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 0-8851
ANGELES PARTNERS VII
(Exact name of small business issuer as specified in its charter)
California 95-3215214
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
55 Beattie Place, PO Box 1089
Greenville, South Carolina 29602
(Address of principal executive offices)
(864) 239-1000
(Issuer's telephone number)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the Partnership was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes X No___
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
a)
ANGELES PARTNERS VII
BALANCE SHEET
(Unaudited)
(in thousands, except unit data)
September 30, 2001
Assets
Cash and cash equivalents $ 1,113
Receivables and deposits 23
Restricted escrows 77
Other assets 91
Investment property:
Land $ 366
Buildings and related personal property 5,867
6,233
Less accumulated depreciation (4,939) 1,294
$ 2,598
Liabilities and Partners' Capital (Deficit)
Liabilities
Accounts payable $ 29
Tenant security deposit liabilities 21
Accrued property taxes 32
Other liabilities 91
Mortgage note payable 2,915
Partners' Capital (Deficit)
General partner $ 291
Limited partners (8,669 units issued and
outstanding) (781) (490)
$ 2,598
See Accompanying Notes to Financial Statements
b)
ANGELES PARTNERS VII
STATEMENTS OF OPERATIONS
(Unaudited)
(in thousands, except per unit data)
Three Months Ended Nine Months Ended
September 30, September 30,
2001 2000 2001 2000
Revenues:
Rental income $ 354 $ 360 $ 1,063 $ 1,041
Other income 18 22 64 63
Total revenues 372 382 1,127 1,104
Expenses:
Operating 137 122 375 378
General and administrative 36 34 88 78
Depreciation 65 65 206 208
Interest 41 46 128 139
Property taxes 12 11 32 34
Total expenses 291 278 829 837
Net income $ 81 $ 104 $ 298 $ 267
Net income allocated to
general partner (1%) $ 1 $ 1 $ 3 $ 3
Net income allocated to
limited partners (99%) 80 103 295 264
$ 81 $ 104 $ 298 $ 267
Net income per limited
partnership unit $ 9.23 $11.88 $34.03 $30.45
Distributions per limited
partnership unit $ 9.57 $ -- $37.49 $34.26
See Accompanying Notes to Financial Statements
c)
ANGELES PARTNERS VII
STATEMENT OF CHANGES IN PARTNERS' CAPITAL (DEFICIT)
(Unaudited)
(in thousands, except unit data)
Limited
Partnership General Limited
Units Partner Partners Total
Original capital contributions 8,674 $ 88 $8,674 $ 8,762
Partners' capital (deficit) at
December 31, 2000 8,669 $ 291 $ (751) $ (460)
Distributions to partners -- (3) (325) (328)
Net income for the nine months
ended September 30, 2001 -- 3 295 298
Partners' capital (deficit)
at September 30, 2001 8,669 $ 291 $ (781) $ (490)
See Accompanying Notes to Financial Statements
d)
ANGELES PARTNERS VII
STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
Nine Months Ended
September 30,
2001 2000
Cash flows from operating activities:
Net income $ 298 $ 267
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 206 208
Change in accounts:
Receivables and deposits 11 57
Other assets (11) (6)
Accounts payable (25) 14
Tenant security deposit liabilities (5) (4)
Accrued property taxes 32 35
Other liabilities 2 (8)
Net cash provided by operating activities 508 563
Cash flows from investing activities:
Property improvements and replacements (121) (64)
Net deposits to restricted escrows (77) --
Net cash used in investing activities (198) (64)
Cash flows from financing activities:
Distribution to partners (328) (300)
Payments on mortgage note payable (134) (110)
Repayment of mortgage note payable (1,809) --
Loan costs paid (64) --
Consideration received for assumption of loan from
an affiliate 2,928 --
Net cash provided by (used in) financing activities 593 (410)
Net increase in cash and cash equivalents 903 89
Cash and cash equivalents at beginning of period 210 356
Cash and cash equivalents at end of period $ 1,113 $ 445
Supplemental disclosure of cash flow information:
Cash paid for interest $ 142 $ 139
See Accompanying Notes to Financial Statements
e)
ANGELES PARTNERS VII
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
Note A - Basis of Presentation
The accompanying unaudited financial statements of Angeles Partners VII (the
"Partnership" or "Registrant") have been prepared in accordance with generally
accepted accounting principles for interim financial information and with the
instructions to Form 10-QSB and Item 310(b) of Regulation S-B. Accordingly, they
do not include all of the information and footnotes required by generally
accepted accounting principles for complete financial statements. In the opinion
of Angeles Realty Corporation (the "General Partner"), all adjustments
(consisting of normal recurring accruals) considered necessary for a fair
presentation have been included. Operating results for the three and 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 financial statements and footnotes thereto included in
the Partnership's Annual Report on Form 10-KSB for the year ended December 31,
2000. The General Partner is indirectly owned by Apartment Investment and
Management Company ("AIMCO"), a publicly traded real estate investment trust.
