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 0-14248
ANGELES PARTNERS XIV
(Exact name of small business issuer as specified in its charter)
California 95-3959771
(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 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 XIV
CONSOLIDATED BALANCE SHEET
(Unaudited)
(in thousands, except unit data)
September 30, 2001
Assets
Cash and cash equivalents $ 1,061
Receivables and deposits 507
Restricted escrows 129
Other assets 271
Investment properties:
Land $ 2,243
Buildings and related personal property 26,608
28,851
Less accumulated depreciation (20,891) 7,960
$ 9,928
Liabilities and Partners' Deficit
Liabilities
Accounts payable $ 63
Tenant security deposit liabilities 137
Accrued property taxes 475
Accrued interest (including $3,907 in default) 8,992
Due to affiliates (Note C) 2,039
Other liabilities 313
Notes payable (including $4,576 in default) 29,010
Partners' Deficit
General partners $ (706)
Limited partners (43,421 units issued and
outstanding) (30,395) (31,101)
$ 9,928
See Accompanying Notes to Consolidated Financial Statements
b)
ANGELES PARTNERS XIV
CONSOLIDATED 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 $ 1,287 $ 1,229 $ 3,791 $ 3,675
Other income 73 70 239 164
Total revenues 1,360 1,299 4,030 3,839
Expenses:
Operating 471 409 1,349 1,251
General and administrative 71 116 227 232
Depreciation 348 341 1,046 1,018
Interest 843 877 2,577 2,582
Property taxes 90 108 302 298
Total expenses 1,823 1,851 5,501 5,381
Net loss $ (463) $ (552) $(1,471) $(1,542)
Net loss allocated to general
partners (1%) $ (5) $ (6) $ (15) $ (15)
Net loss allocated to limited
partners (99%) (458) (546) (1,456) (1,527)
$ (463) $ (552) $(1,471) $(1,542)
Net loss per limited partnership unit $(10.55) $(12.53) $(33.53) $(35.03)
See Accompanying Notes to Consolidated Financial Statements
c)
ANGELES PARTNERS XIV
CONSOLIDATED STATEMENT OF CHANGES IN PARTNERS' DEFICIT
(Unaudited)
(in thousands, except unit data)
Limited
Partnership General Limited
Units Partners Partners Total
Original capital contributions 44,390 $ 1 $ 44,390 $ 44,391
Partners' deficit at
December 31, 2000 43,421 $ (684) $(28,939) $(29,623)
Distribution to partners -- (7) -- (7)
Net loss for the nine months
ended September 30, 2001 -- (15) (1,456) (1,471)
Partners' deficit at
September 30, 2001 43,421 $ (706) $(30,395) $(31,101)
See Accompanying Notes to Consolidated Financial Statements
d)
ANGELES PARTNERS XIV
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
Nine Months Ended
September 30,
2001 2000
Cash flows from operating activities:
Net loss $(1,471) $(1,542)
Adjustments to reconcile net loss to net cash (used in)
provided by operating activities:
Depreciation 1,046 1,018
Amortization of discounts and loan costs 23 23
Change in accounts:
Receivables and deposits (224) (152)
Other assets 43 23
Accounts payable (58) (55)
Tenant security deposit liabilities 3 24
Accrued property taxes 197 74
Accrued interest 344 1,462
Due to affiliates 229 157
Other liabilities 47 (186)
Net cash provided by operating activities 179 846
Cash flows from investing activities:
Property improvements and replacements (354) (363)
Net (deposits to) withdrawals from restricted escrows (35) 135
Net cash used in investing activities (389) (228)
Cash flows from financing activities:
Principal payments on notes payable (369) (229)
Advance from affiliate 150 --
Distribution to partners (7) --
Net cash used in financing activities (226) (229)
Net (decrease) increase in cash and cash equivalents (436) 389
Cash and cash equivalents at beginning of period 1,497 1,210
Cash and cash equivalents at end of period $ 1,061 $ 1,599
Supplemental disclosure of cash flow information:
Cash paid for interest $ 2,164 $ 1,054
See Accompanying Notes to Consolidated Financial Statements
e)
ANGELES PARTNERS XIV
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note A - Going Concern
The accompanying consolidated financial statements have been prepared assuming
Angeles Partners XIV (the "Partnership" or "Registrant") will continue as a
going concern. The Partnership continues to incur recurring operating losses and
suffers from inadequate liquidity.
