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 0-8851
ANGELES PARTNERS VII
(Exact name of small business issuer as specified in its charter)
California 95-3215214
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
55 Beattie Place, PO Box 1089
Greenville, South Carolina 29602
(Address of principal executive offices)
(864) 239-1000
(Issuer's telephone number)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the Partnership was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes X No___
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
a)
ANGELES PARTNERS VII
BALANCE SHEET
(Unaudited)
(in thousands, except unit data)
June 30, 2001
Assets
Cash and cash equivalents $ 174
Receivables and deposits 26
Other assets 26
Investment property:
Land $ 366
Buildings and related personal property 5,839
6,205
Less accumulated depreciation (4,874) 1,331
$ 1,557
Liabilities and Partners' Capital (Deficit)
Liabilities
Accounts payable $ 22
Tenant security deposit liabilities 21
Accrued property taxes 20
Other liabilities 130
Mortgage note payable 1,851
Partners' Capital (Deficit)
General partner $ 291
Limited partners (8,669 units issued and
outstanding) (778) (487)
$ 1,557
See Accompanying Notes to Financial Statements
b)
ANGELES PARTNERS VII
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 $ 358 $ 351 $ 709 $ 681
Other income 26 26 46 41
Total revenues 384 377 755 722
Expenses:
Operating 124 131 238 256
General and administrative 25 25 52 44
Depreciation 72 72 141 143
Interest 43 46 87 93
Property taxes 10 12 20 23
Total expenses 274 286 538 559
Net income $ 110 $ 91 $ 217 $ 163
Net income allocated to
general partner (1%) $ 1 $ 1 $ 2 $ 2
Net income allocated to
limited partners (99%) 109 90 215 161
$ 110 $ 91 $ 217 $ 163
Net income per limited
partnership unit $12.57 $10.38 $24.80 $18.57
Distributions per limited
partnership unit $12.00 $34.26 $27.92 $34.26
See Accompanying Notes to Financial Statements
c)
ANGELES PARTNERS VII
STATEMENT OF CHANGES IN PARTNERS' CAPITAL (DEFICIT)
(Unaudited)
(in thousands, except unit data)
Limited
Partnership General Limited
Units Partner Partners Total
Original capital contributions 8,674 $ 88 $ 8,674 $ 8,762
Partners' capital (deficit) at
December 31, 2000 8,669 $ 291 $ (751) $ (460)
Distributions to partners -- (2) (242) (244)
Net income for the six months
ended June 30, 2001 -- 2 215 217
Partners' capital (deficit)
at June 30, 2001 8,669 $ 291 $ (778) $ (487)
See Accompanying Notes to Financial Statements
d)
ANGELES PARTNERS VII
STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
Six Months Ended
June 30,
2001 2000
Cash flows from operating activities:
Net income $ 217 $ 163
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 141 143
Change in accounts:
Receivables and deposits 8 56
Other assets (10) (2)
Accounts payable (32) 6
Tenant security deposit liabilities (5) (2)
Accrued property taxes 20 23
Other liabilities 41 (23)
Net cash provided by operating activities 380 364
Cash flows used in investing activities:
Property improvements and replacements (93) (38)
Cash flows from financing activities:
Distributions to partners (244) (300)
Payments on mortgage note payable (79) (73)
Net cash used in financing activities (323) (373)
Net decrease in cash and cash equivalents (36) (47)
Cash and cash equivalents at beginning of period 210 356
Cash and cash equivalents at end of period $ 174 $ 309
Supplemental disclosure of cash flow information:
Cash paid for interest $ 87 $ 93
See Accompanying Notes to Financial Statements
e)
ANGELES PARTNERS VII
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
Note A - Basis of Presentation
The accompanying unaudited financial statements of Angeles Partners VII (the
"Partnership" or "Registrant") have been prepared in accordance with generally
accepted accounting principles for interim financial information and with the
instructions to Form 10-QSB and Item 310(b) of Regulation S-B. Accordingly, they
do not include all of the information and footnotes required by generally
accepted accounting principles for complete financial statements. In the opinion
of Angeles Realty Corporation (the "General Partner"), all adjustments
(consisting of normal recurring accruals) considered necessary for a fair
presentation have been included. Operating results for the three and six month
periods ended June 30, 2001, are not necessarily indicative of the results that
may be expected for the year ending December 31, 2001. For further information,
refer to the financial statements and footnotes thereto included in the
Partnership's Annual Report on Form 10-KSB for the year ended December 31, 2000.
