reserves, insurance proceeds, and operating cash flow.
The Partnership has evaluated the capital improvement needs of the property for
the year 2001. The amount budgeted is approximately $82,000, consisting
primarily of carpet and vinyl replacements, appliances, and structural
improvements. Additional improvements may be considered and will depend on the
physical condition of the property as well as replacement reserves and
anticipated cash flow generated by the property.
Landmark
During the six months ended June 30, 2001, the Partnership spent approximately
$109,000 on budgeted and non-budgeted capital improvements consisting primarily
of water heater replacements, countertop replacements, and carpet and vinyl
replacements. These improvements were funded from operating cash flow. The
Partnership has evaluated the capital improvement needs of the property for the
year 2001. The amount budgeted is approximately $84,000, consisting primarily of
air conditioning unit replacements, carpet and vinyl replacement, window
treatments, cabinets, and appliances. Additional improvements may be considered
and will depend on the physical condition of the property as well as replacement
reserves and anticipated cash flow generated by the property.
The additional capital expenditures will be incurred only if cash is available
from operations or from Partnership reserves. 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 Partnership's current assets are thought to be sufficient for any near-term
needs (exclusive of capital improvements) of the Partnership. The mortgage
indebtedness encumbering Deer Creek Apartments of $13,750,000 is amortized over
20 years and matures July 1, 2021. The mortgage indebtedness encumbering
Georgetown Apartments and Landmark Apartments of approximately $11,444,000, net
of discount, is amortized over periods ranging from 29 to 30 years with balloon
payments due in 2003. The Managing General Partner will attempt to refinance the
mortgages encumbering Georgetown and Landmark and/or sell the properties prior
to such maturity date. If the properties cannot be refinanced or sold for a
sufficient amount, the Partnership may risk losing such properties through
foreclosure.
During the six months ended June 30, 2001, the Partnership declared and paid
distributions of approximately $857,000 (approximately $848,000 to the limited
partners or $8.50 per limited partnership unit) from operations. Subsequent to
June 30, 2001, the Partnership declared and paid a distribution of approximately
$7,270,000 (approximately $7,197,000 to the limited partners or $72.13 per
limited partnership unit) from proceeds of the refinance of Deer Creek
Apartments. During the six months ended June 30, 2000, the Partnership paid a
distribution that was accrued in December 1999 of approximately $1,500,000 of
which approximately $1,074,000 (approximately $1,063,000 to the limited partners
or $10.65 per limited partnership unit) was from operations and approximately
$426,000 (approximately $422,000 to the limited partners or $4.23 per limited
partnership unit) was from proceeds from the sale of Princeton Meadows Golf
Course Joint Venture during 1999. During the six months ended June 30, 2000, the
Partnership declared and paid distributions of approximately $5,246,000
(approximately $5,108,000 to the limited partners or $51.19 per limited
partnership unit) of which approximately $2,450,000 (approximately $2,426,000 to
the limited partners or $24.31 per limited partnership unit) is from operations
and approximately $2,796,000 (approximately $2,682,000 to the limited partners
or $26.88 per limited partnership unit) is from proceeds of the sale of Atlanta
Crossing Shopping Center. Pursuant to the Partnership Agreement, the Partnership
accrued a distribution of approximately $86,000 to the Managing General Partner
related to the sale of Atlanta Crossing Shopping Center in March 2000. This
amount is subordinate to the limited partners receiving their original capital
contributions plus a cumulative preferred return of 6% per annum of their
adjusted capital investment, as defined in the Partnership Agreement. This
distribution was paid during the third quarter of 2000 even though the required
returns had not been met. If the limited partners have not received these
returns when the Partnership terminates, the Managing General Partner will
return this amount to the Partnership. Future cash distributions will depend on
the levels of cash generated from operations, the availability of cash reserves
and the timing of debt maturities, refinancings, and/or property sales. The
Partnership's distribution policy is reviewed on a quarterly basis. There can be
no assurance, however, that the Partnership will generate sufficient funds from
operations after required capital 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 currently own 59,002 limited partnership
units in the Partnership representing 59.13% 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 59.13% 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
their 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 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:
Exhibit 10.19, Multifamily Note dated June 27, 2001, by and
between Angeles Income Properties, Ltd. II, a California
Limited Partnership, and GMAC Commercial Mortgage Corporation.
b) Reports on Form 8-K filed during the quarter ended June 30, 2001:
None.