Segment Reporting: Statement of Financial Accounting Standards ("SFAS") No. 131,
"Disclosure about Segments of an Enterprise and Related Information" established
standards for the way that public business enterprises report information about
operating segments in annual financial statements and requires that those
enterprises report selected information about operating segments in interim
financial reports. It also established standards for related disclosures about
products and services, geographic areas, and major customers. As defined in SFAS
No. 131, the Partnership has only one reportable segment. The General Partner
believes that segment-based disclosures will not result in a more meaningful
presentation than the financial statements as currently presented.
Note B - Transactions with Affiliated Parties
The Partnership has no employees and is dependent on the General Partner and its
affiliates for the management and administration of all partnership activities.
The Partnership Agreement provides for (i) certain payments to affiliates for
services and (ii) reimbursement of certain expenses incurred by affiliates on
behalf of the Partnership. The following payments were made to the General
Partner and affiliates during the nine months ended September 30, 2001 and 2000:
2001 2000
(in thousands)
Property management fees (included in
operating expenses) $ 56 $ 54
Reimbursement for services of affiliates
(included in general and administrative expenses) 43 40
Partnership management fee (included in other liabilities,
general and administrative expense) 10 --
Affiliates of the General Partner are entitled to receive 5% of gross receipts
from the Registrant's property for providing property management services. The
Registrant paid to such affiliates approximately $56,000 and $54,000 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 $43,000 and $40,000 for the
nine months ended September 30, 2001 and 2000, respectively. Approximately
$12,000 of these expenses were accrued at September 30, 2000.
The Partnership Agreement provides for a fee equal to 7.5% of "net cash flow
from operations", as defined in the Partnership Agreement to be paid to the
General Partner for executive and administrative management services. At
September 30, 2001, the Partnership has accrued $10,000 of Partnership
management fees included in other liabilities on the accompanying consolidated
balance sheet.
On September 28, 2001, the Partnership assumed the mortgage loan of an affiliate
of the General Partner. The Partnership substituted its investment property as
collateral for the mortgage and assumed the payments and terms of the mortgage.
In consideration for the assumption of this mortgage, the Partnership received
approximately $2,928,000 from an affiliate of the General Partner. See Note D
for further details.
In addition to its indirect ownership of the general partner interest in the
Partnership, AIMCO and its affiliates owned 5,858 limited partnership units (the
"Units") in the Partnership representing 67.57% 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 67.57% 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 General Partner because of its affiliation with
the General Partner.
Note C - Distributions
During the nine months ended September 30, 2001, the Partnership declared and
paid distributions of approximately $328,000 (approximately $325,000 paid to the
limited partners or $37.49 per limited partnership unit) from operations. During
the nine months ended September 30, 2000, the Partnership declared and paid
distributions of approximately $300,000 (approximately $297,000 paid to the
limited partners or $34.26 per limited partnership unit) from operations.
Subsequent to September 30, 2001, the Partnership declared and paid a
distribution of approximately $1,044,000 (approximately $945,000 paid to the
limited partners or $109.01 per limited partnership unit) of which approximately
$66,000 (approximately $65,000 to the limited partners or $7.50 per limited
partnership unit) was from operations and approximately $978,000 (approximately
$880,000 to the limited partners or $101.51 per limited partnership unit) was
from the net consideration received for the assumption of the mortgage loan as
discussed in Note D.
