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, 2005
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
For the transition period from _________to _________
Commission file number 0-16116
ANGELES OPPORTUNITY PROPERTIES, LTD.
(Exact name of small business issuer as specified in its charter)
California 95-4052473
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
55 Beattie Place, PO Box 1089
Greenville, South Carolina 29602
(Address of principal executive offices)
(864) 239-1000
(Issuer's telephone number)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports) and (2) has been
subject to such filing requirements for the past 90 days.
Yes X No ___
Indicate by check mark whether the registrant is a shell company (as defined
in rule 12b-2 of Exchange Act). Yes _ No _X_
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
ANGELES OPPORTUNITY PROPERTIES, LTD.
CONSOLIDATED BALANCE SHEET
(Unaudited)
(in thousands, except unit data)
September 30, 2005
Assets
Cash and cash equivalents $ 53
Receivables and deposits 22
Other assets 220
Investment property:
Land $ 540
Buildings and related personal property 7,223
7,763
Less accumulated depreciation (3,247) 4,516
$ 4,811
Liabilities and Partners' Deficit
Liabilities
Accounts payable $ 57
Tenant security deposit liabilities 35
Accrued property taxes 150
Due to affiliates (Note B) 951
Other liabilities 99
Mortgage note payable 4,812
Partners' Deficit:
General partner $ (172)
Limited partners (12,425 units issued and
outstanding) (1,121) (1,293)
$ 4,811
See Accompanying Notes to Consolidated Financial Statements
ANGELES OPPORTUNITY PROPERTIES, LTD.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(in thousands, except per unit data)
Three Months Ended Nine Months Ended
September 30, September 30,
2005 2004 2005 2004
Revenues:
Rental income $ 339 $ 390 $ 1,050 $ 1,174
Other income 39 47 124 153
Total revenues 378 437 1,174 1,327
Expenses:
Operating 226 198 694 612
General and administrative 27 21 79 87
Depreciation 76 64 199 193
Interest 101 90 278 273
Property taxes 50 45 151 145
Total expenses 480 418 1,401 1,310
(Loss) income from continuing
operations (102) 19 (227) 17
Loss from discontinued operations
(Note A and C) -- -- -- (16)
Gain on sale of discontinued
operations (Note C) -- 68 -- 2,478
Net (loss) income $ (102) $ 87 $ (227) $ 2,479
Net (loss) income allocated to
general partner (1%) $ (1) $ 1 $ (2) $ 25
Net (loss) income allocated to
limited partners (99%) (101) 86 (225) 2,454
$ (102) $ 87 $ (227) $ 2,479
Per limited partnership unit:
(Loss) income from continuing
operations $ (8.13) $ 1.53 $(18.11) $ 1.37
Loss from discontinued operations -- -- -- (1.28)
Gain on sale of discontinued
operations -- 5.39 -- 197.42
$ (8.13) $ 6.92 $(18.11) $197.51
Distributions per limited
partnership unit $ -- $166.28 $ -- $171.03
See Accompanying Notes to Consolidated Financial Statements
ANGELES OPPORTUNITY PROPERTIES, LTD.
CONSOLIDATED STATEMENT OF CHANGES IN PARTNERS' DEFICIT
(Unaudited)
(in thousands, except unit data)
Limited
Partnership General Limited
Units Partner Partners Total
Original capital contributions 12,425 $ 1 $12,425 $12,426
Partners' deficit at
December 31, 2004 12,425 $ (170) $ (896) $(1,066)
Net loss for the nine months
ended September 30, 2005 -- (2) (225) (227)
Partners' deficit at
September 30, 2005 12,425 $ (172) $(1,121) $(1,293)
See Accompanying Notes to Consolidated Financial Statements
ANGELES OPPORTUNITY PROPERTIES, LTD.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
Nine Months Ended
September 30,
2005 2004
Cash flows from operating activities:
Net (loss) income $ (227) $ 2,479
Adjustments to reconcile net (loss) income to net
cash (used in) provided by operating activities:
Bad debt expense 35 80
Depreciation 199 240
Loss on early extinguishment of debt -- 71
Amortization of loan costs 7 17
Gain on sale of investment property -- (2,478)
Change in accounts:
Receivables and deposits (33) (83)
Other assets (26) (22)
Accounts payable (29) (23)
Due to affiliates 45 (31)
Tenant security deposit liabilities 5 (15)
Accrued property taxes (40) (141)
Other liabilities (2) (44)
Net cash (used in) provided by operating activities (66) 50
Cash flows from investing activities:
Net proceeds from sale of investment property -- 4,212
Property improvements and replacements (790) (125)
Net withdrawals from restricted escrows -- 95
Net cash (used in) provided by investing activities (790) 4,182
Cash flows from financing activities:
Payments on mortgage notes payable (115) (133)
Distributions to partners -- (2,148)
Repayment of mortgage note payable -- (2,045)
Advances from affiliates 796 --
Net cash provided by (used in) financing activities 681 (4,326)
Net decrease in cash and cash equivalents (175) (94)
Cash and cash equivalents at beginning of period 228 288
Cash and cash equivalents at end of period $ 53 $ 194
Supplemental disclosure of cash flow information:
Cash paid for interest $ 261 $ 288
Supplemental disclosure of non-cash activity:
Property improvements and replacements in accounts payable
and due to affiliates $ 149 $ --
See Accompanying Notes to Consolidated Financial Statements
ANGELES OPPORTUNITY PROPERTIES, LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note A - Basis of Presentation
The accompanying unaudited consolidated financial statements of Angeles
Opportunity Properties, Ltd. (the "Partnership" or the "Registrant") have been
prepared in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-QSB and Item 310(b)
of Regulation S-B. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of Angeles Realty Corporation II (the
"General Partner" and a subsidiary of Apartment Investment and Management
Company ("AIMCO"), a publicly traded real estate investment trust, all
adjustments (consisting of normal recurring accruals) considered necessary for a
fair presentation have been included. Operating results for the three and nine
month periods ended September 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.
In accordance with Statement of Financial Accounting Standards ("SFAS") No. 144,
the consolidated statements of operations for the nine months ended September
30, 2004 reflect the operations of Lake Meadows Apartments as loss from
discontinued operations due to the sale of the property in June 2004.
Certain 2004 balances have been reclassified to conform with the 2005
presentation.
Note B - Transactions with Affiliated Parties
The Partnership has no employees and depends on the General Partner and its
affiliates for the management and administration of all Partnership activities.
The Partnership Agreement provides for certain payments to affiliates for
services and reimbursement of certain expenses incurred by affiliates on behalf
of the Partnership.
Affiliates of the General Partner receive 5% of gross receipts from the
Partnership's properties as compensation for providing property management
services. The Partnership paid to such affiliates approximately $58,000 and
$84,000 for the nine months ended September 30, 2005 and 2004, which is included
in operating expenses and loss from discontinued operations.
Affiliates of the General Partner charged the Partnership for reimbursement of
accountable administrative expenses amounting to approximately $141,000 and
$54,000 for the nine months ended September 30, 2005 and 2004, respectively,
which is included in general and administrative expenses and investment
property. The portion of these reimbursements included in investment property
for the nine months ended September 30, 2005 and 2004 are fees related to
construction management services provided by an affiliate of the General Partner
of approximately $99,000 and $1,000, respectively. The construction management
service fees are calculated based on a percentage of additions to the investment
property. At September 30, 2005, approximately $144,000 in reimbursements was
due to the General Partner and is included in due to affiliates on the
accompanying consolidated balance sheet.
Pursuant to the Partnership Agreement, during the nine months ended September
30, 2005 an affiliate of the General Partner advanced the Partnership
approximately $796,000 to fund capital improvements and operating expenses at
the investment property. There were no such advances during the nine months
ended September 30, 2004. Interest on advances is charged at the prime rate plus
2% or 8.75% at September 30, 2005. Interest of approximately $11,000 was charged
during the nine months ended September 30, 2005. At September 30, 2005, the
Partnership owed approximately $807,000 of principal and accrued interest which
is included in due to affiliates on the accompanying consolidated balance sheet.
Subsequent to September 30, 2005, the General Partner advanced approximately
$53,000 to the Partnership to fund capital improvements at the Partnership's
investment property.
The Partnership insures its property up to certain limits through coverage
provided by AIMCO which is generally self-insured for a portion of losses and
liabilities related to workers' compensation, property casualty, general
liability and vehicle liability. The Partnership insures its property above the
AIMCO limits through insurance policies obtained by AIMCO from insurers
unaffiliated with the General Partner. During the nine months ended September
30, 2005 and 2004, the Partnership was charged by AIMCO and its affiliates
approximately $26,000 and $34,000, respectively, for insurance coverage and fees
associated with policy claims administration.
Note C - Sale of Discontinued Operations
On June 25, 2004, the Partnership sold Lake Meadows Apartments to a third party
for net proceeds of approximately $4,212,000 after payment of closing costs. The
Partnership realized a gain of approximately $2,478,000 as a result of the sale.
The additional gain of approximately $68,000 recorded during the three months
ended September 30, 2004 was due to the write off of an accrual for additional
sale related expenses that was not needed. The Partnership used approximately
$2,045,000 of the net proceeds to repay the mortgage encumbering the property.
In addition the Partnership recorded a loss on early extinguishment of debt of
approximately $71,000 as a result of unamortized loan costs being written off
and lender fees paid by the buyer. This amount is included in loss from
discontinued operations in the accompanying consolidated statements of
operations. In accordance with SFAS 144, the accompanying consolidated
statements of operations for the three and nine months ended September 30, 2004
reflect the operations of Lake Meadows Apartments as discontinued operations.
Included in loss from discontinued operations for the nine months ended
September 30, 2004 is approximately $359,000 of revenues generated by the
property.
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 General Partner and several of
their affiliated partnerships and corporate entities. The action purported to
assert claims on behalf of a class of limited partners and derivatively on
behalf of a number of limited partnerships (including the Partnership) that are
named as nominal defendants, challenging, among other things, the acquisition of
interests in certain General Partner entities by Insignia Financial Group, Inc.
("Insignia") and entities that were, at one time, affiliates of Insignia; past
tender offers by the Insignia affiliates to acquire limited partnership units;
management of the partnerships by the Insignia affiliates; and the series of
transactions which closed on October 1, 1998 and February 26, 1999 whereby
Insignia and Insignia Properties Trust, respectively, were merged into AIMCO.
The plaintiffs sought monetary damages and equitable relief, including judicial
dissolution of the Partnership. In addition, during the third quarter of 2001, a
complaint captioned Heller v. Insignia Financial Group (the "Heller action") was
filed against the same defendants that are named in the Nuanes action. On or
about August 6, 2001, plaintiffs filed a first amended complaint. The Heller
action was brought as a purported derivative action, and asserted claims for,
among other things, breach of fiduciary duty, unfair competition, conversion,
unjust enrichment, and judicial dissolution. On January 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.
On August 18, 2005, Objector and his counsel filed a motion to disqualify the
trial court based on a peremptory challenge and filed a motion to disqualify for
cause on October 17, 2005. On or about October 13, 2005 Objector filed a motion
to intervene and on or about October 19, 2005 filed both a motion to take
discovery relating to the adequacy of plaintiffs as derivative representatives
and a motion to dissolve the anti-suit injunction in connection with settlement.
On October 27, 2005, the Court denied Objector's peremptory challenge and struck
Objector's motion to disqualify for cause. No hearing has been set on Objector's
remaining motions. On November 3, 2005, Objector and his counsel filed a writ of
mandate to the Court of Appeals challenging the court's October 27, 2005 order.
The General Partner does not anticipate that any costs to the Partnership,
whether legal or settlement costs, associated with these cases will be material
to the Partnership's overall operations.
AIMCO Properties L.P. and NHP Management Company, both affiliates of the
Corporate 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, filed in the United States District Court for the District of
Columbia, 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. In June 2005 the Court conditionally certified the collective action
on both the on-call and overtime issues, which allows the 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, and AIMCO Properties, L.P. and NHP Management
Company will have the opportunity to move to decertify the collective action.
Because the court denied plaintiffs' motion to certify state subclasses, on
September 26, 2005, the plaintiffs filed a class action with the same
allegations in the Superior Court of California (Contra Costa County). 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
Corporate 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 property 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 property, the
Partnership could potentially be liable for environmental liabilities or costs
associated with its property.
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 General Partner have
implemented a national policy and procedures to prevent or eliminate mold from
its properties and the 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 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
General Partner does not believe that the ultimate outcome will have a material
adverse effect on the Partnership's consolidated financial condition or results
of operations.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
The matters discussed in this report contain certain forward-looking statements,
including, without limitation, statements regarding future financial performance
and the effect of government regulations. Actual results may differ materially
from those described in the forward-looking statements and will be affected by a
variety of risks and factors including, without limitation: national and local
economic conditions; the terms of governmental regulations that affect the
Registrant and interpretations of those regulations; the competitive environment
in which the Registrant operates; financing risks, including the risk that cash
flows from operations may be insufficient to meet required payments of principal
and interest; real estate risks, including variations of real estate values and
the general economic climate in local markets and competition for tenants in
such markets; litigation, including costs associated with prosecuting and
defending claims and any adverse outcomes, and possible environmental
liabilities. Readers should carefully review the Registrant's financial
statements and the notes thereto, as well as the risk factors described in the
documents the Registrant files from time to time with the Securities and
Exchange Commission.
The Partnership's investment property consists of one apartment complex. The
following table sets forth the average occupancy for the property for the nine
months ended September 30, 2005 and 2004:
Average Occupancy
Property 2005 2004
Lakewood Apartments 82% 90%
Tomball, Texas
The General Partner attributes the decrease in occupancy at Lakewood Apartments
to increased credit standards for tenants.
The Partnership's financial results depend upon a number of factors including
the ability to attract and maintain tenants at the investment property, interest
rates on mortgage loans, costs incurred to operate the investment property,
general economic conditions and weather. As part of the ongoing business plan of
the Partnership, the General Partner monitors the rental market environment of
its investment property to assess the feasibility of increasing rents,
maintaining or increasing occupancy levels and protecting the Partnership from
increases in expenses. As part of this plan, the General Partner attempts to
protect the Partnership from the burden of inflation-related increases in
expenses by increasing rents and maintaining a high overall occupancy level.
However, the General Partner may use rental concessions and rental rate
reductions to offset softening market conditions, accordingly, there is no
guarantee that the General Partner will be able to sustain such a plan. Further,
a number of factors that are outside the control of the Partnership such as the
local economic climate and weather can adversely or positively affect the
Partnership's financial results.
Results from Operations
The Partnership's net loss for the three and nine months ended September 30,
2005 was approximately $102,000 and $227,000, respectively, compared to net
income of approximately $87,000 and $2,479,000 for the three and nine months
ended September 30, 2004, respectively. The decrease in net income for the three
and nine month periods is due to the recognition of a gain on the sale of Lake
Meadows Apartments in 2004. In accordance with Statement of Financial Accounting
Standards ("SFAS") No. 144, the consolidated statements of operations for the
nine months ended September 30, 2004 reflect the operations of Lake Meadows
Apartments as loss from discontinued operations due to its sale in June 2004.
On June 25, 2004, the Partnership sold Lake Meadows Apartments to a third party
for net proceeds of approximately $4,212,000 after payment of closing costs. The
Partnership realized a gain of approximately $2,478,000 as a result of the sale.
The additional gain of approximately $68,000 recorded during the three months
ended September 30, 2004 was due to the write off of an accrual for additional
sale related expenses that was not needed. The Partnership used approximately
$2,045,000 of the net proceeds to repay the mortgage encumbering the property.
In addition the Partnership recorded a loss on early extinguishment of debt of
approximately $71,000 as a result of unamortized loan costs being written off
and lender fees paid by the buyer. This amount is included in loss from
discontinued operations in the accompanying consolidated statements of
operations. In accordance with SFAS 144, the accompanying consolidated
statements of operations for the nine months ended September 30, 2004 reflect
the operations of Lake Meadows Apartments as discontinued operations. Included
in loss from discontinued operations for the nine months ended September 30,
2004 is approximately $359,000 of revenues generated by the property.
Excluding the gain on sale and loss from discontinued operations, the
Partnership's loss from continuing operations for the three and nine months
ended September 30, 2005 was approximately $102,000 and $227,000 respectively,
compared to income from continuing operations of approximately $19,000 and
$17,000 for the same period in 2004. The decrease in income from continuing
operations for the three and nine month periods is due to a decrease in total
revenues and an increase in total expenses. Total revenues decreased due to
decreases in rental and other income. Rental income decreased due to decreases
in occupancy and the average rental rates, partially offset by a decrease in bad
debt expense at the investment property. Other income decreased due to a
decrease in lease cancellation fees.
Total expenses increased for the three and nine months ended September 30, 2005
due to an increase in operating, depreciation and interest expenses. Operating
expense increased due to increases in property, administrative, and maintenance
expenses. Property expense increased due to an increase in payroll and related
benefits at the investment property. Administrative expense increased due to
increases in phone sales and applicant screening. Maintenance expense increased
due to an increase in contract labor at the investment property. Depreciation
expense increased as a result of property improvements placed in service over
the past twelve months. Interest expense increased due to an increase in
interest on advances from an affiliate of the General Partner, partially offset
by a decrease in interest expense on the mortgage encumbering the investment
property as a result of regularly scheduled principal payments.
Included in general and administrative expenses for the three and nine months
ended September 30, 2005 and 2004 are management reimbursements to the 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.
Liquidity and Capital Resources
At September 30, 2005, the Partnership had cash and cash equivalents of
approximately $53,000 compared to approximately $194,000 at September 30, 2004.
Cash and cash equivalents decreased approximately $175,000, from December 31,
2004, due to approximately $66,000 and $790,000 of cash used in operating and
investing activities, respectively, partially offset by approximately $681,000
of cash provided by financing activities. Cash used in investing activities
consisted of property improvements and replacements. Cash provided by financing
activities consisted of advances from an affiliate of the General Partner,
partially offset by principal payments made on the mortgage encumbering the
investment property. 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 investment property to adequately maintain the
physical assets and other operating needs of the registrant and to comply with
Federal, state, and local legal and regulatory requirements. The General Partner
monitors developments in the area of legal and regulatory compliance. For
example, the Sarbanes-Oxley Act of 2002 mandates or suggests additional
compliance measures with regard to governance, disclosure, audit and other
areas. In light of these changes, the Partnership expects that it will incur
higher expenses related to compliance. Capital improvements planned for the
Partnership's property are detailed below.
Lakewood Apartments
During the nine months ended September 30, 2005, the Partnership completed
approximately $939,000 of capital improvements at Lakewood Apartments,
consisting primarily of structural upgrades, clubhouse renovations, major
landscaping, swimming pool resurfacing, and air conditioning, appliance, and
floor covering replacements. These improvements were funded from operating cash
flow and advances from an affiliate of the 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 anticipated cash flow generated by the property.
Capital expenditures will be incurred only if cash is available from operations,
from Partnership reserves or from advances from an affiliate of the 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 Lakewood Apartments of approximately $4,812,000 matures
in January 2022, at which time the loan is scheduled to be fully amortized.
The Partnership distributed the following amounts during the nine months ended
September 30, 2005 and 2004 (in thousands, except per unit data):
Per Limited Per Limited
Nine months Ended Partnership Nine months Ended Partnership
September 30, 2005 Unit September 30, 2004 Unit
Operations $ -- $ -- $ 61 $ 4.75
Sale (1) -- -- 2,087 166.28
$ -- $ -- $2,148 $171.03
(1) Proceeds from the sale of Lake Meadows Apartments in June 2004.
Future cash distributions will depend on the levels of cash generated from
operations and the timing of the debt maturity, property sale and/or
refinancing. The Partnership's cash available for distribution is reviewed on a
monthly basis. In light of the significant amounts due to the General Partner at
September 30, 2005, it is not anticipated that the Partnership will make any
distributions in the foreseeable future.
Other
In addition to its indirect ownership of the general partner interest in the
Partnership, AIMCO and its affiliates owned 6,380 limited partnership units (the
"Units") in the Partnership representing 51.35% of the outstanding Units at
September 30, 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, unit holders holding a majority of the Units are entitled to take
action with respect to a variety of matters that include, but are not limited
to, voting on certain amendments to the Partnership Agreement and voting to
remove the General Partner. As a result of its ownership of 51.35% of the
outstanding Units, AIMCO and its affiliates are in a position to control all
such voting decisions with respect to the Partnership. Although the General
Partner owes fiduciary duties to the limited partners of the Partnership, the
General Partner also owes fiduciary duties to AIMCO as its sole stockholder. As
a result, the duties of the General Partner, as general partner, to the
Partnership and its limited partners may come into conflict with the duties of
the General Partner to AIMCO as its sole stockholder.
Critical Accounting Policies and Estimates
The consolidated financial statements are prepared in accordance with accounting
principles generally accepted in the United States, which require the
Partnership to make estimates and assumptions. The Partnership believes that of
its significant accounting policies, the following may involve a higher degree
of judgment and complexity.
Impairment of Long-Lived Assets
Investment property is recorded at cost, less accumulated depreciation, unless
considered impaired. If events or circumstances indicate that the carrying
amount of the property may be impaired, the Partnership will make an assessment
of its recoverability by estimating the undiscounted future cash flows,
excluding interest charges, of the property. If the carrying amount exceeds the
aggregate future cash flows, the Partnership would recognize an impairment loss
to the extent the carrying amount exceeds the fair value of the property.
Real property investments are subject to varying degrees of risk. Several
factors may adversely affect the economic performance and value of the
Partnership's investment property. These factors include, but are not limited
to, changes in the national, regional and local economic climate; local
conditions, such as an oversupply of multifamily properties; competition from
other available multifamily property owners and changes in market rental rates.
Any adverse changes in these factors could cause impairment of the Partnership's
asset.
Revenue Recognition
The Partnership generally leases apartment units for twelve-month terms or less.
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 General Partner, who are the equivalent of the Partnership's principal
executive officer and principal financial officer, respectively, has evaluated
the effectiveness of the Partnership's disclosure controls and procedures (as
such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities
Exchange Act of 1934, as amended (the "Exchange Act")) as of the end of the
period covered by this report. Based on such evaluation, the principal executive
officer and principal financial officer of the General Partner, who are the
equivalent of the Partnership's principal executive officer and principal
financial officer, respectively, have concluded that, as of the end of such
period, the Partnership's disclosure controls and procedures are effective.
(b) Internal Control Over Financial Reporting. There have not been any changes
in the Partnership's internal control over financial reporting (as such term is
defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the
fiscal quarter to which this report relates that have materially affected, or
are reasonably likely to materially affect, the Partnership's internal control
over financial reporting.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
In March 1998, several putative unit holders of limited partnership units of the
Partnership commenced an action entitled Rosalie Nuanes, et al. v. Insignia
Financial Group, Inc., et al. (the "Nuanes action") in the Superior Court of the
State of California for the County of San Mateo. The plaintiffs named as
defendants, among others, the Partnership, its General Partner and several of
their affiliated partnerships and corporate entities. The action purported to
assert claims on behalf of a class of limited partners and derivatively on
behalf of a number of limited partnerships (including the Partnership) that are
named as nominal defendants, challenging, among other things, the acquisition of
interests in certain General Partner entities by Insignia Financial Group, Inc.
("Insignia") and entities that were, at one time, affiliates of Insignia; past
tender offers by the Insignia affiliates to acquire limited partnership units;
management of the partnerships by the Insignia affiliates; and the series of
transactions which closed on October 1, 1998 and February 26, 1999 whereby
Insignia and Insignia Properties Trust, respectively, were merged into AIMCO.
The plaintiffs sought monetary damages and equitable relief, including judicial
dissolution of the Partnership. In addition, during the third quarter of 2001, a
complaint captioned Heller v. Insignia Financial Group (the "Heller action") was
filed against the same defendants that are named in the Nuanes action. On or
about August 6, 2001, plaintiffs filed a first amended complaint. The Heller
action was brought as a purported derivative action, and asserted claims for,
among other things, breach of fiduciary duty, unfair competition, conversion,
unjust enrichment, and judicial dissolution. On January 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.
On August 18, 2005, Objector and his counsel filed a motion to disqualify the
trial court based on a peremptory challenge and filed a motion to disqualify for
cause on October 17, 2005. On or about October 13, 2005 Objector filed a motion
to intervene and on or about October 19, 2005 filed both a motion to take
discovery relating to the adequacy of plaintiffs as derivative representatives
and a motion to dissolve the anti-suit injunction in connection with settlement.
On October 27, 2005, the Court denied Objector's peremptory challenge and struck
Objector's motion to disqualify for cause. No hearing has been set on Objector's
remaining motions. On November 3, 2005, Objector and his counsel filed a writ of
mandate to the Court of Appeals challenging the court's October 27, 2005 order.
The General Partner does not anticipate that any costs to the Partnership,
whether legal or settlement costs, associated with these cases will be material
to the Partnership's overall operations.
AIMCO Properties L.P. and NHP Management Company, both affiliates of the
Corporate 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, filed in the United States District Court for the District of
Columbia, 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. In June 2005 the Court conditionally certified the collective action
on both the on-call and overtime issues, which allows the 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, and AIMCO Properties, L.P. and NHP Management
Company will have the opportunity to move to decertify the collective action.
Because the court denied plaintiffs' motion to certify state subclasses, on
September 26, 2005, the plaintiffs filed a class action with the same
allegations in the Superior Court of California (Contra Costa County). 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
Corporate 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 OPPORTUNITY PROPERTIES, LTD.
By: Angeles Realty Corporation II
General Partner
By: /s/Martha L. Long
Martha L. Long
Senior Vice President
By: /s/Stephen B. Waters
Stephen B. Waters
Vice President
Date: November 14, 2005
ANGELES OPPORTUNITY PROPERTIES, LTD.
EXHIBIT INDEX
Exhibit Number Description of Exhibit
3.1 Amendment Certificate and Agreement of the Limited Partnership
filed in the Partnership's prospectus dated July 7, 1986,
which is incorporated herein by reference.
10.3 Joint Venture Agreement - Lakewood Project Joint Venture filed
in Form 8K dated December 31, 1990, and is incorporated herein
by reference.
10.10 Multifamily Note dated December 6, 2001, between Lakewood AOPL
and GMAC Commercial Mortgage Corporation, a California
Corporation, refinancing the mortgage encumbering Lakewood
Apartments filed in Form 10-KSB dated December 31, 2002 and is
incorporated herein by reference.
10.12 Purchase and Sale Contract between Registrant and Wyndmere
Capital, Inc., dated April 15, 2004, filed in Form 8K dated
June 25, 2004 and is incorporated herein by reference.
10.13 Amendment to Purchase and Sale Contract between Registrant
and Wyndmere Capital, Inc., dated May 13, 2004, filed in
Form 8K dated June 25, 2004 and is incorporated herein by
reference.
10.14 Second Amendment to Purchase and Sale Contract between
Registrant and Wyndmere Capital, Inc., dated May 27, 2004,
filed in Form 8K dated June 25, 2004 and is incorporated
herein by reference.
10.15 Third Amendment to Purchase and Sale Contract between
Registrant and Wyndmere Capital, Inc., dated June 9, 2004,
filed in Form 8K dated June 25, 2004 and is incorporated
herein by reference.
10.16 Assignment of Purchase and Sale Contract between Wyndmere
Capital Inc., and Lake Meadows Partners, Ltd., dated June
15, 2004, filed in Form 8K dated June 25, 2004 and is
incorporated herein by reference.
31.1 Certification of equivalent of Chief Executive Officer
pursuant to Securities Exchange Act Rules
13a-14(a)/15d-14(a), as Adopted Pursuant to Section 302 of
the Sarbanes-Oxley Act of 2002.
31.2 Certification of equivalent of Chief Financial Officer
pursuant to Securities Exchange Act Rules
13a-14(a)/15d-14(a), as Adopted Pursuant to Section 302 of
the Sarbanes-Oxley Act of 2002.
32.1 Certification of the equivalent of the Chief Executive Officer
and Chief Financial Officer Pursuant to Section 18 U.S.C.
Section 1350, as Adopted Pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
99.1 Partnership prospectus filed in registration statement dated
June 26, 1987, which is incorporated herein by reference.
99.2 Agreement of Limited Partnership for AOP GP Limited
Partnership, L.P. and Angeles Opportunity Properties, Ltd.
entered into on September 9, 1993.
99.3 Agreement of Limited Partnership for New Lake Meadows, L.P.
between AOP GP Limited Partnership, L.P. and Angeles
Opportunity Properties, Ltd. entered into on September 9,
1993.
Exhibit 31.1
CERTIFICATION
I, Martha L. Long, certify that:
1. I have reviewed this quarterly report on Form 10-QSB of Angeles
Opportunity Properties, Ltd.;
2. Based on my knowledge, this report does not contain any untrue statement
of a material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material
respects the financial condition, results of operations and cash flows of
the small business issuer as of, and for, the periods presented in this
report;
4. The small business issuer's other certifying officer(s) and I are
responsible for establishing and maintaining disclosure controls and
procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for
the small business issuer and have:
(a) Designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the
small business issuer, including its consolidated subsidiaries, is
made known to us by others within those entities, particularly
during the period in which this report is being prepared;
(b) Evaluated the effectiveness of the small business issuer's
disclosure controls and procedures and presented in this report our
conclusions about the effectiveness of the disclosure controls and
procedures, as of the end of the period covered by this report based
on such evaluation; and
(c) Disclosed in this report any change in the small business issuer's
internal control over financial reporting that occurred during the
small business issuer's most recent fiscal quarter (the small
business issuer's fourth fiscal quarter in the case of an annual
report) that has materially affected, or is reasonably likely to
materially affect, the small business issuer's internal control over
financial reporting; and
5. The small business issuer's other certifying officer(s) and I have
disclosed, based on our most recent evaluation of internal control over
financial reporting, to the small business issuer's auditors and the audit
committee of the small business issuer's board of directors (or persons
performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design
or operation of internal control over financial reporting which are
reasonably likely to adversely affect the small business issuer's
ability to record, process, summarize and report financial
information; and
(b) Any fraud, whether or not material, that involves management or
other employees who have a significant role in the small business
issuer's internal control over financial reporting.
Date: November 14, 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
Opportunity Properties, Ltd.;
2. Based on my knowledge, this report does not contain any untrue statement
of a material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material
respects the financial condition, results of operations and cash flows of
the small business issuer as of, and for, the periods presented in this
report;
4. The small business issuer's other certifying officer(s) and I are
responsible for establishing and maintaining disclosure controls and
procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for
the small business issuer and have:
(a) Designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the
small business issuer, including its consolidated subsidiaries, is
made known to us by others within those entities, particularly
during the period in which this report is being prepared;
(b) Evaluated the effectiveness of the small business issuer's
disclosure controls and procedures and presented in this report our
conclusions about the effectiveness of the disclosure controls and
procedures, as of the end of the period covered by this report based
on such evaluation; and
(c) Disclosed in this report any change in the small business issuer's
internal control over financial reporting that occurred during the
small business issuer's most recent fiscal quarter (the small
business issuer's fourth fiscal quarter in the case of an annual
report) that has materially affected, or is reasonably likely to
materially affect, the small business issuer's internal control over
financial reporting; and
5. The small business issuer's other certifying officer(s) and I have
disclosed, based on our most recent evaluation of internal control over
financial reporting, to the small business issuer's auditors and the audit
committee of the small business issuer's board of directors (or persons
performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design
or operation of internal control over financial reporting which are
reasonably likely to adversely affect the small business issuer's
ability to record, process, summarize and report financial
information; and
(b) Any fraud, whether or not material, that involves management or
other employees who have a significant role in the small business
issuer's internal control over financial reporting.
Date: November 14, 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 Opportunity
Properties, Ltd. (the "Partnership"), for the quarterly period ended September
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: November 14, 2005
/s/Stephen B. Waters
Name: Stephen B. Waters
Date: November 14, 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.