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 March 31, 2002
[ ] 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)
March 31, 2002
Assets
Cash and cash equivalents $ 1,249
Receivables and deposits 427
Restricted escrows 184
Other assets 289
Investment properties:
Land $ 2,243
Buildings and related personal property 26,734
28,977
Less accumulated depreciation (21,599) 7,378
$ 9,527
Liabilities and Partners' Deficit
Liabilities
Accounts payable $ 64
Tenant security deposit liabilities 129
Accrued property taxes 395
Accrued interest (including $4,984 in default) 9,797
Due to affiliates (Note C) 2,066
Other liabilities 269
Notes payable (including $6,981 in default) 28,837
Partners' Deficit
General partners $ (715)
Limited partners (43,411 units issued and
outstanding) (31,315) (32,030)
$ 9,527
See Accompanying Notes to Consolidated Financial Statements
b)
ANGELES PARTNERS XIV
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(in thousands, except unit data)
Three Months Ended
March 31,
2002 2001
Revenues:
Rental income $ 1,278 $ 1,243
Other income 66 89
Total revenues 1,344 1,332
Expenses:
Operating 458 447
General and administrative 83 76
Depreciation 355 348
Interest 828 883
Property taxes 104 110
Total expenses 1,828 1,864
Net loss $ (484) $ (532)
Net loss allocated to general partners (1%) $ (5) $ (5)
Net loss allocated to limited partners (99%) (479) (527)
$ (484) $ (532)
Net loss per limited partnership unit $(11.03) $(12.14)
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, 2001 43,411 $ (710) $(30,836) $(31,546)
Net loss for the three months
ended March 31, 2002 -- (5) (479) (484)
Partners' deficit
at March 31, 2002 43,411 $ (715) $(31,315) $(32,030)
See Accompanying Notes to Consolidated Financial Statements
d)
ANGELES PARTNERS XIV
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
Three Months Ended
March 31,
2002 2001
Cash flows from operating activities:
Net loss $ (484) $ (532)
Adjustments to reconcile net loss to net cash provided
by operating activities:
Depreciation 355 348
Amortization of loan costs 6 8
Change in accounts:
Receivables and deposits (141) (115)
Other assets (12) 11
Accounts payable 14 (57)
Tenant security deposit liabilities -- 7
Accrued property taxes 104 110
Accrued interest 341 514
Due to affiliates (24) 54
Other liabilities 110 20
Net cash provided by operating activities 269 368
Cash flows from investing activities:
Property improvements and replacements (83) (51)
Net deposits to restricted escrows (27) (27)
Net cash used in investing activities (110) (78)
Cash flows used in financing activities:
Principal payments on notes payable (87) (81)
Net increase in cash and cash equivalents 72 209
Cash and cash equivalents at beginning of period 1,177 1,497
Cash and cash equivalents at end of period $ 1,249 $ 1,706
Supplemental disclosure of cash flow information:
Cash paid for interest $ 465 $ 347
At March 31, 2002 and December 31, 2001, approximately $79,000 of property
improvements and replacements were included in Due to affiliates.
See Accompanying Notes to Consolidated Financial Statements
e)
ANGELES PARTNERS XIV
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note A - Going Concern
The accompanying unaudited 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
$4,065,000 that is in default at March 31, 2002 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.
In addition the Partnership has two notes which are recourse to the Partnership
and are owed to an affiliate of Angeles Realty Corporation II (the "Managing
General Partner"). One of the two notes totaling $2,405,000 originally matured
in March 1998. The Managing General Partner negotiated with the holder of the
note to extend this indebtedness through March 2002. This loan in the amount of
$2,405,000 plus accrued interest of approximately $919,000 is in default at
March 31, 2002 as a result of non-payment of interest and principal upon its
maturity in March 2002. It is anticipated that this indebtedness will be repaid
with proceeds from the sale of Waterford Square Apartments (see below). If the
Partnership is unable to sell Waterford Square Apartments by June 30, 2002, the
Managing General Partner will commence negotiations with the current holder to
extend this indebtedness. The remaining note with a principal balance of
approximately $4,765,000 matures in March 2003.
