UNITED STATES
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 June 30, 2003
[ ] 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 0-11767
ANGELES INCOME PROPERTIES, LTD. II
(Exact name of registrant as specified in its charter)
California 95-3793526
(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)
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
ANGELES INCOME PROPERTIES, LTD. II
CONSOLIDATED BALANCE SHEET
(Unaudited)
(in thousands, except unit data)
June 30, 2003
Assets
Cash and cash equivalents $ 397
Receivables and deposits 424
Restricted escrows 43
Other assets 717
Investment properties:
Land $ 1,984
Buildings and related personal property 33,627
35,611
Less accumulated depreciation (28,982) 6,629
$ 8,210
Liabilities and Partners' Deficit
Liabilities
Accounts payable $ 25
Tenant security deposit liabilities 254
Accrued property taxes 178
Other liabilities 298
Due to affiliates 110
Mortgage notes payable 25,383
Partners' Deficit
General partners $ (618)
Limited partners (99,804 units issued and
outstanding) (17,420) (18,038)
$ 8,210
See Accompanying Notes to Consolidated Financial Statements
ANGELES INCOME PROPERTIES, LTD. II
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(in thousands, except per unit data)
Three Months Ended Six Months Ended
June 30, June 30,
2003 2002 2003 2002
Revenues:
Rental income $ 1,555 $ 1,737 $ 3,059 $ 3,429
Other income 115 117 212 271
Total revenues 1,670 1,854 3,271 3,700
Expenses:
Operating 486 549 1,083 1,089
General and administrative 86 74 179 187
Depreciation 481 485 957 969
Interest 459 493 933 980
Property taxes 189 170 374 337
Loss on early extinguishment of debt
(Note C) 58 -- 58 --
Total expenses 1,759 1,771 3,584 3,562
Net (loss) income $ (89) $ 83 $ (313) $ 138
Net (loss) income allocated to general
partners $ (1) $ 1 $ (3) $ 1
Net (loss) income allocated to limited
partners (88) 82 (310) 137
$ (89) $ 83 $ (313) $ 138
Net (loss) income per limited partnership
unit $ (0.88) $ 0.82 $ (3.10) $ 1.37
Distributions per limited partnership unit $ 12.24 $ 1.90 $ 14.30 $ 1.90
See Accompanying Notes to Consolidated Financial Statements
ANGELES INCOME PROPERTIES, LTD. II
CONSOLIDATED STATEMENT OF CHANGES IN PARTNERS' DEFICIT
(Unaudited)
(in thousands, except unit data)
Limited
Partnership General Limited
Units Partners Partners Total
Original capital contributions 100,000 $ 1 $ 50,000 $ 50,001
Partners' deficit at
December 31, 2002 99,784 $ (601) $(15,683) $(16,284)
Distributions to partners -- (14) (1,427) (1,441)
Units recorded as abandoned
in error (Note D) 20 -- -- --
Net loss for the six months
ended June 30, 2003 -- (3) (310) (313)
Partners' deficit at
June 30, 2003 99,804 $ (618) $(17,420) $(18,038)
See Accompanying Notes to Consolidated Financial Statements
ANGELES INCOME PROPERTIES, LTD. II
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
Six Months Ended
June 30,
2003 2002
Cash flows from operating activities:
Net (loss) income $ (313) $ 138
Adjustments to reconcile net (loss) income to net cash
provided by operating activities:
Depreciation 957 969
Amortization of mortgage discounts and loan costs 36 46
Loss on early extinguishment of debt 58 --
Change in accounts:
Receivables and deposits (115) 19
Other assets (65) (88)
Accounts payable (28) (42)
Tenant security deposit liabilities 18 (4)
Accrued property taxes 35 69
Due to affiliates 5 46
Other liabilities 34 39
Net cash provided by operating activities 622 1,192
Cash flows from investing activities:
Property improvements and replacements (241) (388)
Net withdrawals from restricted escrows 105 14
Net cash used in investing activities (136) (374)
Cash flows from financing activities:
Payments on mortgage notes payable (275) (253)
Distributions to partners (1,441) (192)
Proceeds from refinance of mortgage note payable 6,175 --
Repayment of mortgage note payable (5,017) --
Repayment of advances from affiliates -- (47)
Loan costs paid (172) (34)
Prepayment penalty paid (28) --
Net cash used in financing activities (758) (526)
Net (decrease) increase in cash and cash equivalents (272) 292
Cash and cash equivalents at beginning of period 669 150
Cash and cash equivalents at end of period $ 397 $ 442
Supplemental disclosure of cash flow information:
Cash paid for interest $ 859 $ 933
See Accompanying Notes to Consolidated Financial Statements
ANGELES INCOME PROPERTIES, LTD. II
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note A - Basis of Presentation
The accompanying unaudited consolidated financial statements of Angeles Income
Properties, Ltd. II (the "Partnership" or "Registrant") have been prepared in
accordance with generally accepted accounting principles for interim financial
information and with the instructions to Form 10-QSB and Item 310(b) of
Regulation S-B. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of Angeles Realty Corporation II (the
"Managing General Partner"), which is wholly-owned by Apartment Investment and
Management Company ("AIMCO"), a publicly traded real estate investment trust,
all adjustments (consisting of normal recurring accruals) considered necessary
for a fair presentation have been included. Operating results for the three and
six month periods ended June 30, 2003, are not necessarily indicative of the
results that may be expected for the fiscal year ending December 31, 2003. 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, 2002.
