FORM 10-QSB.--QUARTERLY REPORT UNDER SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
UNITED STATES
U.S. Securities and Exchange Commission
Washington, D.C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended June 30, 1997
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT
For the transition period.........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 (IRS Employer
incorporation or organization) Identification No.)
One Insignia Financial Plaza
Greenville, South Carolina 29602
(Address of principal executive offices) (Zip Code)
(Issuer's telephone number) (864) 239-1000
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
a) ANGELES OPPORTUNITY PROPERTIES, LTD.
CONSOLIDATED BALANCE SHEET
(Unaudited)
(in thousands, except unit data)
June 30, 1997
Assets
Cash and cash equivalents:
Unrestricted $1,207
Restricted--tenant security deposits 32
Accounts receivable 6
Escrow for taxes 113
Restricted escrows 234
Other assets 191
Investment in joint venture 41
Investment properties:
Land $ 956
Buildings and related personal property 7,248
8,204
Less accumulated depreciation (1,768) 6,436
$8,260
Liabilities and Partners' Capital
Liabilities
Accounts payable $ 22
Tenant security deposits 33
Accrued taxes 106
Other liabilities 66
Mortgage notes payable 5,441
Partners' (Deficit) Capital
General partner $ (90)
Limited partners (12,425 units issued
and outstanding) 2,682 2,592
$8,260
See Accompanying Notes to Consolidated Financial Statements
b) ANGELES OPPORTUNITY PROPERTIES, LTD.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(in thousands, except unit data)
Three Months Ended Six Months Ended
June 30, June 30,
1997 1996 1997 1996
Revenues:
Rental income $ 552 $ 516 $1,106 $1,009
Interest income 16 9 36 23
Other income 20 17 39 31
Total revenues 588 542 1,181 1,063
Expenses:
Operating 183 181 365 360
General and administrative 24 53 69 92
Maintenance 78 116 128 172
Depreciation 72 65 141 130
Interest 110 108 220 218
Bad debt recovery -- (789) -- (789)
Property taxes 53 53 104 104
Total expenses 520 (213) 1,027 287
Income before equity in income
of joint venture 68 755 154 776
Equity in income of joint venture 6 1 6 1
Net income $ 74 $ 756 $ 160 $ 777
Net income allocated
to general partner (1%) $ 1 $ 8 $ 2 $ 8
Net income allocated
to limited partners (99%) 73 748 158 769
Net income $ 74 $ 756 $ 160 $ 777
Net income per limited
partnership unit $ 5.91 $60.20 $12.75 $61.89
See Accompanying Notes to Consolidated Financial Statements
c) ANGELES OPPORTUNITY PROPERTIES, LTD.
CONSOLIDATED STATEMENT OF CHANGES IN PARTNERS' CAPITAL (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) capital
at December 31, 1996 12,425 $ (70) $ 3,712 $ 3,642
Distributions to partners -- (22) (1,188) (1,210)
Net income for the six
months ended June 30, 1997 -- 2 158 160
Partners' (deficit) capital
at June 30, 1997 12,425 $ (90) $ 2,682 $ 2,592
See Accompanying Notes to Consolidated Financial Statements
d) ANGELES OPPORTUNITY PROPERTIES, LTD.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
Six Months Ended
June 30,
1997 1996
Cash flows from operating activities:
Net income $ 160 $ 777
Adjustments to reconcile net income to
net cash provided by (used in)
operating activities:
Equity in income from joint venture 6 (1)
Depreciation 141 130
Amortization of loan costs and discounts 15 15
Bad debt recovery -- (789)
Change in accounts:
Restricted cash 5 1
Accounts receivable 12 1
Escrows for taxes (31) 105
Other assets (13) (33)
Accounts payable (11) (165)
Tenant security deposit liabilities (4) (1)
Accrued taxes 19 (95)
Other liabilities 11 (13)
Net cash provided by (used in)
operating activities 298 (68)
Cash flows from investing activities:
Property improvements and replacements (132) (18)
Proceeds from sale of joint venture property 459 --
Deposits to restricted escrows (34) (23)
Withdrawals from restricted escrows -- 155
Net cash provided by
investing activities 293 114
Cash flows from financing activities:
Payments on mortgage notes payable (10) (65)
Distributions to partners (1,210) (300)
Net cash used in financing activities (1,220) (365)
Net decrease in cash and cash equivalents (629) (319)
Cash and cash equivalents at beginning of period 1,836 1,080
Cash and cash equivalents at end of period $ 1,207 $ 761
Supplemental disclosure of cash flow information:
Cash paid for interest $ 205 $ 204
See Accompanying Notes to Consolidated Financial Statements
e) ANGELES OPPORTUNITY PROPERTIES, LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE A - BASIS OF PRESENTATION
The accompanying unaudited financial statements of Angeles Opportunity
Properties, Ltd. (the "Partnership") 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"), 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, 1997, are not necessarily indicative of the results
that may be expected for the fiscal year ending December 31, 1997. For further
information, refer to the financial statements and footnotes thereto included in
the Partnership's annual report on Form 10-KSB for the fiscal year ended
December 31, 1996.
NOTE B - TRANSACTIONS WITH AFFILIATED PARTIES
The Partnership has no employees and is dependent on the General Partner and its
affiliates for the management and administration of all Partnership activities.
The Partnership Agreement provides for payments to affiliates for services and
as reimbursement of certain expenses incurred by affiliates on behalf of the
Partnership. The following payments were made to the General Partner and
affiliates during the six months ended June 30, 1997 and 1996 (in thousands):
Six Months Ended
June 30,
1997 1996
Property management fees (included in operating expenses) $ 57 $ 52
Reimbursement for services of affiliates, including
approximately $1,000 and $15,000 of construction
services reimbursements for the six months ended
June 30, 1997 and 1996 (included in general and
administrative and maintenance expenses) 34 67
The Partnership insures its properties under a master policy through an agency
and insurer unaffiliated with the General Partner. An affiliate of the General
Partner acquired, in the acquisition of a business, certain financial
obligations from an insurance agency which was later acquired by the agent who
placed the current year's master policy. The current agent assumed the
financial obligations to the affiliate of the General Partner who receives
payment on these obligations from the agent. The amount of the Partnership's
insurance premiums accruing to the benefit of the affiliate of the General
Partner by virtue of the agent's obligations is not significant.
NOTE C - INVESTMENT IN JOINT VENTURE
The Partnership has a 42.82% interest in a property owned jointly by the
Partnership and an affiliate of Angeles Mortgage Investment Trust ("AMIT"), a
real estate investment trust (the "Joint Venture"). The Joint Venture is the
result of the June 6, 1996, foreclosure of an approximate 8,000 square foot
retail strip shopping center and over 150 acres of undeveloped land. Prior to
the foreclosure, the Partnership and an affiliate of AMIT held a note receivable
collateralized by the foreclosed property. On June 24, 1997, the Joint Venture
sold its sole investment property to an unaffiliated third party.
MAE GP Corporation ("MAE GP"), an affiliate of the General Partner, owns
1,675,113 Class B Shares of AMIT. The terms of the Class B Shares provide that
they are convertible, in whole or in part, into Class A Shares on the basis of 1
Class A Share for every 49 Class B Shares (however, in connection with the
settlement agreement described in the following paragraph, MAE GP has agreed not
to convert the Class B Shares so long as AMIT's option is outstanding). These
Class B Shares entitle MAE GP to receive 1% of the distributions of net cash
distributed by AMIT (however, in connection with the settlement agreement
described in the following paragraph, MAE GP has agreed to waive its right to
receive dividends and distributions so long as AMIT's option is outstanding).
These Class B Shares also entitle MAE GP to vote on the same basis as Class A
Shares, providing MAE GP with approximately 39% of the total voting power of
AMIT (unless and until converted to Class A Shares, in which case the percentage
of the vote controlled represented by the shares held by MAE GP would
approximate 1.3% of the vote). Between the date of acquisition of these shares
(November 24, 1992) and March 31, 1995, MAE GP declined to vote these shares.
Since that date, MAE GP voted its shares at the 1995 and 1996 annual meetings in
connection with the election of trustees and other matters. MAE GP has not
exerted and continues to decline to exert any management control over or
participate in the management of AMIT. MAE GP may choose to vote these shares
as it deems appropriate in the future. In addition, Liquidity Assistance L.L.C.,
an affiliate of the General Partner and an affiliate of Insignia Financial
Group, Inc. ("Insignia"), which provides property management and partnership
administration services to the Partnership, owns 96,800 Class A Shares of AMIT
at June 30, 1997. These Class A Shares represent approximately 2.2% of the total
voting power of AMIT.
As part of a settlement of certain disputes with AMIT, MAE GP granted to AMIT an
option to acquire the Class B shares owned by it. This option can be exercised
at the end of 10 years or when all loans made by AMIT to partnerships affiliated
with MAE GP as of November 9, 1994 (which is the date of execution of a
definitive Settlement Agreement) have been paid in full, but in no event prior
to November 9, 1997. In connection with such settlement, AMIT delivered to MAE
GP cash in the sum of $250,000 at closing (which occurred April 14, 1995) as
payment for the option. If and when the option is exercised, AMIT will be
required to remit to MAE GP an additional $94,000.
Simultaneously with the execution of the option and as part of the settlement,
MAE GP executed an irrevocable proxy in favor of AMIT, the result of which is
that MAE GP is permitted to vote the Class B Shares on all matters except those
involving transactions between AMIT and MAE GP affiliated borrowers or the
election of any MAE GP affiliate as an officer or trustee of AMIT. On those
matters, MAE GP is obligated to deliver to the AMIT trustees, in their capacity
as trustees of AMIT, proxies with regard to the Class B Shares instructing such
trustees to vote said Class B Shares in accordance with the vote of the majority
of the Class A Shares voting to be determined without consideration of the votes
of "Excess Class A Shares" (as defined in Section 6.13 of the Declaration of
Trust of AMIT).
On April 3, 1997, Insignia and AMIT entered into a non-binding agreement in
principle contemplating, among other things, a business combination of AMIT and
Insignia Properties Trust, an entity owned 98% by Insignia and its affiliates
("IPT"). On July 18, 1997, IPT, Insignia, MAE GP entered into a definitive
merger agreement pursuant to which (subject to shareholder approval and certain
other conditions, including the receipt by AMIT of a fairness opinion from its
investment bankers) AMIT would be merged with and into IPT, with each Class A
Share and Class B Share being converted into 1.625 and 0.0332 Common Shares of
IPT, respectively. The foregoing exchange ratios are subject to adjustment to
account for dividends paid by AMIT from January 1, 1997, through the closing
date of the merger. It is anticipated that Insignia (and its affiliates) and
MAE GP (and its affiliates) would own approximately 55% and 2.4%, respectively,
of post-merger IPT when this transaction is consummated.
The balance sheet of the Joint Venture is summarized as follows (in thousands):
June 30,
1997
Assets
Cash $ 96
Other assets 2
Total $ 98
Liabilities and Partners' Capital
Partners' capital 98
Total $ 98
The statement of operations of the Joint Venture is summarized as follows (in
thousands):
Six Months Ended
June 30,
1997
Revenue $ 34
Costs and expenses (31)
Income before loss on sale of investment property 3
Gain on sale of investment property 11
Net income $ 14
The Partnership's equity interest in income of the Joint Venture for the period
ended June 30, 1997, was approximately $6,000. The Joint Venture's sole
investment property was sold on June 24, 1997 for approximately $1,175,000.
Upon the sale of the Joint Venture property, the proceeds were distributed to
the owners.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS
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, 1997 and 1996:
Average
Occupancy
Property 1997 1996
Lake Meadows Apartments
Garland, Texas 96% 94%
Lakewood Apartments
Tomball, Texas 98% 92%
The General Partner attributes the increase in occupancy at the Partnership's
properties to exterior rehabilitation projects, including exterior painting,
being completed in 1996 and to effective marketing by property management.
The Partner's net income for the six months ended June 30, 1997, was
approximately $160,000 versus net income of approximately $777,000 for the six
months ended June 30, 1996. The Partnership's net income for the three months
ended June 30, 1997, was approximately $74,000 versus net income of
approximately $756,000 for the three months ended June 30, 1996. The decrease
in net income for the three and six months ended June 30, 1997 is primarily
attributed to decreases in general and administrative expenses, maintenance, and
a bad debt recovery recorded by the Partnership in 1996 as result of the
foreclosure of the property owned by Rolling Greens Communities, Ltd. General
and administrative expenses decreased as result of a decrease in reimbursements
to the General Partner. Maintenance expense decreased as result of an exterior
painting project in 1996 at Lakewood Apartments property in order to enhance the
appearance of the property.
As part of the ongoing business plan of the Partnership, the General Partner
monitors the rental market environment of each 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 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, due to changing market
conditions, which can result in the use of rental concessions and rental
reductions to offset softening market conditions, there is no guarantee that the
General Partner will be able to sustain such a plan.
At June 30, 1997, the Partnership had unrestricted cash of approximately
$1,207,000 compared to approximately $761,000 at June 30, 1996. Net cash
provided by operating activities increased primarily due to the decrease in the
change of accounts payable and accrued taxes related to the timing of payments.
Net cash provided by investing activities increased primarily due to proceeds
from the sale of the Joint Venture property. Net cash used in financing
activities increased primarily due to increased distributions to the partners in
1997.
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 various properties to adequately maintain the
physical assets and other operating needs of the Partnership. Such assets are
currently thought to be sufficient for any near-term needs of the Partnership.
The mortgage indebtedness of approximately $5,441,000, net of discount, is
interest only or is being amortized over 343 months with balloon payments due at
the maturity dates of October 2003 and November 2003, at which time the
properties will either be refinanced or sold. During the six months ended June
30, 1997, the Partnership distributed approximately $1,188,000 to the limited
partners and approximately $22,000 to the General Partner. Cash distributed in
1997 was from cash generated by the refinancing of Lakewood Apartments. During
the six months ended June 30, 1996, the Partnership distributed approximately
$297,000 to the limited partners and approximately $3,000 to the General
Partner. Cash distributed in 1996 was from cash generated by operations. Future
cash distributions will depend on the levels of net cash generated from
operations, refinancings, property sales, and the availability of cash reserves.
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a) Exhibits -
Exhibit 27, Financial Data Schedule, is filed as an exhibit to this
report.
b) Reports on Form 8-K:
None filed during the quarter ended June 30, 1997.
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/Carroll D. Vinson
Carroll D. Vinson
President
By: /s/Robert D. Long, Jr.
Robert D. Long, Jr.
Vice President/CAO
Date: August 1, 1997