The Partnership has unsecured working capital loans in the amount of
approximately $4,576,000 plus related accrued interest of approximately
$3,907,000 that are in default at September 30, 2001 as a result of non-payment
of interest and principal upon its maturity in November 1997. These loans were
payable to Angeles Acceptance Pool, L.P. ("AAP"). During the year ended December
31, 2000, AAP transferred ownership of the loans to Saticoy Investments Company,
LLC ("Saticoy"), a wholly owned entity of The PNL Companies. This indebtedness
is recourse to the Partnership. The Partnership does not have the means with
which to satisfy this obligation and Saticoy has a judgment against the
Partnership for this debt.
During the quarter ended June 30, 2001, the Managing General Partner signed a
forebearance agreement with Saticoy. The Managing General Partner agreed to
market Waterford Square Apartments for sale. The forebearance period began June
1, 2001 and ends the earlier of March 1, 2002 or the date Waterford Square
Apartments is sold. Upon the sale of Waterford Square Apartments, the
distributable sale proceeds, after deducting reasonable closing costs, will be
used to repay the first lien mortgage debt on the property and repay certain
AMIT debt. Saticoy has agreed to accept 68.75% of the remaining proceeds in full
satisfaction of its notes.
The Partnership realized a net loss of approximately $1,471,000 for the nine
months ended September 30, 2001. Angeles Realty Corporation II (the "Managing
General Partner") expects the Partnership to continue to incur such losses from
operations.
No other sources of additional financing have been identified by the
Partnership, nor does the Managing General Partner have any other plans to
remedy the liquidity problems the Partnership is currently experiencing. The
Managing General Partner anticipates that the Fox Crest Apartments and Waterford
Square Apartments will generate sufficient cash flows during 2001 to meet all
property operating expenses, property debt service requirements and to fund
capital expenditures. However, these cash flows will be insufficient to service
the Partnership indebtedness.
As a result, there is substantial doubt about the Partnership's ability to
continue as a going concern. The consolidated financial statements do not
include any adjustments to reflect the possible future effects on the
recoverability and classification of assets or amounts and classifications of
liabilities that may result from these uncertainties.
Note B - Basis of Presentation
The accompanying unaudited consolidated financial statements of the Partnership
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 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 consolidated financial statements include all
of the accounts of the Partnership and its 99% limited partnership interest in
Waterford Square Apartments, Ltd. The general partner of this partnership is the
Managing General Partner. The Managing General Partner may be removed by the
Registrant; therefore, this 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 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 C - 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 were paid or accrued to the Managing General Partner and
affiliates during each of the nine months ended September 30, 2001 and 2000:
2001 2000
(in thousands)
Property management fees (included in operating expense) $ 234 $ 210
Reimbursement for services of affiliates (included in
investment properties and general and administrative
expenses) 281 157
Due to affiliate 2,039 1,595
During the nine months ended September 30, 2001 and 2000, affiliates of the
Managing General Partner were entitled to receive 5% of gross receipts from both
of the Registrant's residential properties as compensation for providing
property management services. The Registrant paid to such affiliates
approximately $234,000 and $210,000 for the nine months ended September 30, 2001
and 2000, respectively.
Affiliates of the Managing General Partner were to receive reimbursements of
accountable administrative expenses amounting to approximately $281,000 and
$157,000 for the nine months ended September 30, 2001 and 2000, respectively.
The Partnership owed the affiliates approximately $2,039,000 and $1,595,000 at
September 30, 2001 and 2000, respectively. Included in the charges for the nine
months ended September 30, 2001 are approximately $126,000 of construction
service reimbursements.
During the third quarter of 2001, the Partnership received an advance from an
affiliate of the Managing General Partner in the amount of approximately
$150,000. Interest is charged at the prime rate plus 2%. Interest expense was
approximately $2,000 for the nine months ended September 30, 2001. There were no
loans from the Managing General Partner or associated interest during the nine
months ended September 30, 2000.
Angeles Mortgage Investment Trust ("AMIT") provided financing (the "AMIT Loans")
to the Partnership. Pursuant to a series of transactions, affiliates of the
Managing General Partner acquired ownership interests in AMIT. On September 17,
1998, AMIT was merged with and into Insignia Properties Trust ("IPT"), the
entity which controlled the Managing General Partner. Effective February 26,
1999, IPT was merged into AIMCO. Thus, AIMCO is the current holder of the AMIT
loans. The principal balances on the AMIT Loans total approximately $7,169,000
at September 30, 2001, accrue interest at a rate of 12.5% per annum and are
recourse to the Partnership. One of the three notes was paid in full during the
nine months ended September 30, 2001. One of the two remaining notes in the
amount of $2,404,000 originally matured in March 1998. The Managing General
Partner negotiated with AMIT to extend this indebtedness through March 2002. The
remaining note with a principal balance of approximately $4,765,000 matures in
March 2003. Total interest expense on the AMIT Loans was approximately
$1,129,000 and $1,085,000 for the nine months ended September 30, 2001 and 2000,
respectively. Accrued interest was approximately $4,972,000 at September 30,
2001.
In addition to its indirect ownership of the general partner interest in the
Partnership, AIMCO and its affiliates currently own 10,693 limited partnership
units in the Partnership representing 24.63% of the outstanding units at
September 30, 2001. 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 Managing General Partner. When voting on
matters, AIMCO would in all likelihood vote the Units it acquired in a manner
favorable to the interest of the Managing General Partner because of its
affiliation with the Managing General Partner.
Note D - Notes Payable
In November 1992, AAP, a Delaware limited partnership which controlled the
working capital loans previously provided by Angeles Capital Investment, Inc.
("ACII"), was organized. Angeles Corporation ("Angeles") is the 99% limited
partner of AAP and Angeles Acceptance Directives, Inc. ("AAD"), which was
wholly-owned by Insignia Properties Trust ("IPT"), was the 1% general partner of
AAP, until April 14, 1995. On April 14, 1995, as part of a settlement of claims
between affiliates of the Managing General Partner and Angeles, AAD resigned as
general partner of AAP and simultaneously received a 0.5% limited partner
interest in AAP. An affiliate of Angeles now serves as the general partner of
AAP.
The AAP working capital loans funded the Partnership's operating deficits in
prior years. Total indebtedness was approximately $4,576,000, plus accrued
interest of approximately $3,907,000, at September 30, 2001, with monthly
interest accruing at the prime rate plus two percent. Upon maturity on November
25, 1997, the Partnership did not have the means with which to satisfy this
maturing debt obligation. Total interest expense for this loan was approximately
$346,000 and $378,000 for the nine months ended September 30, 2001 and 2000,
respectively. During the year ended December 31, 2000, AAP transferred ownership
of the loans to Saticoy Investments Company, LLC ("Saticoy"), a wholly owned
entity of the PNL Companies, which is an unrelated party.
During the quarter ended June 30, 2001, the Managing General Partner signed a
forebearance agreement with Saticoy. The Managing General Partner agreed to
market Waterford Square Apartments for sale. The forebearance period began June
1, 2001 and ends the earlier of March 1, 2002 or the date Waterford Square
Apartments is sold. Upon the sale of Waterford Square Apartments, the
distributable sale proceeds, after deducting reasonable closing costs, will be
used to repay the first lien mortgage debt on the property and repay certain
AMIT debt. Saticoy has agreed to accept 68.75% of the remaining proceeds in full
satisfaction of its notes.
Note E - Distributions
For the nine months ended September 30, 2001, Waterford Square Apartments, Ltd.
(a limited partnership in which the Registrant owns a 99% interest) made a
surplus cash distribution of approximately $701,000 of which approximately
$7,000 was paid to the general partner of Waterford Square Apartments, Ltd. and
approximately $694,000 was paid to the Partnership and was eliminated in
consolidation. There were no distributions made for the nine month period ended
September 30, 2000.
Note F - 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 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 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 OPERATIONS
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 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
Waterford Square Apartments 96% 97%
Huntsville, Alabama
Fox Crest Apartments 98% 98%
Waukegan, Illinois
Results from Operations
The Partnership's net loss for the nine months ended September 30, 2001 was
approximately $1,471,000 compared to a net loss of approximately $1,542,000 for
the corresponding period in 2000. The Partnership recorded a net loss of
approximately $463,000 for the three months ended September 30, 2001 compared to
a net loss of approximately $552,000 for the corresponding period in 2000. The
decrease in net loss for the nine months ended September 30, 2001 was primarily
due to an increase in total revenues which was partially offset by an increase
in total expenses. The decrease in net loss for the three months ended September
30, 2001 was primarily due to an increase in total revenues and a decrease in
total expenses. The increase in total revenues for the three and nine month
periods ended September 30, 2001 was due to an increase in both rental income
and other income. Rental income increased due primarily to increased average
rental rates at both Waterford Square Apartments and Fox Crest Apartments, which
more than offset a slight decrease in occupancy at Waterford Square Apartments.