Effective April 1, 2002, the Partnership adopted Statement of Financial
Accounting Standards ("SFAS") No. 145, "Rescission of FASB Statements No. 4, 44
and 64" which requires that gains and losses from extinguishment of debt should
only be classified as extraordinary if they are unusual in nature and occur
infrequently. Neither of these criteria applies to the Partnership. As a result,
the accompanying consolidated statements of operations reflect the loss on early
extinguishment of debt at Georgetown Apartments (see "Note C") in operations
rather than as an extraordinary item.
Note B - Transactions with Affiliated Parties
The Partnership has no employees and is dependent on the Managing General
Partner and its affiliates for the management and administration of all
Partnership activities. The Partnership Agreement provides for certain payments
to affiliates for services and reimbursement of certain expenses incurred by
affiliates on behalf of the Partnership.
Affiliates of the Managing General Partner are entitled to receive 5% of gross
receipts from all of the Partnership's properties for providing property
management services. The Partnership paid to such affiliates approximately
$162,000 and $185,000 for the six months ended June 30, 2003 and 2002,
respectively, which are included in operating expenses.
Affiliates of the Managing General Partner received reimbursement of accountable
administrative expenses amounting to approximately $86,000 and $118,000 for the
six months ended June 30, 2003 and 2002, respectively, which are included in
general and administrative expenses and investment properties. Included in these
amounts are fees related to construction management services provided by an
affiliate of the Managing General Partner of approximately $10,000 and $16,000
for the six months ended June 30, 2003 and 2002, respectively. The construction
management service fees are calculated based on a percentage of current year
additions to investment properties.
The Partnership Agreement provides for a fee equal to 10% of "Net cash flow from
operations," as defined in the Partnership Agreement to be paid to the Managing
General Partner for executive and administrative management services. The
Managing General Partner earned fees of approximately $15,000 and $48,000 for
the six months ended June 30, 2003 and 2002, respectively, which is included in
general and administrative expenses. At June 30, 2003 the balance due to the
Managing General Partner for these fees is approximately $110,000, which are
included in Due to affiliates on the accompanying consolidated balance sheet.
In accordance with the Partnership Agreement, during 2001 the Managing General
Partner loaned the Partnership funds for operating expenses at Landmark
Apartments. During the six months ended June 30, 2002 this loan was repaid in
full by the Partnership. Interest was charged at the prime rate plus 2%.
Interest expense was approximately $1,000 for the six months ended June 30,
2002. There were no loans from the Managing General Partner or associated
interest expense during the six months ended June 30, 2003.
Pursuant to the Partnership Agreement, the Managing General Partner is entitled
to receive a distribution equal to 3% of the aggregate disposition price of sold
properties. The Partnership paid a distribution of approximately $86,000 to the
Managing General Partner related to the sale of Atlanta Crossing Shopping Center
in March 2000. The right to receive payment for this amount is subordinate to
the right of the limited partners to receive their original capital
contributions plus a cumulative preferred return of 6% per annum of their
adjusted capital investment, as defined in the Partnership Agreement. If the
limited partners have not received these returns when the Partnership
terminates, the Managing General Partner will return this amount to the
Partnership.
The Partnership paid an affiliate of the Managing General Partner approximately
$62,000 for loan costs related to the refinancing of Georgetown Apartments
during the six months ended June 30, 2003. These costs were capitalized and are
included in other assets on the accompanying consolidated balance sheet.
The Partnership insures 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 six months ended June 30, 2003 and 2002,
the Partnership was charged by AIMCO and its affiliates approximately $86,000
and $104,000, respectively, for insurance coverage and fees associated with
policy claims administration.
Note C - Refinancing of Mortgage Notes Payable
On May 21, 2003, the Partnership refinanced the mortgages encumbering Georgetown
Apartments. The refinancing replaced the existing mortgages of approximately
$5,017,000 with a new mortgage in the amount of $6,175,000. Total capitalized
loan costs were approximately $172,000 during the six months ended June 30,
2003. These costs included approximately $62,000 in fees payable to the Managing
General Partner. The Partnership recognized a loss on the early extinguishment
of debt of approximately $58,000 during the six months ended June 30, 2003, due
to the write off of unamortized loan costs and debt discounts and the payment of
a prepayment penalty.
