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 September 30, 2001
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from _________to _________
Commission file number 0-11766
ANGELES PARTNERS XI
(Exact name of small business issuer as specified in its charter)
California 95-3788040
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
55 Beattie Place, PO Box 1089
Greenville, South Carolina 29602
(Address of principal executive offices)
(864) 239-1000
(Issuer's telephone number)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the 12 months (or for such shorter period
that the registrant was required to file such reports), and (2) has been subject
to such filing requirements for the past 90 days. Yes X No___
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
a)
ANGELES PARTNERS XI
CONSOLIDATED BALANCE SHEET
(Unaudited)
(in thousands, except unit data)
September 30, 2001
Assets
Cash and cash equivalents $ 442
Receivables and deposits 624
Other assets 83
Investment property:
Land $ 3,998
Buildings and related personal property 29,891
-------
33,889
Less accumulated depreciation (23,056) 10,833
------- -------
$ 11,982
Liabilities and Partners' Deficit
Liabilities
Accounts payable $ 137
Tenant security deposits 537
Property taxes 177
Due to Affiliates 278
Other liabilities 310
Mortgage notes payable 29,210
Partners' Deficit
General partners $ (503)
Limited partners (39,627 units issued and
outstanding) (18,164) (18,667)
------- -------
$ 11,982
See Accompanying Notes to Consolidated Financial Statements
b)
ANGELES PARTNERS XI
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(in thousands, except unit data)
Three Months Ended Nine Months Ended
September 30, September 30,
2001 2000 2001 2000
---- ---- ---- ----
Revenues:
Rental income $ 2,188 $ 2,052 $ 6,436 $ 5,924
Other income 133 131 359 439
Casualty gain 19 -- 19 --
------ ------ ------ ------
Total revenues 2,340 2,183 6,814 6,363
------ ------ ------ ------
Expenses:
Operating 535 600 1,902 1,912
General and administrative 59 93 183 191
Depreciation 463 393 1,353 1,162
Interest 681 685 2,040 2,053
Property taxes 268 208 1,017 626
------ ------ ------ ------
Total expenses 2,006 1,979 6,495 5,944
------ ------ ------ ------
Net income $ 334 $ 204 $ 319 $ 419
====== ====== ====== ======
Net income allocated to general partners (1%) $ 3 $ 2 $ 3 $ 4
Net income allocated to limited partners (99%) 331 202 316 415
------ ------ ------ ------
$ 334 $ 204 $ 319 $ 419
====== ====== ====== ======
Net income per limited partnership unit $ 8.35 $ 5.09 $ 7.97 $ 10.47
====== ====== ====== ======
Distributions per limited partnership unit $ 7.17 $ -- $ 7.17 $ 44.59
====== ====== ====== ======
See Accompanying Notes to Consolidated Financial Statements
c)
ANGELES PARTNERS XI
CONSOLIDATED STATEMENT OF CHANGES IN PARTNERS' DEFICIT
(Unaudited)
(in thousands, except unit data)
Limited
Partnership General Limited
Units Partners Partners Total
Original capital contributions 40,000 $ 30 $ 40,000 $ 40,030
====== ===== ======= =======
Partners' deficit at
December 31, 2000 39,627 $ (503) $ (18,196) $(18,699)
Distributions to partners -- (3) (284) (287)
Net income for the nine months
ended September 30, 2001 -- 3 316 319
------ ------- -------- -------
Partners' deficit at
September 30, 2001 39,627 $ (503) $ (18,164) $(18,667)
====== ====== ======== =======
See Accompanying Notes to Consolidated Financial Statements
d)
ANGELES PARTNERS XI
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
Nine Months Ended
September 30,
2001 2000
Cash flows from operating activities:
Net income $ 319 $ 419
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 1,353 1,162
Amortization of loan costs 85 85
Casualty gain (19) --
Change in accounts:
Receivables and deposits 18 151
Other assets (16) (38)
Accounts payable (78) 19
Tenant security deposit liabilities (92) 51
Accrued property taxes 177 --
Due to affiliates 3 45
Other liabilities 160 100
------ ------
Net cash provided by operating activities 1,910 1,994
------ ------
Cash flows from investing activities:
Property improvements and replacements (1,588) (1,241)
Net insurance proceeds 26 --
------ ------
Net cash used in investing activities (1,562) (1,241)
------ ------
Cash flows from financing activities:
Distributions to partners (287) (1,785)
Payments on mortgage notes payable (326) (314)
Advances from affiliate 500 --
Payments on advances from affiliate (225) --
------ ------
Net cash used in financing activities (338) (2,099)
------ ------
Net increase (decrease) in cash and cash equivalents 10 (1,346)
Cash and cash equivalents at beginning of period 432 2,118
------ ------
Cash and cash equivalents at end of period $ 442 $ 772
====== ======
Supplemental disclosure of cash flow information:
Cash paid for interest $ 1,734 $ 1,747
====== ======
Supplemental disclosure of non-cash flow information:
Property improvements and replacements included in
accounts payable $ 98 $ --
====== ======
Included in property improvements and replacements for the nine months ended
September 30, 2001, are approximately $306,000 of improvements which were
included in accounts payable at December 31, 2000.