Other income increased due to increased interest income due to higher average
cash balances in interest bearing accounts, increased cable television income at
both of the Partnership's properties, and increased utilities reimbursements at
Fox Crest Apartments.
The increase in total expenses for the nine month period ended September 30,
2001 was primarily the result of increases in operating and depreciation
expenses. The decrease in total expenses for the three month period ended
September 30, 2001 was primarily the result of decreases in interest, property
tax, and general and administrative expenses partially offset by increases in
operating and depreciation expenses. The increase in operating expenses for the
three and nine month periods ended September 30, 2001 was due to increases in
payroll related expenses and management fees due to increased revenues at both
of the Partnership's properties and an increase in maintenance expenses
primarily at Waterford Square Apartments. The increase in depreciation expense
for the three and nine month periods ended September 30, 2001 is due to capital
improvements and replacements placed into service at the properties over the
past year. Interest expense decreased for the three month period ended September
30, 2001 due to an interest payment made on the Saticoy loan, the repayment of
one of the AMIT loans and payments made on the remaining AMIT loans. Property
tax expense decreased for the three month period ended September 30, 2001 due to
a refund received during 2001 from prior years taxes at Waterford Square
Apartments. General and administrative expenses decreased for the three and nine
months ended September 30, 2001 primarily due to a decrease in the cost of
services provided by the Managing General Partner and its affiliates as allowed
under the Partnership Agreement and a decrease in professional fees associated
with the administration of the Partnership partially offset by an increase in
legal expenses. 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.
As part of the ongoing business plan of the Partnership, the Managing General
Partner continues to monitor the rental market environment of each 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 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 Registrant had cash and cash equivalents of
approximately $1,061,000 as compared to approximately $1,599,000 at September
30, 2000. Cash and cash equivalents decreased approximately $436,000 since
December 31, 2000 due to approximately $389,000 of cash used in investing
activities and approximately $226,000 of cash used in financing activities
partially offset by approximately $179,000 of cash provided by operating
activities. Cash used in investing activities consisted of property improvements
and replacements and net deposits to escrows maintained by the mortgage lender.
Cash used in financing activities consisted primarily of payments of principal
on the mortgages encumbering the Registrant's properties and a principal payment
on the Waterford Square note payable to AMIT and, to a lesser extent, a
distribution to the Managing General Partner from Waterford Square Apartments,
Ltd. partially offset by an advance received from an affiliate. The Registrant
invests its working capital reserves in interest bearing accounts.
The accompanying consolidated financial statements have been prepared assuming
the Partnership will continue as a going concern. The Partnership continues to
incur recurring operating losses and suffers from inadequate liquidity. Recourse
indebtedness of approximately $4,576,000 plus accrued interest of approximately
$3,907,000 is in default at September 30, 2001, as a result of nonpayment of
interest and principal upon its maturity in November 1997. These loans were
payable to Angeles Acceptance Pool, L.P. ("AAP"). During the year ended December
31, 2000, AAP transferred ownership of the loans to Saticoy Investments Company,
LLC ("Saticoy"), a wholly owned entity of the PNL Companies. This indebtedness
is recourse to the Partnership.
During the quarter ended June 30, 2001, the Managing General Partner signed a
forebearance agreement with Saticoy Investments Company, LLC ("Saticoy"). The
Managing General Partner agreed to market Waterford Square Apartments for sale.
The forebearance period began June 1, 2001 and ends the earlier of March 1, 2002
or the date Waterford Square Apartments is sold. Upon the sale of Waterford
Square Apartments, the distributable sale proceeds, after deducting reasonable
closing costs, will be used to repay the first lien mortgage debt on the
property and repay certain AMIT debt. Saticoy has agreed to accept 68.75% of the
remaining proceeds in full satisfaction of its notes.