Initially the May 21, 2003 refinancing of Georgetown Apartments was under an
interim credit facility ("Interim Credit Facility") that also provided for the
refinancing of several other properties. The Interim Credit Facility created
separate loans for each property refinanced thereunder, which loans were not
cross-collateralized or cross-defaulted with each other. During the term of the
Interim Credit Facility, Georgetown Apartments was required to make
interest-only payments. The first month's interest rate for Georgetown
Apartments was 2.78%.
As of June 1, 2003, the loan on Georgetown Apartments was assumed by a different
lender. The credit facility ("Permanent Credit Facility") with the new lender
has a maturity of five years with an option for the Partnership to elect one
five-year extension. This Permanent Credit Facility also created separate loans
for each property refinanced thereunder, which loans are not
cross-collateralized or cross-defaulted with each other. Each note under this
Permanent Credit Facility is initially a variable rate loan, and after three
years the Partnership has the option of converting the note to a fixed rate
loan. The interest rate on the variable rate loans is 85 basis points over the
Fannie Mae discounted mortgage-backed security index (2.06% per annum at June 1,
2003), and the rate resets monthly. Each loan automatically renews at the end of
each month. In addition, monthly principal payments are required based on a
30-year amortization schedule, using the interest rate in effect during the
first month that the property is financed by the Permanent Credit Facility. The
loans may be prepaid without penalty.
Note D - Units Abandoned in Error
During the six months ended June 30, 2003, the Partnership discovered that
twenty limited partnership Units that had previously been reported as abandoned
were actually not abandoned. The Units were reinstated as of January 1, 2003 and
back distributions of approximately $4,000 were paid to the unitholder during
the six months ended June 30, 2003.
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
purported to assert claims on behalf of a class of limited partners and
derivatively on behalf of a number of limited partnerships (including the
Partnership) that 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 that 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 sought 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 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 opposed the
motion. On April 29, 2002, the Court held a hearing on plaintiffs' motion for
class certification and took the matter under submission after further briefing,
as ordered by the court, was submitted by the parties. On July 10, 2002, the
Court entered an order vacating the trial date of January 13, 2003 (as well as
the pre-trial and discovery cut-off dates) and stayed the case in its entirety
through November 7, 2002 so that the parties could have an opportunity to
discuss settlement. On October 30, 2002, the court entered an order extending
the stay in effect through January 10, 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 Heller action was brought as a purported
derivative action, and asserted 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. Before completing
briefing on the appeal, the parties stayed further proceedings in the appeal in
light of a settlement.
On January 8, 2003, the parties filed a Stipulation of Settlement in proposed
settlement of the Nuanes action and the Heller action described below.
In general terms, the proposed settlement provides for certification for
settlement purposes of a settlement class consisting of all limited partners in
this Partnership and others (the "Partnerships") as of December 20, 2002, the
dismissal with prejudice and release of claims in the Nuanes and Heller
litigation, payment by AIMCO of $9.9 million (which shall be distributed to
settlement class members after deduction of attorney fees and costs of class
counsel and certain costs of settlement) and up to $1 million toward the cost of
independent appraisals of the Partnerships' properties by a Court appointed
appraiser. An affiliate of the Managing General Partner has also agreed to make
a tender offer to purchase all of the partnership interests in the Partnerships
within one year of final approval, if it is granted, and to provide partners
with the independent appraisals at the time of these tenders. The proposed
settlement also provided for the limitation of the allowable costs which the
Managing General Partner or its affiliates will charge the Partnerships in
connection with this litigation and imposes limits on the class counsel fees and
costs in this litigation. On April 11, 2003, notice was distributed to limited
partners providing the details of the proposed settlement.
On June 13, 2003, the Court granted final approval of the settlement and entered
judgment in both the Nuanes and Heller actions.
The Managing General Partner does not anticipate that any costs to the
Partnership, 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 report contain certain forward-looking statements,
including, without limitation, statements regarding future financial performance
and the effect of government regulations. Actual results may differ materially
from those described in the forward-looking statements and will be affected by a
variety of risks and factors including, without limitation: national and local
economic conditions; the terms of governmental regulations that affect the
Registrant and interpretations of those regulations; the competitive environment
in which the Registrant operates; financing risks, including the risk that cash
flows from operations may be insufficient to meet required payments of principal
and interest; real estate risks, including variations of real estate values and
the general economic climate in local markets and competition for tenants in
such markets; litigation, including costs associated with prosecuting and
defending claims and any adverse outcomes, and possible environmental
liabilities. Readers should carefully review the Registrant's financial
statements and the notes thereto, as well as the risk factors described in the
documents the Registrant files from time to time with the Securities and
Exchange Commission.