See Accompanying Notes to Consolidated Financial Statements
e)
ANGELES PARTNERS XI
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note A - Basis of Presentation
The accompanying unaudited consolidated financial statements of Angeles Partners
XI (the "Partnership" or "Registrant") have been prepared in accordance with
generally accepted accounting principles for interim financial information and
with the instructions to Form 10-QSB and Item 310(b) of Regulation S-B.
Accordingly, they do not include all of the information and footnotes required
by generally accepted accounting principles for complete financial statements.
In the opinion of Angeles Realty Corporation II (the "Managing General
Partner"), all adjustments (consisting of normal recurring accruals) considered
necessary for a fair presentation have been included. Operating results for the
three and nine month periods ended September 30, 2001, are not necessarily
indicative of the results that may be expected for the fiscal year ending
December 31, 2001. For further information, refer to the consolidated financial
statements and footnotes thereto included in the Partnership's Annual Report on
Form 10-KSB for the fiscal year ended December 31, 2000. The Managing General
Partner is an affiliate of Apartment Investment and Management Company
("AIMCO"), a publicly traded real estate investment trust.
Principles of Consolidation
The Partnership's consolidated financial statements include all of the accounts
of Fox Run AP XI, L.P., of which the Partnership owns a 99% limited partnership
interest. The general partner of Fox Run AP XI, L.P. is AP XI Fox Run GP, LLC, a
single member limited liability corporation which is wholly-owned by the
Registrant. Thus, these Partnerships are deemed controlled and, therefore,
consolidated by the Partnership. All inter-partnership balances have been
eliminated.
Segment Reporting
Statement of Financial Accounting Standards ("SFAS") No. 131, "Disclosure about
Segments of an Enterprise and Related Information" established standards for the
way that public business enterprises report information about operating segments
in annual financial statements and requires that those enterprises report
selected information about operating segments in interim financial reports. It
also established standards for related disclosures about products and services,
geographic areas and major customers. As defined in SFAS No. 131, the
Partnership has only one reportable segment. The Managing General Partner
believes that segment-based disclosures will not result in a more meaningful
presentation than the consolidated financial statements as currently presented.
Note B - Transactions with Affiliated Parties
The Partnership has no employees and is dependent on the Managing General
Partner and its affiliates for the management and administration of all
Partnership activities. The Partnership Agreement provides for (i) certain
payments to affiliates for services and (ii) reimbursement of certain expenses
incurred by affiliates on behalf of the Partnership.
The following payments owed to the Managing General Partner and affiliates
during the nine months ended September 30, 2001 and 2000 were paid or accrued:
2001 2000
---- ----
(in thousands)
Property management fees (included in
operating expense) $341 $316
Reimbursement for services of affiliates (included
in general and administrative and operating
expenses and investment property) 224 243
Affiliates of the Managing General Partner are entitled to receive 5% of gross
receipts from the Registrant's property for providing property management
services. The Registrant paid to such affiliates approximately $341,000 and
$316,000 for the nine months ended September 30, 2001 and 2000, respectively.
An affiliate of the Managing General Partner received reimbursement of
accountable administrative expenses amounting to approximately $224,000 and
$243,000 for the nine months ended September 30, 2001 and 2000, respectively.
Included in these amounts at September 30, 2001 and 2000 are reimbursements of
approximately $91,000 and $104,000, respectively, for construction oversight
costs.
In accordance with the Partnership Agreement, an affiliate of the General
Partner loaned the Partnership $500,000 to cover the property tax bill at Fox
Run Apartments. Of this amount, $225,000 was repaid during the nine months ended
September 30, 2001. At September 30, 2001, approximately $278,000 remains
outstanding, including accrued interest which is included in Due to affiliates
on the accompanying consolidated balance sheet. Interest is charged at the prime
rate plus 2%. Interest expense was approximately $3,000 for the nine months
ended September 30, 2001. There were no loans from the General Partner or
associated interest expense during the nine months ended September 30, 2000.
In addition to its indirect ownership of the general partner interests in the
Partnership, AIMCO and its affiliates owned 24,276 limited partnership units
(the "Units") in the Partnership representing 61.26% of the outstanding Units at
September 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 voting on
certain amendments to the Partnership Agreement and voting to remove the
Managing General Partner. As a result of its ownership of 61.26% of the
outstanding Units, AIMCO is in a position to control all voting decisions with
respect to the Registrant. When voting on matters, AIMCO would in all likelihood
vote the Units it acquired in a manner favorable to the interest of the Managing
General Partner because of its affiliation with the Managing General Partner.
Note C - Casualty Gain
During the three and nine months ended September 30, 2001, a net casualty gain
of approximately $19,000 was recorded at Fox Run Apartments. The casualty gain
related to a fire that occurred in February 2001. The gain was a result of the
receipt of net insurance proceeds of approximately $26,000, offset by the
write-off of the net book value of the destroyed assets totaling approximately
$7,000.
Note D - Distributions
During the nine months ended September 30, 2001, the Partnership paid a
distribution from operations of approximately $287,000 (approximately $284,000
to the limited partners or $7.17 per limited partnership unit). A distribution
of approximately $1,785,000 (approximately $1,767,000 to the limited partners or
$44.59 per limited partnership unit) was paid from operations during the nine
months ended September 30, 2000.
Note E - 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. (the "Nuanes action") 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. On July 20, 2001,
plaintiffs filed a motion for reconsideration of the Court's July 10, 2001 order
granting in part and denying in part defendants' demurrer. On September 7, 2001,
plaintiffs filed a fourth amended class and derivative action complaint. On
September 12, 2001, the Court denied plaintiffs' motion for reconsideration. On
October 5, 2001, the Managing General Partner and affiliated defendants filed a
demurrer to the fourth amended complaint, which, together with a demurrer filed
by other defendants, is currently scheduled to be heard on November 15, 2001.
The Court has set the matter for trial in January 2003.
During the third quarter of 2001, a complaint (the "Heller action") was filed
against the same defendants that are named in the Nuanes action, captioned
Heller v. Insignia Financial Group. On or about August 6, 2001, plaintiffs filed
a first amended complaint. The first amended complaint in the Heller action is
brought as a purported derivative action, and asserts claims for among other
things breach of fiduciary duty; unfair competition; conversion, unjust
enrichment; and judicial dissolution. Plaintiffs in the Nuanes action filed a
motion to consolidate the Heller action with the Nuanes action and stated that
the Heller action was filed in order to preserve the derivative claims that were
dismissed without leave to amend in the Nuanes action by the Court order dated
July 10, 2001. On October 5, 2001, the Managing General Partner and affiliated
defendants moved to strike the first amended complaint in its entirety for
violating the Court's July 10, 2001 order granting in part and denying in part
defendants' demurrer in the Nuanes action, or alternatively, to strike certain
portions of the complaint based on the statute of limitations. Other defendants
in the action demurred to the fourth amended complaint, and, alternatively,
moved to strike the complaint. The matters are currently scheduled to be heard
on November 15, 2001.
The Managing General Partner does not anticipate that any costs, whether legal
or settlement costs, associated with these cases will be material to the
Partnership's overall operations.
The Partnership also is a party to certain legal actions resulting from its
operating activities. These actions are routine litigation and administrative
proceedings arising in the ordinary course of business, none of which are
expected to have a material adverse effect on the consolidated financial
condition or results of operations of the Partnership.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
---------------------------------------------------------
The matters discussed in this Form 10-QSB contain certain forward-looking
statements and involve risks and uncertainties (including changing market
conditions, competitive and regulatory matters, etc.) detailed in the disclosure
contained in this Form 10-QSB and the other filings with the Securities and
Exchange Commission made by the Registrant from time to time. The discussion of
the Registrant's business and results of operations, including forward-looking
statements pertaining to such matters, does not take into account the effects of
any changes to the Registrant's business and results of operations. Accordingly,
actual results could differ materially from those projected in the
forward-looking statements as a result of a number of factors, including those
identified herein.
The Partnership's investment property consists of one apartment complex. The
following table sets forth the average occupancy of the property for the nine
months ended September 30, 2001 and 2000:
Average Occupancy
Property 2001 2000
-------- ---- ----
Fox Run Apartments 95% 96%
Plainsboro, New Jersey
Results from Operations
The Partnership's net income for the nine months ended September 30, 2001 was
approximately $319,000 as compared to approximately $419,000 for the nine months
ended September 30, 2000. The Partnership's net income for the three months
ended September 30, 2001 was approximately $334,000 as compared to approximately
$204,000 for the three months ended September 30, 2000.
The decrease in net income for the nine months ended September 30, 2001 is due
to an increase in total expenses, partially offset by an increase in total
revenues. The increase in net income for the three months ended September 30,
2001 is due to an increase in total revenues, slightly offset by an increase in
total expenses. Total expenses for the nine months ended September 30, 2001
increased due to increases in property tax expense and depreciation. Total
expenses for the three months ended September 30, 2001 increased due to
increases in property tax and depreciation expense, offset by a decrease in
operating and general and administrative expenses. Property tax expense
increased for the three and nine months ended September 30, 2001 due to an
increase in the assessed value of the property by the taxing authorities.
Depreciation expense increased for the three and nine months ended September 30,
2001 due to capital improvements and replacements during the past twelve months
which are now being depreciated. Operating expenses decreased for the three
months ended September 30, 2001 due to a decrease in maintenance costs.
General and administrative expenses decreased for the three months ended
September 30, 2001 due to a decrease in management reimbursements to the General
Partner allowed under the Partnership Agreement. In addition to these
reimbursements, costs associated with the quarterly and annual communications
with investors and regulatory agencies and the annual audit required by the
Partnership Agreement are also included.
The increase in total revenues for the nine months ended September 30, 2001 is
due to an increase in rental revenue and recognition of a casualty gain offset
by a decrease in other income. The increase in total revenues for the three
months ended September 30, 2001 is due to an increase in rental revenue and
recognition of a casualty gain. Rental revenue increased for the three and nine
months ended September 30, 2001 due to an increase in the average rental rates
which more than offset a slight decrease in occupancy. Other income decreased
for the nine months ended September 30, 2001 due to decreases in corporate
housing revenue and interest income. Interest income decreased due to lower
average cash balances in interest bearing accounts.
During the three and nine months ended September 30, 2001, a net casualty gain
of approximately $19,000 was recorded at Fox Run Apartments. The casualty gain
related to a fire that occurred in February 2001. The gain was a result of the
receipt of net insurance proceeds of approximately $26,000 offset by the
write-off of the net book value of the destroyed assets totaling approximately
$7,000.
As part of the ongoing business plan of the Partnership, the Managing General
Partner monitors the rental market environment of its investment property to
assess the feasibility of increasing rents, maintaining or increasing occupancy
levels and protecting the Partnership from increases in expenses. As part of
this plan, the Managing General Partner attempts to protect the Partnership from
the burden of inflation-related increases in expenses by increasing rents and
maintaining a high overall occupancy level. However, due to changing market
conditions, which can result in the use of rental concessions and rental
reductions to offset softening market conditions, there is no guarantee that the
Managing General Partner will be able to sustain such a plan.
Liquidity and Capital Resources
At September 30, 2001, the Partnership had cash and cash equivalents of
approximately $442,000 compared to approximately $772,000 at September 30, 2000.
Cash and cash equivalents increased approximately $10,000 from December 31, 2000
due to approximately $1,910,000 of cash provided by operating activities offset
by approximately $1,562,000 and $338,000 of cash used in investing and financing
activities, respectively. Cash used in investing activities consisted of
property improvements and replacements slightly offset by insurance proceeds
received. Cash used in financing activities consisted of principal payments made
on the mortgages encumbering Fox Run Apartments, distributions to partners and
payments on advances from affiliate offset by an advance from an affiliate of
the General Partner. The Registrant invests its working capital reserves in
interest bearing accounts.
The sufficiency of existing liquid assets to meet future liquidity and capital
expenditure requirements is directly related to the level of capital
expenditures required at the property to adequately maintain the physical assets
and other operating needs of the Partnership and to comply with Federal, state,
and local legal and regulatory requirements. The Partnership budgeted
approximately $3,168,000 for capital improvements for the property for 2001
consisting primarily of structural improvements and cabinet, appliance, and
floor covering replacements. During the nine months ended September 30, 2001,
the Partnership spent approximately $1,380,000 on capital improvements at Fox
Run Apartments primarily consisting of cabinet and floor replacements, parking
lot resurfacing, and water heaters. These improvements were funded from
operating cash flow and advances from an affiliate. Additional improvements
planned for 2001 at the Partnership's property will be incurred only if cash is
available from operations and/or advances from affiliates. To the extent that
such budgeted capital improvements are completed, the Registrant's distributable
cash flow, if any, may be adversely affected at least in the short term.
