FORM 10-QSB.--QUARTERLY REPORT UNDER SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
UNITED STATES
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 September 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)
(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, 1997
Assets
Cash and cash equivalents:
Unrestricted $1,337
Restricted--tenant security deposits 31
Accounts receivable 4
Escrows for taxes 172
Restricted escrows 219
Other assets 180
Investment in joint venture 39
Investment properties:
Land $ 956
Buildings and related personal property 7,286
8,242
Less accumulated depreciation (1,840) 6,402
$8,384
Liabilities and Partners' Capital
Liabilities
Accounts payable $ 28
Tenant security deposit liabilities 32
Accrued taxes 159
Other liabilities 79
Mortgage notes payable 5,437
Partners' (Deficit) Capital
General partner $ (90)
Limited partners (12,425 units issued
and outstanding) 2,739 2,649
$8,384
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,
1997 1996 1997 1996
Revenues:
Rental income $ 565 $ 542 $1,671 $1,551
Other income 43 30 118 84
Total revenues 608 572 1,789 1,635
Expenses:
Operating 193 177 558 537
General and administrative 54 52 123 144
Maintenance 67 113 195 285
Depreciation 72 71 213 201
Interest 110 108 330 326
Bad debt recovery -- -- -- (789)
Property taxes 53 51 157 155
Total expenses 549 572 1,576 859
Income before equity in income
of joint venture 59 -- 213 776
Equity in income (loss) of joint venture (2) (251) 4 (250)
Net income (loss) $ 57 $ (251) $ 217 $ 526
Net income (loss) allocated
to general partner (1%) $ -- $ (3) $ 2 $ 5
Net income (loss) allocated
to limited partners (99%) 57 (248) 215 521
Net income (loss) $ 57 $ (251) $ 217 $ 526
Net income (loss) per limited
partnership unit $ 4.55 $(19.96) $17.30 $41.93
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 nine months
ended September 30, 1997 -- 2 215 217
Partners' (deficit) capital
at September 30, 1997 12,425 $ (90) $ 2,739 $ 2,649
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,
1997 1996
Cash flows from operating activities:
Net income $ 217 $ 526
Adjustments to reconcile net income to
net cash provided by operating activities:
Equity in (income) loss from joint venture (4) 250
Depreciation 213 201
Amortization of loan costs and discounts 23 23
Bad debt recovery -- (789)
Change in accounts:
Restricted cash 6 5
Accounts receivable 14 (1)
Escrows for taxes (90) 41
Other assets (1) (30)
Accounts payable (5) (4)
Tenant security deposit liabilities (5) (5)
Accrued taxes 72 (43)
Other liabilities 24 14
Net cash provided by operating
activities 464 188
Cash flows from investing activities:
Property improvements and replacements (170) (223)
Distributions from joint venture property 459 --
Deposits to restricted escrows (50) (34)
Withdrawals from restricted escrows 31 203
Net cash provided by (used in)
investing activities 270 (54)
Cash flows from financing activities:
Payments on mortgage notes payable (16) (98)
Additional loan costs (7) --
Distributions to partners (1,210) (303)
Net cash used in financing activities (1,233) (401)
Net decrease in cash and cash equivalents (499) (267)
Cash and cash equivalents at beginning of period 1,836 1,080
Cash and cash equivalents at end of period $ 1,337 $ 813
Supplemental disclosure of cash flow information:
Cash paid for interest $ 307 $ 304
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 and nine
month periods ended September 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 nine months ended September 30, 1997 and 1996:
Nine Months Ended
September 30,
1997 1996
(in thousands)
Property management fees (included in operating expenses) $ 86 $ 80
Reimbursement for services of affiliates
(included in general and administrative, maintenance
expenses and investment properties) (1) 72 111
(1) Included in "Reimbursement for services of affiliates" for 1997 and 1996 is
approximately $7,000 and $28,000 of construction oversight costs.
For the period of January 1, 1996 to August 31, 1997, the Partnership insured
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. Subject to the terms of the proxy
described below, 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 September 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 and 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 and dividends paid by
IPT from February 1, 1997. It is anticipated that Insignia (and its affiliates)
and MAE GP (and its affiliates) would own approximately 53.1% and 2.3%,
respectively, of post-merger IPT when this transaction is consummated.
The balance sheet of the Joint Venture is summarized as follows (in thousands):
September 30,
1997
Cash $ 91
Partners Capital $ 91
The Partnership's equity interest in income of the Joint Venture for the period
ended September 30, 1997 was approximately $4,000.
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. The Partnership's remaining equity in
the Joint Venture was received in October 1997.
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, 1997 and 1996:
Average
Occupancy
Property 1997 1996
Lake Meadows Apartments
Garland, Texas 96% 95%
Lakewood Apartments
Tomball, Texas 98% 93%
The General Partner attributes the increase in occupancy at the Partnership's
properties to exterior rehabilitation projects, including exterior painting,
which were completed in 1996 and to effective marketing by property management.
Additionally, occupancy at Lakewood Apartments was low in 1996 due to highway
construction in front of the property in 1996 which made it difficult to attract
new tenants.
The Partnership's net income for the nine months ended September 30, 1997, was
approximately $217,000 versus net income of approximately $526,000 for the nine
months ended September 30, 1996. The Partnership's net income for the three
months ended September 30, 1997, was approximately $57,000 versus a net loss of
approximately $251,000 for the three months ended September 30, 1996.
The decrease in net income for the nine months ended September 30, 1997 is
primarily attributed to bad debt recovery recorded by the Partnership in 1996 as
result of the foreclosure of the property owned by Rolling Greens Communities,
Ltd. This decrease in net income was partially offset by an increase in
revenues and a decrease in maintenance expense. Revenues increased due to the
increase in occupancy levels. In addition, interest income increased due to
higher cash balances in 1997. 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.
The increase in net income for the three months ended September 30, 1997 is
attributable to the decrease in equity in loss of joint venture from 1996 to
1997. This decrease is due to the recognition of a valuation allowance on the
joint venture property during the three months ended September 30, 1996. The
increase is also the result of reduced maintenance expenses as discussed above.
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, 1997, the Partnership had unrestricted cash of approximately
$1,337,000 compared to approximately $813,000 at September 30, 1996. Net cash
provided by operating activities increased primarily due to the increase in the
change in accrued taxes related to the timing of payments. Net cash provided by
investing activities increased primarily due to distributions from the Joint
Venture property related to proceeds from the sale of the Joint Venture's
investment property which was partially offset by a decrease in the withdrawals
from restricted escrows. 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 $5,437,000, net of discount, is
interest only and 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 nine months ended
September 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 in the fourth quarter of 1996. During the nine months ended
September 30, 1996, the Partnership distributed approximately $297,000 to the
limited partners and approximately $6,000 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 September 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: November 13, 1997