The Partnership's investment properties consist of three apartment complexes.
The following table sets forth the average occupancy of the properties for the
six month periods ended June 30, 2003 and 2002:
Average Occupancy
Property 2003 2002
Deer Creek Apartments 95% 95%
Plainsboro, New Jersey
Georgetown Apartments 94% 96%
South Bend, Indiana
Landmark Apartments 84% 92%
Raleigh, North Carolina
The Managing General Partner attributes the decrease in occupancy at Landmark
Apartments to increased layoffs and resulting unemployment in the population
typically served by this property, lower mortgage rates, and a slow rental
market.
Results of Operations
The Partnership's net loss for the six months ended June 30, 2003, was
approximately $313,000 compared to net income of approximately $138,000 for the
six months ended June 30, 2002. The Partnership's net loss for the three month
period ended June 30, 2003 was approximately $89,000 as compared to net income
of $83,000 for the three month period ended June 30, 2002. The decrease in net
income for the three and six months ended June 30, 2003 was due primarily to a
decrease in total revenues. During the six months ended June 30, 2003, total
expenses increased slightly and during the three months ended June 30, 2003,
total expenses decreased slightly.
Total revenues decreased for the three and six months ended June 30, 2003 due to
decreases in rental and other income. Rental income decreased due to decreases
in occupancy at Landmark and Georgetown Apartments, and decreases in average
rental rates, increases in concessions and increases in bad debt expenses at all
of the Partnership's properties. Other income decreased primarily due to
decreases in utility reimbursements and lease cancellation fees at Deer Creek
Apartments.
Total expenses increased for the six months ended June 30, 2003 due to a loss on
early extinguishment of debt and an increase in property tax expense, partially
offset by a decrease in interest expense. For the three months ended June 30,
2003 total expenses decreased slightly due to decreases in operating and
interest expenses partially offset by a loss on early extinguishment of debt and
an increase in property tax expense. The loss on early extinguishment of debt
during the three and six months ended June 30, 2003 is related to the
refinancing of the mortgage encumbering Georgetown Apartments in May 2003 as
discussed in "Liquidity and Capital Resources".
Effective April 1, 2002, the Partnership adopted Statement of Financial
Accounting Standards ("SFAS") No. 145, "Rescission of FASB Statements No. 4, 44
and 64" which requires that gains and losses from extinguishment of debt should
only be classified as extraordinary if they are unusual in nature and occur
infrequently. Neither of these criteria applies to the Partnership. As a result,
the accompanying consolidated statements of operations reflect the loss on early
extinguishment of debt at Georgetown Apartments (as discussed below) in
operations rather than as an extraordinary item.
For the three months ended June 30, 2003, operating expenses decreased primarily
due to decreases in maintenance expenses, management fees and property expenses
partially offset by an increase in administrative expenses. Maintenance expenses
decreased due to a decrease in contract work at all of the Partnership's
properties. Management fees decreased primarily due to decreased rental revenues
at Deer Creek and Landmark Apartments. Property expenses decreased due to
decreases in payroll and related benefits expenses at all of the Partnership's
properties and decreases in utilities at Deer Creek Apartments, which was
partially offset by increases in utilities at Landmark Apartments.
Administrative expenses increased primarily due to an increase in temporary
agency help at Landmark Apartments and an increase in legal fees at Georgetown
and Deer Creek Apartments. Property tax expenses increased during the three and
six months ended June 30, 2003 primarily at Georgetown Apartments which are
located in Indiana. During 2003, Indiana adjusted its methodology for assessing
property taxable values and tax rates, which has resulted in a significant
increase in property tax expense. Interest expense decreased during the three
and six months ended June 30, 2003 due to principal payments made on the
mortgages encumbering the Partnership's properties which decreased the debt
balance and the refinancing of Georgetown Apartments in May 2003 at a lower
interest rate.
General and administrative expenses decreased slightly during the six months
ended June 30, 2003 primarily due to reduced costs of services included in the
management reimbursements paid to the Managing General Partner as allowed under
the Partnership Agreement and a decrease in the management fee due to the
Managing General partner based on cash flow as allowed in the Partnership
Agreement partially offset by a new partner tax implemented in New Jersey.
General and administrative expenses increased slightly for the three months
ended June 30, 2003 due to the new partner tax implemented in New Jersey
partially offset by reduced costs of services included in the management
reimbursements paid to the Managing General Partner and reduced management fees
due to the Managing General Partner based on cash flow as allowed in the
Partnership Agreement. Also included in general and administrative expenses at
both June 30, 2003 and 2002 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 monitors 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
expense. 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 June 30, 2003, the Partnership had cash and cash equivalents of approximately
$397,000 compared to approximately $442,000 at June 30, 2002. The decrease in
cash and cash equivalents of approximately $272,000 since December 31, 2002 is
due to approximately $758,000 of cash used in financing activities and
approximately $136,000 of cash used in investing activities partially offset by
approximately $622,000 of cash provided by operating activities. Cash used in
financing activities consisted of distributions to the partners, payments of
principal made on the mortgages encumbering the Partnership's properties,
repayment of mortgage notes payable due to the refinancing of Georgetown
Apartments and loan costs and prepayment penalties paid, partially offset by
proceeds received in the refinancing of the mortgage encumbering Georgetown
Apartments. Cash used in investing activities consisted of property improvements
and replacements partially offset by net withdrawals from restricted escrow
accounts maintained by the mortgage lenders. 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 various properties to adequately maintain the
physical assets and other operating needs of the Partnership and to comply with
Federal, state, and local legal and regulatory requirements. The Managing
General Partner monitors developments in the area of legal and regulatory
compliance and is studying new federal laws, including the Sarbanes-Oxley Act of
2002. The Sarbanes-Oxley Act of 2002 mandates or suggests additional compliance
measures with regard to governance, disclosure, audit and other areas. In light
of these changes, the Partnership expects that it will incur higher expenses
related to compliance, including increased legal and audit fees. Capital
improvements planned for each of the Partnership's properties are detailed
below.
Deer Creek Apartments
During the six months ended June 30, 2003, the Partnership completed
approximately $134,000 of capital improvements at Deer Creek Apartments,
consisting primarily of floor covering and air conditioning unit replacements,
water heater upgrades and structural improvements. These improvements were
funded from the property's operating cash flow. The Partnership evaluates the
capital improvement needs of the property during the year and currently expects
to complete an additional $32,000 in capital improvements during the remainder
of 2003. The additional capital improvements will consist primarily of
additional floor covering replacements. Additional capital improvements may be
considered and will depend on the physical condition of the property as well as
the anticipated cash flow generated by the property.
Georgetown Apartments
During the six months ended June 30, 2003, the Partnership completed
approximately $21,000 of capital improvements at Georgetown Apartments,
consisting primarily of floor covering, appliance, plumbing fixture, and window
replacements. These improvements were funded from the property's operating cash
flow. The Partnership evaluates the capital improvement needs of the property
during the year and currently expects to complete an additional $46,000 in
capital improvements during the remainder of 2003. The additional capital
improvements will consist primarily of additional appliance and floor covering
replacements, parking lot upgrades and other building improvements. Additional
capital improvements may be considered and will depend on the physical condition
of the property as well as the anticipated cash flow generated by the property.
Landmark Apartments
During the six months ended June 30, 2003, the Partnership completed
approximately $86,000 of capital improvements at Landmark Apartments, consisting
primarily of floor covering and wall covering replacements. These improvements
were funded from the property's operating cash flow and replacement reserves.
The Partnership evaluates the capital improvement needs of the property during
the year and currently expects to complete an additional $15,000 in capital
improvements during the remainder of 2003. The additional capital improvements
will consist primarily of additional floor covering replacements and other
building improvements. Additional capital improvements may be considered and
will depend on the physical condition of the property as well as the anticipated
cash flow generated by the property and replacement reserves.
The additional capital expenditures will be incurred only if cash is available
from operations or from Partnership reserves. To the extent that such budgeted
capital improvements are completed, the Registrant's distributable cash flow, if
any, may be adversely affected at least in the short term.
On May 21, 2003, the Partnership refinanced the mortgages encumbering Georgetown
Apartments. The refinancing replaced the existing mortgages of approximately
$5,017,000 with a new mortgage in the amount of $6,175,000. Total capitalized
loan costs were approximately $172,000 during the six months ended June 30,
2003. These costs included approximately $62,000 in fees payable to the Managing
General Partner. The Partnership recognized a loss on the early extinguishment
of debt of approximately $58,000 during the six months ended June 30, 2003, due
to the write off of unamortized loan costs and debt discounts and the payment of
a prepayment penalty.
Initially the May 21, 2003 refinancing of Georgetown Apartments was under an
interim credit facility ("Interim Credit Facility") that also provided for the
refinancing of several other properties. The Interim Credit Facility created
separate loans for each property refinanced thereunder, which loans were not
cross-collateralized or cross-defaulted with each other. During the term of the
Interim Credit Facility, Georgetown Apartments was required to make
interest-only payments. The first month's interest rate for Georgetown
Apartments was 2.78%.
