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
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended September 30, 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)
(864) 239-1000
Issuer's telephone number
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes X No
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
a) ANGELES OPPORTUNITY PROPERTIES, LTD.
CONSOLIDATED BALANCE SHEET
(Unaudited)
(in thousands, except unit data)
September 30, 1996
Assets
Cash and cash equivalents:
Unrestricted $ 813
Restricted--tenant security deposits 38
Accounts receivable 6
Escrow for taxes 179
Restricted escrows 82
Other assets 195
Investment in joint venture 538
Investment properties:
Land $ 956
Buildings and related personal property 7,097
8,053
Less accumulated depreciation (1,557) 6,496
$ 8,347
Liabilities and Partners' Capital (Deficit)
Liabilities
Accounts payable $ 26
Tenant security deposits 38
Accrued taxes 155
Other liabilities 103
Mortgage notes payable 4,253
Partners' Capital (Deficit):
General partner's $ (69)
Limited partners' (12,425 units issued 3,841 3,772
and outstanding) $ 8,347
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 Nine Months Ended
September 30, September 30,
1996 1995 1996 1995
Revenues:
Rental income $ 542 $ 486 $ 1,551 $ 1,603
Other income 30 31 84 97
Gain on sale of investment property -- -- -- 958
Casualty gain -- 5 -- 26
Total revenues 572 522 1,635 2,684
Expenses:
Operating 177 204 537 589
General and administrative 52 43 144 171
Maintenance 113 35 285 142
Depreciation 71 63 201 204
Interest 108 111 326 335
Bad debt expense (recovery) -- 9 (789) 9
Property taxes 51 54 155 154
Total expenses 572 519 859 1,604
Income before equity in
loss of joint venture -- 3 776 1,080
Equity in loss of joint venture (251) -- (250) --
Net (loss) income $ (251) $ 3 $ 526 $ 1,080
Net (loss) income allocated
to general partner (1%) $ (3) $ -- $ 5 $ 11
Net (loss) income allocated
to limited partners (99%) (248) 3 521 1,069
Net (loss) income $ (251) $ 3 $ 526 $ 1,080
Net (loss) income per limited
partnership unit $ (19.96) $ .24 $ 41.93 $ 86.04
<FN>
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, 1995 12,425 $ (68) $ 3,617 $ 3,549
Distributions to partners -- (6) (297) (303)
Net income for the nine months
ended September 30, 1996 -- 5 521 526
Partners' (deficit) capital at
September 30, 1996 12,425 $ (69) $ 3,841 $ 3,772
<FN>
See Accompanying Notes to Consolidated Financial Statements
d) ANGELES OPPORTUNITY PROPERTIES, LTD.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
Nine Months Ended
September 30,
1996 1995
Cash flows from operating activities:
Net income $ 526 $ 1,080
Adjustments to reconcile net income to
net cash provided by operating activities:
Equity in loss of joint venture 250 --
Depreciation 201 204
Amortization of discounts, loan costs,
and leasing commissions 23 30
Gain on sale of investment property -- (958)
Casualty gain -- (26)
Bad debt (recovery) expense (789) 9
Change in accounts:
Restricted cash 5 35
Accounts receivable (1) 11
Escrows for taxes 41 51
Other assets (30) (10)
Accounts payable (4) (1)
Tenant security deposit liabilities (5) (6)
Accrued taxes (43) (39)
Other liabilities 14 (25)
Net cash provided by operating activities 188 355
Cash flows from investing activities:
Property improvements and replacements (223) (238)
Proceeds from sale of investment property -- 3,393
Deposits to restricted escrows (34) (33)
Withdrawals from restricted escrows 203 4
Insurance proceeds -- 88
Net cash (used in) provided by
investing activities (54) 3,214
Cash flows from financing activities:
Payments on mortgage notes payable (98) (89)
Distributions to partners (303) (3,500)
Net cash used in financing activities (401) (3,589)
Net decrease in cash (267) (20)
Cash and cash equivalents at beginning of period 1,080 1,101
Cash and cash equivalents at end of period $ 813 $ 1,081
Supplemental disclosure of cash flow information:
Cash paid for interest $ 304 $ 313
See Accompanying Notes to Consolidated Financial Statements
e) ANGELES OPPORTUNITY PROPERTIES, LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(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 nine
month periods ended September 30, 1996, are not necessarily indicative of the
results that may be expected for the fiscal year ending December 31, 1996. 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, 1995.
Certain reclassifications have been made to the 1995 information to conform to
the 1996 presentation.
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 nine months ended September 30, 1996 and 1995:
1996 1995
(in thousands)
Property management fees $ 80 $ 82
Reimbursement for services of affiliates 112 106
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.
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 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,
currently owns 87,700 Class A Shares of AMIT. These Class A Shares entitle LAC
to vote approximately 2% of the total shares. The number of Class A Shares of
AMIT owned by LAC increased from 63,200 shares on September 30, 1996 to 87,700
shares as of October 22, 1996. The voting percentage also increased from 1.5%
to 2% over the same period.
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 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.
The balance sheet of the Joint Venture is summarized as follows:
September 30,
1996
(in thousands)
Assets
Cash $ 95
Other assets 1
Investment properties, net 1,177
Total $ 1,273
Liabilities and Partners' Capital
Other liabilities $ 16
Partners' capital 1,257
Total $ 1,273
The statement of operations of the Joint Venture is summarized as follows:
Nine Months Ended
September 30,
1996
(in thousands)
Revenue $ 10
Costs and expenses (11)
Valuation allowance
of investment property (582)
Net loss $ (583)
During the third quarter, the Joint Venture property was reduced by
approximately $582,000 to its fair market value. The valuation allowance is the
result of an appraisal received on the Joint Venture property. The
Partnership's share of the valuation allowance recorded on the Joint Venture
property was approximately $250,000. The Partnership's equity interest in loss
of the Joint Venture for the period ended September 30, 1996, was approximately
$250,000.
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 nine
months ended September 30, 1996 and 1995:
Average
Occupancy
Property 1996 1995
Lake Meadows Apartments
Garland, Texas 95% 94%
Lakewood Apartments
Tomball, Texas 93% 97%
The General Partner attributes the decrease in occupancy at Lakewood Apartments
to highway construction in front of the property during 1996. The construction
made it difficult to attract new tenants to the property.
The Partnership's net income for the nine months ended September 30, 1996, was
approximately $526,000 compared to net income of approximately $1,080,000 for
the corresponding period of 1995. The Partnership incurred a net loss for the
three months ended September 30, 1996, of approximately $251,000 compared to net
income of approximately $3,000 for the three months ended September 30, 1995.
The decrease in net income for the nine month period is primarily due the
Partnership recording a gain of approximately $958,000 on the sale of Oquendo
Warehouse during 1995 (see discussion below). Partially offsetting the gain on
sale in 1995 was a $789,000 bad debt recovery in 1996, as the Partnership
foreclosed on property previously collateralized by a note receivable (see
discussion in "Note C" for further detail).
Also contributing to the decrease in net income for the three and nine month
periods ended September 30, 1996, was an increase in maintenance expense and the
Partnership's share of the Joint Venture loss. The increase in maintenance
expense is primarily due to an exterior rehabilitation project at Lakewood in
1996, including painting and parking lot repairs. Maintenance expense also
increased at Lake Meadows primarily due to exterior painting and gutter repairs.
The Partnership's share of the Joint Venture loss increased during the three
months ended September 30, 1996, due to the valuation allowance of the Joint
Venture to its fair market value (see discussion in "Note C" for further
detail). Partially offsetting the decrease in net income for the nine months
ended September 30, 1996, was a decrease in general and administrative expenses
primarily due to a decrease in expense reimbursements.
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. On May 5,
1995, the Partnership sold the remaining two buildings at Oquendo Warehouse,
located at 3655 W. Quail and 3600 W. Oquendo in Las Vegas, Nevada, to an
unrelated third party. Total consideration was $2,250,000 resulting in a gain
on the sale of the property of $466,000. Due to the above transactions, a total
gain on sale of the property of $958,000 was realized for the nine months ended
September 30, 1995. 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 casualty gain of $26,000 resulted from the excess insurance
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 September 30, 1996, the Partnership had unrestricted cash of $813,000
compared to $1,081,000 at September 30, 1995. Net cash provided by operating
activities decreased primarily due to the increase in maintenance expense for
the nine months ended September 30, 1996, versus the nine months ended September
30, 1995. Net cash provided by investing activities decreased due to the cash
proceeds received relating to the sale of Oquendo Warehouse during the first
nine months of 1995. Net cash used in financing activities decreased due to
decreased cash distributions to partners from 1995 to 1996.
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 $4,253,000, 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. Total cash distributed
was $3,500,000 for the nine months ended September 30, 1995. Total cash
distributed was $303,000 for the nine months ended September 30, 1996. Future
cash distributions will depend on the levels of net cash generated from
operations, property sales, and the availability of cash reserves.
The General Partner is currently negotiating a refinance of the mortgage secured
by Lakewood Apartments in an effort to obtain a lower interest rate. However,
the General Partner can give no assurances that a refinance will be successful.
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 September 30, 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: November 5, 1996