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 0-14283
ANGELES INCOME PROPERTIES, LTD. IV
(Exact name of small business issuer as specified in its charter)
California 95-3974194
(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 preceding 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. IV
CONSOLIDATED BALANCE SHEET
(Unaudited)
(in thousands, except unit data)
June 30, 2001
Assets
Cash and cash equivalents $ 249
Receivables and deposits, net of allowance for
doubtful accounts of $169 177
Restricted escrows 581
Other assets 359
Investment property:
Land $ 2,414
Buildings and related personal property 18,205
20,619
Less accumulated depreciation (13,812) 6,807
$ 8,173
Liabilities and Partners' Deficit
Liabilities
Accounts payable $ 15
Tenant security deposit liabilities 16
Accrued property taxes 68
Other liabilities 216
Mortgage note payable 14,546
Partners' Deficit
General partner $ (150)
Limited partners (131,585 units issued and
outstanding) (6,538) (6,688)
$ 8,173
See Accompanying Notes to Consolidated Financial Statements
b)
ANGELES INCOME PROPERTIES, LTD. IV
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(in thousands, except per unit data)
Three Months Ended Six Months Ended
June 30, June 30,
2001 2000 2001 2000
Revenues:
Rental income $ 820 $ 810 $ 1,527 $ 1,741
Other income 11 20 21 42
Total revenues 831 830 1,548 1,783
Expenses:
Operating 363 362 715 759
General and administrative 71 33 118 80
Depreciation 235 237 470 474
Interest 367 355 729 726
Property taxes 30 38 61 78
Bad debt expense, net 51 54 67 69
Total expenses 1,117 1,079 2,160 2,186
Net loss $ (286) $ (249) $ (612) $ (403)
Net loss allocated to general
partner (2%) $ (6) $ (5) $ (12) $ (8)
Net loss allocated to limited
partners (98%) (280) (244) (600) (395)
$ (286) $ (249) $ (612) $ (403)
Net loss per limited partnership unit $ (2.13) $ (1.85) $ (4.56) $ (3.00)
Distributions per limited partnership
unit $ -- $ 7.08 $ -- $ 7.08
See Accompanying Notes to Consolidated Financial Statements
c)
ANGELES INCOME PROPERTIES, LTD. IV
CONSOLIDATED STATEMENT OF CHANGES IN PARTNERS' DEFICIT
(Unaudited)
(in thousands, except unit data)
Limited
Partnership General Limited
Units Partner Partners Total
Original capital contributions 131,800 $ 1 $65,900 $65,901
Partners' deficit at
December 31, 2000 131,585 $ (138) $(5,938) $(6,076)
Net loss for the six months
ended June 30, 2001 -- (12) (600) (612)
Partners' deficit at
June 30, 2001 131,585 $ (150) $(6,538) $(6,688)
See Accompanying Notes to Consolidated Financial Statements
d)
ANGELES INCOME PROPERTIES, LTD. IV
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
Six Months Ended
June 30,
2001 2000
Cash flows from operating activities:
Net loss $ (612) $ (403)
Adjustments to reconcile net loss to net cash (used in)
provided by operating activities:
Depreciation 470 474
Amortization of loan costs and leasing commissions 37 59
Bad debt expense, net 67 69
Change in accounts:
Receivables and deposits 113 166
Other assets (21) (3)
Accounts payable (85) (7)
Tenant security deposit liabilities -- 10
Accrued property taxes (60) 78
Other liabilities 22 (31)
Net cash (used in) provided by operating
activities (69) 412
Cash flows from investing activities:
Property improvements and replacements (11) (9)
Net deposits to restricted escrows (96) (81)
Net cash used in investing activities (107) (90)
Cash flows from financing activities:
Payments on mortgage note payable (111) (115)
Distribution to partners (89) (950)
Net cash used in financing activities (200) (1,065)
Net decrease in cash and cash equivalents (376) (743)
Cash and cash equivalents at beginning of period 625 1,170
Cash and cash equivalents at end of period $ 249 $ 427
Supplemental disclosure of cash flow information:
Cash paid for interest $ 712 $ 709
A distribution of approximately $89,000 was declared and accrued at December 31,
2000. This distribution was paid during the six months ended June 30, 2001.
See Accompanying Notes to Consolidated Financial Statements
e)
ANGELES INCOME PROPERTIES, LTD. IV
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note A - Basis of Presentation
The accompanying unaudited consolidated financial statements of Angeles Income
Properties, Ltd. IV (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 ("ARC II"
or the "General Partner"), all adjustments (consisting of normal recurring
accruals) considered necessary for a fair presentation have been included.
