FORM 10-QSB.--QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Quarterly or Transitional Report (As last amended by 34-32231, eff. 6/3/93.) 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 March 31, 1996 [ ] 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, P.O. Box 1089 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) March 31, 1996 Assets Cash and cash equivalents: Unrestricted $ 1,099 Restricted--tenant security deposits 43 Accounts receivable 5 Escrow for taxes 84 Restricted escrows 107 Other assets 175 Investment properties: Land $ 956 Buildings and related personal property 7,068 8,024 Less accumulated depreciation (1,421) 6,603 $ 8,116 Liabilities and Partners' Capital Liabilities Accounts payable $ 52 Tenant security deposits 44 Accrued taxes 51 Other liabilities 82 Mortgage notes payable 4,317 Partners' (Deficit) Capital General partner $ (68) Limited partners (12,425 units issued and outstanding) 3,638 3,570 $ 8,116 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 March 31, 1996 1995 Revenues: Rental income $ 493 $ 587 Other income 28 34 Total revenues 521 621 Expenses: Operating 179 194 General and administrative 39 60 Maintenance 56 48 Depreciation 65 74 Interest 110 112 Property taxes 51 55 Bad debt expense -- 9 Total expenses 500 552 Income before gain on sale of investment property and casualty gain 21 69 Gain on sale of investment property -- 492 Casualty gain -- 3 Net income $ 21 $ 564 Net income allocated to general partner (1%) $ -- $ 6 Net income allocated to limited partners (99%) 21 558 Net income $ 21 $ 564 Net income per limited partnership unit $ 1.69 $ 44.91 See Accompanying Notes to Consolidated Financial Statements c) ANGELES OPPORTUNITY PROPERTIES, LTD. CONSOLIDATED STATEMENT OF CHANGES IN PARTNERS' CAPITAL (DEFICIT) (Unaudited) (in thousands) Limited Partnership General Limited Units Partner Partners Total Original capital contributions 12,425 $ 1 $12,425 $12,426 Partners' (deficit) capital at December 31, 1995 12,425 $ (68) $ 3,617 $ 3,549 Net income for the three months ended March 31, 1996 -- -- 21 21 Partners' (deficit) capital at March 31, 1996 12,425 $ (68) $ 3,638 $ 3,570 <FN> See Accompanying Notes to Consolidated Financial Statements d) ANGELES OPPORTUNITY PROPERTIES, LTD. CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (in thousands) Three Months Ended March 31, 1995 1995 Cash flows from operating activities: Net income $ 21 $ 564 Adjustments to reconcile net income to net cash (used in) provided by operating activities: Depreciation 65 74 Amortization of discounts, loan costs and leasing commissions 8 14 Gain on sale of investment property -- (492) Bad debt expense -- 9 Casualty gain -- (3) Change in accounts: Restricted cash -- 8 Accounts receivable -- (12) Escrows for taxes 136 134 Other assets 5 6 Accounts payable (141) (8) Tenant security deposit liabilities -- 1 Accrued taxes (147) (140) Other liabilities (7) (66) Net cash (used in) provided by operating activities (60) 89 Cash flows from investing activities: Property improvements and replacements (32) (16) Proceeds from sale of investment property -- 1,312 Deposits to restricted escrows (11) (11) Withdrawals from restricted escrows 154 2 Net cash provided by investing activities 111 1,287 Cash flows used in financing activities: Payments on mortgage notes payable (32) (29) Net increase in cash 19 1,347 Cash at beginning of period 1,080 1,102 Cash at end of period $ 1,099 $ 2,449 Supplemental disclosure of cash flow information: Cash paid for interest $ 102 $ 105 <FN> 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 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 the General Partner, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three month period ended March 31, 1996, are not necessarily indicative of the results that may be expected for the fiscal year ended December 31, 1996. For further information, refer to the financial statements and footnotes thereto included in Angeles Opportunity Properties, Ltd.'s (the "Partnership") annual report on Form 10-KSB for the fiscal year ended December 31, 1995. Certain reclassifications have been made to the 1995 information to conform to the 1996 presentation. Note B - Note Receivable The Partnership's assets included a note receivable ("Note") of $1,850,000 from Rolling Greens Communities, Ltd. ("Borrower") collateralized by a first trust deed on undeveloped commercial and mobile home park land adjacent to Rolling Green Communities ("Rolling Greens"). The note required interest only payments computed at a 12.5% rate per annum with a maturity date of June 1997. The Note was in default due to non-payment and had been written down in prior years to $1,070,000, which is the estimated value of the collateral less the estimated cost to dispose of such collateral. During 1992, a refinancing of the first mortgage secured by Rolling Greens was consummated. As a concession to the new first mortgage holder, Angeles Corporation ("Angeles"), a former affiliate of the General Partner and/or its affiliates, released or caused to be released a lien on the developed portion of the mobile home park, retaining a lien upon undeveloped commercial and park zoned land as security for the Note. The Partnership was informed and believes that the release of the lien was without consideration to the Partnership. Proceeds from the refinanced first mortgage and an additional $450,000 that the Partnership advanced to the Borrower in 1992 under this Note included in the note amount of $1,850,000 were used by the Borrower to pay off: (i) third trust deed financing that had been provided by Angeles Mortgage Investment Trust ("AMIT"), a real estate investment trust, and (ii) unsecured advances payable to Angeles. Subsequent to the refinancing of the first mortgage discussed above, the developed portion of Rolling Greens was sold to a third party and a note receivable was received by the Partnership as consideration. AMIT continues to have loans outstanding to the Partnership that owns the interest in the Borrower. Note B - Note Receivable (continued) On April 29, 1994, the Partnership, the Borrower and AMIT entered into an agreement as to the distribution of the sales proceeds generated by the sale of certain real estate owned by the Borrower. On August 29, 1994, the Partnership received $1,061,440 in proceeds as a partial settlement from the above described Note. During the first quarter of 1995, the Partnership initiated foreclosure proceedings under the terms of the Note against the Borrower relating to the remaining security for the Note. At March 31, 1996, these foreclosure proceedings are still in process. The General Partner anticipates that the foreclosure will be consummated in 1996. MAE GP Corporation ("MAE GP"), an affiliate of the General Partner, owns 1,675,113 Class B Shares of AMIT. MAE GP has the option to convert these Class B Shares, in whole or in part, into Class A Shares on the basis of 1 Class A Share for every 49 Class B Shares. These Class B Shares entitle MAE GP to receive 1.2% of the distributions of net cash distributed by AMIT. These Class B Shares also entitle MAE GP to vote on the same basis as Class A Shares which allows MAE GP to vote approximately 37% of the total shares (unless and until converted to Class A Shares at which time the percentage of the vote controlled represented by the shares held by MAE GP would approximate 1.2% of the vote). Between the date of acquisition of these shares on November 24, 1992, and March 31, 1995, MAE GP has declined to vote these shares. Since that date, MAE GP voted its shares at the 1995 annual meeting 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, LLC, ("LAC"), an affiliate of the General Partner and an affiliate of Insignia Financial Group, Inc., which provides property management and partnership administration services to the Partnership, owns 63,200 Class A Shares of AMIT. These Class A Shares entitle LAC to vote approximately 1.5% of the total shares. 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. AMIT delivered to MAE GP cash in the sum of $250,000 at closing, which occurred April 14, 1995, as payment for the option. Upon exercise of the option, AMIT would remit to MAE GP an additional $94,000. Simultaneously with the execution of the option, MAE GP executed an irrevocable proxy in favor of AMIT the result of which is MAE GP will be able 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 granted to the AMIT trustees, in their capacity as trustees of AMIT, proxies with regard to the 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. Note C - 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 paid to the General Partner and affiliates during the first three months of 1996 and 1995: 1996 1995 (in thousands) Property management fees $26 $28 Reimbursement for services of affiliates 40 35 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. 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 three months ended March 31, 1996 and 1995: Average Occupancy Property 1996 1995 Lake Meadows Apartments 93% 94% Garland, Texas Lakewood Apartments (1) 89% 96% Houston, Texas (1) The occupancy at Lakewood Apartments decreased due to increased competition from new apartment complexes and due to decreased traffic, caused by highway construction, which restricts access to the property. The Partnership generated $21,000 in net income for the three months ended March 31, 1996, as compared to $564,000 in net income for the three months ended March 31, 1995. The decreased net income can primarily be attributed to the $492,000 gain recognized on the sale of one of the buildings at Oquendo Warehouse during the first three months of 1995 (See discussion below). Overall, total revenues and total expenses decreased during the first three months of 1996, as compared to the first quarter of 1995. The decreases in rental income, other income, operating expense, depreciation expense and property tax expense can all be attributed to the sale of one of the buildings at Oquendo Warehouse during the first three months of 1995. General and administrative expenses decreased primarily due to a decrease in partnership administration cost reimbursements. Maintenance expense increased for the three months ended March 31, 1996, versus the three months ended March 31, 1995, due to increased use of contract labor at Lake Meadows Apartments which is due to the loss one of the property's maintenance employees. The bad debt expense for the three months ended March 31, 1995, is due to the write-off of certain amounts considered uncollectible for past due rent and common area maintenance charges relating to one of the tenants at Oquendo Warehouse. On January 20, 1995, the Partnership sold one building at Oquendo Warehouse, located at 3550 W. Quail Avenue in Las Vegas, Nevada to the tenant occupying the building, Czarnowski Display Service, Inc. Total consideration was $1,325,000 resulting in a gain on sale of the property of $492,000. The General Partner believed that the sale of the property was in the best interest of the Partnership. On March 27, 1995, Lake Meadows Apartments sustained damage to the roofs of the apartment units due to a severe hailstorm. This casualty was covered by insurance. The roofs were written-off as of March 31, 1995, and a receivable was established for the insurance proceeds. The casualty gain of $3,000 results from the estimated excess proceeds over the book value of the roofs written-off. 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 March 31, 1996, the Partnership had unrestricted cash of $1,099,000 as compared to $2,449,000 at March 31, 1995. Net cash from operating activities decreased primarily due to the decrease in accounts payable. Net cash provided by investing activities decreased due to the cash proceeds received relating to the sale of the building at Oquendo Warehouse in 1995. This decrease was partially offset by increased withdrawals from the restricted escrow to fund exterior siding repair and exterior painting at Lakewood Apartments. Net cash used in financing activities increased only slightly due to increased principal payments as the mortgage nears maturity. 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 $4,317,000, net of discount, is amortized over 10 years and 37 years with maturity dates of October 2003 and March 2008, at which time the properties will either be refinanced or sold. Future cash distributions will depend on the levels of net cash generated from operations, property sales, and the availability of cash reserves. There were no cash distributions during the first three months of 1996. PART II - OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS The Registrant is unaware of any pending or outstanding litigation that is not of a routine nature. The General Partner of the Registrant believes that all such pending or outstanding litigation will be resolved without a material adverse effect upon the business, financial condition, or operations of the Partnership. 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 three months ended March 31, 1996. 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: May 8, 1996