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 INCOME PROPERTIES, LTD. II
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:
Exhibit 10.19
FHLMC Loan No. 002772809
Deer Creek Apartments
MULTIFAMILY NOTE
(MULTISTATE - REVISION DATE 11-01-2000)
US $13,750,000.00 As of June 27, 2001
FOR VALUE RECEIVED, the undersigned ("Borrower") jointly and severally (if
more than one) promises to pay to the order of GMAC COMMERCIAL MORTGAGE
CORPORATION, a California corporation, the principal sum of Thirteen Million
Seven Hundred Fifty Thousand and 00/100 Dollars (US $13,750,000.00), with
interest on the unpaid principal balance at the annual rate of Seven and Four
Hundred Thirty Thousandths percent (7.430%).
1. Defined Terms. As used in this Note, (i) the term "Lender" means the holder
of this Note, and (ii) the term "Indebtedness" means the principal of, interest
on, and any other amounts due at any time under, this Note, the Security
Instrument or any other Loan Document, including prepayment premiums, late
charges, default interest, and advances to protect the security of the Security
Instrument under Section 12 of the Security Instrument. "Event of Default" and
other capitalized terms used but not defined in this Note shall have the
meanings given to such terms in the Security Instrument.
2. Address for Payment. All payments due under this Note shall be payable at 200
Witmer Road, Post Office Box 809, Horsham, Pennsylvania 19044, Attn: Servicing -
Account Manager, or such other place as may be designated by written notice to
Borrower from or on behalf of Lender.
3. Payment of Principal and Interest. Principal and interest shall be paid as
follows:
(a) Unless disbursement of principal is made by Lender to Borrower on the first
day of the month, interest for the period beginning on the date of disbursement
and ending on and including the last day of the month in which such disbursement
is made shall be payable simultaneously with the execution of this Note.
Interest under this Note shall be computed on the basis of a 360-day year
consisting of twelve 30-day months.
(b) Consecutive monthly installments of principal and interest, each in the
amount of One Hundred Ten Thousand One Hundred Eighty-One and 27/100 Dollars (US
$110,181.27), shall be payable on the first day of each month beginning on
August 1, 2001, until the entire unpaid principal balance evidenced by this Note
is fully paid.
(c) Any accrued interest remaining past due for 30 days or more may, at Lender's
discretion, be added to and become part of the unpaid principal balance and
shall bear interest at the rate or rates specified in this Note, and any
reference below to "accrued interest" shall refer to accrued interest which has
not become part of the unpaid principal balance. Any remaining principal and
interest shall be due and payable on July 1, 2021 or on any earlier date on
which the unpaid principal balance of this Note becomes due and payable, by
acceleration or otherwise (the "Maturity Date"). The unpaid principal balance
shall continue to bear interest after the Maturity Date at the Default Rate set
forth in this Note until and including the date on which it is paid in full.
(d) Any regularly scheduled monthly installment of principal and interest that
is received by Lender before the date it is due shall be deemed to have been
received on the due date solely for the purpose of calculating interest due.
4. Application of Payments. If at any time Lender receives, from Borrower or
otherwise, any amount applicable to the Indebtedness which is less than all
amounts due and payable at such time, Lender may apply that payment to amounts
then due and payable in any manner and in any order determined by Lender, in
Lender's discretion. Borrower agrees that neither Lender's acceptance of a
payment from Borrower in an amount that is less than all amounts then due and
payable nor Lender's application of such payment shall constitute or be deemed
to constitute either a waiver of the unpaid amounts or an accord and
satisfaction.
5. Security. The Indebtedness is secured, among other things, by a multifamily
mortgage, deed to secure debt or deed of trust dated as of the date of this Note
(the "Security Instrument"), and reference is made to the Security Instrument
for other rights of Lender as to collateral for the Indebtedness.
6. Acceleration. If an Event of Default has occurred and is continuing, the
entire unpaid principal balance, any accrued interest, the prepayment premium
payable under Paragraph 10, if any, and all other amounts payable under this
Note and any other Loan Document shall at once become due and payable, at the
option of Lender, without any prior notice to Borrower (except if notice is
required by applicable law, then after such notice). Lender may exercise this
option to accelerate regardless of any prior forbearance.