The General Partner is indirectly owned by Apartment Investment and Management
Company ("AIMCO"), a publicly traded real estate investment trust.
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 General Partner
believes that segment-based disclosures will not result in a more meaningful
presentation than the financial statements as currently presented.
Note B - Transactions with Affiliated Parties
The Partnership has no employees and is dependent on the General Partner and its
affiliates for the management and administration of all partnership activities.
The Partnership Agreement provides for (i) certain payments to affiliates for
services and (ii) reimbursement of certain expenses incurred by affiliates on
behalf of the Partnership. The following payments were made to the General
Partner and affiliates during the six months ended June 30, 2001 and 2000:
2001 2000
(in thousands)
Property management fees (included in
operating expenses) $ 38 $ 35
Reimbursement for services of affiliates
(included in general and administrative expenses) 25 19
Affiliates of the General Partner are entitled to receive 5% of gross receipts
from the Registrant's property for providing property management services. The
Registrant paid to such affiliates approximately $38,000 and $35,000 for the six
months ended June 30, 2001 and 2000, respectively.
An affiliate of the General Partner received reimbursement of accountable
administrative expenses amounting to approximately $25,000 and $19,000 for the
six months ended June 30, 2001 and 2000, respectively.
In addition to its indirect ownership of the general partner interest in the
Partnership, AIMCO and its affiliates currently own 5,858 limited partnership
units (the "Units") in the Partnership representing 67.57% of the outstanding
Units. A number of these Units were acquired pursuant to tender offers made by
AIMCO or its affiliates. It is possible that AIMCO or its affiliates will make
one or more additional offers to acquire additional limited partnership
interests in the Partnership for cash or in exchange for units in the operating
partnership of AIMCO. Under the Partnership Agreement, unitholders holding a
majority of the Units are entitled to take action with respect to a variety of
matters, which would include without limitation, voting on certain amendments to
the Partnership Agreement and voting to remove the General Partner. As a result
of its ownership of 67.57% of the outstanding Units, AIMCO is in a position to
influence all voting decisions with respect to the Registrant. When voting on
matters, AIMCO would in all likelihood vote the Units it acquired in a manner
favorable to the interest of the General Partner because of its affiliation with
the General Partner.
Note C - Distributions
During the six months ended June 30, 2001, the Partnership declared and paid
distributions of approximately $244,000 (approximately $242,000 paid to the
limited partners or $27.92 per limited partnership unit) from operations. During
the six months ended June 30, 2000, the Partnership declared and paid
distributions of approximately $300,000 (approximately $297,000 paid to the
limited partners or $34.26 per limited partnership unit) from operations.
Subsequent to June 30, 2001, the Partnership declared and paid a distribution of
approximately $84,000 (approximately $83,000 paid to the limited partners or
$9.57 per limited partnership unit) from operations.
Note D - Legal Proceedings
In March 1998, several putative unitholders of limited partnership units of the
Partnership commenced an action entitled Rosalie Nuanes, et al. v. Insignia
Financial Group, Inc., et al. in the Superior Court of the State of California
for the County of San Mateo. The plaintiffs named as defendants, among others,
the Partnership, its General Partner and several of their affiliated
partnerships and corporate entities. The action purports to assert claims on
behalf of a class of limited partners and derivatively on behalf of a number of
limited partnerships (including the Partnership) which are named as nominal
defendants, challenging, among other things, the acquisition of interests in
certain general partner entities by Insignia Financial Group, Inc. ("Insignia")
and entities which were, at one time, affiliates of Insignia; past tender offers
by the Insignia affiliates to acquire limited partnership units; management of
the partnerships by the Insignia affiliates; and the series of transactions
which closed on October 1, 1998 and February 26, 1999 whereby Insignia and
Insignia Properties Trust, respectively, were merged into AIMCO. The plaintiffs
seek monetary damages and equitable relief, including judicial dissolution of
the Partnership. On June 25, 1998, the General Partner filed a motion seeking
dismissal of the action. In lieu of responding to the motion, the plaintiffs
filed an amended complaint. The General Partner filed demurrers to the amended
complaint which were heard February 1999.
