UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-QSB
(Mark One)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended June 30, 2004
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
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)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports) and (2) has been
subject to such filing requirements for the past 90 days.
Yes X No ___
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
ANGELES OPPORTUNITY PROPERTIES, LTD.
CONSOLIDATED BALANCE SHEET
(Unaudited)
(in thousands, except unit data)
June 30, 2004
Assets
Cash and cash equivalents $ 2,264
Receivables and deposits 95
Other assets 234
Investment property:
Land $ 540
Buildings and related personal property 6,197
6,737
Less accumulated depreciation (2,923) 3,814
$ 6,407
Liabilities and Partners' (Deficiency) Capital
Liabilities
Accounts payable $ 132
Tenant security deposit liabilities 31
Accrued property taxes 101
Due to affiliates (Note B) 47
Other liabilities 116
Mortgage note payable 5,000
Partners' (Deficiency) Capital:
General partner $ (148)
Limited partners (12,425 units issued and
outstanding) 1,128 980
$ 6,407
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 Six Months Ended
June 30, June 30,
2004 2003 2004 2003
(Restated) (Restated)
Revenues:
Rental income $ 392 $ 412 $ 784 $ 804
Other income 51 43 106 84
Total revenues 443 455 890 888
Expenses:
Operating 238 198 414 386
General and administrative 34 33 66 60
Depreciation 65 64 129 127
Interest 91 94 183 188
Property taxes 51 53 100 105
Total expenses 479 442 892 866
(Loss) income from continuing operations (36) 13 (2) 22
(Loss) income from discontinued operations
(Notes A & C) (50) (10) (16) 8
Gain on sale of discontinued operations
(Note C) 2,410 -- 2,410 --
Net income $ 2,324 $ 3 $ 2,392 $ 30
Net income allocated to general partner
(1%) $ 23 $ -- $ 24 $ --
Net income allocated to limited partners
(99%) 2,301 3 2,368 30
$ 2,324 $ 3 $ 2,392 $ 30
Per limited partnership unit:
(Loss) income from continuing operations $ (2.86) $ 1.05 $ (0.16) $ 1.77
(Loss) income from discontinued operations (3.98) (0.81) (1.29) 0.64
Gain on sale of discontinued operations 192.03 -- 192.03 --
$ 185.19 $ 0.24 $190.58 $ 2.41
Distributions per limited partnership unit $ -- $ 27.69 $ 4.75 $ 27.69
See Accompanying Notes to Consolidated Financial Statements
ANGELES OPPORTUNITY PROPERTIES, LTD.
CONSOLIDATED STATEMENT OF CHANGES IN PARTNERS' (DEFICIENCY) CAPITAL
(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, 2003 12,425 $ (171) $(1,181) $(1,352)
Distributions to partners -- (1) (59) (60)
Net income for the six months
ended June 30, 2004 -- 24 2,368 2,392
Partners' (deficiency) capital
at June 30, 2004 12,425 $ (148) $ 1,128 $ 980
See Accompanying Notes to Consolidated Financial Statements
ANGELES OPPORTUNITY PROPERTIES, LTD.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
Six Months Ended
June 30,
2004 2003
Cash flows from operating activities:
Net income $ 2,392 $ 30
Adjustments to reconcile net income to net cash (used in)
provided by operating activities:
Depreciation 176 180
Loss on early extinguishment of debt 71 42
Amortization of loan costs 15 10
Gain on sale of investment property (2,410) --
Change in accounts:
Receivables and deposits (65) 5
Other assets (33) (48)
Accounts payable 16 (14)
Due to affiliates 16 --
Tenant security deposit liabilities (15) 11
Accrued property taxes (187) (147)
Other liabilities (32) 43
Net cash (used in) provided by operating activities (56) 112
Cash flows from investing activities:
Net proceeds from sale of investment property 4,212 --
Property improvements and replacements (73) (71)
Net withdrawals from (deposits to) restricted escrows 95 (17)
Net cash provided by (used in) investing activities 4,234 (88)
Cash flows from financing activities:
Payments on mortgage notes payable (97) (84)
Distributions to partners (60) (347)
Repayment of mortgage notes payable (2,045) (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) provided by financing activities (2,202) 27
Net increase in cash and cash equivalents 1,976 51
Cash and cash equivalents at beginning of period 288 184
Cash and cash equivalents at end of period $ 2,264 $ 235
Supplemental disclosure of cash flow information:
Cash paid for interest $ 199 $ 251
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 six
month periods ended June 30, 2004, are not necessarily indicative of the results
that may be expected for the fiscal year ending December 31, 2004. 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, 2003.
In accordance with Statement of Financial Accounting Standards ("SFAS") No. 144,
the consolidated statements of operations for the three and six months ended
June 30, 2003 have been restated to reflect the operations of Lake Meadows
Apartments as (loss) income from discontinued operations due to its sale in June
2004.
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
$62,000 for both the six months ended June 30, 2004 and 2003, which is included
in operating expenses and (loss) income from discontinued operations.
An affiliate of the General Partner received reimbursement of accountable
administrative expenses amounting to approximately $41,000 and $29,000 for the
six months ended June 30, 2004 and 2003, respectively, which is included in
general and administrative expenses. At June 30, 2004, the Partnership owed
approximately $47,000 in reimbursements which is included in due to affiliates.
Subsequent to June 30, 2004, this amount was paid, in full.
During the six months ended June 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
six months ended June 30, 2003. There were no such advances or repayments during
the six months ended June 30, 2004 and there was no balance outstanding at June
30, 2004. Interest was charged at the prime rate plus 2% and was approximately
$2,000 for the six months ended June 30, 2003.
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 six months ended June 30, 2004 and 2003, the Partnership was
charged by AIMCO and its affiliates approximately $21,000 and $32,000,
respectively, for insurance coverage and fees associated with policy claims
administration.
Note C- Sale of Investment Property
On June 25, 2004, the Partnership sold Lake Meadows Apartments to an unrelated
third party for net proceeds of approximately $4,212,000 after payment of
closing costs. The Partnership realized a gain of approximately $2,410,000 as a
result of the sale. The Partnership used approximately $2,045,000 of the net
proceeds to repay the mortgage encumbering the property. In addition the
Partnership recorded a loss on early extinguishment of debt of approximately
$71,000 as a result of unamortized loan costs being written off and lender fees
paid by the buyer. This amount is included in (loss) income from discontinued
operations in the accompanying consolidated statement of operations. In
accordance with SFAS 144, the accompanying statements of operations for the
three and six months ended June 30, 2003 have been restated to reflect the
operations of Lake Meadows as discontinued operations. Included in (loss) income
from discontinued operations for the six months ended June 30, 2004 and 2003 is
approximately $371,000 and $380,000, respectively, of revenue generated by the
property.
Note D - 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
six months ended June 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 date of September 1, 2007 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 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 repaid this loan during June 2004 from the proceeds of
the sale of Lake Meadows Apartments.
Note E - Subsequent Event
Subsequent to June 30, 2004, approximately $2,087,000 (approximately $2,066,000
to the limited partners or $166.28 per limited partnership unit) was distributed
to the partners related to the sale of Lake Meadows in June 2004.
Note F - Contingencies
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
("Objector") filed an appeal seeking to vacate and/or reverse the order
approving the settlement and entering judgment thereto. On November 24, 2003,
the Objector filed an application requesting the Court order AIMCO to withdraw
settlement tender offers it had commenced, refrain from making further offers
pending the appeal and auction any units tendered to third parties, contending
that the offers did not conform with the terms of the Settlement. Counsel for
the Objector (on behalf of another investor) had alternatively requested the
Court take certain action purportedly to enforce the terms of the settlement
agreement. On December 18, 2003, the Court heard oral argument on the motions
and denied them both in their entirety.