As of June 1, 2003, the loan on Georgetown Apartments was assumed by a different
lender. The credit facility ("Permanent Credit Facility") with the new lender
has a maturity of five years with an option for the Partnership to elect one
five-year extension. This Permanent Credit Facility also created separate loans
for each property refinanced thereunder, which loans are not
cross-collateralized or cross-defaulted with each other. Each note under this
Permanent Credit Facility is initially a variable rate loan, and after three
years the Partnership has the option of converting the note to a fixed rate
loan. The interest rate on the variable rate loans is 85 basis points over the
Fannie Mae discounted mortgage-backed security index (2.06% per annum at June 1,
2003), and the rate resets monthly. Each loan automatically renews at the end of
each month. In addition, monthly principal payments are required based on a
30-year amortization schedule, using the interest rate in effect during the
first month that the property is financed by the Permanent Credit Facility. The
loans may be prepaid without penalty.
The Partnership's assets are thought to be sufficient for any near-term needs
(exclusive of capital improvements) of the Partnership. The mortgage
indebtedness encumbering Deer Creek Apartments of approximately $13,133,000 is
amortized over 20 years and matures on July 1, 2021 at which time it is
scheduled to be fully amortized. The mortgage indebtedness encumbering Landmark
Apartments of approximately $6,087,000 is amortized over 30 years with a balloon
payment of approximately $6,054,000 due in November 2003. The mortgage
indebtedness encumbering Georgetown Apartments of approximately $6,175,000 that
was refinanced during the six months ended June 30, 2003, has a balloon payment
due in October 2008. The Managing General Partner intends to refinance the
mortgages encumbering Landmark and Georgetown Apartments and/or sell the
properties prior to their maturity dates. If the properties cannot be refinanced
or sold for a sufficient amount, the Partnership may risk losing the properties
through foreclosure.
The Partnership distributed the following amounts during the six months ended
June 30, 2003 and 2002 (in thousands, except per unit data):
Six Months Per Limited Six Months Per Limited
Ended Partnership Ended Partnership
June 30, 2003 Unit June 30, 2002 Unit
Operations $ 409 $ 4.06 $ 192 $ 1.90
Refinance (1) 1,032 10.24 -- --
Total $1,441 $14.30 $ 192 $ 1.90
(1) Distribution from the refinancing of Georgetown Apartments during May 2003.
Future cash distributions will depend on the levels of cash generated from
operations, the availability of cash reserves and the timing of debt maturities,
refinancings and/or property sales. The Partnership's cash available for
distribution is reviewed on a monthly basis. There can be no assurance, however,
that the Partnership will generate sufficient funds from operations after
required capital expenditures to permit additional distributions to its partners
during the remainder of 2003 or subsequent periods.
Other
In addition to its indirect ownership of the general partner interest in the
Partnership, AIMCO and its affiliates owned 61,754 limited partnership units
(the "Units") in the Partnership representing 61.88% of the outstanding Units at
June 30, 2003. A number of these Units were acquired pursuant to tender offers
made by AIMCO or its affiliates. It is possible that AIMCO or its affiliates
will acquire additional Units in exchange for cash or a combination of cash and
units in the operating partnership of AIMCO either through private purchases or
tender offers. Pursuant to the Partnership Agreement, unitholders holding a
majority of the Units are entitled to take action with respect to a variety of
matters that include, but are not limited to, voting on certain amendments to
the Partnership Agreement and voting to remove the Managing General Partner. As
a result of its ownership of 61.88% of the outstanding units, AIMCO and its
affiliates are in a position to control all voting decisions with respect to the
Partnership. Although the Managing General Partner owes fiduciary duties to the
limited partners of the Partnership, the Managing General Partner also owes
fiduciary duties to AIMCO as its sole stockholder. As a result, the duties of
the Managing General Partner, as managing general partner, to the Partnership
and its limited partners may come into conflict with the duties of the Managing
General Partner to AIMCO, as its sole stockholder.
Critical Accounting Policies and Estimates
The consolidated financial statements are prepared in accordance with accounting
principles generally accepted in the United States which require the Partnership
to make estimates and assumptions. The Partnership believes that of its
significant accounting policies, the following may involve a higher degree of
judgment and complexity.
Impairment of Long-Lived Assets
Investment properties are recorded at cost, less accumulated depreciation,
unless considered impaired. If events or circumstances indicate that the
carrying amount of a property may be impaired, the Partnership will make an
assessment of its recoverability by estimating the undiscounted future cash
flows, excluding interest charges, of the property. If the carrying amount
exceeds the aggregate future cash flows, the Partnership would recognize an
impairment loss to the extent the carrying amount exceeds the fair value of the
property.
Real property investments are subject to varying degrees of risk. Several
factors may adversely affect the economic performance and value of the
Partnership's investment properties. These factors include changes in the
national, regional and local economic climate; local conditions, such as an
oversupply of multifamily properties; competition from other available
multifamily property owners and changes in market rental rates. Any adverse
changes in these factors could cause an impairment in the Partnership's assets.
Revenue Recognition
The Partnership generally leases apartment units for twelve-month terms or less.