7. Late Charge. If any monthly amount payable under this Note or under the
Security Instrument or any other Loan Document is not received by Lender within
ten (10) days after the amount is due (unless applicable law requires a longer
period of time before a late charge may be imposed, in which event such longer
period shall be substituted), Borrower shall pay to Lender, immediately and
without demand by Lender, a late charge equal to five percent (5%) of such
amount (unless applicable law requires a lesser amount be charged, in which
event such lesser amount shall be substituted). Borrower acknowledges that its
failure to make timely payments will cause Lender to incur additional expenses
in servicing and processing the loan evidenced by this Note (the "Loan"), and
that it is extremely difficult and impractical to determine those additional
expenses. Borrower agrees that the late charge payable pursuant to this
Paragraph represents a fair and reasonable estimate, taking into account all
circumstances existing on the date of this Note, of the additional expenses
Lender will incur by reason of such late payment. The late charge is payable in
addition to, and not in lieu of, any interest payable at the Default Rate
pursuant to Paragraph 8.
8. Default Rate. So long as (a) any monthly installment under this Note remains
past due for thirty (30) days or more, or (b) any other Event of Default has
occurred and is continuing, interest under this Note shall accrue on the unpaid
principal balance from the earlier of the due date of the first unpaid monthly
installment or the occurrence of such other Event of Default, as applicable, at
a rate (the "Default Rate") equal to the lesser of four (4) percentage points
above the rate stated in the first paragraph of this Note and the maximum
interest rate which may be collected from Borrower under applicable law. If the
unpaid principal balance and all accrued interest are not paid in full on the
Maturity Date, the unpaid principal balance and all accrued interest shall bear
interest from the Maturity Date at the Default Rate. Borrower also acknowledges
that its failure to make timely payments will cause Lender to incur additional
expenses in servicing and processing the Loan, that, during the time that any
monthly installment under this Note is delinquent for more than thirty (30)
days, Lender will incur additional costs and expenses arising from its loss of
the use of the money due and from the adverse impact on Lender's ability to meet
its other obligations and to take advantage of other investment opportunities,
and that it is extremely difficult and impractical to determine those additional
costs and expenses. Borrower also acknowledges that, during the time that any
monthly installment under this Note is delinquent for more than thirty (30) days
or any other Event of Default has occurred and is continuing, Lender's risk of
nonpayment of this Note will be materially increased and Lender is entitled to
be compensated for such increased risk. Borrower agrees that the increase in the
rate of interest payable under this Note to the Default Rate represents a fair
and reasonable estimate, taking into account all circumstances existing on the
date of this Note, of the additional costs and expenses Lender will incur by
reason of the Borrower's delinquent payment and the additional compensation
Lender is entitled to receive for the increased risks of nonpayment associated
with a delinquent loan.
9. Limits on Personal Liability.
(a) Except as otherwise provided in this Paragraph 9, Borrower shall have no
personal liability under this Note, the Security Instrument or any other Loan
Document for the repayment of the Indebtedness or for the performance of any
other obligations of Borrower under the Loan Documents, and Lender's only
recourse for the satisfaction of the Indebtedness and the performance of such
obligations shall be Lender's exercise of its rights and remedies with respect
to the Mortgaged Property and any other collateral held by Lender as security
for the Indebtedness. This limitation on Borrower's liability shall not limit or
impair Lender's enforcement of its rights against any guarantor of the
Indebtedness or any guarantor of any obligations of Borrower.
(b) Borrower shall be personally liable to Lender for the repayment of a portion
of the Indebtedness equal to zero percent (0%) of the original principal balance
of this Note, plus any other amounts for which Borrower has personal liability
under this Paragraph 9.
(c) In addition to Borrower's personal liability under Paragraph 9(b), Borrower
shall be personally liable to Lender for the repayment of a further portion of
the Indebtedness equal to any loss or damage suffered by Lender as a result of
(1) failure of Borrower to pay to Lender upon demand after an Event of Default
all Rents to which Lender is entitled under Section 3(a) of the Security
Instrument and the amount of all security deposits collected by Borrower from
tenants then in residence; (2) failure of Borrower to apply all insurance
proceeds and condemnation proceeds as required by the Security Instrument; or
(3) failure of Borrower to comply with Section 14(d) or (e) of the Security
Instrument relating to the delivery of books and records, statements, schedules
and reports.