During the year ended December 31, 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 was to end the earlier of March 1, 2002 or the date Waterford Square
Apartments was sold. The Managing General Partner and Saticoy negotiated an
extension of the forebearance agreement until April 1, 2002. Subsequently, the
Managing General Partner and Saticoy negotiated an additional extension of the
forebearance agreement until July 1, 2002. The extensions have been granted to
allow the Partnership time to finalize a contract for the sale of Waterford
Square Apartments. 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
Angeles Mortgage Investment Trust ("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 $484,000 for the three
months ended March 31, 2002. The Managing General Partner expects the
Partnership to continue to incur such losses from operations. The Partnership
generated cash from operations of approximately $269,000 during the three months
ended March 31, 2002; however, this was primarily the result of accruing
interest of approximately $341,000 on its indebtedness.
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 2002 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 of the above, 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. The Managing General Partner of the
Partnership is an affiliate of Apartment Investment and Management Company
("AIMCO"), a publicly traded real estate investment trust. 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 month period ended March 31, 2002 are not
necessarily indicative of the results that may be expected for the fiscal year
ending December 31, 2002. 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, 2001.
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.
As compensation for providing property management services, affiliates of the
Managing General Partner were entitled to receive 5% of gross receipts from
Foxcrest Apartments during the three months ended March 31, 2002 and 2001, and
6% of gross receipts from Waterford Square Apartments for the three months ended
March 31, 2001, and 7.82% of gross receipts for the three months ended March 31,
2002. The Registrant paid to such affiliates approximately $89,000 and $72,000
for the three months ended March 31, 2002 and 2001, respectively, which are
included in operating expenses.
Affiliates of the Managing General Partner were eligible to receive
reimbursements of accountable administrative expenses amounting to approximately
$53,000 and $54,000 for the three months ended March 31, 2002 and 2001,
respectively, which are included in general and administrative expenses. The
Partnership owed the affiliates approximately $1,908,000 and $1,714,000 at March
31, 2002 and 2001, respectively, for reimbursement of accountable administrative
expenses. These amounts are included in Due to affiliates at March 31, 2002 and
2001.
In accordance with the Partnership Agreement, the Managing General Partner has
made advances to the Partnership. At March 31, 2002, the amount of the
outstanding loan and accrued interest was approximately $158,000, and is
included in Due to affiliates at March 31, 2002. Interest is charged at the
prime rate plus 2%. Interest expense was approximately $3,000 for the three
months ended March 31, 2002. There were no loans from the Managing General
Partner or associated interest for the three months ended March 31, 2001.
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 $7,170,000 at March 31, 2002, accrue interest at
a rate of 12.5% per annum and are recourse to the Partnership. One of the two
notes totaling $2,405,000 originally matured in March 1998. The Managing General
Partner negotiated with AMIT to extend this indebtedness through March 2002. The
Partnership is currently in default with respect to this note as a result of
non-payment of interest and principal upon its maturity in March 2002. It is
anticipated that this indebtedness will be repaid with proceeds from the sale of
Waterford Square Apartments upon its sale. If the Partnership is unable to sell
Waterford Square Apartments by June 30, 2002, the Managing General Partner will
commence negotiations with AIMCO to extend this indebtedness. 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 $389,000 and $382,000
for the three months ended March 31, 2002 and 2001, respectively. Total interest
paid on the AMIT Loans was approximately $125,000 for the three months ended
March 31, 2002. No such payments were made during the three months ended March
31, 2001. Accrued interest was approximately $5,618,000 at March 31, 2002.
Beginning in 2001, the Partnership began insuring its properties up to certain
limits through coverage provided by AIMCO which is generally self-insured for a
portion of losses and liabilities related to workers compensation, property
casualty and vehicle liability. The Partnership insures its properties above the
AIMCO limits through insurance policies obtained by AIMCO from insurers
unaffiliated with the Managing General Partner. During the three months ended
March 31, 2002 and 2001, the Partnership was charged by AIMCO and its affiliates
approximately $68,000 and $56,000, respectively, for insurance coverage and fees
associated with policy claims administration.