Operating results for the three and six month periods ended June 30, 2001, are
not necessarily indicative of the results that may be expected for the fiscal
year ending December 31, 2001. For further information, refer to the
consolidated financial statements and footnotes thereto included in the
Partnership's Annual Report on Form 10-KSB for the fiscal year ended December
31, 2000. The General Partner is an affiliate of Apartment Investment and
Management Company ("AIMCO"), a publicly traded real estate investment trust.
Principles of Consolidation
The consolidated financial statements include the Partnership's majority
interest in a joint venture which owns Factory Merchants AIP IV, L.P., and AIP
IV Factory GP, LLC. The Partnership has the ability to control the major
operating and financial policies of the joint venture. The Partnership may
remove the general partner of its 99.5% owned joint venture, therefore, the
joint venture is deemed controlled and therefore consolidated by the
Partnership. No minority interest has been reflected for the joint venture
because minority interests are limited to the extent of their equity capital,
and losses in excess of the minority interest equity capital are charged against
the Partnership's interest. Should the losses reverse, the Partnership would be
credited with the amount of minority interest losses previously absorbed. All
significant interentity balances have been eliminated.
Note B - Transactions with Affiliated Parties
The Partnership has no employees and is dependent on the General Partner and its
affiliates for the management and administration of all Partnership activities.
The Partnership Agreement provides for certain payments to affiliates for
services and reimbursement of certain expenses incurred by affiliates on behalf
of the Partnership.
The following amounts were paid or accrued to the General Partner and affiliates
during the six months ended June 30, 2001 and 2000:
2001 2000
(in thousands)
Reimbursement for services of affiliates (included
in general and administrative expense) $ 47 $ 14
An affiliate of the General Partner received reimbursement of accountable
administrative expenses amounting to approximately $47,000 and $14,000 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 owned 28,838 limited partnership units in
the Partnership representing 21.92% of the outstanding units at June 30, 2001. A
number of these units were acquired pursuant to tender offers made by AIMCO or
its affiliates. It is possible that AIMCO or its affiliates will acquire
additional limited partnership interests in the Partnership for cash or in
exchange for units in the operating partnership of AIMCO either through private
purchases or tender offers. Under the Partnership Agreement, unitholders holding
a majority of the Units are entitled to take action with respect to a variety of
matters, which would include without limitation, voting on certain amendments to
the Partnership Agreement and voting to remove the General Partner. 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 - Distribution
During the six months ended June 30, 2001, the Partnership paid distributions of
approximately $89,000 from operations, of which approximately $87,000 ($0.66 per
limited partnership unit) is allocable to the limited partners. This
distribution was declared and accrued as of December 31, 2000. During the six
months ended June 30, 2000, the Partnership paid a cash distribution from
operations of approximately $950,000, of which approximately $931,000 ($7.08 per
limited partnership unit) was paid to the limited partners.
Note D - 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 required that those enterprises report
selected information about operating segments in interim financial reports. It
also established standards for related disclosures about products and services,
geographic areas, and major customers. As defined in SFAS No. 131, the
Partnership has only one reportable segment. The General Partner believes that
segment-based disclosures will not result in a more meaningful presentation than
the consolidated financial statements as currently presented.
Note E - 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 General Partner and several of their affiliated
partnerships and corporate entities. The action purports to assert claims on
behalf of a class of limited partners and derivatively on behalf of a number of
limited partnerships (including the Partnership) which are named as nominal
defendants, challenging, among other things, the acquisition of interests in
certain general partner entities by Insignia Financial Group, Inc. ("Insignia")
and entities which were, at one time, affiliates of Insignia; past tender offers
by the Insignia affiliates to acquire limited partnership units; management of
the partnerships by the Insignia affiliates; and the series of transactions
which closed on October 1, 1998 and February 26, 1999 whereby Insignia and
Insignia Properties Trust, respectively, were merged into AIMCO. The plaintiffs
seek monetary damages and equitable relief, including judicial dissolution of
the Partnership. On June 25, 1998, the General Partner filed a motion seeking
dismissal of the action. In lieu of responding to the motion, the plaintiffs
filed an amended complaint. The General Partner filed demurrers to the amended
complaint which were heard February 1999.
Pending the ruling on such demurrers, settlement negotiations commenced. On
November 2, 1999, the parties executed and filed a Stipulation of Settlement,
settling claims, subject to court approval, on behalf of the Partnership and all
limited partners who owned units as of November 3, 1999. Preliminary approval of
the settlement was obtained on November 3, 1999 from the Court, at which time
the Court set a final approval hearing for December 10, 1999. Prior to the
December 10, 1999 hearing, the Court received various objections to the
settlement, including a challenge to the Court's preliminary approval based upon
the alleged lack of authority of prior lead counsel to enter the settlement. On
December 14, 1999, the General Partner and its affiliates terminated the
proposed settlement. In February 2000, counsel for some of the named plaintiffs
filed a motion to disqualify plaintiff's lead and liaison counsel who negotiated
the settlement. On June 27, 2000, the Court entered an order disqualifying them
from the case and an appeal was taken from the order on October 5, 2000. On
December 4, 2000, the Court appointed the law firm of Lieff Cabraser Heimann &
Bernstein LLP as new lead counsel for plaintiffs and the putative class.
