UNITED STATES
SECURITIES EXCHANGE ACT OF 1934
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 0-11766
ANGELES PARTNERS XI
(Exact name of Registrant as specified in its charter)
California 95-3788040
(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 PARTNERS XI
CONSOLIDATED BALANCE SHEET
(Unaudited)
(in thousands, except unit data)
September 30, 2003
Assets
Cash and cash equivalents $ 504
Receivables and deposits 427
Restricted escrows 625
Other assets 485
Investment property:
Land $ 3,998
Buildings and related personal property 32,919
36,917
Less accumulated depreciation (27,072) 9,845
$ 11,886
Liabilities and Partners' Deficit
Liabilities
Accounts payable $ 52
Tenant security deposit liabilities 371
Due to affiliates (Note B) 648
Other liabilities 194
Mortgage note payable 33,463
Partners' Deficit
General partners $ (545)
Limited partners (39,627 units issued and
outstanding) (22,297) (22,842)
$ 11,886
See Accompanying Notes to Consolidated Financial Statements
ANGELES PARTNERS XI
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 $ 2,019 $ 1,996 $ 5,739 $ 6,097
Other income 169 142 361 440
Casualty gain (Note C) -- -- 4 --
Total revenues 2,188 2,138 6,104 6,537
Expenses:
Operating 583 553 1,910 1,790
General and administrative 95 230 324 358
Depreciation 344 524 1,437 1,583
Interest 578 586 1,741 1,772
Property taxes 286 266 817 795
Total expenses 1,886 2,159 6,229 6,298
Net income (loss) $ 302 $ (21) $ (125) $ 239
Net income (loss) allocated to general
partners (1%) $ 3 $ -- $ (1) $ 2
Net income (loss) allocated to limited
partners (99%) 299 (21) (124) 237
$ 302 $ (21) $ (125) $ 239
Net income (loss) per limited partnership
unit $ 7.54 $ (0.53) $ (3.13) $ 5.98
Distributions per limited partnership unit $ -- $ 6.96 $ 3.36 $ 6.96
See Accompanying Notes to Consolidated Financial Statements
ANGELES PARTNERS XI
CONSOLIDATED STATEMENT OF CHANGES IN PARTNERS' DEFICIT
(Unaudited)
(in thousands, except unit data)
Limited
Partnership General Limited
Units Partners Partners Total
Original capital contributions 40,000 $ 30 $ 40,000 $ 40,030
Partners' deficit at
December 31, 2002 39,627 $ (543) $(22,040) $(22,583)
Distributions to partners (1) (133) (134)
Net loss for the nine months
ended September 30, 2003 -- (1) (124) (125)
Partners' deficit
at September 30, 2003 39,627 $ (545) $(22,297) $(22,842)
See Accompanying Notes to Consolidated Financial Statements
ANGELES PARTNERS XI
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
Nine Months Ended
September 30,
2003 2002
Cash flows from operating activities:
Net (loss) income $ (125) $ 239
Adjustments to reconcile net (loss) income to net cash
provided by operating activities:
Depreciation 1,437 1,583
Amortization of loan costs 13 12
Casualty gain (4) --
Change in accounts:
Receivables and deposits (118) 409
Other assets (51) (80)
Accounts payable (107) 11
Tenant security deposit liabilities (14) (77)
Due to affiliates (6) --
Other liabilities (106) 105
Net cash provided by operating activities 919 2,202
Cash flows from investing activities:
Property improvements and replacements (967) (1,324)
Insurance proceeds received 4 --
Net cash used in investing activities (963) (1,324)
Cash flows from financing activities:
Advances from affiliate 611 --
Payments on mortgage notes payable (606) (637)
Distributions to partners (134) (279)
Net cash used in financing activities (129) (916)
Net decrease in cash and cash equivalents (173) (38)
Cash and cash equivalents at beginning of period 677 460
Cash and cash equivalents at end of period $ 504 $ 422
Supplemental disclosure of cash flow information:
Cash paid for interest $ 1,713 $ 1,760
Supplemental disclosure of non-cash activity:
Property improvements and replacements included in
accounts payable $ 52 $ --
Included in property improvements and replacements for the nine months ended
September 30, 2003 and 2002, are approximately $161,000 and $259,000,
respectively, of improvements which were included in accounts payable at
December 31, 2002 and 2001, respectively.
See Accompanying Notes to Consolidated Financial Statements
ANGELES PARTNERS XI
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note A - Basis of Presentation
The accompanying unaudited consolidated financial statements of Angeles Partners
XI (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"), 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. The Managing General
Partner is an affiliate of Apartment Investment and Management Company
("AIMCO"), a publicly traded real estate investment trust.
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 (i) certain
payments to affiliates for services and (ii) 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 the Partnership's property as compensation for providing property
management services. The Partnership paid to such affiliates approximately
$303,000 and $328,000 for the nine months ended September 30, 2003 and 2002,
respectively, which is included in operating expenses.
Affiliates of the Managing General Partner received reimbursement of accountable
administrative expenses amounting to approximately $181,000 and $276,000 for the
nine months ended September 30, 2003 and 2002, respectively, which are included
in general and administrative expenses and investment property. Included in
these amounts are fees related to construction management services provided by
an affiliate of the Managing General Partner of approximately $74,000 and
$133,000 for the nine months ended September 30, 2003 and 2002, respectively.
The construction management service fees are calculated based on a percentage of
current additions to investment property.
The Partnership Agreement provides for a fee equal to 7.5% of "net cash flow
from operations", as defined in the Partnership Agreement, to be paid to the
Managing General Partner for executive and administrative management services.
One half of this fee is to be accrued and not paid unless the limited partners
have received distributions equal to a 5% cumulative annual return on their
adjusted capital investment as defined in the Partnership Agreement. This return
criteria has not been met. During the nine months ended September 30, 2003 and
2002 no fees were earned. At September 30, 2003, the Partnership has accrued
approximately $21,000 of Partnership management fees which is included in due to
affiliates on the accompanying consolidated balance sheet and this amount will
remain accrued until criteria for payment has been met.
During the nine months ended September 30, 2003, the Managing General Partner
loaned the Partnership $611,000 to cover operating expenses and capital
expenditures. At September 30, 2003 the amount of the outstanding loan and
accrued interest was approximately $626,000 and is included in due to affiliates
on the accompanying consolidated balance sheet. Interest is charged on this loan
at prime plus 2% or 6.00% at September 30, 2003, and was approximately $15,000
for the nine months ended September 30, 2003. There were no similar loans
payable at September 30, 2002.
The Partnership insures its property 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 property above the AIMCO limits through
insurance policies obtained by AIMCO from insurers unaffiliated with the
Managing General Partner. During the nine months ended September 30, 2003 and
2002, the Partnership was charged by AIMCO and its affiliates approximately
$103,000 and $124,000, respectively, for insurance coverage and fees associated
with policy claims administrations.
Note C - Casualty
During the year ended December 31, 2002, a casualty gain of approximately
$17,000 was recorded at Fox Run Apartments. The casualty gain related to a fire
that occurred in June 2002. The gain was a result of the receipt of insurance
proceeds of approximately $18,000 offset by the write-off of the net book value
of the destroyed assets totaling approximately $1,000.
During the nine months ended September 30, 2003, additional insurance proceeds
of approximately $4,000 were received and recorded as additional casualty gain.
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 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.
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 Managing 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 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. 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 Managing General Partner intends
to file a respondent's brief in support of the order approving settlement and
entering judgment thereto.
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.
On August 8, 2003 AIMCO Properties L.P., an affiliate of the Managing 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 Managing 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 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 property consists of one apartment complex. The
following table sets forth the average occupancy of the property for the nine
months ended September 30, 2003 and 2002:
Average Occupancy
Property 2003 2002
Fox Run Apartments 94% 95%
Plainsboro, New Jersey
Results of Operations
The Partnership's net loss for the nine months ended September 30, 2003 was
approximately $125,000 compared to net income of approximately $239,000 for the
corresponding period in 2002. The Partnership's net income for the three months
ended September 30, 2003 was approximately $302,000 compared to a net loss of
approximately $21,000 for the corresponding period in 2002.
The decrease in net income for the nine months ended September 30, 2003 compared
to the same period in 2002 is due to a decrease in total revenues partially
offset by a decrease in total expenses. The increase in net income for the three
months ended September 30, 2003 compared to the same period in 2002 is due to an
increase in total revenues and a decrease in total expenses. The decrease in
total revenues for the nine months ended September 30, 2003 was primarily due to
decreases in rental and other income. Rental income decreased due to a decrease
in occupancy and an increase in concession costs at the Partnership's investment
property. Other income decreased primarily due to decreases in lease
cancellation and recreational facility fees, partially offset by increased
utility reimbursements. The increase in total revenues for the three month
period ended September 30, 2003 was due to increases in rental and other income.
Rental income increased primarily due to increases in occupancy and average
rental rates, partially offset by an increase in concession costs at the
Partnership's investment property. Other income increased primarily due to an
increase in utility reimbursements partially offset by a decrease in lease
cancellation fees.
Total expenses decreased for the three and nine months ended September 30, 2003
due to decreases in depreciation, interest, and general and administrative
expenses partially offset by increases in operating and property tax expenses.
Depreciation expense decreased due to the buildings at the Partnership's
investment property becoming fully depreciated during the three months ended
September 30, 2003. Interest expense decreased due to the declining balance of
mortgage indebtedness encumbering the Partnership's property as a result of
scheduled principal payments. Operating expenses increased due to increases in
property and maintenance expenses, partially offset by decreases in
administrative and property management fee expenses. Property expenses increased
primarily due to an increase in utilities at the Partnership's property.
Maintenance expenses increased primarily due to an increase in snow removal
costs and contract service costs at Fox Run Apartments. The decrease in
administrative expenses is due to a decrease in the ad valorem tax bill. The
decrease in property management fees is due to the decrease in rental income.
Property tax expense increased due to an increase in the local property tax
rates.
General and administrative expenses decreased for the three and nine months
ended September 30, 2003 due to reduced costs of services included in management
reimbursements to the Managing General Partner allowed by the Partnership
Agreement. For the three months ended September 30, 2003 there was a decrease in
a partnership level tax based on the number of partners in the partnership. This
tax was implemented by the state of New Jersey in 2002 and nine months of
expense was recorded during the three months ended September 30, 2002. Also
included in general and administrative expenses for both periods are costs
associated with the quarterly and annual communications with investors and
regulatory agencies and the annual audit required by the Partnership Agreement.
During the year ended December 31, 2002, a casualty gain of approximately
$17,000 was recorded at Fox Run Apartments. The casualty gain related to a fire
that occurred in June 2002. The gain was a result of the receipt of insurance
proceeds of approximately $18,000 offset by the write-off of the net book value
of the destroyed assets totaling approximately $1,000. During the nine months
ended September 30, 2003, additional insurance proceeds of approximately $4,000
were received and recorded as additional casualty gain.
As part of the ongoing business plan of the Partnership, the Managing General
Partner monitors the rental market environment of its investment property to
assess the feasibility of increasing rents, maintaining or increasing occupancy
levels and protecting the Partnership from increases in expenses. As part of
this plan, the Managing General Partner attempts to protect the Partnership from
the burden of inflation-related increases in expenses by increasing rents and
maintaining a high overall occupancy level. However, the Managing General
Partner may use rental concessions and rental rate reductions to offset
softening market conditions, accordingly, there is no guarantee that the
Managing 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 $504,000 compared to approximately $422,000 at September 30, 2002.
Cash and cash equivalents decreased approximately $173,000 since December 31,
2002 due to approximately $919,000 of cash provided by operating activities
partially offset by approximately $963,000 of cash used in investing activities
and approximately $129,000 used in financing activities. Cash used in financing
activities consisted of distributions to partners and principal payments made on
the mortgage encumbering Fox Run Apartments, partially offset by advances from
affiliate. Cash used in investing activities consisted of property improvements
and replacement expenditures slightly offset by the receipt of insurance
proceeds. 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 property 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.
During the nine months ended September 30, 2003, the Partnership completed
approximately $858,000 of capital improvements at Fox Run Apartments, primarily
consisting of a gas submetering project, water heater and floor covering
replacement, parking lot and pool upgrades and structural improvements. These
improvements were funded from operating cash flow and insurance proceeds. The
Partnership evaluates the capital improvement needs of the property and
currently expects to complete an additional $125,000 in capital improvements
during the remainder of 2003. The additional capital improvements will consist
primarily of floor covering and appliance replacements, fencing, exterior
building improvements and major landscaping. 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. To the extent that such
budgeted capital improvements are completed, the Partnership's distributable
cash flow, if any, may be adversely affected at least in the short term.
The Partnership's assets are thought to be sufficient for any near-term needs
(exclusive of capital improvements) of the Partnership. The mortgage
indebtedness encumbering Fox Run Apartments of approximately $33,463,000 is
being amortized over 20 years and matures in December 2021 at which time it is
expected to be fully amortized.
The Partnership distributed the following amounts during the nine months ended
September 30, 2003 and 2002 (in thousands, except per unit data):
For the Nine Per For the Nine Per
Months Ended Limited Months Ended Limited
September 30, Partnership September 30, Partnership
2003 Unit 2002 Unit
Refinancing (1) $ 134 $ 3.36 $ 279 $ 6.96
(1) Refinancing proceeds are from the December 2001 refinancing of Fox Run
Apartments. Approximately $554,000 remains to be distributed at September
30, 2003.
Future cash distributions will depend on the levels of net cash generated from
operations, the availability of cash reserves, the timing of the debt maturity
and refinancing and/or sale of the property. 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 improvement expenditures, to permit further distributions to its
partners in 2003 or subsequent periods.
Other
In addition to its indirect ownership of the general partner interests in the
Partnership, AIMCO and its affiliates owned 24,944 limited partnership units
(the "Units") in the Partnership representing 62.95% 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. 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 62.95% 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
The investment property is recorded at cost, less accumulated depreciation,
unless considered impaired. If events or circumstances indicate that the
carrying amount of the 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 property. These factors include, but are not limited
to, changes in 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 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 1. LEGAL PROCEEDINGS
In March 1998, several putative unit holders of limited partnership units of the
Partnership commenced an action entitled Rosalie Nuanes, et al. v. Insignia
Financial Group, Inc., et al. (the "Nuanes action") in the Superior Court of the
State of California for the County of San Mateo. The plaintiffs named as
defendants, among others, the Partnership, its Managing General Partner and
several of their affiliated partnerships and corporate entities. The action
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.
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 Managing 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 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. 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 Managing General Partner intends
to file a respondent's brief in support of the order approving settlement and
entering judgment thereto.
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.
On August 8, 2003 AIMCO Properties L.P., an affiliate of the Managing 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 Managing 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 Agreement of Limited Partnership dated
February 26, 1982, filed in Form 10-K dated November 30, 1983,
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 has
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
ANGELES PARTNERS XI
(A California Limited Partnership)
(Registrant)
By: Angeles Realty Corporation II
Managing 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 Partners
XI;
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 Partners
XI;
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 Partners XI
(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.