Note D - Assumption of Mortgage Loan
On September 28, 2001, the Partnership assumed the mortgage loan of an affiliate
of the General Partner. The Partnership substituted its investment property as
collateral for the mortgage and assumed the payments and terms of the mortgage.
In consideration for the assumption of this mortgage, the Partnership received
approximately $2,928,000, from the affiliate of the General Partner, which was
the outstanding principal balance of the mortgage assumed. From this amount, the
Partnership paid approximately $64,000 in closing costs which were capitalized
and included in other assets on the accompanying balance sheet and deposited
approximately $77,000 into a mortgage escrow account maintained by the lender.
Additionally, the Partnership repaid its existing mortgage of approximately
$1,809,000. The new mortgage carries a stated interest rate of 6.62% while the
interest rate on the old mortgage was 9.13%. Principal and interest payments on
the assumed mortgage loan are due monthly until the loan matures in July 2013 at
which time the mortgage will be fully amortized.
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 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
discussion of the Registrant's business and results of operations, including
forward-looking statements pertaining to such matters, does not take into
account the effects of any changes to the Registrant's business and results of
operation. Accordingly, actual results could differ materially from those
projected in the forward-looking statements as a result of a number of factors,
including those identified herein.
The Partnership's investment property consists of one apartment complex. The
following table sets forth the average occupancy of the property for the nine
months ended September 30, 2001 and 2000:
Average Occupancy
Property 2001 2000
Cedarwood Apartments 95% 97%
Gretna, Louisiana
Results of Operations
The Partnership recognized net income of approximately $81,000 for the three
months ended September 30, 2001 compared to net income of approximately $104,000
for the same period in 2000. The decrease in net income is due to a slight
increase in total expenses and a slight decrease in total revenues. Total
expenses increased slightly for the three months ended September 30, 2001 due to
an increase in operating expenses which was attributable to an increase in
insurance costs and legal fees. Total revenues decreased slightly for the three
months ended September 30, 2001 due primarily to a decrease in rental income.
Rental income decreased due to a decrease in occupancy at the Partnership's
investment property.
The Partnership recognized net income of approximately $298,000 for the nine
months ended September 30, 2001 compared to net income of approximately $267,000
for the same period in 2000. The increase in net income is due to an increase in
total revenues and a slight decrease in total expenses. Total revenues increased
as a result of an increase in rental income due to increases in average rental
rates which were more than sufficient to offset a decrease in occupancy at
Cedarwood Apartments. Total expenses decreased slightly due to a decrease in
interest expense partially offset by an increase in general and administrative
expenses. Interest expense decreased due to principal payments made on the
mortgage encumbering the Partnership's investment property.
General and administrative expenses increased for the nine months ended
September 30, 2001 due to an increase in professional fees. Also included in
general and administrative expenses for the three and nine months ended
September 30, 2001 and 2000, are management reimbursements to the General
Partner allowed under the Partnership Agreement. 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 Registrant, the General Partner
monitors the rental market environment of its investment property to assess the
feasibility of increasing rents, maintaining or increasing occupancy levels and
protecting the Registrant from increases in expense. As part of this plan, the
General Partner attempts to protect the Registrant from the burden of
inflation-related increases in expenses by increasing rents and maintaining a
high overall occupancy level. However, due to changing market conditions, which
can result in the use of rental concessions and rental reductions needed to
offset softening market conditions, there is no guarantee that the General
Partner will be able to sustain such a plan.
Liquidity and Capital Resources
At September 30, 2001, the Partnership had cash and cash equivalents of
approximately $1,113,000 compared to approximately $445,000 at September 30,
2000. Cash and cash equivalents increased approximately $903,000 since December
31, 2000 due to approximately $508,000 and $593,000 of cash provided by
operating and financing activities, respectively, partially offset by
approximately $198,000 of cash used in investing activities. Cash provided by
financing activities consisted of proceeds from the assumption of a mortgage
loan of an affiliate of the General Partner, partially offset by distributions
to partners, principal payments made on the mortgage encumbering the
Registrant's property, repayment of the mortgage note payable and loan costs
paid. Cash used in investing activities consisted of property improvements and
replacements and net deposits to restricted escrows maintained by the mortgage
lender. The Partnership invests its working capital reserves in interest bearing
accounts.