Pending the ruling on such demurrers, settlement negotiations commenced. On
November 2, 1999, the parties executed and filed a Stipulation of Settlement,
settling claims, subject to court approval, on behalf of the Partnership and all
limited partners who owned units as of November 3, 1999. Preliminary approval of
the settlement was obtained on November 3, 1999 from the Court, at which time
the Court set a final approval hearing for December 10, 1999. Prior to the
December 10, 1999 hearing, the Court received various objections to the
settlement, including a challenge to the Court's preliminary approval based upon
the alleged lack of authority of prior lead counsel to enter the settlement. On
December 14, 1999, the General Partner and its affiliates terminated the
proposed settlement. In February 2000, counsel for some of the named plaintiffs
filed a motion to disqualify plaintiff's lead and liaison counsel who negotiated
the settlement. On June 27, 2000, the Court entered an order disqualifying them
from the case and an appeal was taken from the order on October 5, 2000. On
December 4, 2000, the Court appointed the law firm of Lieff Cabraser Heimann &
Bernstein LLP as new lead counsel for plaintiffs and the putative class.
Plaintiffs filed a third amended complaint on January 19, 2001 and defendants
are scheduled to respond to the complaint by March 2, 2001. On March 2, 2001,
the General Partner and its affiliates filed a demurrer to the third amended
complaint. On May 14, 2001, the Court heard the demurrer to the third amended
complaint. On July 10, 2001, the Court issued an order sustaining defendants'
demurrer on certain grounds. Plaintiffs have until August 16, 2001 to file a
fourth amended complaint. The General Partner does not anticipate that any
costs, whether legal or settlement costs, associated with this case will be
material to the Partnership's overall operations.
The Partnership is unaware of any other pending or outstanding litigation that
is not of a routine nature arising in the ordinary course of business.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
The matters discussed in this Form 10-QSB contain certain forward-looking
statements and involve risks and uncertainties (including changing market
conditions, competitive and regulatory matters, etc.) detailed in the
disclosures contained in this Form 10-QSB and the other filings with the
Securities and Exchange Commission made by the Registrant from time to time. The
discussion of the Registrant's business and results of operations, including
forward-looking statements pertaining to such matters, does not take into
account the effects of any changes to the Registrant's business and results of
operation. Accordingly, actual results could differ materially from those
projected in the forward-looking statements as a result of a number of factors,
including those identified herein.
The Partnership's investment property consists of one apartment complex. The
following table sets forth the average occupancy of the property for the six
months ended June 30, 2001 and 2000:
Average Occupancy
Property 2001 2000
Cedarwood Apartments 95% 98%
Gretna, Louisiana
The General Partner attributes the decrease in occupancy at Cedarwood Apartments
to a decrease in the overall market of the area in which the property is
located.
Results of Operations
The Partnership realized net income of approximately $110,000 and $217,000,
respectively, for the three and six months ended June 30, 2001 as compared to
net income of approximately $91,000 and $163,000, respectively, for the three
and six months ended June 30, 2000. The increase in net income for the three and
six months ended June 30, 2001 was due primarily to an increase in total
revenues and a decrease in total expenses. Total revenues increased due to an
increase in rental income. The increase in rental income is primarily due to an
increase in average rental rates at the Partnership's investment property, which
more than offset the decrease in occupancy.
Total expenses decreased primarily due to a decrease in operating expenses and
interest expense partially offset by a slight increase for the six months ended
June 30, 2001 in general and administrative expenses. Operating expenses
decreased due to decreases in salaries and other benefits and due to decreases
in maintenance expense. Maintenance expense decreased due to decreases in
contract services and interior building improvements. Interest expense decreased
due to scheduled principal payments on the mortgage encumbering the property.
