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 September 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)
September 30, 2004
Assets
Cash and cash equivalents $ 194
Receivables and deposits 33
Other assets 221
Investment property:
Land $ 540
Buildings and related personal property 6,249
6,789
Less accumulated depreciation (2,987) 3,802
$ 4,250
Liabilities and Partners' Deficit
Liabilities
Accounts payable $ 25
Tenant security deposit liabilities 31
Accrued property taxes 147
Other liabilities 104
Mortgage note payable 4,964
Partners' Deficit:
General partner $ (169)
Limited partners (12,425 units issued and
outstanding) (852) (1,021)
$ 4,250
See Accompanying Notes to Financial Statements
ANGELES OPPORTUNITY PROPERTIES, LTD.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(in thousands, except per unit data)
Three Months Ended Nine Months Ended
September 30, September 30,
2004 2003 2004 2003
Revenues: (Restated) (Restated)
Rental income $ 390 $ 408 $ 1,174 $ 1,212
Other income 47 54 153 138
Total revenues 437 462 1,327 1,350
Expenses:
Operating 198 208 612 594
General and administrative 21 26 87 86
Depreciation 64 62 193 189
Interest 90 92 273 280
Property taxes 45 43 145 148
Total expenses 418 431 1,310 1,297
Income from continuing operations 19 31 17 53
(Loss) income from discontinued
operations (Note A) -- 52 (16) 60
Gain on sale of discontinued
operations (Note C) 68 -- 2,478 --
Net income $ 87 $ 83 $ 2,479 $ 113
Net income allocated to general
partner (1%) $ 1 $ 1 $ 25 $ 1
Net income allocated to limited
partners (99%) 86 82 2,454 112
$ 87 $ 83 $ 2,479 $ 113
Per limited partnership unit:
Income from continuing operations $ 1.53 $ 2.50 $ 1.37 $ 4.26
(Loss) income from discontinued
operations -- 4.10 (1.28) 4.75
Gain on sale of discontinued
operations 5.39 -- 197.42 --
$ 6.92 $ 6.60 $197.51 $ 9.01
Distributions per limited
partnership unit $166.28 $ 17.70 $171.03 $ 45.39
See Accompanying Notes to Financial Statements
ANGELES OPPORTUNITY PROPERTIES, LTD.
CONSOLIDATED STATEMENT OF CHANGES IN PARTNERS' DEFICIT
(Unaudited)
(in thousands, except unit data)
Limited
Partnership General Limited
Units Partner Partners Total
Original capital contributions 12,425 $ 1 $12,425 $12,426
Partners' deficit at
December 31, 2003 12,425 $ (171) $(1,181) $(1,352)
Distributions to partners -- (23) (2,125) (2,148)
Net income for the nine months
ended September 30, 2004 -- 25 2,454 2,479
Partners' deficit at
September 30, 2004 12,425 $ (169) $ (852) $(1,021)
See Accompanying Notes to Financial Statements
ANGELES OPPORTUNITY PROPERTIES, LTD.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
Nine Months Ended
September 30,
2004 2003
Cash flows from operating activities:
Net income $ 2,479 $ 113
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation 240 268
Loss on early extinguishment of debt 71 42
Amortization of loan costs 17 18
Gain on sale of investment property (2,478) --
Change in accounts:
Receivables and deposits (3) 7
Other assets (22) (40)
Accounts payable (23) (29)
Due to affiliates (31) --
Tenant security deposit liabilities (15) 12
Accrued property taxes (141) (80)
Other liabilities (44) 100
Net cash provided by operating activities 50 411
Cash flows from investing activities:
Net proceeds from sale of investment property 4,212 --
Property improvements and replacements (125) (132)
Net withdrawals from (deposits to) restricted escrows 95 (40)
Net cash provided by (used in) investing activities 4,182 (172)
Cash flows from financing activities:
Payments on mortgage notes payable (133) (131)
Distributions to partners (2,148) (571)
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 financing activities (4,326) (244)
Net decrease in cash and cash equivalents (94) (5)
Cash and cash equivalents at beginning of period 288 184
Cash and cash equivalents at end of period $ 194 $ 179
Supplemental disclosure of cash flow information:
Cash paid for interest $ 288 $ 355
See Accompanying Notes to Financial Statements
ANGELES OPPORTUNITY PROPERTIES, LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note A - Basis of Presentation
The accompanying unaudited consolidated financial statements of Angeles
Opportunity Properties, Ltd. (the "Partnership" or the "Registrant") have been
prepared in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-QSB and Item 310(b)
of Regulation S-B. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of Angeles Realty Corporation II (the
"General Partner" and a subsidiary of Apartment Investment and Management
Company ("AIMCO"), a publicly traded real estate investment trust), all
adjustments (consisting of normal recurring accruals) considered necessary for a
fair presentation have been included. Operating results for the three and nine
month periods ended September 30, 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 nine months ended
September 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 depends 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
$84,000 and $95,000 for the nine months ended September 30, 2004 and 2003,
respectively, 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 $54,000 and $48,000 for the
nine months ended September 30, 2004 and 2003, respectively, which is included
in general and administrative expenses.
During the nine months ended September 30, 2003, an affiliate of the General
Partner advanced the Partnership approximately $117,000 to assist in paying the
property taxes of the two investment properties. These advances were repaid
during the nine months ended September 30, 2003. There were no such advances or
repayments during the nine months ended September 30, 2004 and there was no
balance outstanding at September 30, 2004. Interest was charged at the prime
rate plus 2% and was approximately $2,000 for the nine months ended September
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 nine months ended September 30, 2004 and 2003, the
Partnership was charged by AIMCO and its affiliates approximately $35,000 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 a third party
for net proceeds of approximately $4,212,000 after payment of closing costs. The
Partnership realized a gain of approximately $2,478,000 as a result of the sale.
The additional gain of approximately $68,000 recorded during the three months
ended September 30, 2004 was due to the write off of an accrual for additional
sale related expenses that was not needed. 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. Included in (loss) income from discontinued operations
for the nine months ended September 30, 2004 and 2003 is approximately $359,000
and $582,000, respectively, of revenue generated by the property.
Note D - Mortgage Notes Payable
During May 2003, the Partnership refinanced the first and second mortgages
encumbering Lake Meadows Apartments. The refinancing replaced a first mortgage
of $1,500,000 and a second mortgage of $54,000 with a new mortgage of
$2,096,000. Total capitalized loan costs were approximately $84,000 during the
nine months ended September 30, 2003. The Partnership recognized a loss on the
early extinguishment of debt of approximately $42,000 due to the write-off of
unamortized loan costs on the old loans.
Initially the May 2003 refinancing of Lake Meadows Apartments was under an
interim credit facility ("Interim Credit Facility") which also provided for the
refinancing of several other properties. The Interim Credit Facility created
separate loans for each property refinanced thereunder, which loans were not
cross-collateralized or cross-defaulted with each other. During the term of the
Interim Credit Facility, Lake Meadows Apartments was required to make
interest-only payments. The first month's interest rate for Lake Meadows
Apartments was 2.78%.
As of June 1, 2003, the loan on Lake Meadows Apartments was transferred to a
different lender. The credit facility ("Permanent Credit Facility") with the new
lender has a maturity 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 - 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 captioned Heller v. Insignia Financial Group (the "Heller action") was
filed against the same defendants that are named in the Nuanes action. 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 (the "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 notconform 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. The Objector filed a second
appeal challenging the court's use of a referee and its order requiring Objector
to pay those fees.
On January 28, 2004, the Objector filed his opening brief in the Appeal. On
April 23, 2004, the General Partner and its affiliates filed a response brief in
support of the settlement and the judgment thereto. The 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. In addition
both the Objector and plaintiffs filed briefs in connection with the second
appeal. The Court of Appeals heard oral argument on both appeals on September
22, 2004 and took the matters under submission.
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 the 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. 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.
The Partnership is unaware of any other pending or outstanding litigation
matters involving it or its investment property 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 (the "SEC") is conducting a formal
investigation relating to certain matters. Although the staff of the SEC is not
limited in the areas that it may investigate, 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, capitalization of payroll and certain other expenses, and tax
credit transactions. AIMCO is cooperating fully. AIMCO is not able to predict
when the matter will be resolved. AIMCO does not believe that the ultimate
outcome will have a material adverse effect on its consolidated financial
condition or results of operations. 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.
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 for the property for the nine
months ended September 30, 2004 and 2003:
Average Occupancy
Property 2004 2003
Lakewood Apartments 90% 93%
Tomball, Texas
The General Partner attributes the decrease in occupancy at Lakewood Apartments
to an increase in home purchases in the Houston area.
The Partnership's financial results depend 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 that are outside the control of the Partnership such as the
local economic climate and weather can adversely or positively affect the
Partnership's financial results.
Results of Operations
The Partnership's net income for the three and nine months ended September 30,
2004 was approximately $87,000 and $2,479,000, respectively, compared to net
income of approximately $83,000 and $113,000 for the three and nine months ended
September 30, 2003, respectively. The increase in net income for the three
months ended September 30, 2004 is due to the gain on the sale of Lake Meadows
Apartments recognized in 2004 and a decrease in total expenses partially offset
by a decrease in income from discontinued operations and a decrease in total
revenues. The increase in net income for the nine months ended September 30,
2004 is due to the gain on the sale of Lake Meadows Apartments recognized in
2004 partially offset by decreases in income from discontinued operations and
total revenues and an increase in total expenses.
In accordance with Statement of Financial Accounting Standards ("SFAS") No. 144,
the consolidated statements of operations for the three and nine months ended
September 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 a third party
for net proceeds of approximately $4,212,000 after payment of closing costs. The
Partnership realized a gain of approximately $2,478,000 as a result of the sale.
The additional gain of approximately $68,000 recorded during the three months
ended September 30, 2004 was due to the write off of an accrual for additional
sale related expenses that was not needed. 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. Included in (loss) income from discontinued operations
for the nine months ended September 30, 2004 and 2003 is approximately $359,000
and $582,000, respectively, of revenue generated by the property.
Excluding the gain on sale and the discontinued operations, the Partnership's
income from continuing operations for the three and nine months ended September
30, 2004 was approximately $19,000 and $17,000, compared to income from
continuing operations of approximately $31,000 and $53,000 for the corresponding
periods in 2003. The decrease in income from continuing operations for the three
months ended September 30, 2004 is due to a decrease in total revenues partially
offset by a decrease in total expenses. The decrease in income from continuing
operations for the nine months ended September 30, 2004 is due to a decrease in
total revenues and an increase in total expenses. The decrease in total revenues
for the three months ended September 30, 2004 is due to decreases in rental and
other income. The decrease in total revenues for the nine months ended September
30, 2004 is due to a decrease in rental income partially offset by an increase
in other income. Rental income for both periods decreased due to decreases in
occupancy and the average rental rate at Lakewood Apartments partially offset by
a decrease in bad debt expense. Other income for the three months ended
September 30, 2004 decreased due to decreases in late charges and cleaning fees
partially offset by an increase in utility reimbursements. Other income for the
nine months ended September 30, 2004 increased due to increases in utility
reimbursements and lease cancellation fees partially offset by decreases in late
charges and cleaning fees.
Total expenses for the three month period decreased due to a decrease in
operating expenses which decreased as a result of decreases in property and
maintenance expenses. Property expense decreased due to a decrease in utilities
at the investment property. Maintenance expense decreased due to decreases in
contract labor and in painting and maintenance supplies. Total expenses for the
nine month period increased due to an increase in operating expenses, primarily
due to an increase in contract labor at the investment property.
Included in general and administrative expense for the nine months ended
September 30, 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 September 30, 2004, the Partnership had cash and cash equivalents of
approximately $194,000 compared to approximately $179,000 at September 30, 2003.
Cash and cash equivalents decreased approximately $94,000, from December 31,
2003, due to approximately $4,326,000 of cash used in financing activities
partially offset by approximately $50,000 of cash provided by operating
activities and approximately $4,182,000 of cash provided by investing
activities. 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.
Cash provided by investing activities consisted of net proceeds from the sale of
Lake Meadows Apartments and the refund of restricted escrows held by the
mortgage lender for Lake Meadows Apartments partially offset by property
improvements and replacements. 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. Capital improvements planned for the Partnership's property are
detailed below.
Lake Meadows Apartments
During the nine months ended September 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 nine months ended September 30, 2004, the Partnership completed
approximately $89,000 of capital improvements at Lakewood Apartments, consisting
primarily of fencing, parking lot resurfacing, structural upgrades, exterior
painting, 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 $52,000 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 $4,964,000 matures
in January 2022, at which time the loan is scheduled to be fully amortized.
The Partnership distributed the following amounts during the nine months ended
September 30, 2004 and 2003 (in thousands, except per unit data):
Nine Months Ended Per Limited Nine Months Ended Per Limited
September 30, Partnership September 30, Partnership
2004 Unit 2003 Unit
Operations (1) $ 61 $ 4.75 $ 112 $ 8.77
Refinancing (2) -- -- 459 36.62
Sale (3) 2,087 166.28 -- --
$2,148 $171.03 $ 571 $45.39
(1) Includes approximately $1,000 and $2,000 for the nine months ended
September 30, 2004 and 2003, respectively, distributed to the General
Partner of the majority-owned sub tier limited partnership.
(2) Proceeds from the refinancing of the mortgage encumbering Lake Meadows
Apartments in May 2003.
(3) Proceeds from the sale of Lake Meadows Apartments in June 2004.
Future cash distributions will depend on the levels of net cash generated from
operations, the availability of cash reserves, refinancings, and/or property
sale. 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 6,380 limited partnership units (the
"Units") in the Partnership representing 51.35% of the outstanding Units at
September 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 51.35% 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
asset.
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 captioned Heller v. Insignia Financial Group (the "Heller action") was
filed against the same defendants that are named in the Nuanes action. 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 (the "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. The Objector filed a second
appeal challenging the court's use of a referee and its order requiring Objector
to pay those fees.
On January 28, 2004, the Objector filed his opening brief in the Appeal. On
April 23, 2004, the General Partner and its affiliates filed a response brief in
support of the settlement and the judgment thereto. The 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. In addition
both the Objector and plaintiffs filed briefs in connection with the second
appeal. The Court of Appeals heard oral argument on both appeals on September
22, 2004 and took the matters under submission.
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 the 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. 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.
ITEM 6. EXHIBITS
See Exhibit Index attached.
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: November 12, 2004
ANGELES OPPORTUNITY PROPERTIES, LTD.
EXHIBIT INDEX
Exhibit Number Description of Exhibit
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
10.3 Joint Venture Agreement - Lakewood Project Joint Venture filed
in Form 8K dated December 31, 1990, and 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.
10.12 Purchase and Sale Contract between Registrant and Wyndmere
Capital, Inc., dated April 15, 2004, filed in Form 8K dated
June 25, 2004 and is incorporated herein by reference.
10.13 Amendment to Purchase and Sale Contract between Registrant and
Wyndmere Capital, Inc., dated May 13, 2004, filed in Form 8K
dated June 25, 2004 and is incorporated herein by reference.
10.14 Second Amendment to Purchase and Sale Contract between
Registrant and Wyndmere Capital, Inc., dated May 27, 2004,
filed in Form 8K dated June 25, 2004 and is incorporated
herein by reference.
10.15 Third Amendment to Purchase and Sale Contract between
Registrant and Wyndmere Capital, Inc., dated June 9, 2004,
filed in Form 8K dated June 25, 2004 and is incorporated
herein by reference.
10.16 Assignment of Purchase and Sale Contract between Wyndmere
Capital Inc., and Lake Meadows Partners, Ltd., dated June
15, 2004, filed in Form 8K dated June 25, 2004 and is
incorporated herein by reference.
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: November 12, 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: November 12, 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 September
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: November 12, 2004
/s/Stephen B. Waters
Name: Stephen B. Waters
Date: November 12, 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.