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 $4,065,000, at March 31, 2002, 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. This indebtedness remains in default at March 31, 2002. Total
interest expense for this loan was approximately $76,000 and $132,000 for the
three months ended March 31, 2002 and 2001, 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 year ended December 31, 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 was to end the earlier of March 1, 2002 or the date Waterford Square
Apartments was sold. The Managing General Partner and Saticoy negotiated an
extension of the forebearance agreement until April 1, 2002. Subsequently, the
Managing General Partner and Saticoy negotiated an additional extension of the
forebearance agreement until July 1, 2002. The extensions have been granted to
allow the Partnership time to finalize a contract for the sale of Waterford
Square Apartments. 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 - 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 Managing 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 was heard on December 11, 2001.
On February 2, 2002, the Court served its order granting in part the demurrer.
The Court has dismissed without leave to amend certain of the plaintiffs'
claims. On February 11, 2002, plaintiffs filed a motion seeking to certify a
putative class comprised of all non-affiliated persons who own or have owned
units in the partnerships. The Managing General Partner and affiliated
defendants oppose the motion. On April 29, 2002, the Court heard argument on the
motion and ordered further briefing after which time the matter will be taken
under submission. 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. On December 11, 2001, the court heard argument on
the motions and took the matters under submission. On February 4, 2002, the
Court served notice of its order granting defendants' motion to strike the
Heller complaint as a violation of its July 10, 2001 order in the Nuanes action.
On March 27, 2002, the plaintiffs filed a notice appealing the order striking
the complaint.
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 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 properties consist of two apartment complexes. The
following table sets forth the average occupancy of the properties for the three
months ended March 31, 2002 and 2001:
Average Occupancy
Property 2002 2001
Waterford Square Apartments 97% 95%
Huntsville, Alabama
Fox Crest Apartments 96% 97%
Waukegan, Illinois
Results of Operations
The Partnership's net loss for the three months ended March 31, 2002 was
approximately $484,000, compared to a net loss of approximately $532,000 for the
three months ended March 31, 2001. The decrease in net loss is due to a decrease
in total expenses, and to a lesser extent, an increase in total revenues. Total
expenses decreased primarily due to a decrease in interest expense, which was
partially offset by small increases in operating and general and administrative
expenses. Interest expense decreased due to scheduled principal payments made on
the properties' mortgages, the repayment during the past twelve months of one of
the AMIT loans, and payments made on the remaining AMIT loans. Operating expense
increased primarily due to increases in utilities, payroll related expenses, and
management fees as a result of increased rental income at both of the
Partnership's investment properties. The increase in operating expense was
partially offset by a decrease in maintenance expense at both properties.
Depreciation expense and property tax expense remained relatively constant for
the comparable periods.
General and administrative expenses increased primarily due to an increase in
legal expenses related to extending the terms of the various Partnership debt.
Included in general and administrative expenses at both March 31, 2002 and 2001
are management reimbursements to the Managing General Partner allowed under the
Partnership Agreement, costs associated with the quarterly and annual
communications with investors and regulatory agencies and the annual audit
required by the Partnership Agreement.
The increase in total revenues is due to an increase in rental income, which was
partially offset by a decrease in other income. Rental income increased
primarily due to an increase in occupancy at Waterford Square Apartments and an
increase in the average rental rate at both Fox Crest Apartments and Waterford
Square Apartments, partially offset by a decrease in occupancy at Fox Crest
Apartments. The decrease in other income is primarily due to a decrease in
interest income, as a result of lower average cash balances in interest bearing
accounts.
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 March 31, 2002, the Registrant had cash and cash equivalents of approximately
$1,249,000 as compared to approximately $1,706,000 at March 31, 2001. The
increase in cash and cash equivalents of approximately $72,000 for the three
months ended March 31, 2002, from the Registrant's year ended December 31, 2001,
is due to approximately $269,000 of cash provided by operating activities,
partially offset by approximately $110,000 of cash used in investing activities
and approximately $87,000 of cash used in financing activities. Cash used in
investing activities consisted of property improvements and replacements and net
deposits to restricted escrow accounts maintained by the mortgage lender. Cash
used in financing activities consisted of payments of principal on the mortgages
encumbering the Registrant's properties. The Registrant invests its working
capital reserves in interest bearing accounts.
The accompanying unaudited 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 $4,065,000 is in default at March 31, 2002, 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.