The Registrant's current assets are thought to be sufficient for any near-term
needs (exclusive of capital improvements) of the Registrant. The mortgage
indebtedness of approximately $29,210,000 encumbering Fox Run Apartments is
being amortized over periods ranging from 15 to 27 years with balloon payments
of $29,108,000 due January 2002. The Managing General Partner will attempt to
refinance such indebtedness and/or sell the property prior to such maturity
date. If the property cannot be refinanced or sold for a sufficient amount, the
Partnership will risk losing such property through foreclosure.
During the nine months ended September 30, 2001, the Partnership paid a
distribution from operations of approximately $287,000 (approximately $284,000
to the limited partners or $7.17 per limited partnership unit). A distribution
of approximately $1,785,000 (approximately $1,767,000 to the limited partners or
$44.59 per limited partnership unit) was paid from operations during the nine
months ended September 30, 2000. Future cash distributions will depend on the
levels of net cash generated from operations, the availability of cash reserves
and the timing of the debt maturities, refinancings and/or sale of the property.
The Partnership's distribution policy is reviewed on a monthly basis. There can
be no assurance that the Partnership will generate sufficient funds from
operations, after required capital improvement expenditures, to permit
additional distributions to its partners during the remainder of 2001 or
subsequent periods.
In addition to its indirect ownership of the general partner interests in the
Partnership, AIMCO and its affiliates owned 24,276 limited partnership units
(the "Units") in the Partnership representing 61.26% of the outstanding Units at
September 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 voting on
certain amendments to the Partnership Agreement and voting to remove the
Managing General Partner. As a result of its ownership of 61.26% of the
outstanding Units, AIMCO is in a position to control all voting decisions with
respect to the Registrant. When voting on matters, AIMCO would in all likelihood
vote the Units it acquired in a manner favorable to the interest of the Managing
General Partner because of its affiliation with the Managing General Partner.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
In March 1998, several putative unitholders of limited partnership units of the
Partnership commenced an action entitled Rosalie Nuanes, et al. v. Insignia
Financial Group, Inc., et al. (the "Nuanes action") 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. On July 20, 2001,
plaintiffs filed a motion for reconsideration of the Court's July 10, 2001 order
granting in part and denying in part defendants' demurrer. On September 7, 2001,
plaintiffs filed a fourth amended class and derivative action complaint. On
September 12, 2001, the Court denied plaintiffs' motion for reconsideration. On
October 5, 2001, the Managing General Partner and affiliated defendants filed a
demurrer to the fourth amended complaint, which, together with a demurrer filed
by other defendants, is currently scheduled to be heard on November 15, 2001.
The Court has set the matter for trial in January 2003.
During the third quarter of 2001, a complaint (the "Heller action") was filed
against the same defendants that are named in the Nuanes action, captioned
Heller v. Insignia Financial Group. On or about August 6, 2001, plaintiffs filed
a first amended complaint. The first amended complaint in the Heller action is
brought as a purported derivative action, and asserts claims for among other
things breach of fiduciary duty; unfair competition; conversion, unjust
enrichment; and judicial dissolution. Plaintiffs in the Nuanes action filed a
motion to consolidate the Heller action with the Nuanes action and stated that
the Heller action was filed in order to preserve the derivative claims that were
dismissed without leave to amend in the Nuanes action by the Court order dated
July 10, 2001. On October 5, 2001, the Managing General Partner and affiliated
defendants moved to strike the first amended complaint in its entirety for
violating the Court's July 10, 2001 order granting in part and denying in part
defendants' demurrer in the Nuanes action, or alternatively, to strike certain
portions of the complaint based on the statute of limitations. Other defendants
in the action demurred to the fourth amended complaint, and, alternatively,
moved to strike the complaint. The matters are currently scheduled to be heard
on November 15, 2001.
The Managing General Partner does not anticipate that any costs, whether legal
or settlement costs, associated with these cases 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 September 30, 2001.
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the Registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
ANGELES PARTNERS XI
By: Angeles Realty Corporation II
Managing General Partner
By: /s/Patrick J. Foye
Patrick J. Foye
Executive Vice President
By: /s/Martha L. Long
Martha L. Long
Senior Vice President and
Controller
Date: