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 0-9704
ANGELES PARTNERS IX
(Exact name of small business issuer as specified in its charter)
California 95-3417137
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
55 Beattie Place, P.O. 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 IX
CONSOLIDATED BALANCE SHEET
(Unaudited)
(in thousands, except unit data)
September 30, 2001
Assets
Cash and cash equivalents $ 1,120
Receivables and deposits 37
Restricted escrows 105
Other assets 327
Investment properties:
Land $ 532
Buildings and related personal property 13,891
14,423
Less accumulated depreciation (11,176) 3,247
$ 4,836
Liabilities and Partners' Deficit
Liabilities
Accounts payable $ 206
Tenant security deposit liabilities 47
Accrued property taxes 102
Other liabilities 165
Mortgage notes payable 9,921
Partners' Deficit
General partner $ (285)
Limited partners (19,975 units issued and
outstanding) (5,320) (5,605)
$ 4,836
See Accompanying Notes to Consolidated Financial Statements
b)
ANGELES PARTNERS IX
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 $ 943 $ 1,460 $ 3,731 $ 5,301
Other income 92 177 307 400
Casualty gain -- -- 41 50
Gain on sale of properties 7,137 4,857 7,137 4,857
Total revenues 8,172 6,494 11,216 10,608
Expenses:
Operating 538 811 1,910 2,506
General and administrative 102 151 296 291
Depreciation 231 411 1,003 1,458
Interest 253 367 889 1,230
Property taxes (7) 86 144 275
Total expenses 1,117 1,826 4,242 5,760
Income before extraordinary
item 7,055 4,668 6,974 4,848
Extraordinary loss on early
extinguishment of debt (526) (324) (576) (324)
Net income $ 6,529 $ 4,344 $ 6,398 $ 4,524
Net income allocated to
general partner (1%) $ 65 $ 43 $ 64 $ 45
Net income allocated to
limited partners (99%) 6,464 4,301 6,334 4,479
$ 6,529 $ 4,344 $ 6,398 $ 4,524
Per limited partnership unit:
Income before extraordinary item $349.68 $231.38 $345.64 $240.29
Extraordinary loss on early
extinguishment of debt (26.08) (16.06) (28.54) (16.06)
Net income $323.60 $215.32 $317.10 $224.23
Distributions per limited
partnership unit $324.11 $185.98 $357.90 $219.77
See Accompanying Notes to Consolidated Financial Statements
c)
ANGELES PARTNERS IX
CONSOLIDATED STATEMENT OF CHANGES IN PARTNERS' DEFICIT
(Unaudited)
(in thousands, except unit data)
Limited
Partnership General Limited
Units Partner Partners Total
Original capital contributions 20,000 $ 1 $ 20,000 $ 20,001
Partners' deficit at
December 31, 2000 19,975 $ (262) $ (4,505) $ (4,767)
Distributions to partners -- (87) (7,149) (7,236)
Net income for the nine months
ended September 30, 2001 -- 64 6,334 6,398
Partners' deficit
at September 30, 2001 19,975 $ (285) $ (5,320) $ (5,605)
See Accompanying Notes to Consolidated Financial Statements
d)
ANGELES PARTNERS IX
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
Nine Months Ended
September 30,
2001 2000
Cash flows from operating activities:
Net income $ 6,398 $ 4,524
Adjustments to reconcile net income to net cash
provided by operating activities:
Gain on sale of investment properties (7,137) (4,857)
Extraordinary loss on early extinguishment of debt 576 324
Casualty gain (41) (50)
Depreciation 1,003 1,458
Amortization of loan costs and discounts 52 95
Change in accounts:
Receivables and deposits 159 66
Other assets -- (11)
Accounts payable (216) 12
Tenant security deposit liabilities (72) 6
Accrued property taxes 49 39
Due to general partner (285) 77
Other liabilities (61) (160)
Net cash provided by operating activities 425 1,523
Cash flows from investing activities:
Sale proceeds received 11,748 9,338
Insurance proceeds received 45 154
Property improvements and replacements (520) (1,561)
Net withdrawals from restricted escrows 117 34
Net cash provided by investing activities 11,390 7,965
Cash flows from financing activities:
Repayment of mortgage notes payable (11,068) (4,739)
Proceeds from mortgage notes payable 6,800 --
Loan costs paid (230) --
Payments on mortgage notes payable (161) (201)
Prepayment penalty -- (215)
Distributions to partners (7,236) (4,472)
Net cash used in financing activities (11,895) (9,627)
Net decrease in cash and cash equivalents (80) (139)
Cash and cash equivalents at beginning of period 1,200 1,313
Cash and cash equivalents at end of period $ 1,120 $ 1,174
Supplemental disclosure of cash flow information:
Cash paid for interest $ 852 $ 1,149
See Accompanying Notes to Consolidated Financial Statements
e)
ANGELES PARTNERS IX
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note A - Basis of Presentation
The accompanying unaudited consolidated financial statements of Angeles Partners
IX (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" or "ARC"),
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 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. ARC is an affiliate of Apartment Investment
and Management Company ("AIMCO"), a publicly traded real estate investment
trust.
Principles of Consolidation
The financial statements include all of the accounts of the Partnership and its
99% owned partnership. The general partner of the consolidated partnership is
Angeles Realty Corporation. Angeles Realty Corporation may be removed as the
general partner of the consolidated partnership by the Registrant; therefore,
the consolidated partnership is controlled and consolidated by the Registrant.
All significant interpartnership 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 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 B - Disposition of Investment Properties
On July 30, 2001, the Partnership sold Rosemont Crossing Apartments to an
unrelated third party for a gross sale price of approximately $5,339,000. The
net proceeds realized by the Partnership were approximately $4,833,000 after
payment of closing costs of approximately $292,000 and a prepayment penalty of
approximately $214,000 owed by the Partnership and paid by the buyer. The
Partnership realized a gain of approximately $2,710,000 as a result of the sale.
The Partnership used approximately $2,764,000 of the net proceeds to repay the
mortgages encumbering the property. In addition, the Partnership recorded an
extraordinary loss on early extinguishment of debt of approximately $265,000 as
a result of the write off of unamortized loan costs and mortgage discounts and a
prepayment penalty.
On August 1, 2001, the Partnership sold Panorama Terrace Apartments to an
unrelated third party for a gross sale price of approximately $7,463,000. The
net proceeds realized by the Partnership were approximately $6,915,000 after
payment of closing costs of approximately $303,000 and a prepayment penalty of
approximately $245,000 owed by the Partnership and paid by the buyer. The
Partnership realized a gain of approximately $4,427,000 as a result of the sale.
The Partnership used approximately $3,649,000 of the net proceeds to repay the
mortgage encumbering the property. In addition, the Partnership recorded an
extraordinary loss on early extinguishment of debt of approximately $261,000 as
a result of the write off of unamortized loan costs and a prepayment penalty.
On July 20, 2000, The Pines of Northwest Crossing Apartments, located in
Houston, Texas, was sold to an unaffiliated third party for a gross sales price
of $9,500,000. The net proceeds realized by the Partnership were approximately
$9,338,000. The Partnership used a portion of the proceeds from the sale of the
property to repay the debt encumbering the property of approximately $4,739,000.
The sale of property resulted in a gain on sale of investment property of
approximately $4,857,000 and a loss on early extinguishment of debt of
approximately $324,000, consisting of a prepayment penalty and the write off of
unamortized loan costs.
Note C - 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 amounts were paid to the General Partner and its affiliates for
the nine months ended September 30, 2001 and 2000:
2001 2000
(in thousands)
Property management fees (included in
operating expenses) $223 $291
Reimbursement for services of affiliates
(included in investment properties and general
and administrative expenses) 359 279
Loan costs (included in other assets) 68 --
Real estate brokerage commissions (included in gain
on sale of investment property) 371 285
During the nine months ended September 30, 2001 and 2000, affiliates of the
General Partner were entitled to receive 5% of gross receipts from all of the
Registrant's properties for providing property management services. The
Registrant paid to such affiliates approximately $223,000 and $291,000 for the
nine months ended September 30, 2001 and 2000, respectively.
An affiliate of the General Partner received reimbursement of accountable
administrative expenses amounting to approximately $359,000 and $279,000 for the
nine months ended September 30, 2001 and 2000, respectively. Included in these
charges for the nine months ended September 30, 2001 and 2000, are approximately
$150,000 and $56,000, respectively, for construction oversight reimbursements.
For services provided in connection with the refinancing of Village Green
Apartments, the General Partner was paid for loan costs related to the
refinancing of approximately $68,000 during the nine months ended September 30,
2001. These costs were capitalized and are included in other assets on the
consolidated balance sheet.
In connection with the sales of Rosemont Crossing Apartments and Panorama
Terrace Apartments during 2001, the General Partner earned commissions of 3% of
the selling prices, or approximately $154,000 and $217,000, respectively. In
connection with the sale of The Pines of Northwest Crossing Apartments in July
2000, the General Partner earned a commission of 3% of the selling price or
$285,000. These fees are subordinate to the limited partners receiving a
preferred return, as specified in the Partnership Agreement. During the nine
months ended September 30, 2001, the Partnership paid all of these fees. If the
limited partners have not received their preferred return when the Partnership
terminates, the General Partner will return these amounts to the Partnership.
In addition to its indirect ownership of the general partner interest in the
Partnership, AIMCO and its affiliates currently own 13,251 limited partnership
units in the Partnership representing 66.34% 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 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 voting on certain amendments to the
Partnership Agreement and voting to remove the General Partner. As a result of
its ownership of 66.34% of the outstanding units, AIMCO is in a position to
control all such 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 D - Distributions
During the nine months ended September 30, 2001, cash distributions of
approximately $7,236,000 (approximately $7,149,000 to the limited partners or
$357.90 per limited partnership unit) were paid to the partners, of which
approximately $534,000 (approximately $529,000 to the limited partners or $26.48
per limited partnership unit) was paid from operations and approximately
$6,687,000 (approximately $6,620,000 to the limited partners or $331.42 per
limited partnership unit) was paid from proceeds from the refinancing of the
mortgage of Village Green Apartments, proceeds from the sales of Rosemont
Crossing Apartments and Panorama Terrace Apartments, and the remaining proceeds
from the sale of The Pines of Northwest Crossing Apartments in July 2000. During
the nine months ended September 30, 2000, cash distributions of approximately
$4,472,000 (approximately $4,390,000 of which was paid to the limited partners
or $219.77 per limited partnership unit) were paid to the partners, of which
approximately $682,000 (approximately $675,000 to the limited partners or $33.79
per limited partnership unit) was paid from operations and approximately
$3,752,000 (approximately $3,715,000 to the limited partners or $185.98 per
limited partnership unit) was paid from proceeds from the sale of The Pines of
Northwest Crossing Apartments. In conjunction with the transfer of funds from
the majority-owned sub-tier limited partnership to the Partnership,
approximately $15,000 and $38,000 was distributed to the general partner of the
majority owned sub-tier limited partnership during the nine months ended
September 31, 2001 and 2000, respectively. Subsequent to September 30, 2001, the
General Partner approved and paid a distribution of approximately $443,000
(approximately $439,000 to the limited partners or $21.98 per limited
partnership unit) from proceeds from the sales of Rosemont Crossing Apartments
and Panorama Terrace Apartments and the remaining proceeds from the refinancing
of the mortgage of Village Green Apartments.
Note E - Refinancing and Extraordinary Loss
On June 27, 2001, the Partnership refinanced the mortgage encumbering Village
Green Apartments. The refinancing replaced indebtedness of approximately
$4,655,000 with a new mortgage in the amount of $6,800,000. The new mortgage
carries a stated interest rate of 7.39% as compared to 7.33% on the previous
loan. Payments of principal and interest on the new mortgage loan are due
monthly until the loan matures on July 1, 2021. The Partnership recognized an
extraordinary loss on the early extinguishment of debt of approximately $50,000
due to the write-off of unamortized loan costs. Total capitalized loan costs for
the new mortgage were approximately $230,000 at September 30, 2001.
Note F - Casualty Event
In October 2000, a fire occurred at Forest River Apartments, which resulted in
damage to two apartment units. The property incurred damages of approximately
$51,000. Insurance proceeds of approximately $45,000 were received during the
nine months ended September 30, 2001. After writing off the undepreciated cost
of the damaged units, the Partnership realized a casualty gain of approximately
$41,000 from this event during the nine months ended September 30, 2001.
In March 2000, a fire occurred at Forest River Apartments, which resulted in
damage to four apartment units. The property incurred damages of approximately
$250,000. Insurance proceeds of approximately $154,000 were received during the
nine months ended September 30, 2000. The Partnership realized a casualty gain
of approximately $50,000 from this event for the nine months ended September 30,
2000.
Note G - 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. (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 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. 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 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 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 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 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 properties consist of two apartment complexes. The
following table sets forth the average occupancy of the properties for the nine
months ended September 30, 2001 and 2000:
Average Occupancy
Property 2001 2000
Forest River Apartments 96% 96%
Gadsden, Alabama
Village Green Apartments 93% 95%
Montgomery, Alabama
Results of Operations
The Registrant's net income for the three and nine months ended September 30,
2001 was approximately $6,529,000 and $6,398,000, respectively, compared to net
income of approximately $4,344,000 and $4,524,000, respectively, for the three
and nine months ended September 30, 2000. The increase in net income for both
the three and nine months ended September 30, 2001 is primarily attributable to
an increase in total revenues due to the gain recognized during 2001 on the
sales of Rosemont Crossing Apartments and Panorama Terrace Apartments. The gain
recognized in 2001 was partially offset by the loss on early extinguishment of
debt recognized upon the sales of the properties. On July 30, 2001, the
Partnership sold Rosemont Crossing Apartments to an unrelated third party for a
gross sale price of approximately $5,339,000. The net proceeds realized by the
Partnership were approximately $4,833,000 after payment of closing costs of
approximately $292,000 and a prepayment penalty of approximately $214,000 owed
by the Partnership and paid by the buyer. The Partnership realized a gain of
approximately $2,710,000 as a result of the sale. The Partnership used
approximately $2,764,000 of the net proceeds to repay the mortgages encumbering
the property. In addition, the Partnership recorded an extraordinary loss on
early extinguishment of debt of approximately $265,000 as a result of the write
off of unamortized loan costs and mortgage discounts and a prepayment penalty.
On August 1, 2001, the Partnership sold Panorama Terrace Apartments to an
unrelated third party for a gross sale price of approximately $7,463,000. The
net proceeds realized by the Partnership were approximately $6,915,000 after
payment of closing costs of approximately $303,000 and a prepayment penalty of
approximately $245,000 owed by the Partnership and paid by the buyer. The
Partnership realized a gain of approximately $4,427,000 as a result of the sale.
The Partnership used approximately $3,649,000 of the net proceeds to repay the
mortgage encumbering the property. In addition, the Partnership recorded an
extraordinary loss on early extinguishment of debt of approximately $261,000 as
a result of the write off of unamortized loan costs and a prepayment penalty.
The increase in total revenues was partially offset by the gain recognized
during 2000 on the sale of The Pines of Northwest Crossing Apartments. The gain
recognized in 2000 was partially offset by the loss on early extinguishment of
debt recognized upon the sale of the property. On July 20, 2000, The Pines of
Northwest Crossing Apartments, located in Houston, Texas, was sold to an
unaffiliated third party for a gross sales price of $9,500,000. The net proceeds
realized by the Partnership were approximately $9,338,000. The Partnership used
a portion of the proceeds from the sale of the property to repay the debt
encumbering the property of approximately $4,739,000. The sale of property
resulted in a gain on sale of investment property of approximately $4,857,000
and a loss on early extinguishment of debt of approximately $324,000, consisting
of a prepayment penalty and the write off of unamortized loan costs.
Excluding the impact of the sales and operations of Rosemont Crossing
Apartments, Panorama Terrace Apartments and The Pines of Northwest Crossing
Apartments, the Registrant's net (loss) income for the three and nine months
ended September 30, 2001 was approximately ($50,000) and $3,000, respectively,
compared to net income of approximately $4,000 and $212,000, respectively, for
the three and nine months ended September 30, 2000. The decrease in net income
for the three months ended September 30, 2001 is due to an increase in total
expenses. The decrease in net income for the nine months ended September 30,
2001 is due to an increase in total expenses and an extraordinary loss as a
result of the refinancing of the mortgage at Village Green Apartments (as
discussed in "Liquidity and Capital Resources"). The decrease in net income for
the nine months ended September 30, 2001 was partially offset by an increase in
total revenues. Total revenues remained relatively constant for the three months
ended September 30, 2001. Total expenses increased for the three and nine months
ended September 30, 2001 primarily due to increases in operating and interest
expenses. Operating expenses increased primarily due to increases in payroll,
utility, insurance, and advertising expenses at both of the Partnership's
remaining investment properties and an increase in interior repairs at Forest
River Apartments. Interest expense increased as a result of the refinancing of
the debt encumbering Village Green Apartments with a larger loan balance. The
increase in total expenses for the three months ended September 30, 2001 was
partially offset by a decrease in general and administrative expenses. General
and administrative expenses remained relatively constant for the nine months
ended September 30, 2001. Depreciation expense and property tax expense remained
relatively constant for both the comparable periods.
General and administrative expenses decreased for the three months ended
September 30, 2001 primarily due to a decrease in the management reimbursements
to the General Partner as allowed under the Partnership Agreement. Also included
in general and administrative expenses at both September 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.
Excluding the impact of the sales and operations of Rosemont Crossing
Apartments, Panorama Terrace Apartments and The Pines of Northwest Crossing
Apartments, total revenues increased for the nine months ended September 30,
2001 due to an increase in total rental income and the recognition of a casualty
gain during the nine months ended September 30, 2001. Rental income increased as
a result of an increase in the average rental rate at both of the Partnership's
remaining investment properties, and reduced concession costs at Forest River
Apartments. The increase in rental income was partially offset by a decrease in
occupancy at Village Green Apartments. The casualty gain in 2001 is a result of
an October 2000 fire which occurred at Forest River Apartments. Two apartment
units were damaged with a cost of repairs of approximately $51,000. Insurance
proceeds of approximately $45,000 were received in 2001 to cover these damages.
After writing off the undepreciated cost of the damaged units, the Partnership
recognized a casualty gain of approximately $41,000. The increase in total
revenues was partially offset by the recognition of a casualty gain during the
nine months ended September 30, 2000 and a decrease in other income. The
casualty gain in 2000 was a result of a March 2000 fire which occurred at Forest
River Apartments. Four apartment units were damaged with a cost of approximately
$250,000. Insurance proceeds of approximately $154,000 were received during the
nine months ended September 30, 2000 to cover these damages. After writing off
the undepreciated cost of the damaged units, the Partnership recognized a
casualty gain of approximately $50,000 during the nine months ended September
30, 2000. Other income decreased primarily as a result of a decrease in interest
income.
As part of the ongoing business plan of the Partnership, the General Partner
monitors the rental market environment of its investment properties 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 September 30, 2001, the Partnership had cash and cash equivalents of
approximately $1,120,000, compared to approximately $1,174,000 at September 30,
2000. The decrease in cash and cash equivalents of approximately $80,000 for the
nine months ended September 30, 2001, from the Partnership's calendar year end,
is due to approximately $11,895,000 of cash used in financing activities, which
was partially offset by approximately $11,390,000 of cash provided by investing
activities and approximately $425,000 of cash provided by operating activities.
Cash provided by investing activities consisted primarily of net proceeds
received from the sales of Rosemont Crossing Apartments and Panorama Terrace
Apartments and, to a lesser extent, net receipts from escrow accounts maintained
by the mortgage lender and the receipt of insurance proceeds related to the
casualty at Forest River Apartments, partially offset by property improvements
and replacements. Cash used in financing activities consisted of the repayment
of the existing mortgage notes payable at Rosemont Crossing Apartments, Panorama
Terrace Apartments, and Village Green Apartments, distributions to partners, and
to a lesser extent, loan costs paid related to the refinancing of the mortgage
encumbering Village Green Apartments, and payments of principal made on the
mortgages encumbering the Registrant's properties, which was partially offset by
net proceeds received as a result of the refinancing of the mortgage at Village
Green Apartments. The Registrant invests its working capital reserves in
interest bearing accounts.
The sufficiency of existing liquid assets to meet future liquidity and capital
expenditure requirements is directly related to the level of capital
expenditures required at the 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 Partnership's properties are detailed
below.
Panorama Terrace Apartments: During 2001, the Partnership completed
approximately $189,000 in capital expenditures at Panorama Terrace Apartments
consisting primarily of plumbing upgrades, structural building improvements,
other building improvements, and floor covering replacement. These improvements
were funded primarily from operations. This property was sold August 1, 2001.
Forest River Apartments: For 2001, the Partnership has budgeted approximately
$151,000 for capital improvements, consisting primarily of floor covering,
appliances, and air conditioning unit replacements. The Partnership completed
approximately $127,000 in capital expenditures at Forest River Apartments as of
September 30, 2001, consisting primarily of floor covering, air conditioning
unit and appliance replacement, and construction costs related to the repair of
two units damaged in a fire. These improvements were funded primarily from
operations, replacement reserves, and insurance proceeds.
Village Green Apartments: For 2001, the Partnership has budgeted approximately
$172,000 for capital improvements, consisting primarily of floor covering, and
appliance replacements, furniture upgrades, and electrical and plumbing
improvements. The Partnership completed approximately $123,000 in capital
expenditures at Village Green Apartments as of September 30, 2001, consisting
primarily of structural improvements, lighting upgrades, and floor covering and
appliance replacement. These improvements were funded primarily from operations
and replacement reserves.