No other sources of additional financing have been identified by the
Partnership, nor does the Managing General Partner have any other plans to
remedy the liquidity problems the Partnership is currently experiencing. The
Managing General Partner anticipates that the Fox Crest Apartments and Waterford
Square Apartments will generate sufficient cash flows during 2001 to meet all
property operating expenses, property debt service requirements and to fund
capital expenditures. However, these cash flows will be insufficient to provide
debt service for the Partnership indebtedness. If the Managing General Partner
is unsuccessful in its efforts to restructure these loans, then it may be forced
to liquidate the Partnership.
As a result, there is substantial doubt about the Partnership's ability to
continue as a going concern. The financial statements do not include any
adjustments to reflect the possible future effects on the recoverability and
classification of assets or amounts and classifications of liabilities that may
result from these uncertainties.
With respect to the Partnership's two apartment complexes, 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 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
Registrant's properties are detailed below.
Waterford Square Apartments
The Partnership has budgeted, but is not limited to, approximately $219,000 of
capital improvements at Waterford Square Apartments for 2001 consisting
primarily of carpet and vinyl replacements, appliances, water heater
replacements, and air conditioning unit replacements. As of September 30, 2001,
the property has spent approximately $176,000 on capital improvements consisting
primarily of carpet and vinyl replacements, air conditioning unit replacements,
clubhouse renovations, water heater replacements, and appliances. These
improvements were funded from Partnership reserves and operating cash flow.
Fox Crest Apartments
The Partnership has budgeted, but is not limited to, approximately $296,000 of
capital improvements at Fox Crest Apartments for 2001 consisting primarily of
flooring replacements, roof replacement and water heater replacements. As of
September 30, 2001, the property has spent approximately $178,000 on capital
improvements consisting primarily of roof replacements, flooring replacements
and cabinet replacements. These improvements were funded from Partnership
reserves and operating cash flow.
The additional capital improvements planned for 2001 at the Partnership's
properties will be made only to the extent of cash available from operations and
Partnership reserves.
The existing first mortgage indebtedness, working capital loans and amounts due
to AMIT are thought to be in excess of the value of the properties. (Pursuant to
a series of transactions, affiliates of the Managing General Partner acquired
ownership interests in AMIT as follows: On September 17, 1998, AMIT was merged
with and into IPT and effective February 26, 1999, IPT was merged into AIMCO.
Accordingly, AIMCO is the current holder of the AMIT loans). One AMIT Note was
paid in full during the nine months ended September 30, 2001. One AMIT Note in
the aggregate amount of approximately $2,404,000 plus related accrued interest
at 12.5% per annum compounded monthly of approximately $720,000 matures in March
2002; this note is recourse to the Partnership only. This loan requires monthly
payments of excess cash flow, as defined in the terms of the promissory notes.
The Partnership's other remaining note to AMIT for approximately $4,765,000,
plus accrued interest at 12.5% per annum compounded monthly, is due March 2003
and does not require any payments until maturity. Accrued interest on this note
as of September 30, 2001 is approximately $4,252,000. The first mortgage loan
encumbering Waterford Square Apartments, which is guaranteed by HUD, is
scheduled to mature in November 2027. The first mortgage loan encumbering Fox
Crest Apartments is scheduled to mature in May 2003, at which time a balloon
payment of $5,445,000 is due. The Registrant is current in its payments on both
of these mortgages. The Managing General Partner will attempt to refinance such
indebtedness and/or sell the properties prior to such maturity dates. If the
properties cannot be refinanced or sold for a sufficient amount, the Registrant
will risk losing such properties through foreclosure.
For the nine months ended September 30, 2001, Waterford Square Apartments, Ltd.
(a limited partnership in which the Registrant owns a 99% interest) made a
surplus cash distribution of approximately $701,000 of which approximately
$7,000 was paid to the general partner of Waterford Square Apartments, Ltd. and
approximately $694,000 was paid to the Partnership and was eliminated in
consolidation. There were no distributions made for the nine month period 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 debt maturities, refinancings and/or property sales. The Registrant's
distribution policy is reviewed on a monthly basis. However, based on the
current default under the working capital loans it is unlikely that a
distribution will be made by the Registrant in the foreseeable future.
In addition to its indirect ownership of the general partner interest in the
Partnership, AIMCO and its affiliates currently own 10,693 limited partnership
units in the Partnership representing 24.63% of the outstanding units at
September 30, 2001. 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 Managing General Partner. When voting on
matters, AIMCO would in all likelihood vote the Units it acquired in a manner
favorable to the interest of the 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 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 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 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 XIV
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: