UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Form 10-QSB
(Mark One)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended June 30, 2005
[ ] 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)
June 30, 2005
Assets
Cash and cash equivalents $ 182
Receivables and deposits 529
Restricted escrows 553
Other assets 576
Investment properties:
Land $ 1,691
Buildings and related personal property 27,319
29,010
Less accumulated depreciation (23,250) 5,760
$ 7,600
Liabilities and Partners' Deficit
Liabilities
Accounts payable $ 175
Tenant security deposit liabilities 165
Accrued property taxes 29
Due to affiliates (Note B) 346
Other liabilities 258
Mortgage notes payable 19,389
Partners' Deficit
General partners $ (566)
Limited partners (99,804 units issued and
outstanding) (12,196) (12,762)
$ 7,600
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 Six Months Ended
June 30, June 30,
2005 2004 2005 2004
Revenues:
Rental income $ 1,173 $ 1,104 $ 2,341 $ 2,263
Other income 98 81 191 169
Total revenues 1,271 1,185 2,532 2,432
Expenses:
Operating 610 497 1,105 922
General and administrative 66 51 125 123
Depreciation 218 187 428 371
Interest 366 371 732 734
Property taxes 108 138 262 277
Total expenses 1,368 1,244 2,652 2,427
(Loss) income from continuing operations (97) (59) (120) 5
Loss from discontinued operations -- -- -- (116)
Gain from sale of discontinued operations -- 96 -- 9,652
Net (loss) income $ (97) $ 37 $ (120) $ 9,541
Net (loss) income allocated to general
partners (1%) $ (1) $ -- $ (1) $ 95
Net (loss) income allocated to limited
partners (99%) (96) 37 (119) 9,446
$ (97) $ 37 $ (120) $ 9,541
Per limited partnership unit:
(Loss) income from continuing operations $ (0.96) $ (0.58) $ (1.19) $ 0.05
Loss from discontinued operations -- -- -- (1.15)
Gain from sale of discontinued operations -- 0.95 -- 95.75
Net (loss) income $ (0.96) $ 0.37 $ (1.19) $ 94.65
Distributions per limited partnership unit $ -- $ -- $ -- $ 41.73
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, 2004 99,804 $ (565) $(12,077) $(12,642)
Net loss for the six months
Ended June 30, 2005 -- (1) (119) (120)
Partners' deficit at
June 30, 2005 99,804 $ (566) $(12,196) $(12,762)
See Accompanying Notes to Consolidated Financial Statements
ANGELES INCOME PROPERTIES, LTD. II
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
Six Months Ended
June 30,
2005 2004
Cash flows from operating activities:
Net (loss) income $ (120) $ 9,541
Adjustments to reconcile net (loss) income to net cash
provided by (used in) operating activities:
Gain from sale of discontinued operations -- (9,652)
Depreciation 428 395
Amortization of loan costs 73 37
Loss on early extinguishment of debt -- 159
Change in accounts:
Receivables and deposits (219) 23
Other assets (17) (57)
Accounts payable 53 6
Tenant security deposit liabilities (6) (50)
Accrued property taxes 29 (101)
Due to affiliates 12 (222)
Other liabilities 4 (200)
Net cash provided by (used in) operating activities 237 (121)
Cash flows from investing activities:
Proceeds from sale of investment property -- 10,769
Property improvements and replacements (720) (162)
Net (deposits to) withdrawals from restricted escrows (45) 26
Net cash (used in) provided by investing
activities (765) 10,633
Cash flows from financing activities:
Payments on mortgage notes payable (196) (273)
Repayment of mortgage note payable -- (6,062)
Distributions to partners -- (4,207)
Advance from affiliate 68 --
Loan costs paid (7) (19)
Net cash used in financing activities (135) (10,561)
Net decrease in cash and cash equivalents (663) (49)
Cash and cash equivalents at beginning of period 845 793
Cash and cash equivalents at end of period $ 182 $ 744
Supplemental disclosure of cash flow information:
Cash paid for interest $ 642 $ 728
Supplemental disclosure of non-cash activity:
Property improvements and replacements included in accounts
payable $ 93 $ --
At December 31, 2004, approximately $48,000 of property improvements and
replacements were included in accounts payable and are included in property
improvements and replacements at June 30, 2005.
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
six month periods ended June 30, 2005 are not necessarily indicative of the
results that may be expected for the fiscal year ending December 31, 2005. 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, 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 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
$127,000 and $141,000 for the six months ended June 30, 2005 and 2004,
respectively, which are included in operating expenses and loss from
discontinued operations.
Affiliates of the Managing General Partner charged the Partnership for
reimbursement of accountable administrative expenses amounting to approximately
$121,000 and $91,000 for the six months ended June 30, 2005 and 2004,
respectively, which are included in general and administrative expenses and
investment properties. The portion of these reimbursements included in
investment properties for the six months ended June 30, 2005 and 2004 are fees
related to construction management services provided by an affiliate of the
Managing General Partner of approximately $63,000 and $1,000, respectively. 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 from
operations," as defined in the Partnership Agreement to be paid to the Managing
General Partner for executive and administrative management services. There were
no such fees earned by the Managing General Partner for the six months ended
June 30, 2005 and 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. It is not presently expected that the limited
partners will receive these returns when the Partnership terminates.
Accordingly, no such distribution was paid to the Managing General Partner
related to the March 2004 sale of Georgetown Apartments.
In accordance with the Partnership Agreement, during the third and fourth
quarter of 2004, an affiliate of the Managing General Partner advanced the
Partnership approximately $262,000 to fund capital improvements and costs
related to the refinancing of the mortgage encumbering Landmark Apartments.
During the six months ended June 30, 2005, an affiliate of the Managing General
Partner advanced the Partnership approximately $68,000 to fund capital
improvements at Landmark Apartments. These advances bear interest at the prime
rate plus 2% (8.25% at June 30, 2005). Interest expense was approximately
$12,000 for the six months ended June 30, 2005. At June 30, 2005, the total
outstanding advances and accrued interest was approximately $346,000 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 six months ended June
30, 2004.
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, general
liability 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 six months ended June
30, 2005 and 2004, the Partnership was charged by AIMCO and its affiliates
approximately $65,000 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 six months ended
June 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
six months ended June 30, 2004, including revenues of approximately $234,000,
are included in loss from discontinued operations.
During the three months ended June 30, 2004, certain accruals of approximately
$96,000 established during the first quarter of 2004 related to the sale of
Georgetown Apartments were reversed due to actual costs being less than
anticipated. These accrual reversals are included as an increase in gain from
sale of discontinued operations for the three and six months ended June 30,
2004.
Note D - 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 28, 2002, the trial court granted defendants
motion to strike the complaint. Plaintiffs took an appeal from this order.
On January 8, 2003, the parties filed a Stipulation of Settlement in proposed
settlement of the Nuanes action and the Heller action. 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 May 4, 2004, the Objector filed a
second appeal challenging the court's use of a referee and its order requiring
Objector to pay those fees.
On March 21, 2005, the Court of Appeals issued opinions in both pending appeals.
With regard to the settlement and judgment entered thereto, the Court of Appeals
vacated the trial court's order and remanded to the trial court for further
findings on the basis that the "state of the record is insufficient to permit
meaningful appellate review". With regard to the second appeal, the Court of
Appeals reversed the order requiring the Objector to pay referee fees. On April
26, 2005, the Court of Appeals lifted the stay of a pending appeal related to
the Heller action and the trial court's order striking the complaint. On April
28, 2005, the Objector filed a Petition for Review with the California Supreme
Court in connection with the opinion vacating the order approving settlement and
remanding for further findings. On June 10, 2005, the California Supreme Court
denied Objector's Petition for Review and the Court of Appeals sent the matter
back to the trial court on June 21, 2005. The parties intend to ask the trial
court to make further findings in connection with settlement consistent with the
Court of Appeal's remand order. With respect to the related Heller appeal, on
July 28, 2005, the Court of Appeals reversed the trial court's order striking
the first amended complaint.
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.
As previously disclosed, AIMCO Properties L.P. and NHP Management Company, both
affiliates of the Managing General Partner, are defendants in a lawsuit alleging
that they willfully violated the Fair Labor Standards Act ("FLSA") by failing to
pay maintenance workers overtime for all hours worked in excess of forty per
week. The complaint attempts to bring 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. and
NHP Management Company failed to compensate maintenance workers for time that
they were required to be "on-call". Additionally, the complaint alleges AIMCO
Properties L.P. and NHP Management Company failed to comply with the FLSA in
compensating maintenance workers for time that they worked in excess of 40 hours
in a week. On June 23, 2005 the Court conditionally certified the collective
action on both the on-call and overtime issues. The Court ruling allows
plaintiffs to provide notice of the collective action to all non-exempt
maintenance workers from August 7, 2000 through the present. Those employees
will have the opportunity to opt-in to the collective action. Defendants have
asked the Court to reconsider its ruling or in the alternative certify the
ruling for appeal on that issue. After the notice goes out, defendants will have
the opportunity to move to decertify the collective action. The Court further
denied plaintiffs' Motion for Certification of the state subclass. 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
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.
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.
Environmental
Various Federal, state and local laws subject property owners or operators to
liability for management, and the costs of removal or remediation, of certain
hazardous substances present on a property. Such laws often impose liability
without regard to whether the owner or operator knew of, or was responsible for,
the release or presence of the hazardous substances. The presence of, or the
failure to manage or remedy properly, hazardous substances may adversely affect
occupancy at affected apartment communities and the ability to sell or finance
affected properties. In addition to the costs associated with investigation and
remediation actions brought by government agencies, and potential fines or
penalties imposed by such agencies in connection therewith, the presence of
hazardous substances on a property could result in claims by private plaintiffs
for personal injury, disease, disability or other infirmities. Various laws also
impose liability for the cost of removal, remediation or disposal of hazardous
substances through a licensed disposal or treatment facility. Anyone who
arranges for the disposal or treatment of hazardous substances is potentially
liable under such laws. These laws often impose liability whether or not the
person arranging for the disposal ever owned or operated the disposal facility.
In connection with the ownership, operation and management of its properties,
the Partnership could potentially be liable for environmental liabilities or
costs associated with its properties.
Mold
The Partnership is aware of lawsuits against owners and managers of multifamily
properties asserting claims of personal injury and property damage caused by the
presence of mold, some of which have resulted in substantial monetary judgments
or settlements. The Partnership has only limited insurance coverage for property
damage loss claims arising from the presence of mold and for personal injury
claims related to mold exposure. Affiliates of the Managing General Partner have
implemented a national policy and procedures to prevent or eliminate mold from
its properties and the Managing General Partner believes that these measures
will minimize the effects that mold could have on residents. To date, the
Partnership has not incurred any material costs or liabilities relating to
claims of mold exposure or to abate mold conditions. Because the law regarding
mold is unsettled and subject to change the Managing General Partner can make no
assurance that liabilities resulting from the presence of or exposure to mold
will not have a material adverse effect on the Partnership's consolidated
financial condition or results of operations.
SEC Investigation
The Central Regional Office of the United States Securities and Exchange
Commission (the "SEC") continues its 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 have included 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, tax credit transactions, and
tender offers for limited partnership interests. AIMCO is cooperating fully.
AIMCO is not able to predict when the investigation 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.
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 six
months ended June 30, 2005 and 2004:
Average Occupancy
Property 2005 2004
Deer Creek Apartments 95% 91%
Plainsboro, New Jersey
Landmark Apartments 82% 82%
Raleigh, North Carolina
The Managing General Partner attributes the increase in occupancy at Deer Creek
Apartments to increased rental concessions offered at the property.
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's net loss for the three and six months ended June 30, 2005 was
approximately $97,000 and $120,000, respectively, compared to net income of
approximately $37,000 and $9,541,000 for the three and six months ended June 30,
2004, 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
six months ended June 30, 2004, which is included in gain from sale of
discontinued operations on the consolidated statements of 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, a loss of approximately $116,000 for the
six months ended June 30, 2004, including revenues of approximately $234,000 are
included in loss from discontinued operations.