Rosemont Crossing Apartments: During 2001, the Partnership completed
approximately $81,000 in capital expenditures at Rosemont Crossing Apartments
consisting primarily of structural improvements, interior decoration and floor
covering replacement. These improvements were funded primarily from operations
and replacement reserves. This property was sold July 30, 2001.
The additional capital expenditures will be incurred only if cash is available
from operations and Partnership reserves. 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 Partnership's current assets are thought to be sufficient for any near-term
needs (exclusive of capital improvements) of the Partnership. On June 27, 2001,
the Partnership refinanced the mortgage encumbering Village Green Apartments.
The refinancing replaced indebtedness of approximately $4,655,000 with a new
mortgage in the amount of $6,800,000. The new mortgage carries a stated interest
rate of 7.39% as compared to 7.33% on the previous loan. Payments of principal
and interest on the new mortgage loan are due monthly until the loan matures
fully amortized on July 1, 2021. The Partnership recognized an extraordinary
loss on the early extinguishment of debt of approximately $50,000 due to the
write-off of unamortized loan costs. Total capitalized loan costs for the new
mortgage were approximately $230,000 at September 30, 2001.
The mortgage indebtedness on Forest River Apartments of approximately
$3,146,000, net of discount, is being amortized over 29 years with a balloon
payment due in 2003. 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 Partnership
will risk losing such property through foreclosure.
During the nine months ended September 30, 2001, cash distributions of
approximately $7,236,000 (approximately $7,149,000 to the limited partners or
$357.90 per limited partnership unit) were paid to the partners, of which
approximately $534,000 (approximately $529,000 to the limited partners or $26.48
per limited partnership unit) was paid from operations and approximately
$6,687,000 (approximately $6,620,000 to the limited partners or $331.42 per
limited partnership unit) was paid from proceeds from the refinancing of the
mortgage of Village Green Apartments, proceeds from the sales of Rosemont
Crossing Apartments and Panorama Terrace Apartments, and the remaining proceeds
from the sale of The Pines of Northwest Crossing Apartments in July 2000. During
the nine months ended September 30, 2000, cash distributions of approximately
$4,472,000 (approximately $4,390,000 of which was paid to the limited partners
or $219.77 per limited partnership unit) were paid to the partners, of which
approximately $682,000 (approximately $675,000 to the limited partners or $33.79
per limited partnership unit) was paid from operations and approximately
$3,752,000 (approximately $3,715,000 to the limited partners or $185.98 per
limited partnership unit) was paid from proceeds from the sale of The Pines of
Northwest Crossing Apartments. In conjunction with the transfer of funds from
the majority-owned sub-tier limited partnership to the Partnership,
approximately $15,000 and $38,000 was distributed to the general partner of the
majority owned sub-tier limited partnership during the nine months ended
September 31, 2001 and 2000, respectively. Subsequent to September 30, 2001, the
General Partner approved and paid a distribution of approximately $443,000
(approximately $439,000 to the limited partners or $21.98 per limited
partnership unit) from proceeds from the sales of Rosemont Crossing Apartments
and Panorama Terrace Apartments and the remaining proceeds from the refinancing
of the mortgage of Village Green Apartments. Future cash distributions will
depend on the levels of net 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 monthly basis.
There can be no assurance, however, that the Partnership will generate
sufficient funds from operations, after planned capital improvement
expenditures, to permit any additional distributions to its partners in 2001 or
subsequent periods. In addition, the Partnership may be restricted from making
distributions until the amount in the reserve account maintained by the mortgage
lender is equal to a minimum of $200 and a maximum of $400 per apartment unit at
Forest River Apartments for a total of approximately $50,000 to $99,000. As of
September 30, 2001, the balance in the reserve account is approximately $99,000.
In addition to its indirect ownership of the general partner interest in the
Partnership, AIMCO and its affiliates currently own 13,251 limited partnership
units in the Partnership representing 66.34% 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 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 voting on certain amendments to the
Partnership Agreement and voting to remove the General Partner. As a result of
its ownership of 66.34% of the outstanding units, AIMCO is in a position to
control all such 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 unit holders 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 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. 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
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 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 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) Current report on Form 8-K filed on August 14, 2001 in
connection with the sale of Rosemont Crossing Apartments on
July 30, 2001 and the sale of Panorama Terrace Apartments on
August 1, 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 IX
By: Angeles Realty Corporation
Its 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: November 13, 2001