Rental income attributable to leases is recognized monthly as it is earned and
the Partnership fully reserves all balances outstanding over thirty days. The
Partnership will offer rental concessions during particularly slow months or in
response to heavy competition from other similar complexes in the area. Any
concessions given at the inception of the lease are amortized over the life of
the lease.
ITEM 3. CONTROLS AND PROCEDURES
(a) Disclosure Controls and Procedures. The Partnership's management, with the
participation of the principal executive officer and principal financial officer
of the Managing General Partner, who are the equivalent of the Partnership's
principal executive officer and principal financial officer, respectively, has
evaluated the effectiveness of the Partnership's disclosure controls and
procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the
Securities Exchange Act of 1934, as amended (the "Exchange Act")) as of the end
of the period covered by this report. Based on such evaluation, the principal
executive officer and principal financial officer of the Managing General
Partner, who are the equivalent of the Partnership's principal executive officer
and principal financial officer, respectively, have concluded that, as of the
end of such period, the Partnership's disclosure controls and procedures are
effective.
(b) Internal Control Over Financial Reporting. There have not been any changes
in the Partnership's internal control over financial reporting (as such term is
defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the
fiscal quarter to which this report relates that have materially affected, or
are reasonably likely to materially affect, the Partnership's internal control
over financial reporting.
PART II - OTHER INFORMATION
ITEM 4. 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
purported to assert claims on behalf of a class of limited partners and
derivatively on behalf of a number of limited partnerships (including the
Partnership) that 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 that 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 sought 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 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 opposed the
motion. On April 29, 2002, the Court held a hearing on plaintiffs' motion for
class certification and took the matter under submission after further briefing,
as ordered by the court, was submitted by the parties. On July 10, 2002, the
Court entered an order vacating the trial date of January 13, 2003 (as well as
the pre-trial and discovery cut-off dates) and stayed the case in its entirety
through November 7, 2002 so that the parties could have an opportunity to
discuss settlement. On October 30, 2002, the court entered an order extending
the stay in effect through January 10, 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 Heller action was brought as a purported
derivative action, and asserted 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. Before completing
briefing on the appeal, the parties stayed further proceedings in the appeal in
light of a settlement.
On January 8, 2003, the parties filed a Stipulation of Settlement in proposed
settlement of the Nuanes action and the Heller action described below.
In general terms, the proposed settlement provides for certification for
settlement purposes of a settlement class consisting of all limited partners in
this Partnership and others (the "Partnerships") as of December 20, 2002, the
dismissal with prejudice and release of claims in the Nuanes and Heller
litigation, payment by AIMCO of $9.9 million (which shall be distributed to
settlement class members after deduction of attorney fees and costs of class
counsel and certain costs of settlement) and up to $1 million toward the cost of
independent appraisals of the Partnerships' properties by a Court appointed
appraiser. An affiliate of the Managing General Partner has also agreed to make
a tender offer to purchase all of the partnership interests in the Partnerships
within one year of final approval, if it is granted, and to provide partners
with the independent appraisals at the time of these tenders. The proposed
settlement also provided for the limitation of the allowable costs which the
Managing General Partner or its affiliates will charge the Partnerships in
connection with this litigation and imposes limits on the class counsel fees and
costs in this litigation. On April 11, 2003, notice was distributed to limited
partners providing the details of the proposed settlement.
On June 13, 2003, the Court granted final approval of the settlement and entered
judgment in both the Nuanes and Heller actions.
The Managing General Partner does not anticipate that any costs to the
Partnership, whether legal or settlement costs, associated with these cases will
be material to the Partnership's overall operations.
ITEM 5. EXHIBITS AND REPORTS ON FORM 8-K
a) Exhibits:
Exhibit 3.1, Amendment Agreement of Limited Partnership of the
Partnership dated October 12, 1982 filed on Form 10K dated
November 30, 1983, incorporated herein by reference.
Exhibit 10.20(e), Sixth Reaffirmation and Joinder Agreement
dated May 16, 2003 between Georgetown AIP II, L.P., GMAC
Commercial Mortgage Corporate, and Fannie Mae, a federally
chartered and stockholder owned corporation.
Exhibit 31.1, Certification of equivalent of Chief Executive
Officer pursuant to Securities Exchange Act Rules
13a-14(a)/15d-14(a), as Adopted Pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.
Exhibit 31.2, Certification of equivalent of Chief Financial
Officer pursuant to Securities Exchange Act Rules
13a-14(a)/15d-14(a), as Adopted Pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.
Exhibit 32.1, Certification Pursuant to 18 U.S.C. Section
1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002.
b) Reports on Form 8-K filed during the quarter ended June 30, 2003:
Current Report on Form 8-K dated May 22, 2003 and filed with
the Securities and Exchange Commission on June 6, 2003
disclosing the refinance of Georgetown Apartments.