(d) For purposes of determining Borrower's personal liability under Paragraph
9(b) and Paragraph 9(c), all payments made by Borrower or any guarantor of this
Note with respect to the Indebtedness and all amounts received by Lender from
the enforcement of its rights under the Security Instrument shall be applied
first to the portion of the Indebtedness for which Borrower has no personal
liability.
(e) Borrower shall become personally liable to Lender for the repayment of all
of the Indebtedness upon the occurrence of any of the following Events of
Default: (1) Borrower's acquisition of any property or operation of any business
not permitted by Section 33 of the Security Instrument; (2) a Transfer
(including, but not limited to, a lien or encumbrance) that is an Event of
Default under Section 21 of the Security Instrument, other than a Transfer
consisting solely of the involuntary removal or involuntary withdrawal of a
general partner in a limited partnership or a manager in a limited liability
company; or (3) fraud or written material misrepresentation by Borrower or any
officer, director, partner, member or employee of Borrower in connection with
the application for or creation of the Indebtedness or any request for any
action or consent by Lender.
(f) In addition to any personal liability for the Indebtedness, Borrower shall
be personally liable to Lender for (1) the performance of all of Borrower's
obligations under Section 18 of the Security Instrument (relating to
environmental matters); (2) the costs of any audit under Section 14(d) of the
Security Instrument; and (3) any costs and expenses incurred by Lender in
connection with the collection of any amount for which Borrower is personally
liable under this Paragraph 9, including fees and out of pocket expenses of
attorneys and expert witnesses and the costs of conducting any independent audit
of Borrower's books and records to determine the amount for which Borrower has
personal liability.
(g) To the extent that Borrower has personal liability under this Paragraph 9,
Lender may exercise its rights against Borrower personally without regard to
whether Lender has exercised any rights against the Mortgaged Property or any
other security, or pursued any rights against any guarantor, or pursued any
other rights available to Lender under this Note, the Security Instrument, any
other Loan Document or applicable law. For purposes of this Paragraph 9, the
term "Mortgaged Property" shall not include any funds that (1) have been applied
by Borrower as required or permitted by the Security Instrument prior to the
occurrence of an Event of Default or (2) Borrower was unable to apply as
required or permitted by the Security Instrument because of a bankruptcy,
receivership, or similar judicial proceeding. To the fullest extent permitted by
applicable law, in any action to enforce Borrower's personal liability under
this Paragraph 9, Borrower waives any right to set off the value of the
Mortgaged Property against such personal liability.
10. Voluntary and Involuntary Prepayments.
(a) A prepayment premium shall be payable in connection with any prepayment (any
receipt by Lender of principal, other than principal required to be paid in
monthly installments pursuant to Paragraph 3(b), prior to the scheduled Maturity
Date set forth in Paragraph 3(c)) under this Note as provided below:
(1) Borrower may voluntarily prepay all of the unpaid principal balance of this
Note on a Business Day designated as the date for such prepayment in a written
notice from Borrower to Lender given at least 30 days prior to the date of such
prepayment. Such prepayment shall be made by paying (A) the amount of principal
being prepaid, (B) all accrued interest, (C) all other sums due Lender at the
time of such prepayment, and (D) the prepayment premium calculated pursuant to
Paragraph 10(c). For all purposes including the accrual of interest, any
prepayment received by Lender on any day other than the last calendar day of the
month shall be deemed to have been received on the last calendar day of such
month. For purposes of this Note, a "Business Day" means any day other than a
Saturday, Sunday or any other day on which Lender is not open for business.
Unless expressly provided for in the Loan Documents, Borrower shall not have the
option to voluntarily prepay less than all of the unpaid principal balance.
However, if a partial prepayment is provided for in the Loan Documents or is
accepted by Lender in Lender's discretion, a prepayment premium calculated
pursuant to Paragraph 10(c) shall be due and payable by Borrower.
(2) Upon Lender's exercise of any right of acceleration under this Note,
Borrower shall pay to Lender, in addition to the entire unpaid principal balance
of this Note outstanding at the time of the acceleration, (A) all accrued
interest and all other sums due Lender, and (B) the prepayment premium
calculated pursuant to Paragraph 10(c).
(3) Any application by Lender of any collateral or other security to the
repayment of any portion of the unpaid principal balance of this Note prior to
the Maturity Date and in the absence of acceleration shall be deemed to be a
partial prepayment by Borrower, requiring the payment to Lender by Borrower of a
prepayment premium.
(b) Notwithstanding the provisions of Paragraph 10(a), no prepayment premium
shall be payable with respect to (A) any prepayment made during the period from
one hundred eighty (180) days before the scheduled Maturity Date to the
scheduled Maturity Date, or (B) any prepayment occurring as a result of the
application of any insurance proceeds or condemnation award under the Security
Instrument.
(c) Any prepayment premium payable under this Note shall be computed as follows:
(1) If the prepayment is made between the date of this Note and the
date that is 180 months after the first day of the first calendar month
following the date of this Note (the "Yield Maintenance Period"), the prepayment
premium shall be whichever is the greater of subparagraphs (i) and (ii) below:
(i) 1.0% of the unpaid principal balance of this Note; or
(ii) the product obtained by multiplying:
(A) the amount of principal being prepaid,
by
(B) the excess (if any) of the Monthly Note Rate over the
Assumed Reinvestment Rate,
by
(C) the Present Value Factor.
For purposes of subparagraph (ii), the following definitions shall
apply:
Monthly Note Rate: one-twelfth (1/12) of the annual interest rate of
this Note, expressed as a decimal calculated to five digits.
Prepayment Date: in the case of a voluntary prepayment, the date on
which the prepayment is made; in the case of the application by
Lender of collateral or security to a portion of the principal
balance, the date of such application; and in any other case, the
date on which Lender accelerates the unpaid principal balance of
this Note.
Assumed Reinvestment Rate: one-twelfth (1/12) of the yield rate as
of the date 5 Business Days before the Prepayment Date, on the
9.250% U.S. Treasury Security due February 1, 2016 as reported in
The Wall Street Journal, expressed as a decimal calculated to five
digits. In the event that no yield is published on the applicable
date for the Treasury Security used to determine the Assumed
Reinvestment Rate, Lender, in its discretion, shall select the
non-callable Treasury Security maturing in the same year as the
Treasury Security specified above with the lowest yield published in
The Wall Street Journal as of the applicable date. If the
publication of such yield rates in The Wall Street Journal is
discontinued for any reason, Lender shall select a security with a
comparable rate and term to the Treasury Security used to determine
the Assumed Reinvestment Rate. The selection of an alternate
security pursuant to this Paragraph shall be made in Lender's
discretion.
Present Value Factor: the factor that discounts to present value the
costs resulting to Lender from the difference in interest rates
during the months remaining in the Yield Maintenance Period, using
the Assumed Reinvestment Rate as the discount rate, with monthly
compounding, expressed numerically as follows:
[OBJECT OMITTED]
n = number of months remaining in Yield Maintenance Period
ARR = Assumed Reinvestment Rate
(2) If the prepayment is made after the expiration of the Yield
Maintenance Period but before the period set forth in Paragraph 10(b)(A) above,
the prepayment premium shall be 1.0% of the unpaid principal balance of this
Note.
(d) Any permitted or required prepayment of less than the unpaid principal
balance of this Note shall not extend or postpone the due date of any subsequent
monthly installments or change the amount of such installments, unless Lender
agrees otherwise in writing.
(e) Borrower recognizes that any prepayment of the unpaid principal balance of
this Note, whether voluntary or involuntary or resulting from a default by
Borrower, will result in Lender's incurring loss, including reinvestment loss,
additional expense and frustration or impairment of Lender's ability to meet its
commitments to third parties. Borrower agrees to pay to Lender upon demand
damages for the detriment caused by any prepayment, and agrees that it is
extremely difficult and impractical to ascertain the extent of such damages.
Borrower therefore acknowledges and agrees that the formula for calculating
prepayment premiums set forth in this Note represents a reasonable estimate of
the damages Lender will incur because of a prepayment.
(f) Borrower further acknowledges that the prepayment premium provisions of this
Note are a material part of the consideration for the Loan, and acknowledges
that the terms of this Note are in other respects more favorable to Borrower as
a result of the Borrower's voluntary agreement to the prepayment premium
provisions.
11. Costs and Expenses. To the fullest extent allowed by applicable law,
Borrower shall pay all expenses and costs, including fees and out-of-pocket
expenses of attorneys (including Lender's in-house attorneys) and expert
witnesses and costs of investigation, incurred by Lender as a result of any
default under this Note or in connection with efforts to collect any amount due
under this Note, or to enforce the provisions of any of the other Loan
Documents, including those incurred in post-judgment collection efforts and in
any bankruptcy proceeding (including any action for relief from the automatic
stay of any bankruptcy proceeding) or judicial or non-judicial foreclosure
proceeding.
12. Forbearance. Any forbearance by Lender in exercising any right or remedy
under this Note, the Security Instrument, or any other Loan Document or
otherwise afforded by applicable law, shall not be a waiver of or preclude the
exercise of that or any other right or remedy. The acceptance by Lender of any
payment after the due date of such payment, or in an amount which is less than
the required payment, shall not be a waiver of Lender's right to require prompt
payment when due of all other payments or to exercise any right or remedy with
respect to any failure to make prompt payment. Enforcement by Lender of any
security for Borrower's obligations under this Note shall not constitute an
election by Lender of remedies so as to preclude the exercise of any other right
or remedy available to Lender.
13. Waivers. Presentment, demand, notice of dishonor, protest, notice of
acceleration, notice of intent to demand or accelerate payment or maturity,
presentment for payment, notice of nonpayment, grace, and diligence in
collecting the Indebtedness are waived by Borrower and all endorsers and
guarantors of this Note and all other third party obligors.
14. Loan Charges. Neither this Note nor any of the other Loan Documents shall be
construed to create a contract for the use, forbearance or detention of money
requiring payment of interest at a rate greater than the maximum interest rate
permitted to be charged under applicable law. If any applicable law limiting the
amount of interest or other charges permitted to be collected from Borrower in
connection with the Loan is interpreted so that any interest or other charge
provided for in any Loan Document, whether considered separately or together
with other charges provided for in any other Loan Document, violates that law,
and Borrower is entitled to the benefit of that law, that interest or charge is
hereby reduced to the extent necessary to eliminate that violation. The amounts,
if any, previously paid to Lender in excess of the permitted amounts shall be
applied by Lender to reduce the unpaid principal balance of this Note. For the
purpose of determining whether any applicable law limiting the amount of
interest or other charges permitted to be collected from Borrower has been
violated, all Indebtedness that constitutes interest, as well as all other
charges made in connection with the Indebtedness that constitute interest, shall
be deemed to be allocated and spread ratably over the stated term of the Note.
Unless otherwise required by applicable law, such allocation and spreading shall
be effected in such a manner that the rate of interest so computed is uniform
throughout the stated term of the Note.
15. Commercial Purpose. Borrower represents that the Indebtedness is being
incurred by Borrower solely for the purpose of carrying on a business or
commercial enterprise, and not for personal, family, household or agricultural
purposes.
16. Counting of Days. Except where otherwise specifically provided, any
reference in this Note to a period of "days" means calendar days, not Business
Days.
17. Governing Law. This Note shall be governed by the law of the jurisdiction in
which the Land is located.
18. Captions. The captions of the paragraphs of this Note are for convenience
only and shall be disregarded in construing this Note.
19. Notices; Written Modifications. All notices, demands and other
communications required or permitted to be given by Lender to Borrower pursuant
to this Note shall be given in accordance with Section 31 of the Security
Instrument. Any modification or amendment to this Note shall be ineffective
unless in writing signed by the party sought to be charged with such
modification or amendment; provided, however, that in the event of a Transfer
under the terms of the Security Instrument, any or some or all of the
Modifications to Multifamily Note may be modified or rendered void by Lender at
Lender's option by notice to Borrower/transferee.
20. Consent to Jurisdiction and Venue. Borrower agrees that any controversy
arising under or in relation to this Note shall be litigated exclusively in the
jurisdiction in which the Land is located (the "Property Jurisdiction"). The
state and federal courts and authorities with jurisdiction in the Property
Jurisdiction shall have exclusive jurisdiction over all controversies which
shall arise under or in relation to this Note. Borrower irrevocably consents to
service, jurisdiction, and venue of such courts for any such litigation and
waives any other venue to which it might be entitled by virtue of domicile,
habitual residence or otherwise.
21. WAIVER OF TRIAL BY JURY. BORROWER AND LENDER EACH (A) AGREES NOT TO ELECT A
TRIAL BY JURY WITH RESPECT TO ANY ISSUE ARISING OUT OF THIS NOTE OR THE
RELATIONSHIP BETWEEN THE PARTIES AS LENDER AND BORROWER THAT IS TRIABLE OF RIGHT
BY A JURY AND (B) WAIVES ANY RIGHT TO TRIAL BY JURY WITH RESPECT TO SUCH ISSUE
TO THE EXTENT THAT ANY SUCH RIGHT EXISTS NOW OR IN THE FUTURE. THIS WAIVER OF
RIGHT TO TRIAL BY JURY IS SEPARATELY GIVEN BY EACH PARTY, KNOWINGLY AND
VOLUNTARILY WITH THE BENEFIT OF COMPETENT LEGAL COUNSEL.
ATTACHED EXHIBIT. The following Exhibit is attached to this Note:
-----
X Exhibit A Modifications to Multifamily Note
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IN WITNESS WHEREOF, Borrower has signed and delivered this Note under seal
or has caused this Note to be signed and delivered under seal by its duly
authorized representative. Borrower intends that this Note shall be deemed to be
signed and delivered as a sealed instrument.
ANGELES INCOME PROPERTIES, LTD. II, a
California limited partnership, doing
business in New Jersey as Angeles Income
Properties, Ltd. II Limited Partnership
By: Angeles Realty Corporation II, a
California corporation,
its general partner
By: ______________________
Patti K. Fielding
Senior Vice President
-----------------
Borrower's Social Security/Employer ID Number
PAY TO THE ORDER OF FEDERAL HOME LOAN MORTGAGE
CORPORATION, WITHOUT RECOURSE, THIS ____ DAY OF
JUNE, 2001
GMAC COMMERCIAL MORTGAGE CORPORATION, a
California corporation
By:_________________________________
Donald W. Marshall
Vice President
EXHIBIT A
MODIFICATIONS TO MULTIFAMILY NOTE
1. The first sentence of Paragraph 8 of the Note ("Default Rate") is hereby
deleted and replaced with the following:
So long as (a) any monthly installment under this Note remains past
due for more than thirty (30) days or (b) any other event of Default
has occurred and is continuing, interest under this Note shall
accrue on the unpaid principal balance from the earlier of the due
date of the first unpaid monthly installment or the occurrence of
such other Event of Default, as applicable, at a rate (the "Default
Rate") equal to the lesser of (1) the maximum interest rate which
may be collected from Borrower under applicable law or (2) the
greater of (i) three percent (3%) above the Interest Rate or (ii)
four percent (4.0%) above the then-prevailing Prime Rate. As used
herein, the term "Prime Rate" shall mean the rate of interest
announced by The Wall Street Journal from time to time as the "Prime
Rate".
2. Paragraph 9(c)of the Note is amended to add the following subparagraph(4):
(4) failure by Borrower to pay the amount of the water and sewer
charges, taxes, fire, hazard or other insurance premiums, ground
rents, assessments or other charges in accordance with the terms
of the Security Instrument.
3. Paragraph 19 is modified by deleting: "; provided, however, that in the
event of a Transfer under the terms of the Security Instrument, any or
some or all of the Modifications to Multifamily Note may be modified or
rendered void by Lender at Lender's option by notice to
Borrower/transferee" in the last sentence of the Paragraph; and by adding
the following new sentence:
The Modifications to Multifamily Note set forth in this Exhibit A
shall be null and void unless title to the Mortgaged Property is
vested in an entity whose Controlling Interest(s) are directly or
indirectly held by AIMCO REIT or AIMCO OP. The capitalized terms
used in this paragraph are defined in the Security Instrument.