FORM 10-QSB.--QUARTERLY REPORT UNDER SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
QUARTERLY OR TRANSITIONAL REPORT
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 March 31, 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, 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)
March 31, 1997
Assets
Cash and cash equivalents:
Unrestricted $ 1,945
Restricted--tenant security deposits 35
Accounts receivable 8
Escrow for taxes 56
Restricted escrows 217
Other assets 186
Investment in joint venture 494
Investment properties:
Land $ 956
Buildings and related personal property 7,129
8,085
Less accumulated depreciation (1,695) 6,390
$ 9,331
Liabilities and Partners' Capital (Deficit)
Liabilities
Accounts payable $ 24
Tenant security deposits 35
Accrued taxes 53
Other liabilities 55
Mortgage notes payable 5,446
Partners' Capital (Deficit):
General partner's $ (79)
Limited partners' (12,425 units issued
and outstanding) 3,797 3,718
$ 9,331
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,
1997 1996
Revenues:
Rental income $ 554 $ 493
Other income 39 28
Total revenues 593 521
Expenses:
Operating 182 179
General and administrative 45 39
Maintenance 50 56
Depreciation 69 65
Interest 110 110
Property taxes 51 51
Total expenses 507 500
Income before equity in income of joint venture 86 21
Equity in income of joint venture -- --
Net income $ 86 $ 21
Net income allocated to general partner (1%) $ 1 $ --
Net income allocated to limited partners (99%) 85 21
Net income $ 86 $ 21
Net income per limited partnership unit $ 6.84 $ 1.69
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's 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 -- (10) -- (10)
Net income for the three months
ended March 31, 1997 -- 1 85 86
Partners' (deficit) capital at
March 31, 1997 12,425 $ (79) $ 3,797 $ 3,718
<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,
1997 1996
Cash flows from operating activities:
Net income $ 86 $ 21
Adjustments to reconcile net income to net
cash provided by (used in) operating
activities:
Depreciation 69 65
Amortization of loan costs and discounts 7 8
Change in accounts:
Restricted cash 2 --
Accounts receivable 10 --
Escrows for taxes 26 136
Other assets 6 5
Accounts payable (9) (141)
Tenant security deposit liabilities (2) --
Accrued taxes (34) (147)
Other liabilities -- (7)
Net cash provided by (used in) operating
activities 161 (60)
Cash flows from investing activities:
Property improvements and replacements (13) (32)
Deposits to restricted escrows (17) (11)
Withdrawals from restricted escrows -- 154
Net cash (used in) provided by
investing activities (30) 111
Cash flows from financing activities:
Payments on mortgage notes payable (5) (32)
Loan costs (7) --
Distributions to partners (10) --
Net cash used in financing activities (22) (32)
Net increase in cash 109 19
Cash and cash equivalents at beginning of period 1,836 1,080
Cash and cash equivalents at end of period $ 1,945 $ 1,099
Supplemental disclosure of cash flow information:
Cash paid for interest $ 103 $ 102
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 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 month
period ended March 31, 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 three months ended March 31, 1997 and 1996 (in thousands):
Three Months Ended
March 31,
1997 1996
Property management fees (included in
operating expenses) $ 28 $ 26
Reimbursement for services of affiliates, including
$15,000 of construction services reimbursements
for the three months ended March 31, 1996 (included
in general and administrative and maintenance expenses) 26 40
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. 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. 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,
LLC, ("LAC"), 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 March 31, 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"). It is anticipated that the resulting combined entity would be owned
approximately 82% by Insignia and its affiliates and 18% by the pre-combination
AMIT shareholders (including MAE GP and LAC). The proposed transaction is
contingent upon, among other things, satisfactory review of the business,
operations, properties and assets of AMIT and IPT, the negotiation and execution
of definitive agreements and the approval of the proposed transaction by the
trustees and shareholders of each of AMIT and IPT.
The balance sheet of the Joint Venture is summarized as follows (in thousands):
March 31,
1997
Assets
Cash $ 88
Other assets 4
Investment properties, net 1,073
Total $ 1,165
Liabilities and Partners' Capital
Other liabilities $ 10
Partners' capital 1,155
Total $ 1,165
The statement of operations of the Joint Venture is summarized as follows (in
thousands):
Three Months Ended
March 31,
1997
Revenue $ 12
Costs and expenses (11)
Net income $ 1
The Partnership's equity interest in income of the Joint Venture for the period
ended March 31, 1997, was approximately $400. A purchase agreement has been
executed for the sale of the joint venture property, with the closing expected
to now occur June 15, 1997. The sales price approximates the net book value of
the property at March 31, 1997. Upon the sale, the Joint Venture will
liquidate, distributing the proceeds 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 three
months ended March 31, 1997 and 1996:
Average
Occupancy
Property 1997 1996
Lake Meadows Apartments
Garland, Texas 97% 93%
Lakewood Apartments
Tomball, Texas 98% 89%
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 Partnership's net income for the three months ended March 31, 1997, was
approximately $86,000 compared to net income of approximately $21,000 for the
corresponding period of 1996. The increase in net income for the three month
period is primarily attributable to the increase in rental income resulting from
increases in occupancy at both of the Partnership's properties. Expenses of the
Partnership remained consistent from the first quarter of 1996 to the first
quarter of 1997. During the three months ended March 31, 1997, there were no
major repairs and maintenance at the Partnership's properties. Included in
maintenance expense for the three months ended March 31, 1996 is approximately
$15,000 of major repairs and maintenance comprised primarily of exterior
painting.
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, 1997, the Partnership had unrestricted cash of approximately
$1,945,000 compared to approximately $1,099,000 at March 31, 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 decreased primarily due to the
decrease in withdrawals from restricted escrows. Net cash used in financing
activities decreased primarily due to the decrease in payments on mortgage notes
payable caused by the refinancing of Lakewood Apartments. As a result of the
refinancing, only payments of interest are required on the new debt.
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 $5,446,000, 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. Total cash distributed to the
limited partners was $297,000 for 1996. Cash distributed in 1996 was from cash
generated by operations. No cash distributions were made to the limited
partners during the three months ended March 31, 1997. Future cash
distributions will depend on the levels of net cash generated from operations,
refinancings, property sales, and the availability of cash reserves. The
General Partner anticipates that the Partnership will make a distribution during
the second quarter of 1997.
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 March 31, 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: May 7, 1997