For the six months ended June 30, 2001, general and administrative expenses
increased due to an increase in the cost of services included in the management
reimbursements to the General Partner as allowed under the Partnership
Agreement. In addition to these reimbursements, cost associated with the
quarterly and annual communications with investors and regulatory agencies and
the annual audit required by the Partnership Agreement are also included.
As part of the ongoing business plan of the Registrant, the General Partner
monitors the rental market environment of its investment property to assess the
feasibility of increasing rents, maintaining or increasing occupancy levels and
protecting the Registrant from increases in expense. As part of this plan, the
General Partner attempts to protect the Registrant from the burden of
inflation-related increases in expenses by increasing rents and maintaining a
high overall occupancy level. However, due to changing market conditions, which
can result in the use of rental concessions and rental reductions needed to
offset softening market conditions, there is no guarantee that the General
Partner will be able to sustain such a plan.
Liquidity and Capital Resources
At June 30, 2001, the Partnership had cash and cash equivalents of approximately
$174,000 as compared to approximately $309,000 at June 30, 2000. Cash and cash
equivalents decreased approximately $36,000 since December 31, 2000 due to
approximately $323,000 and $93,000 of cash used in financing and investing
activities, respectively, partially offset by approximately $380,000 of cash
provided by operating activities. Cash used in financing activities consisted of
distributions to partners and principal payments made on the mortgage
encumbering the Registrant's property. Cash used in investing activities
consisted of property improvements and replacements. The Partnership invests its
working capital reserves in interest bearing accounts.
The sufficiency of existing liquid assets to meet future liquidity and capital
expenditure requirements is directly related to the level of capital
expenditures required at the investment property to adequately maintain the
physical assets and other operating needs of the Registrant and to comply with
Federal, state, local, legal and regulatory requirements. Capital improvements
planned for the Partnership's property are detailed below.
Cedarwood Apartments: For 2001, the Partnership budgeted approximately $105,000
for capital improvements, consisting primarily of structural and plumbing
upgrades, pool improvements, and floor covering and appliance replacements. The
Partnership completed approximately $93,000 of capital expenditures at Cedarwood
Apartments during the six months ended June 30, 2001, consisting primarily of
fencing, structural improvements, pool upgrades and appliance and floor covering
replacements. These improvements were funded from operations.
Additional capital expenditures will be incurred only if cash is available from
operations. To the extent that such budgeted capital improvements are completed,
the Partnership's distributable cash flow, if any, may be adversely affected at
least in the short term.
The Registrant's current assets are thought to be sufficient for any near-term
needs (exclusive of capital improvements) of the Registrant. The mortgage
indebtedness of approximately $1,851,000 is amortized over 28 years with a
maturity date of May 2007 at which time a balloon payment of approximately
$599,000 is due. The General Partner may attempt to refinance such indebtedness
and/or sell the property prior to such maturity date. If the property cannot be
refinanced or sold for a sufficient amount, the Registrant will risk losing such
property through foreclosure.
During the six months ended June 30, 2001, the Partnership declared and paid
distributions of approximately $244,000 (approximately $242,000 paid to the
limited partners or $27.92 per limited partnership unit) from operations. During
the six months ended June 30, 2000, the Partnership declared and paid
distributions of approximately $300,000 (approximately $297,000 paid to the
limited partners or $34.26 per limited partnership unit) from operations.
Subsequent to June 30, 2001, the Partnership declared and paid a distribution of
approximately $84,000 (approximately $83,000 paid to the limited partners or
$9.57 per limited partnership unit) from operations. The Partnership's
distribution policy is reviewed on a quarterly basis. Future cash distributions
will depend on the levels of net cash generated from operations, the
availability of cash reserves, and the timing of the debt maturity, refinancing,
and/or the sale of the property. There can be no assurance that the Partnership
will generate sufficient funds from operations, after planned capital
improvement expenditures, to permit any additional distributions to its partners
during the remainder of 2001 or subsequent periods.