During the three months ended June 30, 2004, certain accruals of approximately
$96,000 established during the first quarter of 2004 related to the sale of
Georgetown Apartments were reversed due to actual costs being less than
anticipated. These accrual reversals are included as an increase in gain from
sale of discontinued operations for the three and six months ended June 30,
2004.
The Partnership's loss from continuing operations for the three months ended
June 30, 2005 was approximately $97,000, compared to approximately $59,000 for
the three months ended June 30, 2004. The Partnership's loss from continuing
operations for the six months ended June 30, 2005 was approximately $120,000,
compared to income from continuing operations of approximately $5,000 for the
six months ended June 30, 2004. The increase in loss from continuing operations
for both the three and six months ended June 30, 2005 is due to an increase in
total expenses, partially offset by an increase in total revenues. The increase
in total expenses for the three months ended June 30, 2005 is due to increases
in operating, general and administrative and depreciation expenses, partially
offset by decreases in both interest and property tax expense. The increase in
total expenses for the six months ended June 30, 2005 is due to increases in
both operating and depreciation expense, partially offset by a decrease in
property tax expense. Both interest and general and administrative and expenses
remained relatively constant for the six months ended June 30, 2005. The
increase in operating expenses for both the three and six months ended June 30,
2005 is primarily due to increases in contract maintenance and utilities at
Landmark Apartments and telephone sales and payroll related expenses at both of
the Partnership's investment properties. The increase in depreciation expense
for both periods 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 property tax expense for both periods is due to
the Partnership's successful appeal of the assessed value of Deer Creek
Apartments. The decrease in interest expense for the three months ended June 30,
2005 is due to scheduled principal payments made on the mortgage encumbering
Deer Creek Apartments, which reduced the carrying balance of the loan, and the
November 2004 refinancing of the mortgage encumbering Landmark Apartments at a
lower, variable interest rate (as discussed in "Liquidity and Capital
Resources"), partially offset by increases in loan cost amortization and
interest on advances from an affiliate of the Managing General Partner. The
increase in general and administrative expenses for the three months ended June
30, 2005 is primarily due to an increase in partnership tax expense. Also
included in general and administrative expenses for the three and six months
ended June 30, 2005 and 2004 are management reimbursements to the Managing
General Partner as allowed under the Partnership Agreement, costs associated
with the quarterly and annual communications with investors and regulatory
agencies and the annual audit required by the Partnership Agreement.
The increase in total revenues for both the three and six months ended June 30,
2005 is due to increases in both rental and other income. The increase in rental
income is primarily due to increases in occupancy at Deer Creek Apartments and
the average rental rate at Landmark Apartments, partially offset by a decrease
in the average rental rate at Deer Creek Apartments. The increase in other
income is primarily due to increases in late charges and resident utility
payments at Deer Creek Apartments, partially offset by a decrease in lease
cancellation fees at both of the Partnership's investment properties.
Liquidity and Capital Resources
At June 30, 2005, the Partnership had cash and cash equivalents of approximately
$182,000, compared to approximately $744,000 at June 30, 2004. The decrease in
cash and cash equivalents of approximately $663,000, from December 31, 2004, is
due to approximately $765,000 of cash used in investing activities and
approximately $135,000 of cash used in financing activities, partially offset by
approximately $237,000 of cash provided by operating activities. Cash used in
investing activities consisted of property improvements and replacements and net
deposits to restricted escrow accounts maintained by the mortgage lender. Cash
used in financing activities consisted of payments of principal made on the
mortgage encumbering Deer Creek Apartments and loan costs paid related to the
November 2004 refinancing of the mortgage encumbering Landmark Apartments,
partially offset by an advance from an affiliate of the Managing General
Partner. 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.
Deer Creek Apartments
During the six months ended June 30, 2005, the Partnership completed
approximately $266,000 of capital improvements at Deer Creek Apartments,
consisting primarily of structural improvements, security equipment, furniture
upgrades and appliance and floor covering replacements. These improvements were
funded from operating cash flow. The Partnership regularly evaluates the capital
improvement needs of the property. While the Partnership has no material
commitments for property improvements and replacements, certain routine capital
expenditures are anticipated during 2005. Such capital expenditures will depend
on the physical condition of the property as well as anticipated cash flow
generated by the property.
Landmark Apartments
During the six months ended June 30, 2005, the Partnership completed
approximately $499,000 of capital improvements at Landmark Apartments,
consisting primarily of a repair project to address water filtration issues with
15 units. This project was completed in May 2005 and all units are back online.
Other improvements consisted primarily of structural improvements, exterior
painting, major landscaping, fitness equipment, interior and exterior building
improvements, furniture upgrades, electrical upgrades, plumbing upgrades,
cabinet upgrades, and floor covering replacement. These improvements were funded
from operating cash flow and an advance from an affiliate of the Managing
General Partner. The Partnership regularly evaluates the capital improvement
needs of the property. While the Partnership has no material commitments for
property improvements and replacements, certain routine capital expenditures are
anticipated during 2005. Such capital expenditures will depend on the physical
condition of the property as well as replacement reserves and anticipated cash
flow generated by the property.
The capital expenditures will be incurred only if cash is available from
operations, Partnership reserves, or advances from affiliates of the Managing
General Partner. To the extent that 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 $12,389,000 is
amortized over 20 years and matures on July 1, 2021 at which time the loan is
scheduled to be fully amortized. On November 1, 2004, the Partnership obtained a
mortgage in the principal amount of $7,000,000 on Landmark Apartments. 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. Loan costs associated with the existing mortgage were fully amortized.
Total capitalized loan costs associated with the new mortgage were approximately
$208,000 during the year ended December 31, 2004. These costs included
approximately $70,000 paid to the Managing General Partner. Approximately $7,000
of additional loan costs were capitalized during the six months ended June 30,
2005. 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 (5.6901% at
June 30, 2005 with a minimum rate of 4.3662%). In conjunction with the new
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 increases. Under this interest rate cap agreement, the Partnership's
interest rate on the amounts owed to the lender will be no higher than 5.5%.
Adjustments to the initial amount paid for the interest rate cap agreement 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 Managing General Partner, to guarantee the obligations and
liabilities of the Partnership with respect to the new mortgage.
The Partnership distributed the following amounts during the six months ended
June 30, 2005 and 2004 (in thousands, except per unit data):
Six Months Per Limited Six Months Per Limited
Ended Partnership Ended Partnership
June 30, 2005 Unit June 30, 2004 Unit
Sale (1) $ -- $ -- $3,927 $38.96
Operations -- -- 280 2.77
Total $ -- $ -- $4,207 $41.73
(1) From proceeds from the sale of Georgetown Apartments.
Future cash distributions will depend on the levels of net cash generated from
operations 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 planned capital expenditures to
permit any distributions to its partners in 2005 or subsequent periods.
Other
In addition to its indirect ownership of the general partner interest in the
Partnership, AIMCO and its affiliates owned 69,155 limited partnership units
(the "Units") in the Partnership representing 69.29% of the outstanding Units at
June 30, 2005. A number of these Units were acquired pursuant to tender offers
made by AIMCO or its affiliates. It is possible that AIMCO or its affiliates
will acquire additional Units in exchange for cash or a combination of cash and
units in AIMCO Properties L.P., the operating partnership of AIMCO, either
through private purchases or tender offers. Pursuant to the Partnership
Agreement, unitholders holding a majority of the Units are entitled to take
action with respect to a variety of matters that include, but are not limited
to, voting on certain amendments to the Partnership Agreement and voting to
remove the Managing General Partner. As a result of its ownership of 69.29% 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.
The Partnership will offer rental concessions during particularly slow months or
in response to heavy competition from other similar complexes in the area.
Rental income attributable to leases, net of any concessions, is recognized on a
straight-line basis over the term of the lease. 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.
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 28, 2002, the trial court granted defendants
motion to strike the complaint. Plaintiffs took an appeal from this order.
On January 8, 2003, the parties filed a Stipulation of Settlement in proposed
settlement of the Nuanes action and the Heller action. 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 May 4, 2004, the Objector filed a
second appeal challenging the court's use of a referee and its order requiring
Objector to pay those fees.
On March 21, 2005, the Court of Appeals issued opinions in both pending appeals.
With regard to the settlement and judgment entered thereto, the Court of Appeals
vacated the trial court's order and remanded to the trial court for further
findings on the basis that the "state of the record is insufficient to permit
meaningful appellate review". With regard to the second appeal, the Court of
Appeals reversed the order requiring the Objector to pay referee fees. On April
26, 2005, the Court of Appeals lifted the stay of a pending appeal related to
the Heller action and the trial court's order striking the complaint. On April
28, 2005, the Objector filed a Petition for Review with the California Supreme
Court in connection with the opinion vacating the order approving settlement and
remanding for further findings. On June 10, 2005, the California Supreme Court
denied Objector's Petition for Review and the Court of Appeals sent the matter
back to the trial court on June 21, 2005. The parties intend to ask the trial
court to make further findings in connection with settlement consistent with the
Court of Appeal's remand order. With respect to the related Heller appeal, on
July 28, 2005, the Court of Appeals reversed the trial court's order striking
the first amended complaint.
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.
As previously disclosed, AIMCO Properties L.P. and NHP Management Company, both
affiliates of the Managing General Partner, are defendants in a lawsuit alleging
that they willfully violated the Fair Labor Standards Act ("FLSA") by failing to
pay maintenance workers overtime for all hours worked in excess of forty per
week. The complaint attempts to bring 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. and
NHP Management Company failed to compensate maintenance workers for time that
they were required to be "on-call". Additionally, the complaint alleges AIMCO
Properties L.P. and NHP Management Company failed to comply with the FLSA in
compensating maintenance workers for time that they worked in excess of 40 hours
in a week. On June 23, 2005 the Court conditionally certified the collective
action on both the on-call and overtime issues. The Court ruling allows
plaintiffs to provide notice of the collective action to all non-exempt
maintenance workers from August 7, 2000 through the present. Those employees
will have the opportunity to opt-in to the collective action. Defendants have
asked the Court to reconsider its ruling or in the alternative certify the
ruling for appeal on that issue. After the notice goes out, defendants will have
the opportunity to move to decertify the collective action. The Court further
denied plaintiffs' Motion for Certification of the state subclass. 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
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.
ITEM 5. OTHER INFORMATION
None.
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: August 15, 2005
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
10.19 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.
10.28 Loan Agreement dated November 1, 2004 between Angeles Income
Properties, Ltd. II, a California limited partnership and GMAC
Commercial Mortgage Bank, incorporated by reference to the
Current Report on Form 8-K dated November 1, 2004.
10.29 Promissory Notes dated November 1, 2004 between Angeles Income
Properties, Ltd. II, a California limited partnership and GMAC
Commercial Mortgage Bank, incorporated by reference to the
Current Report on Form 8-K dated November 1, 2004.
10.30 Guaranty dated November 1, 2004 by AIMCO Properties, L.P., for
the benefit of GMAC Commercial Mortgage Bank, incorporated by
reference to the Current Report on Form 8-K dated November 1,
2004.
31.1 Certification of equivalent of Chief Executive Officer
pursuant to Securities Exchange Act Rules
13a-14(a)/15d-14(a), as Adopted Pursuant to Section 302 of
the Sarbanes-Oxley Act of 2002.
31.2 Certification of equivalent of Chief Financial Officer
pursuant to Securities Exchange Act Rules
13a-14(a)/15d-14(a), as Adopted Pursuant to Section 302 of
the Sarbanes-Oxley Act of 2002.
32.1 Certification of equivalent of Chief Executive Officer and
Chief Financial Officer 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: August 15, 2005
/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: August 15, 2005
/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 June 30,
2005 as filed with the Securities and Exchange Commission on the date hereof
(the "Report"), Martha L. Long, as the equivalent of the chief executive officer
of the Partnership, and Stephen B. Waters, as the equivalent of the chief
financial officer of the Partnership, each hereby certifies, pursuant to 18
U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002, that, to the best of his knowledge:
(1) The Report fully complies with the requirements of Section 13(a) or
15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all
material respects, the financial condition and results of operations
of the Partnership.
/s/Martha L. Long
Name: Martha L. Long
Date: August 15, 2005
/s/Stephen B. Waters
Name: Stephen B. Waters
Date: August 15, 2005
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.