The sufficiency of existing liquid assets to meet future liquidity and capital
expenditure requirements is directly related to the level of capital
expenditures required at the investment property to adequately maintain the
physical assets and other operating needs of the Registrant and to comply with
Federal, state and local, legal and regulatory requirements. Capital
improvements planned for the Partnership's property are detailed below.
Cedarwood Apartments: For 2001, the Partnership budgeted approximately $100,000
for capital improvements, consisting primarily of structural and plumbing
upgrades, pool improvements, and floor covering and appliance replacements. The
Partnership completed approximately $121,000 of budgeted and unbudgeted capital
expenditures at Cedarwood Apartments during the nine months ended September 30,
2001, consisting primarily of fencing, plumbing, structural improvements, pool
upgrades and appliance and floor covering replacements. These improvements were
funded from operations.
Additional capital expenditures will be incurred only if cash is available from
operations. To the extent that such budgeted capital improvements are completed,
the Partnership's distributable cash flow, if any, may be adversely affected at
least in the short term.
The Registrant's current assets are thought to be sufficient for any near-term
needs (exclusive of capital improvements) of the Registrant. On September 28,
2001, the Partnership assumed the mortgage loan of an affiliate of the General
Partner. The Partnership substituted its investment property as collateral for
the mortgage and assumed the payments and terms of the mortgage. In
consideration for the assumption of this mortgage, the Partnership received
approximately $2,928,000, from the affiliate of the General Partner, which was
the outstanding principal balance of the mortgage assumed. From this amount, the
Partnership paid approximately $64,000 in closing costs which were capitalized
and included in other assets on the accompanying balance sheet and deposited
approximately $77,000 into a mortgage escrow account maintained by the lender.
Additionally, the Partnership repaid its existing mortgage of approximately
$1,809,000. The new mortgage carries a stated interest rate of 6.62% while the
interest rate on the old mortgage was 9.13%. Principal and interest payments on
the assumed mortgage loan are due monthly until the loan matures in July 2013 at
which time the mortgage will be fully amortized.
During the nine months ended September 30, 2001, the Partnership declared and
paid distributions of approximately $328,000 (approximately $325,000 paid to the
limited partners or $37.49 per limited partnership unit) from operations. During
the nine months ended September 30, 2000, the Partnership declared and paid
distributions of approximately $300,000 (approximately $297,000 paid to the
limited partners or $34.26 per limited partnership unit) from operations.
Subsequent to September 30, 2001, the Partnership declared and paid a
distribution of approximately $1,044,000 (approximately $945,000 paid to the
limited partners or $109.01 per limited partnership unit) of which approximately
$66,000 (approximately $65,000 to the limited partners or $7.50 per limited
partnership unit) was from operations and approximately $978,000 (approximately
$880,000 to the limited partners or $101.51 per limited partnership unit) was
from the net consideration received for the assumption of the mortgage loan as
discussed above. The Partnership's distribution policy is reviewed on a monthly
basis. Future cash distributions will depend on the levels of net cash generated
from operations, the availability of cash reserves, and the timing of the debt
maturity, refinancing, and/or the sale of the property. There can be no
assurance that the Partnership will generate sufficient funds from operations,
after planned capital improvement expenditures, to permit any additional
distributions to its partners during the remainder of 2001 or subsequent
periods.
In addition to its indirect ownership of the general partner interest in the
Partnership, AIMCO and its affiliates owned 5,858 limited partnership units (the
"Units") in the Partnership representing 67.57% 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 67.57% 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 General Partner because of its affiliation with
the General Partner.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
In March 1998, several putative unitholders of limited partnership units of the
Partnership commenced an action entitled Rosalie Nuanes, et al. v. Insignia
Financial Group, Inc., et al. (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) Reports on Form 8-K:
None filed during the quarter ended September 30, 2001.
SIGNATURES
In accordance with the requirements of the Exchange Act, the Registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
ANGELES PARTNERS VII
By: Angeles Realty Corporation
General Partner
By: /s/Patrick J. Foye
Patrick J. Foye
Executive Vice President
By: /s/Martha L. Long
Martha L. Long
Senior Vice President and
Controller
Date: November 13, 2001