In addition the Partnership has two notes which are recourse to the Partnership
and are owed to an affiliate of Angeles Realty Corporation II (the "Managing
General Partner"). One of the two notes totaling $2,405,000 originally matured
in March 1998. The Managing General Partner negotiated with the holder of the
note to extend this indebtedness through March 2002. This loan in the amount of
$2,405,000 plus accrued interest of approximately $919,000 is in default at
March 31, 2002 as a result of non-payment of interest and principal upon its
maturity in March 2002. It is anticipated that this indebtedness will be repaid
with proceeds from the sale of Waterford Square Apartments (see below). If the
Partnership is unable to sell Waterford Square Apartments by June 30, 2002, the
Managing General Partner will commence negotiations with the current holder to
extend this indebtedness. The remaining note with a principal balance of
approximately $4,765,000 matures in March 2003.
During the year ended December 31, 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 was to end the earlier of March 1, 2002 or the date Waterford Square
Apartments was sold. The Managing General Partner and Saticoy negotiated an
extension of the forebearance agreement until April 1, 2002. Subsequently, the
Managing General Partner and Saticoy negotiated an additional extension of the
forebearance agreement until July 1, 2002. The extensions have been granted to
allow the Partnership time to finalize a contract for the sale of Waterford
Square Apartments. 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 Fox Crest Apartments and Waterford
Square Apartments will generate sufficient cash flows during 2002 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 unsecured 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 of the above, 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 $170,000 of
capital improvements at Waterford Square Apartments for 2002 consisting
primarily of floor covering and appliance replacements, cabinet upgrades and air
conditioning unit replacements. As of March 31, 2002, the property has spent
approximately $56,000 on capital improvements consisting primarily of floor
covering and appliance replacements. These improvements were funded from
operations.
Fox Crest Apartments
The Partnership has budgeted, but is not limited to, approximately $179,000 of
capital improvements at Fox Crest Apartments for 2002 consisting primarily of
roof replacement, fencing upgrades, and floor covering replacement. As of March
31, 2002, the property has spent approximately $27,000 on capital improvements
consisting primarily of cabinet upgrades and floor covering replacement. These
improvements were funded from operations.
The additional capital improvements planned for 2002 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; 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 2001. One AMIT Note in the aggregate amount of approximately
$2,405,000 plus related accrued interest at 12.5% per annum compounded monthly
of approximately $919,000 matured 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 note. The Partnership is currently in
default with respect to this note as a result of non-payment of interest and
principal upon its maturity in March 2002. It is anticipated that this
indebtedness will be repaid with proceeds from the sale of Waterford Square
Apartments upon its sale. If the Partnership is unable to sell Waterford Square
Apartments by June 30, 2002, the Managing General Partner will commence
negotiations with AIMCO to extend this indebtedness. 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 March 31, 2002 is
approximately $4,699,000. The first mortgage loan encumbering Waterford Square
Apartments, which is guaranteed by HUD, is scheduled to mature 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. With respect
to Fox Crest Apartments, the Managing General Partner will attempt to refinance
such indebtedness and/or sell the property prior to such maturity date. If the
property cannot be refinanced or sold for a sufficient amount, the Registrant
will risk losing such property through foreclosure.
There were no distributions made during either of the three month periods ended
March 31, 2002 or 2001. 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
cash available for distribution is reviewed on a monthly basis. However, based
on the current default under the working capital loans, the current default of
one AMIT loan, the pending maturity of the other AMIT loan and the first
mortgage loan on Fox Crest Apartments, 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 owned 10,788 limited partnership units in
the Partnership representing 24.85% of the outstanding units at March 31, 2002.
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 Managing 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 was heard on December 11, 2001.
On February 2, 2002, the Court served its order granting in part the demurrer.
The Court has dismissed without leave to amend certain of the plaintiffs'
claims. On February 11, 2002, plaintiffs filed a motion seeking to certify a
putative class comprised of all non-affiliated persons who own or have owned
units in the partnerships. The Managing General Partner and affiliated
defendants oppose the motion. On April 29, 2002, the Court heard argument on the
motion and ordered further briefing after which time the matter will be taken
under submission. 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. On December 11, 2001, the court heard argument on
the motions and took the matters under submission. On February 4, 2002, the
Court served notice of its order granting defendants' motion to strike the
Heller complaint as a violation of its July 10, 2001 order in the Nuanes action.
On March 27, 2002, the plaintiffs filed a notice appealing the order striking
the complaint.
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 March 31, 2002.
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: May 13, 2002