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 September 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 0-16116
ANGELES OPPORTUNITY PROPERTIES, LTD.
(Exact name of small business issuer as specified in its charter)
California 95-4052473
(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 OPPORTUNITY PROPERTIES, LTD.
CONSOLIDATED BALANCE SHEET
(Unaudited)
(in thousands, except unit data)
September 30, 2003
Assets
Cash and cash equivalents $ 179
Receivables and deposits 26
Restricted escrows 79
Other assets 321
Investment properties:
Land $ 1,013
Buildings and related personal property 8,488
9,501
Less accumulated depreciation (3,840) 5,661
$ 6,266
Liabilities and Partners' Deficit
Liabilities
Tenant security deposit liabilities $ 45
Accrued property taxes 220
Other liabilities 201
Mortgage notes payable 7,184
Partners' Deficit:
General partner $ (171)
Limited partners (12,425 units issued and
outstanding) (1,213) (1,384)
$ 6,266
See Accompanying Notes to Consolidated Financial Statements
ANGELES OPPORTUNITY PROPERTIES, LTD.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(in thousands, except per unit data)
Three Months Ended Nine Months Ended
September 30, September 30,
2003 2002 2003 2002
Revenues:
Rental income $ 595 $ 540 $ 1,750 $ 1,745
Other income 68 77 182 162
Total revenues 663 617 1,932 1,907
Expenses:
Operating 292 268 839 768
General and administrative 26 34 86 111
Depreciation 88 85 268 263
Interest 107 127 364 386
Property taxes 67 68 220 206
Loss on early extinguishment of
debt (Note C) -- -- 42 --
Total expenses 580 582 1,819 1,734
Net income $ 83 $ 35 $ 113 $ 173
Net income allocated to general
partner (1%) $ 1 $ -- $ 1 $ 2
Net income allocated to limited
partners (99%) 82 35 112 171
$ 83 $ 35 $ 113 $ 173
Net income per limited
partnership unit $ 6.60 $ 2.82 $ 9.01 $ 13.76
Distributions per limited
partnership unit $ 17.70 $ 14.81 $ 45.39 $ 43.86
See Accompanying Notes to Consolidated Financial Statements
ANGELES OPPORTUNITY PROPERTIES, LTD.
CONSOLIDATED STATEMENT OF CHANGES IN PARTNERS' DEFICIT
(Unaudited)
(in thousands, except unit data)
Limited
Partnership General Limited
Units Partner Partners Total
Original capital contributions 12,425 $ 1 $12,425 $12,426
Partners' deficit at
December 31, 2002 12,425 $ (165) $ (761) $ (926)
Distributions to partners -- (7) (564) (571)
Net income for the nine months
ended September 30, 2003 -- 1 112 113
Partners' deficit at
September 30, 2003 12,425 $ (171) $(1,213) $(1,384)
See Accompanying Notes to Consolidated Financial Statements
ANGELES OPPORTUNITY PROPERTIES, LTD.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
Nine Months Ended
September 30,
2003 2002
Cash flows from operating activities:
Net income $ 113 $ 173
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation 268 263
Loss on early extinguishment of debt 42 --
Amortization of loan costs and discount 18 13
Change in accounts:
Receivables and deposits 7 148
Other assets (40) (40)
Accounts payable (29) (11)
Tenant security deposit liabilities 12 7
Accrued property taxes (80) 119
Other liabilities 100 80
Net cash provided by operating activities 411 752
Cash flows from investing activities:
Property improvements and replacements (132) (111)
Net (deposits to) withdrawals from restricted escrows (40) 2
Net cash used in investing activities (172) (109)
Cash flows from financing activities:
Payments on mortgage notes payable (131) (107)
Distributions to partners (571) (556)
Repayment of mortgage notes payable (1,554) --
Proceeds from mortgage note payable 2,096 --
Loan costs paid (84) --
Advances from affiliates 117 --
Repayment of advances from affiliates (117) --
Net cash used in financing activities (244) (663)
Net (decrease) increase in cash and cash equivalents (5) 20
Cash and cash equivalents at beginning of period 184 254
Cash and cash equivalents at end of period $ 179 $ 234
Supplemental disclosure of cash flow information:
Cash paid for interest $ 355 $ 342
See Accompanying Notes to Consolidated Financial Statements
ANGELES OPPORTUNITY PROPERTIES, LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note A - Basis of Presentation
The accompanying unaudited consolidated financial statements of Angeles
Opportunity Properties, Ltd. (the "Partnership" or the "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
"General Partner" and a subsidiary of 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 nine
month periods ended September 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.
Note B - Transactions with Affiliated Parties
The Partnership has no employees and is dependent on the General Partner and its
affiliates for the management and administration of all Partnership activities.
The Partnership Agreement provides for certain payments to affiliates for
services and reimbursement of certain expenses incurred by affiliates on behalf
of the Partnership.
Affiliates of the General Partner are entitled to receive 5% of gross receipts
from both of the Partnership's properties as compensation for providing property
management services. The Partnership paid to such affiliates approximately
$95,000 and $97,000 for the nine months ended September 30, 2003 and 2002,
respectively, which is included in operating expenses.
An affiliate of the General Partner received reimbursements of accountable
administrative expenses amounting to approximately $48,000 and $67,000 for the
nine months ended September 30, 2003 and 2002, respectively, which is included
in general and administrative expenses and investment properties.
During the nine months ended September 30, 2003, an affiliate of the General
Partner advanced the Partnership approximately $117,000 to assist in paying the
property taxes of the two investment properties. These advances were repaid
during the nine months ended September 30, 2003. Interest was charged at the
prime rate plus 2%. Interest expense was approximately $2,000 for the nine
months ended September 30, 2003. There were no such advances made or repaid
during the nine months ended September 30, 2002.
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 General
Partner. During the nine months ended September 30, 2003 and 2002, the
Partnership was charged by AIMCO and its affiliates approximately $32,000 and
$39,000, respectively, for insurance coverage and fees associated with policy
claims administration.
Note C - Mortgages Notes Payable
During May 2003, the Partnership refinanced the first and second mortgages
encumbering Lake Meadows Apartments. The refinancing replaced a first mortgage
of $1,500,000 and a second mortgage of $54,000 with a new mortgage of
$2,096,000. Total capitalized loan costs were approximately $84,000 during the
nine months ended September 30, 2003. The Partnership recognized a loss on the
early extinguishment of debt of approximately $42,000 due to the write-off of
unamortized loan costs on the old loans.
Initially the May 2003 refinancing of Lake Meadows Apartments was under an
interim credit facility ("Interim Credit Facility") which 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, Lake Meadows Apartments was required to make
interest-only payments. The first month's interest rate for Lake Meadows
Apartments was 2.78%.
As of June 1, 2003, the loan on Lake Meadows Apartments was transferred to 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. The 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 the
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 (1.90% per annum at
September 30, 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 on the Permanent Credit Facility.
The loans may be prepaid without penalty.
Note D - Legal Proceedings
In March 1998, several putative unit holders of limited partnership units of the
Partnership commenced an action entitled Rosalie Nuanes, et al. v. Insignia
Financial Group, Inc., et al. (the "Nuanes action") in the Superior Court of the
State of California for the County of San Mateo. The plaintiffs named as
defendants, among others, the Partnership, its General Partner and several of
their affiliated partnerships and corporate entities. The action 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 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. In addition, 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.
On January 8, 2003, the parties filed a Stipulation of Settlement in proposed
settlement of the Nuanes action and the Heller action.
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 General Partner has also agreed to make at least
one round of tender offers 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 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. On August 12, 2003, an objector
filed an appeal seeking to vacate and/or reverse the order approving the
settlement and entering judgment thereto. The General Partner intends to file a
respondent's brief in support of the order approving settlement and entering
judgment thereto.
The 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.
On August 8, 2003 AIMCO Properties L.P., an affiliate of the General Partner,
was served with a Complaint in the United States District Court, District of
Columbia alleging that AIMCO Properties L.P. willfully violated the Fair Labor
Standards Act (FLSA) by failing to pay maintenance workers overtime for all
hours worked in excess of forty per week. The Complaint is styled as a
Collective Action under the FLSA and seeks to certify state subclasses in
California, Maryland, and the District of Columbia. Specifically, the plaintiffs
contend that AIMCO Properties L.P. failed to compensate maintenance workers for
time that they were required to be "on-call". Additionally, the Complaint
alleges AIMCO Properties L.P. failed to comply with the FLSA in compensating
maintenance workers for time that they worked in responding to a call while
"on-call". The Complaint also attempts to certify a subclass for salaried
service directors who are challenging their classification as exempt from the
overtime provisions of the FLSA. AIMCO Properties L.P. has filed an answer to
the Complaint denying the substantive allegations. Although the outcome of any
litigation is uncertain, in the opinion of the General Partner the claims will
not result in any material liability to the Partnership.
The Partnership is unaware of any other pending or outstanding litigation
matters involving it or its investment properties that are not of a routine
nature arising in the ordinary course of business.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS
The matters discussed in this 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 two apartment complexes. The
following table sets forth the average occupancy for each of the properties for
the nine months ended September 30, 2003 and 2002:
Average Occupancy
Property 2003 2002
Lake Meadows Apartments (1) 95% 90%
Garland, Texas
Lakewood Apartments 93% 91%
Tomball, Texas
(1) The General Partner attributes the increase in occupancy at Lake Meadows
Apartments to increased marketing efforts by property management.
Results of Operations
The Partnership's net income for the three and nine months ended September 30,
2003 was approximately $83,000 and $113,000, respectively compared to net income
of approximately $35,000 and $173,000 for the corresponding periods in 2002. The
increase in net income for the three month period ended September 30, 2003 is
due to an increase in total revenues. The decrease in net income for the nine
month period is due to an increase in total expenses, partially offset by an
increase in total revenues.
Total revenues increased for the three months ended September 30, 2003 due to an
increase in rental income. Total revenues increased for the nine months ended
September 30, 2003 due to an increase in rental income and other income. Rental
income increased due to an increase in average occupancy at both of the
Partnership's properties, partially offset by an increase in concessions and bad
debt expense at both properties. Other income increased for the nine months
ended September 30, 2003 due to increases in lease cancellation fees and late
charges at Lakewood Apartments partially offset by decreases in lease
cancellation fees and late charges at Lake Meadows Apartments.
Total expenses increased for the nine months ended September 30, 2003 due to
increases in operating and property tax expenses and the recognition of a loss
on the early extinguishments of debt from the refinancing of Lake Meadows
Apartments (as discussed in "Liquidity and Capital Resources") partially offset
by decreases in interest and general and administrative expenses. Operating
expenses increased due to increases in property and advertising expenses
partially offset by reduced maintenance expenses. Property expenses increased
primarily due to increases in payroll and related benefits at both investment
properties and increased utility costs at Lakewood Apartments. Advertising
expenses increased primarily due to increased periodical advertisements placed
by Lakewood Apartments and increased internet advertising by Lake Meadows
Apartments. Maintenance expenses decreased primarily due to reduced floor
covering repairs at both properties. Property tax expense increased due to an
increase in the tax rate and assessed value of Lakewood Apartments. Interest
expense decreased due to the refinancing of the mortgage encumbering Lake
Meadows Apartments during May 2003 at a lower interest rate (as discussed in
"Liquidity and Capital Resources").
General and administrative expenses decreased due to a decrease in the cost for
services included in the management reimbursements to the General Partner as
allowed under the Partnership Agreement. Also included in general and
administrative expenses 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 General Partner
monitors the rental market environment of its investment properties to assess
the feasibility of increasing rents, maintaining or increasing occupancy levels
and protecting the Partnership from increases in expenses. As part of this plan,
the General Partner attempts to protect the Partnership from the burden of
inflation-related increases in expenses by increasing rents and maintaining a
high overall occupancy level. However, the General Partner may use rental
concessions and rental rate reductions to offset softening market conditions,
accordingly, there is no guarantee that the General Partner will be able to
sustain such a plan.
Liquidity and Capital Resources
At September 30, 2003, the Partnership had cash and cash equivalents of
approximately $179,000 compared to approximately $234,000 at September 30, 2002.
Cash and cash equivalents decreased approximately $5,000 from December 31, 2002
due to approximately $244,000 and $172,000 of cash used in financing and
investing activities, respectively, partially offset by approximately $411,000
of cash provided by operating activities. Cash used in financing activities
consisted of repayment of the mortgage notes payable on Lake Meadows Apartments,
distributions to the partners, loan costs paid, repayment of advances from
affiliates and principal payments made on the mortgages encumbering the
investment properties partially offset by proceeds from the refinancing of Lake
Meadows Apartments and advances from affiliates. Cash used in investing
activities consisted of property improvements and replacements and net deposits
to restricted escrows held by the mortgage lender. The Partnership invests its
working capital reserves in interest bearing accounts.
The sufficiency of existing liquid assets to meet future liquidity and capital
expenditure requirements is directly related to the level of capital
expenditures required at the investment 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 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 the Partnership's properties are detailed below.
Lake Meadows Apartments
During the nine months ended September 30, 2003, the Partnership completed
approximately $57,000 of capital improvements at Lake Meadows Apartments,
consisting primarily of structural upgrades, floor covering, air conditioning
unit, and appliance replacements and parking lot resurfacing. These improvements
were funded from 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 $19,000 in capital improvements
during the remainder of 2003. The additional capital improvements will consist
primarily of cabinet, appliance and 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.
Lakewood Apartments
During the nine months ended September 30, 2003, the Partnership completed
approximately $75,000 of capital improvements at Lakewood Apartments, consisting
primarily of floor covering, air conditioning unit and appliance replacements.
These improvements were funded from operating cash flow. The Partnership
evaluates the capital improvement needs of the property during the year and
currently expects to complete an additional $36,000 in capital improvements
during the remainder of 2003. The additional capital improvements will consist
primarily of cabinet, appliance and 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.
Additional capital expenditures will be incurred only to the extent of cash
available from operations, replacement reserves, and Partnership reserves. To
the extent that such capital improvements are completed, the Partnership's
distributable cash flow, if any, may be adversely affected at least in the short
term.
During May 2003, the Partnership refinanced the first and second mortgages
encumbering Lake Meadows Apartments. The refinancing replaced a first mortgage
of $1,500,000 and a second mortgage of $54,000 with a new mortgage of
$2,096,000. Total capitalized loan costs were approximately $84,000 during the
nine months ended September 30, 2003. The Partnership recognized a loss on the
early extinguishment of debt of approximately $42,000 due to the write-off of
unamortized loan costs on the old loans.
Initially the May 2003 refinancing of Lake Meadows Apartments was under an
interim credit facility ("Interim Credit Facility") which 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, Lake Meadows Apartments was required to make
interest-only payments. The first month's interest rate for Lake Meadows
Apartments was 2.78%.
As of June 1, 2003, the loan on Lake Meadows Apartments was transferred to 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. The 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 the
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 (1.90% per annum at
September 30, 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 on 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 at Lakewood Apartments is approximately $5,105,000 and is amortized
over 20 years with a maturity date of January 1, 2022, at which time the loan is
scheduled to be fully amortized. The mortgage indebtedness of Lake Meadows
Apartments of approximately $2,079,000 is amortized over 30 years with a balloon
payment of approximately $1,877,000 due in September 2007. The General Partner
will attempt to refinance such indebtedness and/or sell the properties prior to
such maturity dates. If the properties cannot be refinanced or sold for a
sufficient amount, the Partnership may risk losing such properties through
foreclosure.
The Partnership distributed the following amounts during the nine months ended
September 30, 2003 and 2002 (in thousands, except per unit data):
Per Limited Per Limited
Nine Months Ended Partnership Nine Months Ended Partnership
September 30, 2003 Unit September 30, 2002 Unit
Operations (2) $ 112 $ 8.77 $ 556 $43.86
Refinancing (1) 459 36.62 -- --
$ 571 $45.39 $ 556 $43.86
(1) Proceeds from the refinancing of Lake Meadows Apartments in May 2003.
(2) Includes approximately $2,000 and $5,000 for the nine months ended
September 30, 2003 and 2002, respectively, distributed to the General
Partner of the majority owned sub-tier limited partnership.
Future cash distributions will depend on the levels of net cash generated from
operations, the availability of cash reserves, and the timing of debt
maturities, refinancings, and/or property sales. The Partnership's cash
available for distribution is reviewed on a monthly basis. There can be no
assurance that the Partnership will generate sufficient funds from operations
after required capital expenditures to permit further 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 6,160 limited partnership units (the
"Units") in the Partnership representing 49.58% of the outstanding Units at
September 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 AIMCO Properties, L.P., the operating partnership of AIMCO,
either through private purchases or tender offers. In this regard, on November
12, 2003, AIMCO Properties, L.P., commenced a tender offer to acquire 6,265
Units for a purchase price of $70.81 per Unit. Such offer expires on December
11, 2003. 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 General Partner. As a result of
its ownership of 49.58% of the outstanding Units, AIMCO and its affiliates are
in a position to influence all such voting decisions with respect to the
Partnership. Although the General Partner owes fiduciary duties to the limited
partners of the Partnership, the General Partner also owes fiduciary duties to
AIMCO as its sole stockholder. As a result, the duties of the General Partner,
as general partner, to the Partnership and its limited partners may come into
conflict with the duties of the 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, but are not limited
to, 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 impairment of 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 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 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 1. LEGAL PROCEEDINGS
In March 1998, several putative unit holders of limited partnership units of the
Partnership commenced an action entitled Rosalie Nuanes, et al. v. Insignia
Financial Group, Inc., et al. (the "Nuanes action") in the Superior Court of the
State of California for the County of San Mateo. The plaintiffs named as
defendants, among others, the Partnership, its General Partner and several of
their affiliated partnerships and corporate entities. The action 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 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. In addition, 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.
On January 8, 2003, the parties filed a Stipulation of Settlement in proposed
settlement of the Nuanes action and the Heller action.
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 General Partner has also agreed to make at least
one round of tender offers 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 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. On August 12, 2003, an objector
filed an appeal seeking to vacate and/or reverse the order approving the
settlement and entering judgment thereto. The General Partner intends to file a
respondent's brief in support of the order approving settlement and entering
judgment thereto.
The 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.
On August 8, 2003 AIMCO Properties L.P., an affiliate of the General Partner,
was served with a Complaint in the United States District Court, District of
Columbia alleging that AIMCO Properties L.P. willfully violated the Fair Labor
Standards Act (FLSA) by failing to pay maintenance workers overtime for all
hours worked in excess of forty per week. The Complaint is styled as a
Collective Action under the FLSA and seeks to certify state subclasses in
California, Maryland, and the District of Columbia. Specifically, the plaintiffs
contend that AIMCO Properties L.P. failed to compensate maintenance workers for
time that they were required to be "on-call". Additionally, the Complaint
alleges AIMCO Properties L.P. failed to comply with the FLSA in compensating
maintenance workers for time that they worked in responding to a call while
"on-call". The Complaint also attempts to certify a subclass for salaried
service directors who are challenging their classification as exempt from the
overtime provisions of the FLSA. AIMCO Properties L.P. has filed an answer to
the Complaint denying the substantive allegations. Although the outcome of any
litigation is uncertain, in the opinion of the General Partner the claims will
not result in any material liability to the Partnership.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a) Exhibits:
Exhibit 3.1, Amended Certificate and Agreement of the Limited
Partnership filed in the Partnership's prospectus dated July
7, 1986, which is incorporated herein by reference.
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:
None filed during the quarter ended September 30, 2003.
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 OPPORTUNITY PROPERTIES, LTD.
By: Angeles Realty Corporation II
General Partner
By: /s/Patrick J. Foye
Patrick J. Foye
Executive Vice President
By: /s/Paul J. McAuliffe
Paul J. McAuliffe
Executive Vice President
and Chief Financial Officer
Date: November 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
Opportunity Properties, Ltd.;
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: November 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
Opportunity Properties, Ltd.;
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: November 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 Opportunity
Properties, Ltd. (the "Partnership"), for the quarterly period ended September
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: November 13, 2003
/s/Paul J. McAuliffe
Name: Paul J. McAuliffe
Date: November 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.