Plaintiffs filed a third amended complaint on January 19, 2001. On March 2,
2001, the General Partner and its affiliates filed a demurrer to the third
amended complaint. On May 14, 2001, the Court heard the demurrer to the third
amended complaint. On July 10, 2001, the Court issued an order sustaining
defendants' demurrer on certain grounds. Plaintiffs have until August 16, 2001
to file a fourth amended complaint. The General Partner does not anticipate that
any costs, whether legal or settlement costs, associated with this case will be
material to the Partnership's overall operations.
The Partnership is unaware of any other pending or outstanding litigation that
is not of a routine nature arising in the ordinary course of business.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF 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
discussions 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 commercial property. 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
Factory Merchants Mall 90% 89%
Pigeon Forge, Tennessee
Results from Operations
The Partnership realized a net loss of approximately $612,000 for the six months
ended June 30, 2001 as compared to a net loss of approximately $403,000 for the
comparable period in 2000. The Partnership realized a net loss of approximately
$286,000 for the three months ended June 30, 2001, as compared to a net loss of
approximately $249,000 for the comparable period in 2000. The increase in net
loss for the six months ended June 30, 2001 is due to a decrease in total
revenues partially offset by a decrease in total expenses. Total revenues
decreased due to decreases in rental and other incomes. Rental income decreased
due to decreased rent revenue and percentage rent caused by increased
competition in the local market for comparable commercial space. Other income
decreased primarily due to lower interest income due to a decrease in cash held
in interest bearing accounts. Total expenses decreased due to a decrease in
operating and property tax expenses offset by an increase in general and
administrative expense. Operating expense decreased due to a decrease in
merchant association dues which are affected by the decrease in rental income at
Factory Merchant Mall for the six months ended June 30, 2001. The decrease in
property tax expense is due to a lowering of assessed value on the Partnership's
remaining property.
The increase in net loss for the three months ended June 30, 2001 is due to an
increase in total expenses partially offset by a slight increase in total
revenues. Total expenses increased primarily due to an increase in general and
administrative expense. Total revenues increased due to an increase in rent
income partially offset by a decrease in other income. Rent income increased due
to an increase in occupancy at Factory Merchants Mall. Other income decreased
primarily due to lower interest income due to a decrease in cash held in
interest bearing accounts.
General and administrative expense increased for the three and six months ended
June 30, 2001 due to an increase in the costs of services included in the
management reimbursements to the General Partner as allowed under the
Partnership Agreement. Also included in general and administrative expenses for
the three and six months ended June 30, 2001 and 2000, are reimbursements to the
General Partner allowed under the Partnership Agreement associated with its
management of the Partnership. In addition, costs associated with the quarterly
and annual communications with investors and regulatory agencies and the annual
audit required by the Partnership Agreement are also included.
As part of the ongoing business plan of the Partnership, 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 Partnership from increases in expenses. As part of this plan, the
General Partner attempts to protect the Partnership from the burden of
inflation-related increases in expenses by increasing rents and maintaining a
high overall occupancy level. However, due to changing market conditions, which
can result in the use of rental concessions and rental reductions to offset
softening market conditions, there is no guarantee that the General Partner will
be able to sustain such a plan.
Liquidity and Capital Resources
At June 30, 2001, the Partnership had cash and cash equivalents of approximately
$249,000 as compared to approximately $427,000 at June 30, 2000. For the six
months ended June 30, 2001, cash and cash equivalents decreased approximately
$376,000 from the Partnership's year ended December 31, 2000. This decrease in
cash and cash equivalents is due to approximately $200,000 of cash used in
financing activities, approximately $107,000 of cash used in investing
activities and approximately $69,000 of cash used in operating activities. Cash
used in financing activities consists of payments of principal made on the
mortgage encumbering Factory Merchants Mall and payment of a distribution
accrued in the prior year. The cash used in investing activities consists of net
deposits to restricted escrows maintained by the mortgage lender, as well as
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 property to adequately maintain the physical asset
and other operating needs of the Registrant and to comply with Federal, state,
and local legal and regulatory requirements. Capital improvements planned for
the Partnership's property is detailed below.
Factory Merchants Mall
During the six months ended June 30, 2001, the Partnership completed
approximately $11,000 of capital improvements consisting of parking area
improvements and tenant improvements. These improvements were funded from
operating cash flow.
The Partnership and ARC II have entered into a contract with an unrelated third
party to sell their ownership in the joint venture that indirectly owns Factory
Merchants Mall. The purchaser's feasibility period under the contract ended on
August 10, 2001 with the closing expected no sooner than 10 days thereafter. The
Partnership is to receive $49,750 for its 99.5% ownership and ARC II is to
receive $250 for its 0.5% ownership of the joint venture. For a period of one
year after the transaction is completed, should the lender declare a default
under the mortgage debt encumbering the Factory Merchants Mall property as a
result of this transfer or prior act or omission of the lower tier partnership
which owns the Factory Merchants Mall property, the purchaser has the right to
transfer the ownership interest back to the Partnership and ARC II with the cash
being paid back to the purchaser. Assuming that the aforementioned recission
right does not occur, the Partnership will then be terminated.
During the six months ended June 30, 2001, the Partnership paid distributions of
approximately $89,000 from operations, of which approximately $87,000 ($0.66 per
limited partnership unit) is allocable to the limited partners. This
distribution was declared and accrued as of December 31, 2000. During the six
months ended June 30, 2000, the Partnership paid a cash distribution from
operations of approximately $950,000, of which approximately $931,000 ($7.08 per
limited partnership unit) was paid to the limited partners. The Registrant's
distribution policy is reviewed on a monthly basis. There can be no assurance,
however, that the Registrant 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 owned 28,838 limited partnership units in
the Partnership representing 21.92% of the outstanding units at June 30, 2001. A
number of these units were acquired pursuant to tender offers made by AIMCO or
its affiliates. It is possible that AIMCO or its affiliates will acquire
additional limited partnership interests in the Partnership for cash or in
exchange for units in the operating partnership of AIMCO either through private
purchases or tender offers. Under the Partnership Agreement, unitholders holding
a majority of the Units are entitled to take action with respect to a variety of
matters, which would include without limitation, voting on certain amendments to
the Partnership Agreement and voting to remove the General Partner. 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 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 General Partner and several of their affiliated
partnerships and corporate entities. The action purports to assert claims on
behalf of a class of limited partners and derivatively on behalf of a number of
limited partnerships (including the Partnership) which are named as nominal
defendants, challenging, among other things, the acquisition of interests in
certain general partner entities by Insignia Financial Group, Inc. ("Insignia")
and entities which were, at one time, affiliates of Insignia; past tender offers
by the Insignia affiliates to acquire limited partnership units; management of
the partnerships by the Insignia affiliates; and the series of transactions
which closed on October 1, 1998 and February 26, 1999 whereby Insignia and
Insignia Properties Trust, respectively, were merged into AIMCO. The plaintiffs
seek monetary damages and equitable relief, including judicial dissolution of
the Partnership. On June 25, 1998, the General Partner filed a motion seeking
dismissal of the action. In lieu of responding to the motion, the plaintiffs
filed an amended complaint. The General Partner filed demurrers to the amended
complaint which were heard February 1999.
Pending the ruling on such demurrers, settlement negotiations commenced. On
November 2, 1999, the parties executed and filed a Stipulation of Settlement,
settling claims, subject to court approval, on behalf of the Partnership and all
limited partners who owned units as of November 3, 1999. Preliminary approval of
the settlement was obtained on November 3, 1999 from the Court, at which time
the Court set a final approval hearing for December 10, 1999. Prior to the
December 10, 1999 hearing, the Court received various objections to the
settlement, including a challenge to the Court's preliminary approval based upon
the alleged lack of authority of prior lead counsel to enter the settlement. On
December 14, 1999, the General Partner and its affiliates terminated the
proposed settlement. In February 2000, counsel for some of the named plaintiffs
filed a motion to disqualify plaintiff's lead and liaison counsel who negotiated
the settlement. On June 27, 2000, the Court entered an order disqualifying them
from the case and an appeal was taken from the order on October 5, 2000. On
December 4, 2000, the Court appointed the law firm of Lieff Cabraser Heimann &
Bernstein LLP as new lead counsel for plaintiffs and the putative class.
Plaintiffs filed a third amended complaint on January 19, 2001. On March 2,
2001, the General Partner and its affiliates filed a demurrer to the third
amended complaint. On May 14, 2001, the Court heard the demurrer to the third
amended complaint. On July 10, 2001, the Court issued an order sustaining
defendants' demurrer on certain grounds. Plaintiffs have until August 16, 2001
to file a fourth amended complaint. The General Partner does not anticipate that
any costs, whether legal or settlement costs, associated with this case will be
material to the Partnership's overall operations.
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 INCOME PROPERTIES, LTD. IV
By: Angeles Realty Corporation II
General Partner
By: /s/Patrick J. Foye
Patrick J. Foye
Executive Vice President
By: /s/Martha L. Long
Martha L. Long
Senior Vice President
and Controller
Date: