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 0-11767
ANGELES INCOME PROPERTIES, LTD. II
(Exact Name of Small Business Issuer as Specified in Its Charter)
California 95-3793526
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
55 Beattie Place, PO Box 1089
Greenville, South Carolina 29602
(Address of principal executive offices)
(864) 239-1000
(Issuer's telephone number)
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 INCOME PROPERTIES, LTD. II
CONSOLIDATED BALANCE SHEET
(Unaudited)
(in thousands, except unit data)
September 30, 2004
Assets
Cash and cash equivalents $ 515
Receivables and deposits 382
Restricted escrow 27
Other assets 572
Investment properties:
Land $ 1,691
Buildings and related personal property 26,292
27,983
Less accumulated depreciation (22,618) 5,365
$ 6,861
Liabilities and Partners' Deficit
Liabilities
Accounts payable $ 400
Tenant security deposit liabilities 181
Accrued property taxes 109
Other liabilities 195
Due to affiliates (Note B) 42
Mortgage notes payable 18,640
Partners' Deficit
General partners $ (565)
Limited partners (99,804 units issued and
outstanding) (12,141) (12,706)
$ 6,861
See Accompanying Notes to Consolidated Financial Statements
ANGELES INCOME PROPERTIES, LTD. II
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(in thousands, except per unit data)
Three Months Ended Nine Months Ended
September 30, September 30,
2004 2003 2004 2003
(Restated) (Restated)
Revenues:
Rental income $ 1,122 $ 1,221 $ 3,385 $ 3,534
Other income 122 115 291 295
Total revenues 1,244 1,336 3,676 3,829
Expenses:
Operating 543 454 1,465 1,311
General and administrative 48 88 171 267
Depreciation 187 170 558 898
Interest 370 366 1,104 1,108
Property taxes 163 141 440 410
Total expenses 1,311 1,219 3,738 3,994
(Loss) income from continuing operations (67) 117 (62) (165)
Income (loss) from discontinued operations -- 213 (116) 182
Gain from sale of discontinued operations -- -- 9,652 --
Net (loss) income $ (67) $ 330 $ 9,474 $ 17
Net (loss) income allocated to general
partners (1%) $ (1) $ 3 $ 95 $ --
Net (loss) income allocated to limited
partners (99%) (66) 327 9,379 17
$ (67) $ 330 $ 9,474 $ 17
Per limited partnership unit:
(Loss) income from continuing operations $ (0.66) $ 1.16 $ (0.62) $ (1.63)
Income (loss) from discontinued
operations -- 2.12 (1.15) 1.80
Gain from sale of discontinued operations -- -- 95.74 --
Net (loss) income $ (0.66) $ 3.28 $ 93.97 $ 0.17
Distributions per limited partnership unit $ -- $ 3.85 $ 41.73 $ 18.15
See Accompanying Notes to Consolidated Financial Statements
ANGELES INCOME PROPERTIES, LTD. II
CONSOLIDATED STATEMENT OF CHANGES IN PARTNERS' DEFICIT
(Unaudited)
(in thousands, except unit data)
Limited
Partnership General Limited
Units Partners Partners Total
Original capital contributions 100,000 $ 1 $ 50,000 $ 50,001
Partners' deficit at
December 31, 2003 99,804 $ (618) $(17,355) $(17,973)
Distributions to partners -- (42) (4,165) (4,207)
Net income for the nine months
ended September 30, 2004 -- 95 9,379 9,474
Partners' deficit at
September 30, 2004 99,804 $ (565) $(12,141) $(12,706)
See Accompanying Notes to Consolidated Financial Statements
ANGELES INCOME PROPERTIES, LTD. II
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
Nine Months Ended
September 30,
2004 2003
Cash flows from operating activities:
Net income $ 9,474 $ 17
Adjustments to reconcile net income to net cash
provided by operating activities:
Gain from sale of discontinued operations (9,652) --
Depreciation 582 1,162
Amortization of mortgage discounts and loan costs 61 56
Loss on early extinguishment of debt 159 58
Change in accounts:
Receivables and deposits 50 (116)
Other assets (155) (56)
Accounts payable 70 (53)
Tenant security deposit liabilities (64) 13
Accrued property taxes (64) 70
Due to affiliates (222) 14
Other liabilities (205) (13)
Net cash provided by operating activities 34 1,152
Cash flows from investing activities:
Proceeds from sale of investment property 10,769 --
Property improvements and replacements (448) (313)
Net withdrawals from restricted escrows 6 134
Net cash provided by (used in) investing activities 10,327 (179)
Cash flows from financing activities:
Payments on mortgage notes payable (393) (412)
Distributions to partners (4,207) (1,829)
Proceeds from mortgage note payable -- 6,175
Repayment of mortgage notes payable (6,062) (5,017)
Advance from affiliate 42 --
Loan costs paid (19) (174)
Prepayment penalty paid -- (28)
Net cash used in financing activities (10,639) (1,285)
Net decrease in cash and cash equivalents (278) (312)
Cash and cash equivalents at beginning of period 793 669
Cash and cash equivalents at end of period $ 515 $ 357
Supplemental disclosure of cash flow information:
Cash paid for interest $ 1,074 $ 1,296
Supplemental disclosure of non-cash activity:
Property improvements and replacements included in
accounts payable $ 261 $ --
See Accompanying Notes to Consolidated Financial Statements
ANGELES INCOME PROPERTIES, LTD. II
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note A - Basis of Presentation
The accompanying unaudited consolidated financial statements of Angeles Income
Properties, Ltd. II (the "Partnership" or "Registrant") have been prepared in
accordance with generally accepted accounting principles for interim financial
information and with the instructions to Form 10-QSB and Item 310(b) of
Regulation S-B. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of Angeles Realty Corporation II (the
"Managing General Partner"), which is wholly-owned by Apartment Investment and
Management Company ("AIMCO"), a publicly traded real estate investment trust,
all adjustments (consisting of normal recurring accruals) considered necessary
for a fair presentation have been included. Operating results for the three and
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.
The accompanying consolidated statements of operations for the three and nine
months ended September 30, 2003 have been restated as of January 1, 2003 to
reflect the operations of Georgetown Apartments as income (loss) from
discontinued operations in accordance with Statement of Financial Accounting
Standards ("SFAS") No. 144, "Accounting for the Impairment or Disposal of
Long-Lived Assets". Georgetown Apartments was sold to a third party on March 2,
2004.
Note B - Transactions with Affiliated Parties
The Partnership has no employees and depends on the Managing General Partner and
its affiliates for the management and administration of all Partnership
activities. The Partnership Agreement provides for certain payments to
affiliates for services and reimbursement of certain expenses incurred by
affiliates on behalf of the Partnership.
Affiliates of the Managing General Partner are entitled to receive 5% of gross
receipts from all of the Partnership's properties as compensation for providing
property management services. The Partnership paid to such affiliates
approximately $198,000 and $247,000 for the nine months ended September 30, 2004
and 2003, respectively, which are included in operating expenses and income
(loss) from discontinued operations.
Affiliates of the Managing General Partner received reimbursement of accountable
administrative expenses amounting to approximately $136,000 and $127,000 for the
nine months ended September 30, 2004 and 2003, respectively, which are included
in general and administrative expenses and investment properties. Included in
these amounts are fees related to construction management services provided by
an affiliate of the Managing General Partner of approximately $13,000 for each
of the nine months ended September 30, 2004 and 2003. The construction
management service fees are calculated based on a percentage of current
additions to investment properties.
The Partnership Agreement provides for a fee equal to 10% of "Net cash flow from
operations," as defined in the Partnership Agreement to be paid to the Managing
General Partner for executive and administrative management services. Fees of
approximately $39,000 were earned by the Managing General Partner for the nine
months ended September 30, 2003, which is included in general and administrative
expenses. There were no such fees earned by the Managing General Partner for the
nine months ended September 30, 2004.
Pursuant to the Partnership Agreement, the Managing General Partner is entitled
to receive a distribution equal to 3% of the aggregate disposition price of sold
properties. The Partnership paid a distribution of approximately $86,000 to the
Managing General Partner related to the sale of Atlanta Crossing Shopping Center
in March 2000. This amount is subordinate to the limited partners receiving
their original capital contributions plus a cumulative preferred return of 6%
per annum of their adjusted capital investment, as defined in the Partnership
Agreement. If the limited partners have not received these returns when the
Partnership terminates, the Managing General Partner will be required to return
this amount to the Partnership. No such distribution was paid to the Managing
General Partner related to the March 2004 sale of Georgetown Apartments.
The Partnership paid an affiliate of the Managing General Partner approximately
$62,000 for loan costs related to the refinancing of the mortgages encumbering
Georgetown Apartments during the nine months ended September 30, 2003. These
costs were capitalized and the unamortized balance is included in loss from
discontinued operations for the nine months ended September 30, 2004, as a
result of the property's sale in March 2004.
In accordance with the Partnership Agreement, during the nine months ended
September 30, 2004, an affiliate of the Managing General Partner advanced the
Partnership approximately $42,000 to fund costs related to the upcoming
refinancing of the mortgage encumbering Landmark Apartments. This advance bears
interest at the prime rate plus 2% (6.75% at September 30, 2004). Interest
expense was less than $1,000 for the nine months ended September 30, 2004. At
September 30, 2004, the total outstanding advances and accrued interest was
approximately $42,000 and is included in due to affiliates. There were no such
advances made by affiliates of the Managing General Partner to the Partnership
during 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
Managing General Partner. During the nine months ended September 30, 2004 and
2003, the Partnership was charged by AIMCO and its affiliates approximately
$64,000 and $62,000, respectively, for insurance coverage and fees associated
with policy claims administration.
Note C - Disposition of Investment Property
On March 2, 2004, the Partnership sold Georgetown Apartments to a third party
for a gross sale price of approximately $10,950,000. The net proceeds realized
by the Partnership were approximately $10,769,000 after payment of closing costs
and a prepayment penalty owed by the Partnership and paid by the buyer. The
Partnership used approximately $6,062,000 of the net proceeds to repay the
mortgage encumbering the property. The Partnership realized a gain of
approximately $9,652,000 as a result of the sale during the nine months ended
September 30, 2004, which is included in gain from sale of discontinued
operations. In addition, the Partnership recorded a loss on the early
extinguishment of debt of approximately $159,000 as a result of the write-off of
unamortized loan costs and a prepayment penalty, which is included in loss from
discontinued operations. The property's operations, loss of approximately
$116,000 for the nine months ended September 30, 2004 and income of
approximately $213,000 and $182,000 for the three and nine months ended
September 30, 2003, respectively, are included in income (loss) from
discontinued operations. Included in income (loss) from discontinued operations
are revenues of approximately $234,000 for the nine months ended September 30,
2004 and revenues of approximately $399,000 and $1,177,000 for the three and
nine months ended September 30, 2003, respectively.
Note D - Refinancing of Mortgage Notes Payable
On May 21, 2003, the Partnership refinanced the mortgages encumbering Georgetown
Apartments. The refinancing replaced the existing mortgages of approximately
$5,017,000 with a new mortgage in the amount of $6,175,000. Total capitalized
loan costs were approximately $174,000 during the nine months ended September
30, 2003. These costs included approximately $62,000 in fees paid to the
Managing General Partner. The Partnership recognized a loss on the early
extinguishment of debt of approximately $58,000 during the nine months ended
September 30, 2003, due to the write off of unamortized loan costs and debt
discounts and the payment of a prepayment penalty, which is included in income
(loss) from discontinued operations.
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 Managing General Partner and
several of their affiliated partnerships and corporate entities. The action
purported to assert claims on behalf of a class of limited partners and
derivatively on behalf of a number of limited partnerships (including the
Partnership) that are named as nominal defendants, challenging, among other
things, the acquisition of interests in certain Managing General Partner
entities by Insignia Financial Group, Inc. ("Insignia") and entities that were,
at one time, affiliates of Insignia; past tender offers by the Insignia
affiliates to acquire limited partnership units; management of the partnerships
by the Insignia affiliates; and the series of transactions which closed on
October 1, 1998 and February 26, 1999 whereby Insignia and Insignia Properties
Trust, respectively, were merged into AIMCO. The plaintiffs sought monetary
damages and equitable relief, including judicial dissolution of the Partnership.
In addition, during the third quarter of 2001, a complaint 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 Managing General Partner has also agreed to make
at least one round of tender offers to purchase all of the partnership interests
in the Partnerships within one year of final approval, if it is granted, and to
provide partners with the independent appraisals at the time of these tenders.
The proposed settlement also provided for the limitation of the allowable costs
which the Managing General Partner or its affiliates will charge the
Partnerships in connection with this litigation and imposes limits on the class
counsel fees and costs in this litigation. On April 11, 2003, notice was
distributed to limited partners providing the details of the proposed
settlement.
On June 13, 2003, the court granted final approval of the settlement and entered
judgment in both the Nuanes and Heller actions. On August 12, 2003, an objector
("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 Managing 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 Managing 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 Managing General Partner does not anticipate that any costs to the
Partnership, whether legal or settlement costs, associated with these cases will
be material to the Partnership's overall operations.
On August 8, 2003 AIMCO Properties L.P., an affiliate of the Managing General
Partner, was served with a complaint in the United States District Court,
District of Columbia alleging that AIMCO Properties L.P. willfully violated the
Fair Labor Standards Act ("FLSA") by failing to pay maintenance workers overtime
for all hours worked in excess of forty per week. On March 5, 2004 the
plaintiffs filed an amended complaint also naming NHP Management Company, which
is also an affiliate of the Managing 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 Managing 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.
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 (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 costs, 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 Managing 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.
Note F - Subsequent Event
On November 1, 2004, the Registrant obtained a mortgage in the principal amount
of $7,000,000 on one of its investment properties, Landmark Apartments, located
in Raleigh, North Carolina. The existing mortgage with an outstanding principal
amount of approximately $5,950,000 matured on November 1, 2004 and was repaid
with proceeds from the new mortgage. The new mortgage requires monthly payments
of interest beginning on December 1, 2004 until the loan matures November 1,
2006, with interest being equal to the average of the one month LIBOR plus 235
basis points (minimum rate of 4.3662%). In conjunction with the mortgage note,
the Partnership paid approximately $13,000 to enter into an interest rate cap
agreement, which limits the Partnership's exposure to interest rate increase.
Under this interest rate cap agreement, the Partnership's interest rate on the
amounts owed to GMAC Commercial Mortgage will be no higher than 5.5%.
Adjustments to the initial amount paid are recognized in interest expense. In
addition, the new mortgage requires monthly escrow deposits for taxes, insurance
and replacement reserves and a $500,000 repair reserve that was established with
the lender at closing. As a condition of making the new mortgage, the lender
required AIMCO Properties, L.P., an affiliate of the Registrant, to guarantee
the obligations and liabilities of the Registrant with respect to the new
mortgage.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
The matters discussed in this report contain certain forward-looking statements,
including, without limitation, statements regarding future financial performance
and the effect of government regulations. Actual results may differ materially
from those described in the forward-looking statements and will be affected by a
variety of risks and factors including, without limitation: national and local
economic conditions; the terms of governmental regulations that affect the
Registrant and interpretations of those regulations; the competitive environment
in which the Registrant operates; financing risks, including the risk that cash
flows from operations may be insufficient to meet required payments of principal
and interest; real estate risks, including variations of real estate values and
the general economic climate in local markets and competition for tenants in
such markets; litigation, including costs associated with prosecuting and
defending claims and any adverse outcomes, and possible environmental
liabilities. Readers should carefully review the Registrant's financial
statements and the notes thereto, as well as the risk factors described in the
documents the Registrant files from time to time with the Securities and
Exchange Commission.
The Partnership's investment properties consist of two apartment complexes. The
following table sets forth the average occupancy of the properties for the nine
months ended September 30, 2004 and 2003:
Average Occupancy
Property 2004 2003
Deer Creek Apartments 93% 95%
Plainsboro, New Jersey
Landmark Apartments 81% 86%
Raleigh, North Carolina
The Managing General Partner attributes the decrease in occupancy at Landmark
Apartments to increased competition in the Raleigh area.
The Partnership's financial results depend upon a number of factors including
the ability to attract and maintain tenants at the investment properties,
interest rates on mortgage loans, costs incurred to operate the investment
properties, general economic conditions and weather. As part of the ongoing
business plan of the Partnership, the Managing General Partner monitors the
rental market environment of its investment properties to assess the feasibility
of increasing rents, maintaining or increasing occupancy levels and protecting
the Partnership from increases in expenses. As part of this plan, the Managing
General Partner attempts to protect the Partnership from the burden of
inflation-related increases in expenses by increasing rents and maintaining a
high overall occupancy level. However, the Managing General Partner may use
rental concessions and rental rate reductions to offset softening market
conditions. Accordingly, there is no guarantee that the Managing General Partner
will be able to sustain such a plan. 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 recognized a net loss of approximately $67,000 for the three
months ended September 30, 2004 and net income of approximately $9,474,000 for
the nine months ended September 30, 2004, as compared to net income of
approximately $330,000 and $17,000 for the three and nine months ended September
30, 2003, respectively. On March 2, 2004, the Partnership sold Georgetown
Apartments to a third party for a gross sale price of approximately $10,950,000.
The net proceeds realized by the Partnership were approximately $10,769,000
after payment of closing costs and a prepayment penalty owed by the Partnership
and paid by the buyer. The Partnership used approximately $6,062,000 of the net
proceeds to repay the mortgage encumbering the property. The Partnership
realized a gain of approximately $9,652,000 as a result of the sale during the
nine months ended September 30, 2004, which is included in gain from sale of
discontinued operations. In addition, the Partnership recorded a loss on early
extinguishment of debt of approximately $159,000 as a result of the write-off of
unamortized loan costs and a prepayment penalty, which is included in loss from
discontinued operations. The property's operations, loss of approximately
$116,000 for the nine months ended September 30, 2004 and income of
approximately $213,000 and $182,000 for the three and nine months ended
September 30, 2003, respectively, are included in income (loss) from
discontinued operations. Included in income (loss) from discontinued operations
are revenues of approximately $234,000 for the nine months ended September 30,
2004 and revenues of approximately $399,000 and $1,177,000 for the three and
nine months ended September 30, 2003, respectively.
The Partnership's loss from continuing operations for the three and nine months
ended September 30, 2004 was approximately $67,000 and $62,000, compared to
income from continuing operations of approximately $117,000 for the three months
ended September 30, 2003 and loss from continuing operations of approximately
$165,000 for the nine months ended September 30, 2003. The decrease in income
from continuing operations for the three months ended September 30, 2004 is due
to a decrease in total revenues and an increase in total expenses. The decrease
in loss from continuing operations for the nine months ended September 30, 2004
is due to a decrease in total expenses, partially offset by a decrease in total
revenues. The decrease in total revenues for the three months ended September
30, 2004 is due to a decrease in rental income, partially offset by an increase
in other income. The decrease in total revenues for the nine months ended
September 30, 2004 is due to a decrease in rental income. Other income remained
relatively constant for the nine months ended September 30, 2004. The decrease
in rental income for both the three and nine months ended September 30, 2004 is
due to decreases in occupancy at both of the Partnership's investment properties
and the average rental rate at Landmark Apartments, partially offset by an
increase in the average rental rate at Deer Creek Apartments. The increase in
other income for the three months ended September 30, 2004 is primarily due to
an increase in lease cancellation fees at Landmark Apartments.
The increase in total expenses for the three months ended September 30, 2004 is
due to increases in operating, depreciation, and property tax expenses,
partially offset by a decrease in general and administrative expenses. The
decrease in total expenses for the nine months ended September 30, 2004 is due
to decreases in both general and administrative and depreciation expenses,
partially offset by increases in both operating and property tax expenses.
Interest expense remained relatively constant for both the three and nine months
ended September 30, 2004. The increase in operating expenses for both the three
and nine months ended September 30, 2004 is primarily due to increases in
utility, payroll, contract maintenance, and advertising expenses at Deer Creek
Apartments, partially offset by a decrease in snow removal expense at Deer Creek
Apartments. The increase in depreciation expense for the three months ended
September 30, 2004 is due to property improvements and replacements placed into
service at both of the Partnership's investment properties during the past
twelve months. The decrease in depreciation expense for the nine months ended
September 30, 2004 is due to buildings and property improvements and
replacements placed in service in prior years becoming fully depreciated during
the second and third quarters of 2003, partially offset by property improvements
and replacements placed into service at both of the Partnership's investment
properties during the past twelve months. The increase in property tax expense
for both the three and nine months ended September 30, 2004 is due to an
increase in the tax rate at Deer Creek Apartments. The decrease in general and
administrative expense for both the three and nine months ended September 30,
2004 is due to decreases in New Jersey partnership tax expense, the Partnership
management fee payable from net cash flow from operations as defined in the
Partnership Agreement, and professional expenses associated with the
administration of the Partnership, partially offset by an increase in the cost
of services included in the management reimbursements to the Managing General
Partner as allowed under the Partnership Agreement. Also included in general and
administrative expenses for the three and nine months ended September 30, 2004
and 2003 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 $515,000, compared to approximately $357,000 at September 30,
2003. The decrease in cash and cash equivalents of approximately $278,000, from
December 31, 2003, is due to approximately $10,639,000 of cash used in financing
activities, partially offset by approximately $10,327,000 of cash provided by
investing activities and approximately $34,000 of cash provided by operating
activities. Cash used in financing activities consisted of repayment of the
mortgage encumbering Georgetown Apartments, distributions to partners, payments
of principal made on the mortgages encumbering the Partnership's investment
properties and loan costs paid related to the extension obtained on the mortgage
encumbering Landmark Apartments, partially offset by an advance from an
affiliate of the Managing General Partner. Cash provided by investing activities
consisted of proceeds received from the sale of Georgetown Apartments and net
receipts from an escrow account maintained by the mortgage lender, 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 properties to adequately maintain the physical
assets and other operating needs of the Partnership and to comply with Federal,
state, and local legal and regulatory requirements. The Managing General Partner
monitors developments in the area of legal and regulatory compliance. 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 each of
the Partnership's properties are detailed below.
Georgetown Apartments
During the nine months ended September 30, 2004, the Partnership completed
approximately $9,000 of capital improvements at Georgetown Apartments,
consisting primarily of floor covering replacement. These improvements were
funded from operating cash flow. The Partnership sold Georgetown Apartments to a
third party on March 2, 2004.
Deer Creek Apartments
During the nine months ended September 30, 2004, the Partnership completed
approximately $216,000 of capital improvements at Deer Creek Apartments,
consisting primarily of structural improvements, interior building improvements,
water heater upgrades, and floor covering replacement. These improvements were
funded from operating cash flow. The Partnership evaluates the capital
improvement needs of the property during the year and currently expects that
only necessary improvements will be made during the remainder of 2004 in order
to maintain occupancy at the property. Additional capital improvements may be
considered and will depend on the physical condition of the property as well as
the anticipated cash flow generated by the property.
Landmark Apartments
During the nine months ended September 30, 2004, the Partnership completed
approximately $484,000 of capital improvements at Landmark Apartments,
consisting primarily of a repair project to address water infiltration issues
with 15 units. Based upon current plans, the Managing General Partner
anticipates the project to be complete in November 2004 at a total cost of
approximately $400,000. Other improvements consisted primarily of major
landscaping, interior building improvements, and floor covering replacement.
These improvements were funded from replacement reserves and operating cash
flow. The Partnership is currently evaluating the capital improvement needs of
the property for 2004 and expects to complete an additional $37,000 in capital
improvements not related to the water infiltration project and approximately
$48,000 for property redevelopment as mentioned above 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 and replacement reserves.
The additional capital expenditures will be incurred only if cash is available
from operations or from Partnership reserves. To the extent that such budgeted
capital improvements are completed, the 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 Deer Creek Apartments of approximately $12,681,000 is
amortized over 20 years and matures on July 1, 2021, at which time the loan is
scheduled to be fully amortized. The mortgage indebtedness encumbering Landmark
Apartments of approximately $5,959,000 is amortized over a period of 30 years
with a balloon payment of approximately $5,950,000 due November 1, 2004. The
mortgage encumbering Landmark Apartments matured November 1, 2003. However, the
Managing General Partner negotiated a one year extension, which extended the
maturity of the loan to November 1, 2004, with a one-time right to extend to
February 1, 2005. The extension required the Partnership to continue making
monthly payments of principal and interest under the terms of the original
mortgage. On November 1, 2004, the Registrant obtained a mortgage in the
principal amount of $7,000,000 on one of its investment properties, Landmark
Apartments, located in Raleigh, North Carolina. The existing mortgage with an
outstanding principal amount of approximately $5,950,000 matured on November 1,
2004 and was repaid with proceeds from the new mortgage. The new mortgage
requires monthly payments of interest beginning on December 1, 2004 until the
loan matures November 1, 2006, with interest being equal to the average of the
one month LIBOR plus 235 basis points (minimum rate of 4.3662%). In conjunction
with the mortgage note, the Partnership paid approximately $13,000 to enter into
an interest rate cap agreement, which limits the Partnership's exposure to
interest rate increase. Under this interest rate cap agreement, the
Partnership's interest rate on the amounts owed to GMAC Commercial Mortgage will
be no higher than 5.5%. Adjustments to the initial amount paid are recognized in
interest expense. In addition, the new mortgage requires monthly escrow deposits
for taxes, insurance and replacement reserves and a $500,000 repair reserve that
was established with the lender at closing. As a condition of making the new
mortgage, the lender required AIMCO Properties, L.P., an affiliate of the
Registrant, to guarantee the obligations and liabilities of the Registrant with
respect to the new mortgage. The Managing General Partner will attempt to
refinance the mortgage encumbering Landmark Apartments and/or sell the property
prior to such maturity date. If the property cannot be refinanced or sold for a
sufficient amount, the Partnership will risk losing such property through
foreclosure.
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
Sale (1) $3,927 $38.96 $ -- $ --
Refinance (2) -- -- 1,032 10.24
Operations 280 2.77 797 7.91
Total $4,207 $41.73 $1,829 $18.15
(1) From proceeds from the sale of Georgetown Apartments. (2) From proceeds
from the refinancing of the mortgages encumbering Georgetown Apartments
during May 2003.
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, however,
that the Partnership will generate sufficient funds from operations after
required capital expenditures to permit additional distributions to its partners
during the remainder of 2004 or subsequent periods.
Other
In addition to its indirect ownership of the general partner interest in the
Partnership, AIMCO and its affiliates owned 64,653 limited partnership units
(the "Units") in the Partnership representing 64.78% 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. In this regard, on November
5, 2004, AIMCO Properties, L.P., commenced a tender offer to acquire 35,151
Units for a purchase price of $118.69 per Unit. Such offer expires on December
7, 2004. Pursuant to the Partnership Agreement, unitholders holding a majority
of the Units are entitled to take action with respect to a variety of matters
that include, but are not limited to, voting on certain amendments to the
Partnership Agreement and voting to remove the Managing General Partner. As a
result of its ownership of 64.78% 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 Managing General Partner owes fiduciary duties
to the limited partners of the Partnership, the Managing General Partner also
owes fiduciary duties to AIMCO as its sole stockholder. As a result, the duties
of the Managing General Partner, as managing general partner, to the Partnership
and its limited partners may come into conflict with the duties of the Managing
General Partner to AIMCO as its sole stockholder.
Critical Accounting Policies and Estimates
The consolidated financial statements are prepared in accordance with accounting
principles generally accepted in the United States, which require the
Partnership to make estimates and assumptions. The Partnership believes that of
its significant accounting policies, the following may involve a higher degree
of judgment and complexity.
Impairment of Long-Lived Assets
The Partnership's investment properties are recorded at cost, less accumulated
depreciation, unless considered impaired. If events or circumstances indicate
that the carrying amount of a property may be impaired, the Partnership will
make an assessment of its recoverability by estimating the undiscounted future
cash flows, excluding interest charges, of the property. If the carrying amount
exceeds the aggregate future cash flows, the Partnership would recognize an
impairment loss to the extent the carrying amount exceeds the fair value of the
property.
Real property investments are subject to varying degrees of risk. Several
factors may adversely affect the economic performance and value of the
Partnership's investment properties. These factors include, but are not limited
to, changes in the national, regional and local economic climate; local
conditions, such as an oversupply of multifamily properties; competition from
other available multifamily property owners and changes in market rental rates.
Any adverse changes in these factors could cause impairment of the Partnership's
assets.
Revenue Recognition
The Partnership generally leases apartment units for twelve-month terms or less.
Rental income attributable to leases is recognized monthly as it is earned. 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 Managing General Partner, who are the equivalent of the Partnership's
principal executive officer and principal financial officer, respectively, has
evaluated the effectiveness of the Partnership's disclosure controls and
procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the
Securities Exchange Act of 1934, as amended (the "Exchange Act")) as of the end
of the period covered by this report. Based on such evaluation, the principal
executive officer and principal financial officer of the Managing General
Partner, who are the equivalent of the Partnership's principal executive officer
and principal financial officer, respectively, have concluded that, as of the
end of such period, the Partnership's disclosure controls and procedures are
effective.
(b) Internal Control Over Financial Reporting. There have not been any changes
in the Partnership's internal control over financial reporting (as such term is
defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the
fiscal quarter to which this report relates that have materially affected, or
are reasonably likely to materially affect, the Partnership's internal control
over financial reporting.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
In March 1998, several putative unit holders of limited partnership units of the
Partnership commenced an action entitled Rosalie Nuanes, et al. v. Insignia
Financial Group, Inc., et al. (the "Nuanes action") in the Superior Court of the
State of California for the County of San Mateo. The plaintiffs named as
defendants, among others, the Partnership, its Managing General Partner and
several of their affiliated partnerships and corporate entities. The action
purported to assert claims on behalf of a class of limited partners and
derivatively on behalf of a number of limited partnerships (including the
Partnership) that are named as nominal defendants, challenging, among other
things, the acquisition of interests in certain Managing General Partner
entities by Insignia Financial Group, Inc. ("Insignia") and entities that were,
at one time, affiliates of Insignia; past tender offers by the Insignia
affiliates to acquire limited partnership units; management of the partnerships
by the Insignia affiliates; and the series of transactions which closed on
October 1, 1998 and February 26, 1999 whereby Insignia and Insignia Properties
Trust, respectively, were merged into AIMCO. The plaintiffs sought monetary
damages and equitable relief, including judicial dissolution of the Partnership.
In addition, during the third quarter of 2001, a complaint 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 Managing General Partner has also agreed to make
at least one round of tender offers to purchase all of the partnership interests
in the Partnerships within one year of final approval, if it is granted, and to
provide partners with the independent appraisals at the time of these tenders.
The proposed settlement also provided for the limitation of the allowable costs
which the Managing General Partner or its affiliates will charge the
Partnerships in connection with this litigation and imposes limits on the class
counsel fees and costs in this litigation. On April 11, 2003, notice was
distributed to limited partners providing the details of the proposed
settlement.
On June 13, 2003, the court granted final approval of the settlement and entered
judgment in both the Nuanes and Heller actions. On August 12, 2003, an objector
("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 Managing General Partner and its affiliates filed a
responsebrief 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 Managing 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 Managing General Partner does not anticipate that any costs to the
Partnership, whether legal or settlement costs, associated with these cases will
be material to the Partnership's overall operations.
On August 8, 2003 AIMCO Properties L.P., an affiliate of the Managing General
Partner, was served with a complaint in the United States District Court,
District of Columbia alleging that AIMCO Properties L.P. willfully violated the
Fair Labor Standards Act ("FLSA") by failing to pay maintenance workers overtime
for all hours worked in excess of forty per week. On March 5, 2004 the
plaintiffs filed an amended complaint also naming NHP Management Company, which
is also an affiliate of the Managing 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 Managing 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 6. EXHIBITS
See Exhibit Index.
SIGNATURES
In accordance with the requirements of the Exchange Act, the Registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
ANGELES INCOME PROPERTIES, LTD. II
By: Angeles Realty Corporation II
Managing General Partner
By: /s/Martha L. Long
Martha L. Long
Senior Vice President
By: /s/Stephen B. Waters
Stephen B. Waters
Vice President
Date: November 12, 2004
ANGELES INCOME PROPERTIES, LTD. II
EXHIBIT INDEX
Exhibit Number Description of Exhibit
3.1 Amendment Agreement of Limited Partnership of the Partnership
dated October 12, 1982 filed in Form 10K dated November 30,
1983, incorporated herein by reference
3.2 Amended Agreement of Limited Partnership of the Partnership
dated March 31, 1983 filed in the Prospectus, of the
Partnership, as Exhibit A, dated March 31, 1983 incorporated
herein by reference
10.15 Multifamily Note - Landmark Apartments between Angeles
Income Properties, Ltd. II and Lehman Brothers Holdings,
Inc. d/b/a Lehman Capital, a division of Lehman Brothers
Holdings, Inc. dated November 1, 1996
10.19 Multifamily Note dated June 27, 2001, by and between Angeles
Income Properties, Ltd. II, a California Limited Partnership,
and GMAC Commercial Mortgage Corporation for Deer Creek
Apartments, is incorporated by reference to the Quarterly
Report on Form 10-QSB for the quarter ended June 30, 2001.
10.21 Purchase and Sale Contract between Georgetown AIP II, L.P. and
Freestone Realty Advisors, LLC, dated November 25, 2003,
incorporated by reference to the Current Report on Form 8-K
dated March 2, 2004.
10.22 First Amendment to Purchase and Sale Contract between
Georgetown AIP II, L.P. and Freestone Realty Advisors, LLC,
dated January 9, 2004, incorporated by reference to the
Current Report on Form 8-K dated March 2, 2004.
10.23 Second Amendment to Purchase and Sale Contract between
Georgetown AIP II, L.P. and Freestone Realty Advisors, LLC,
dated January 12, 2004, incorporated by reference to the
Current Report on Form 8-K dated March 2, 2004.
10.24 Third Amendment to Purchase and Sale Contract between
Georgetown AIP II, L.P. and Freestone Realty Advisors, LLC,
dated January 13, 2004, incorporated by reference to the
Current Report on Form 8-K dated March 2, 2004.
10.25 Reinstatement and Fourth Amendment to Purchase and Sale
Contract between Georgetown AIP II, L.P. and Freestone Realty
Advisors, LLC, dated January 24, 2004, incorporated by
reference to the Current Report on Form 8-K dated March 2,
2004.
10.26 Assignment and Assumption of Contract between Freestone Realty
Advisors, LLC, as Assignor and Georgetown Apartment
Homes-FRIP, L.L.C., as Assignee, dated February 11, 2004,
incorporated by reference to the Current Report on Form 8-K
dated March 2, 2004.
10.27 Modification and Extension Agreement by and among Federal Home
Loan Mortgage Corporation, Angeles Income Properties, Ltd. II,
and Commonwealth Land Title Company of North Carolina for
Landmark Apartments is incorporated by reference to the Annual
Report on Form 10-KSB for the year ended December 31, 2003.
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.
Exhibit 31.1
CERTIFICATION
I, Martha L. Long, certify that:
1. I have reviewed this quarterly report on Form 10-QSB of Angeles Income
Properties Ltd. II;
2. Based on my knowledge, this report does not contain any untrue statement
of a material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material
respects the financial condition, results of operations and cash flows of
the 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 Income
Properties Ltd. II;
2. Based on my knowledge, this report does not contain any untrue statement
of a material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material
respects the financial condition, results of operations and cash flows of
the 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 Income
Properties, Ltd. II (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.