In addition to its indirect ownership of the general partner interest in the
Partnership, AIMCO and its affiliates currently own 5,858 limited partnership
units (the "Units") in the Partnership representing 67.57% of the outstanding
Units. A number of these Units were acquired pursuant to tender offers made by
AIMCO or its affiliates. It is possible that AIMCO or its affiliates will make
one or more additional offers to acquire additional limited partnership
interests in the Partnership for cash or in exchange for units in the operating
partnership of AIMCO. Under the Partnership Agreement, unitholders holding a
majority of the Units are entitled to take action with respect to a variety of
matters, which would include without limitation, voting on certain amendments to
the Partnership Agreement and voting to remove the General Partner. As a result
of its ownership of 67.57% of the outstanding Units, AIMCO is in a position to
influence all voting decisions with respect to the Registrant. When voting on
matters, AIMCO would in all likelihood vote the Units it acquired in a manner
favorable to the interest of the General Partner because of its affiliation with
the General Partner.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
In March 1998, several putative unitholders of limited partnership units of the
Partnership commenced an action entitled Rosalie Nuanes, et al. v. Insignia
Financial Group, Inc., et al. in the Superior Court of the State of California
for the County of San Mateo. The plaintiffs named as defendants, among others,
the Partnership, its General Partner and several of their affiliated
partnerships and corporate entities. The action purports to assert claims on
behalf of a class of limited partners and derivatively on behalf of a number of
limited partnerships (including the Partnership) which are named as nominal
defendants, challenging, among other things, the acquisition of interests in
certain general partner entities by Insignia Financial Group, Inc. ("Insignia")
and entities which were, at one time, affiliates of Insignia; past tender offers
by the Insignia affiliates to acquire limited partnership units; management of
the partnerships by the Insignia affiliates; and the series of transactions
which closed on October 1, 1998 and February 26, 1999 whereby Insignia and
Insignia Properties Trust, respectively, were merged into AIMCO. The plaintiffs
seek monetary damages and equitable relief, including judicial dissolution of
the Partnership. On June 25, 1998, the General Partner filed a motion seeking
dismissal of the action. In lieu of responding to the motion, the plaintiffs
filed an amended complaint. The General Partner filed demurrers to the amended
complaint which were heard February 1999.
Pending the ruling on such demurrers, settlement negotiations commenced. On
November 2, 1999, the parties executed and filed a Stipulation of Settlement,
settling claims, subject to court approval, on behalf of the Partnership and all
limited partners who owned units as of November 3, 1999. Preliminary approval of
the settlement was obtained on November 3, 1999 from the Court, at which time
the Court set a final approval hearing for December 10, 1999. Prior to the
December 10, 1999 hearing, the Court received various objections to the
settlement, including a challenge to the Court's preliminary approval based upon
the alleged lack of authority of prior lead counsel to enter the settlement. On
December 14, 1999, the General Partner and its affiliates terminated the
proposed settlement. In February 2000, counsel for some of the named plaintiffs
filed a motion to disqualify plaintiff's lead and liaison counsel who negotiated
the settlement. On June 27, 2000, the Court entered an order disqualifying them
from the case and an appeal was taken from the order on October 5, 2000. On
December 4, 2000, the Court appointed the law firm of Lieff Cabraser Heimann &
Bernstein LLP as new lead counsel for plaintiffs and the putative class.
Plaintiffs filed a third amended complaint on January 19, 2001 and defendants
are scheduled to respond to the complaint by March 2, 2001. On March 2, 2001,
the General Partner and its affiliates filed a demurrer to the third amended
complaint. On May 14, 2001, the Court heard the demurrer to the third amended
complaint. On July 10, 2001, the Court issued an order sustaining defendants'
demurrer on certain grounds. Plaintiffs have until August 16, 2001 to file a
fourth amended complaint. The General Partner does not anticipate that any
costs, whether legal or settlement costs, associated with this case will be
material to the Partnership's overall operations.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a) Exhibits:
None.
b) Reports on Form 8-K:
None filed during the quarter ended June 30, 2001.
SIGNATURES
In accordance with the requirements of the Exchange Act, the Registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
ANGELES PARTNERS VII
By: Angeles Realty Corporation
General Partner
By: /s/Patrick J. Foye
Patrick J. Foye
Executive Vice President
By: /s/Martha L. Long
Martha L. Long
Senior Vice President and
Controller
Date: August 13, 2001