On January 28, 2004, Objector filed his opening brief in his pending appeal. On
April 23, 2004, the General Partner and its affiliates filed a response brief in
support of the settlement and the judgment thereto. Plaintiffs have also filed a
brief in support of the settlement. On June 4, 2004, Objector filed a reply to
the briefs submitted by the General Partner and Plaintiffs. No hearing has been
scheduled in the matter.
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. On March 5, 2004 Plaintiffs filed an
amended complaint also naming NHP Management Company, which is also an affiliate
of the General Partner. 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 defendants have filed
an answer to the amended complaint denying the substantive allegations. Some
discovery has taken place and settlement negotiations continue. Although the
outcome of any litigation is uncertain, AIMCO Properties, L.P. does not believe
that the ultimate outcome will have a material adverse effect on its financial
condition or results of operations taken as a whole. Similarly, the General
Partner does not believe that the ultimate outcome will have a material adverse
effect on the Partnership's financial condition or results of operations taken
as a whole.
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.
As previously disclosed, the Central Regional Office of the United States
Securities and Exchange Commission is conducting an investigation relating to
certain matters. AIMCO believes the areas of investigation include AIMCO's
miscalculated monthly net rental income figures in third quarter 2003,
forecasted guidance, accounts payable, rent concessions, vendor rebates, and
capitalization of expenses and payroll. AIMCO is cooperating fully. AIMCO does
not believe that the ultimate outcome will have a material adverse effect on its
consolidated financial condition or results of operations taken as a whole.
Similarly, the General Partner does not believe that the ultimate outcome will
have a material adverse effect on the Partnership's consolidated financial
condition or results of operations taken as a whole.
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 property consists of one apartment complex. The
following table sets forth the average occupancy for the property for the six
months ended June 30, 2004 and 2003:
Average Occupancy
Property 2004 2003
Lakewood Apartments 89% 92%
Tomball, Texas
The General Partner attributes the decrease in occupancy at Lakewood Apartments
to an increase in the credit standards for tenants.
The Partnership's financial results are dependent upon a number of factors
including the ability to attract and maintain tenants at the investment
property, interest rates on mortgage loans, costs incurred to operate the
investment property, general economic conditions and weather. As part of the
ongoing business plan of the Partnership, the 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 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.
Further, a number of factors which are outside the control of the Partnership
such as the local economic climate and weather can adversely or positively
impact the Partnership's financial results.
Results from Operations
The Partnership's net income for the three and six months ended June 30, 2004
was approximately $2,324,000 and $2,392,000, respectively, compared to net
income of approximately $3,000 and $30,000 for the three and six month periods
ended June 30, 2003, respectively. The increase in net income for the three and
six month periods is due to the recognition of a gain on the sale of Lake
Meadows Apartments during the six months ended June 30, 2004.
In accordance with Statement of Financial Accounting Standards ("SFAS") No. 144,
the consolidated statements of operations for the three and six months ended
June 30, 2003 have been restated to reflect the operations of Lake Meadows
Apartments as (loss) income from discontinued operations due to its sale in June
2004.
On June 25, 2004, the Partnership sold Lake Meadows Apartments to an unrelated
third party for net proceeds of approximately $4,212,000 after payment of
closing costs. The Partnership realized a gain of approximately $2,410,000 as a
result of the sale. The Partnership used approximately $2,045,000 of the net
proceeds to repay the mortgage encumbering the property. In addition the
Partnership recorded a loss on early extinguishment of debt of approximately
$71,000 as a result of unamortized loan costs being written off and lender fees
paid by the buyer. This amount is included in (loss) income from discontinued
operations in the accompanying consolidated statement of operations. Included in
(loss) income from discontinued operations for the six months ended June 30,
2004 and 2003 is approximately $371,000 and $380,000, respectively, of revenue
generated by the property.
Excluding the gain on sale and the discontinued operations, the Partnership's
net loss from continuing operations for the three and six months ended June 30,
2004 was approximately $36,000 and $2,000 compared to income from continuing
operations of approximately $13,000 and $22,000 for the corresponding periods in
2003. The decrease in income from continuing operations for the three month
period is due to a decrease in total revenues and an increase in total expenses.
The decrease in income from continuing operations for the six month period is
due to an increase in total expenses partially offset by an increase in total
revenues. Total revenues for the three month period decreased due to a decrease
in rental income partially offset by an increase in other income. Total revenue
for the six month period increased due to an increase in other income partially
offset by a decrease in rental income. Rental income for both periods decreased
due to a decrease in occupancy partially offset by an increase in the average
rental rate at Lakewood Apartments. Other income for both periods increased due
to increases in utilities reimbursements and lease cancellation fees, partially
offset by a decrease in late charges.
Total expenses for the three and six month periods increased due to an increase
in operating expenses. Operating expenses increased due to increases in property
and maintenance expenses. Property expense increased due to an increase in
utilities at the investment property. Maintenance expenses increased due to
increases in contract labor and repairs and supplies.
Included in general and administrative expenses for 2004 and 2003 are 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.
Liquidity and Capital Resources
At June 30, 2004, the Partnership had cash and cash equivalents of approximately
$2,264,000 compared to approximately $235,000 at June 30, 2003. Cash and cash
equivalents increased approximately $1,976,000 from December 31, 2003 due to
approximately $4,234,000 of cash provided by investing activities, partially
offset by approximately $56,000 and $2,202,000 of cash used in operating and
financing activities, respectively. Cash provided by investing activities
consisted of net proceeds from the sale of Lake Meadows Apartments and net
withdrawals from restricted escrows held by the mortgage lender partially offset
by property improvements and replacements. Cash used in financing activities
consisted of the repayment of the mortgage encumbering Lake Meadows Apartments,
principal payments made on the mortgages encumbering the investment properties,
and distributions to partners. 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 General Partner monitors
developments in the area of legal and regulatory compliance. For example, 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 property are detailed below.
Lake Meadows Apartments
During the six months ended June 30, 2004, the Partnership completed
approximately $36,000 of capital improvements at Lake Meadows Apartments,
consisting primarily of floor covering replacements and parking lot resurfacing.
These improvements were funded from operating cash flow. Lake Meadows Apartments
was sold on June 25, 2004.
Lakewood Apartments
During the six months ended June 30, 2004, the Partnership completed
approximately $37,000 of capital improvements at Lakewood Apartments, consisting
primarily of parking lot resurfacing, structural upgrades, plumbing fixtures and
floor covering 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
$104,000 in capital improvements during the remainder of 2004. 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 and from the Partnership's reserves. 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 Lakewood Apartments of approximately $5,000,000 matures
in January 2022, at which time the loan is scheduled to be fully amortized.
The Partnership distributed the following amounts during the six months ended
June 30, 2004 and 2003 (in thousands, except per unit data):
Six Months Per Limited Six Months Per Limited
Ended Partnership Ended Partnership
June 30, 2004 Unit June 30, 2003 Unit
Operations $ 60 $ 4.75 $ -- $ --
Refinancing (1) -- -- 347 27.69
$ 60 $ 4.75 $ 347 $27.69
(1) Proceeds from the refinancing of Lake Meadows Apartments in May 2003.
Subsequent to June 30, 2004, approximately $2,087,000 (approximately $2,066,000
to the limited partners or $166.28 per limited partnership unit) was distributed
to the partners related to the sale of Lake Meadows in June 2004.
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 additional distributions to its
partners during the remainder of 2004 or subsequent periods.
Other
In addition to its indirect ownership of the general partner interest in the
Partnership, AIMCO and its affiliates owned 6,370 limited partnership units (the
"Units") in the Partnership representing 51.27% of the outstanding Units at June
30, 2004. 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, unit
holders 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 51.27% of the outstanding Units, AIMCO
and its affiliates are in a position to control 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 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 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. The
Partnership evaluates all accounts receivable from residents and establishes an
allowance, after the application of security deposits, for accounts greater than
30 days past due on current tenants and all receivables due from former tenants.
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
("Objector") filed an appeal seeking to vacate and/or reverse the order
approving the settlement and entering judgment thereto. On November 24, 2003,
the Objector filed an application requesting the Court order AIMCO to withdraw
settlement tender offers it had commenced, refrain from making further offers
pending the appeal and auction any units tendered to third parties, contending
that the offers did not conform with the terms of the Settlement. Counsel for
the Objector (on behalf of another investor) had alternatively requested the
Court take certain action purportedly to enforce the terms of the settlement
agreement. On December 18, 2003, the Court heard oral argument on the motions
and denied them both in their entirety.
On January 28, 2004, Objector filed his opening brief in his pending appeal. On
April 23, 2004, the General Partner and its affiliates filed a response brief in
support of the settlement and the judgment thereto. Plaintiffs have also filed a
brief in support of the settlement. On June 4, 2004, Objector filed a reply to
the briefs submitted by the General Partner and Plaintiffs. No hearing has been
scheduled in the matter.
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. On March 5, 2004 Plaintiffs filed an
amended complaint also naming NHP Management Company, which is also an affiliate
of the General Partner. 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 defendants have filed
an answer to the amended complaint denying the substantive allegations. Some
discovery has taken place and settlement negotiations continue. Although the
outcome of any litigation is uncertain, AIMCO Properties, L.P. does not believe
that the ultimate outcome will have a material adverse effect on its financial
condition or results of operations taken as a whole. Similarly, the General
Partner does not believe that the ultimate outcome will have a material adverse
effect on the Partnership's financial condition or results of operations taken
as a whole.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a) Exhibits:
See Exhibit Index attached.
b) Reports on Form 8-K:
None filed during the quarter ended June 30, 2004.
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/Martha L. Long
Martha L. Long
Senior Vice President
By: /s/Stephen B. Waters
Stephen B. Waters
Vice President
Date: August 13, 2004
ANGELES OPPORTUNITY PROPERTIES, LTD.
EXHIBIT INDEX
Exhibit Number Description of Exhibit
2.1 Agreement and Plan of Merger, dated as of October 1, 1998, by
and between AIMCO and IPT, filed in Form 8-K on October 16,
1998.
3.1 Amendment Certificate and Agreement of the Limited Partnership
filed in the Partnership's prospectus dated July 7, 1986,
which is incorporated herein by reference
10.1 Purchase and Sale Agreement with Exhibits - Lake Meadows
Apartments filed in Form 8K dated March 31, 1988, incorporated
herein by reference
10.3 Joint Venture Agreement - Lakewood Project Joint Venture filed
in Form 8K dated December 31, 1990, and is incorporated herein
by reference
10.4 General Partnership Agreement - AOPL-AMIT Rolling Greens Joint
Venture dated December 28, 1989, filed in Form 8K dated
December 31, 1990, and is incorporated herein by reference
10.5 Stock Purchase Agreement dated November 24, 1992 showing the
purchase of 100% of the outstanding stock of Angeles Realty
Corporation II by IAP GP Corporation, a subsidiary of MAE GP
Corporation, filed in Form 8K dated December 31, 1992, which
is incorporated herein by reference
10.10 Multifamily Note dated December 6, 2001, between Lakewood AOPL
and GMAC Commercial Mortgage Corporation, a California
Corporation, refinancing the mortgage encumbering Lakewood
Apartments filed in Form 10-KSB dated December 31, 2002 and is
incorporated herein by reference.
10.11 a) Multifamily Note dated May 16, 2003 between Angeles
Opportunity Partners, Ltd. and GMAC Commercial Mortgage
Corporation.
10.11 b) Guaranty dated May 16, 2003 by AIMCO Properties, L.P. for
the benefit of GMAC Commercial Mortgage Corporation.
10.11 c) Completion/Repair and Security Agreement dated May 16,
2003 between New Lake Meadows, L.P. and GMAC Commercial
Mortgage Corporation.
10.11 d) Replacement Reserve and Security Agreement dated May 16,
2003 between New Lake Meadows, L.P. and GMAC Commercial
Mortgage Corporation.
10.12 Purchase and Sale Contract between Registrant and
Wyndmere Capital, Inc., dated April 15, 2004.
10.13 Amendment to Purchase and Sale Contract between
Registrant and Wyndmere Capital, Inc., dated May 13,
2004.
10.14 Second Amendment to Purchase and Sale Contract between
Registrant and Wyndmere Capital, Inc., dated May 27,
2004.
10.15 Third Amendment to Purchase and Sale Contract between
Registrant and Wyndmere Capital, Inc., dated June 9, 2004.
10.16 Assignment of Purchase and Sale Contract between Wyndmere
Capital Inc., and Lake Meadows Partners, Ltd., dated June
15, 2004
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.
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.
32.1 Certification Pursuant to 18 U.S.C. Section 1350, as
Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act
of 2002.
99.1 Partnership prospectus filed in registration statement dated
June 26, 1987, which is incorporated herein by reference.
99.2 Agreement of Limited Partnership for AOP GP Limited
Partnership, L.P. and Angeles Opportunity Properties,
Ltd. entered into on September 9, 1993.
99.3 Agreement of Limited Partnership for New Lake Meadows,
L.P. between AOP GP Limited Partnership, L.P. and Angeles
Opportunity Properties, Ltd. entered into on September 9,
1993.
Exhibit 31.1
CERTIFICATION
I, Martha L. Long, 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 small business issuer as of, and for, the periods presented in this
report;
4. The small business issuer'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 small business issuer 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
small business issuer, 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 small business issuer'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 small business issuer's
internal control over financial reporting that occurred during the
small business issuer's most recent fiscal quarter (the small
business issuer's fourth fiscal quarter in the case of an annual
report) that has materially affected, or is reasonably likely to
materially affect, the small business issuer's internal control over
financial reporting; and
5. The small business issuer's other certifying officer(s) and I have
disclosed, based on our most recent evaluation of internal control over
financial reporting, to the small business issuer's auditors and the audit
committee of the small business issuer'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 small business issuer'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 small business
issuer's internal control over financial reporting.
Date: August 13, 2004
/s/Martha L. Long
Martha L. Long
Senior Vice President of Angeles Realty
Corporation II, equivalent of the chief
executive officer of the Partnership
Exhibit 31.2
CERTIFICATION
I, Stephen B. Waters, 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 small business issuer as of, and for, the periods presented in this
report;
4. The small business issuer'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 small business issuer 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
small business issuer, 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 small business issuer'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 small business issuer's
internal control over financial reporting that occurred during the
small business issuer's most recent fiscal quarter (the small
business issuer's fourth fiscal quarter in the case of an annual
report) that has materially affected, or is reasonably likely to
materially affect, the small business issuer's internal control over
financial reporting; and
5. The small business issuer's other certifying officer(s) and I have
disclosed, based on our most recent evaluation of internal control over
financial reporting, to the small business issuer's auditors and the audit
committee of the small business issuer'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 small business issuer'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 small business
issuer's internal control over financial reporting.
Date: August 13, 2004
/s/Stephen B. Waters
Stephen B. Waters
Vice President 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 June 30,
2004 as filed with the Securities and Exchange Commission on the date hereof
(the "Report"), Martha L. Long, as the equivalent of the chief executive officer
of the Partnership, and Stephen B. Waters, 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/Martha L. Long
Name: Martha L. Long
Date: August 13, 2004
/s/Stephen B. Waters
Name: Stephen B. Waters
Date: August 13, 2004
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.