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 INCOME PROPERTIES, LTD. II
By: Angeles Realty Corporation II
Managing General Partner
By: /s/Patrick J. Foye
Patrick J. Foye
Executive Vice President
By: /s/Thomas C. Novosel
Thomas C. Novosel
Senior Vice President
and Chief Accounting Officer
Date: August 13, 2003
Exhibit 31.1
CERTIFICATION
I, Patrick J. Foye, certify that:
1. I have reviewed this quarterly report on Form 10-QSB of Angeles Income
Properties Ltd. II;
2. Based on my knowledge, this report does not contain any untrue statement
of a material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material
respects the financial condition, results of operations and cash flows of
the registrant as of, and for, the periods presented in this report;
4. The registrant's other certifying officer(s) and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant
and have:
(a) Designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the
registrant, including its consolidated subsidiaries, is made known
to us by others within those entities, particularly during the
period in which this report is being prepared;
(b) Evaluated the effectiveness of the registrant's disclosure controls
and procedures and presented in this report our conclusions about
the effectiveness of the disclosure controls and procedures, as of
the end of the period covered by this report based on such
evaluation; and
(c) Disclosed in this report any change in the registrant's internal
control over financial reporting that occurred during the
registrant's most recent fiscal quarter (the registrant's fourth
fiscal quarter in the case of an annual report) that has materially
affected, or is reasonably likely to materially affect, the
registrant's internal control over financial reporting; and
5. The registrant's other certifying officer(s) and I have disclosed, based
on our most recent evaluation of internal control over financial
reporting, to the registrant's auditors and the audit committee of the
registrant's board of directors (or persons performing the equivalent
functions):
(a) All significant deficiencies and material weaknesses in the design
or operation of internal control over financial reporting which are
reasonably likely to adversely affect the registrant's ability to
record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's
internal control over financial reporting.
Date: August 13, 2003
/s/Patrick J. Foye
Patrick J. Foye
Executive Vice President of Angeles Realty
Corporation II, equivalent of the chief
executive officer of the Partnership
Exhibit 31.2
CERTIFICATION
I, Paul J. McAuliffe, certify that:
1. I have reviewed this quarterly report on Form 10-QSB of Angeles Income
Properties Ltd. II;
2. Based on my knowledge, this report does not contain any untrue statement
of a material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material
respects the financial condition, results of operations and cash flows of
the registrant as of, and for, the periods presented in this report;
4. The registrant's other certifying officer(s) and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant
and have:
(a) Designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the
registrant, including its consolidated subsidiaries, is made known
to us by others within those entities, particularly during the
period in which this report is being prepared;
(b) Evaluated the effectiveness of the registrant's disclosure controls
and procedures and presented in this report our conclusions about
the effectiveness of the disclosure controls and procedures, as of
the end of the period covered by this report based on such
evaluation; and
(c) Disclosed in this report any change in the registrant's internal
control over financial reporting that occurred during the
registrant's most recent fiscal quarter (the registrant's fourth
fiscal quarter in the case of an annual report) that has materially
affected, or is reasonably likely to materially affect, the
registrant's internal control over financial reporting; and
5. The registrant's other certifying officer(s) and I have disclosed, based
on our most recent evaluation of internal control over financial
reporting, to the registrant's auditors and the audit committee of the
registrant's board of directors (or persons performing the equivalent
functions):
(a) All significant deficiencies and material weaknesses in the design
or operation of internal control over financial reporting which are
reasonably likely to adversely affect the registrant's ability to
record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's
internal control over financial reporting.
Date: August 13, 2003
/s/Paul J. McAuliffe
Paul J. McAuliffe
Executive Vice President and Chief Financial
Officer of Angeles Realty Corporation II,
equivalent of the chief financial officer of
the Partnership
Exhibit 32.1
Certification of CEO and CFO
Pursuant to 18 U.S.C. Section 1350,
As Adopted Pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002
In connection with the Quarterly Report on Form 10-QSB of Angeles Income
Properties, Ltd. II (the "Partnership"), for the quarterly period ended June 30,
2003 as filed with the Securities and Exchange Commission on the date hereof
(the "Report"), Patrick J. Foye, as the equivalent of the chief executive
officer of the Partnership, and Paul J. McAuliffe, as the equivalent of the
chief financial officer of the Partnership, each hereby certifies, pursuant to
18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002, that, to the best of his knowledge:
(1) The Report fully complies with the requirements of Section 13(a) or
15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all
material respects, the financial condition and results of operations
of the Partnership.
/s/Patrick J. Foye
Name: Patrick J. Foye
Date: August 13, 2003
/s/Paul J. McAuliffe
Name: Paul J. McAuliffe
Date: August 13, 2003
This certification is furnished with this Report pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002 and shall not be deemed filed by the Partnership for
purposes of Section 18 of the Securities Exchange Act of 1934, as amended.