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 September 30, 1995
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period.........to.........
Commission file number 0-15547
ANGELES INCOME PROPERTIES, LTD. V
(Exact name of small business issuer as specified in its charter)
California 95-4049903
(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 (803) 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 INCOME PROPERTIES, LTD. V
BALANCE SHEET
(Unaudited)
September 30, 1995
Assets
Cash:
Unrestricted $ 442,994
Restricted--tenant security deposits 52,291
Accounts receivable (net of allowance for
doubtful accounts of $282) 56,309
Escrow deposits for taxes 72,753
Other assets 365,035
Investment properties:
Land $ 1,351,522
Buildings and related personal
property 11,303,221
12,654,743
Less accumulated depreciation (3,574,196) 9,080,547
$10,069,929
Liabilities and Partners' Deficit
Liabilities
Accounts payable $ 171,528
Tenant security deposits 78,720
Accrued taxes 318,331
Accrued interest 2,836,769
Due to affiliates 851,942
Other liabilities 81,011
Notes payable, including
$7,250,000 in default 12,936,763
Equity interest in net liabilities
of joint venture 2,966,866
Partners' Deficit
General partners $ (491,521)
Limited partners (45,021 units issued
and outstanding) (9,680,480) (10,172,001)
$10,069,929
[FN]
See Accompanying Notes to Financial Statements
b) ANGELES INCOME PROPERTIES, LTD. V
STATEMENTS OF OPERATIONS
(Unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
1995 1994 1995 1994
Revenues:
Rental income $ 553,720 $ 582,654 $ 1,676,873 $ 1,725,092
Other income 8,550 11,815 52,426 34,728
Total revenues 562,270 594,469 1,729,299 1,759,820
Expenses:
Operating 160,908 186,034 510,409 632,460
General and administrative 95,597 83,271 223,130 387,225
Property management fees 40,192 17,666 114,611 82,269
Maintenance 59,828 44,510 189,318 140,478
Depreciation 97,120 98,502 288,008 295,272
Amortization 5,139 5,433 20,108 18,344
Interest 473,936 659,370 1,646,012 1,946,469
Property taxes 108,287 94,516 333,156 314,354
Bad debt expense 47,041 19,589 54,365 40,981
Tenant reimbursements (106,822) (78,234) (277,167) (303,991)
Total expenses 981,226 1,130,657 3,101,950 3,553,861
Loss before equity in (loss) income
of joint venture, loss on disposal
of property and extraordinary item (418,956) (536,188) (1,372,651) (1,794,041)
Equity in (loss) income of
joint venture (74,658) (20,768) 1,122,799 111,766
Loss on disposal of property -- -- -- (21,670)
Loss before extraordinary item (493,614) (556,956) (249,852) (1,703,945)
Extraordinary item - forgiveness
of debt -- -- 496,881 --
Net (loss) income $ (493,614) $ (556,956)$ 247,029 $(1,703,945)
Net (loss) income allocated to
general partner (1%) $ (4,936) $ (5,570)$ 2,470 $ (17,039)
Net (loss) income allocated to
limited partners (99%) (488,678) (551,386) 244,559 (1,686,906)
$ (493,614) $ (556,956)$ 247,029 $(1,703,945)
Per limited partnership unit:
(Loss) income before
extraordinary item $ (10.85) $ (12.13)$ (5.49)$ (37.12)
Extraordinary item -- 10.93 --
Net (loss) income $ (10.85) $ (12.13)$ 5.44 $ (37.12)
[FN]
See Accompanying Notes to Financial Statements
c) ANGELES INCOME PROPERTIES, LTD. V
STATEMENT OF CHANGES IN PARTNERS' DEFICIT
(Unaudited)
Limited
Partnership General Limited
Units Partners Partners Total
Original capital contributions 45,450 $ 1,000 $45,450,000 $ 45,451,000
Partners' deficit at
December 31, 1994 45,021 $(493,991) $(9,925,039) $(10,419,030)
Net income for the nine months
ended September 30, 1995 2,470 244,559 247,029
Partners' deficit at
September 30, 1995 45,021 $(491,521) $(9,680,480) $(10,172,001)
[FN]
See Accompanying Notes to Financial Statements
d) ANGELES INCOME PROPERTIES, LTD. V
STATEMENTS OF CASH FLOWS
(Unaudited)
Nine Months Ended
September 30,
1995 1994
Cash flows from operating activities:
Net income (loss) $ 247,029 $(1,703,945)
Adjustments to reconcile net income (loss) to net
cash provided by operating activities:
Equity in income of joint ventures (1,122,799) (111,766)
Depreciation 288,008 295,272
Amortization of loan costs and leasing commission 70,613 109,589
Loss on disposal of property -- 21,670
Bad debt expense 54,365 40,981
Extraordinary gain on forgiveness of debt (496,881) --
Change in accounts:
Restricted cash (8,164) (15,949)
Accounts receivable (67,966) (4,856)
Escrows for taxes (28,724) (30,915)
Other assets (18,601) (2,459)
Accounts payable (17,351) (16,117)
Tenant security deposit liabilities 9,422 1,451
Accrued taxes 167,627 (78,902)
Accrued interest 1,094,339 1,333,079
Due to affiliates 93,469 296,516
Other liabilities (34,669) (64,277)
Net cash provided by operating activities 229,717 69,372
Cash flows used in investing activities:
Property improvements and replacements (31,827) (19,959)
Cash flows from financing activities:
Proceeds from long-term borrowings -- 71,533
Payments on mortgage notes payable (54,814) (45,105)
Net cash (used in) provided by financing activities (54,814) 26,428
Net increase in cash 143,076 75,841
Cash at beginning of period 299,918 226,247
Cash at end of period $ 442,994 $ 302,088
Supplemental disclosure of cash flow information
Cash paid for interest $ 501,169 $ 522,145
[FN]
See Accompanying Notes to Financial Statements
e) ANGELES INCOME PROPERTIES, LTD. V
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
Note A - Going Concern
The accompanying financial statements have been prepared assuming the
Partnership will continue as a going concern. The Partnership has incurred
recurring operating losses and is experiencing liquidity problems. It is also
in default on $7,250,000 of its mortgages and other notes payable due to its
inability to service the indebtedness on a current basis, including $6,400,000
indebtedness to Angeles Mortgage Investment Trust ("AMIT").
Included in the debt to AMIT are two second mortgages secured by Southgate
Village Apartments and Springdale Lake Estates Mobile Home Park totalling
$4,600,000 which are in default due to nonpayment of interest. Also, included
in the debt to AMIT are mortgage notes payable secured by University Park Center
- - Phase IV in the amount of $1,800,000, which is recourse to the Partnership.
In addition, $850,000 in debt, which is secured by University Park Center -
Phase III is in default due to nonpayment of interest. On July 21, 1995, and
May 24, 1995, Phase III and Phase IV were sold at a foreclosure sale,
respectively. Under foreclosure proceedings, the property was sold to the
lender, however, the Partnership has a one year redemption period during which
it may pay off the debt, including related accrued interest, and retain the
property. If the Partnership cannot pay the debt on the property, the title to
the property will transfer to the lender at the close of the one year redemption
period. AMIT issued a deficiency Judgement against the Partnership on March 3,
1995 in the original amount of $451,406 for the $1,800,000 note. The Judgement
constitutes a first lien against University Center Phase I and II, which is also
collateral on a $2,600,000 promissory note to AMIT. As of September 30, 1995,
the General Partner is negotiating with AMIT an Agreement for Deed in Lieu of
Foreclosure for University Center Phase I and II. If such negotiations are
successful, the Partnership will lose Phase I and II of the University Park
Center, in exchange for (1) the satisfaction of the Judgement, the balance of
which is $460,979 at September 30, 1995, and (2) the satisfaction of a portion
of the outstanding amount of the $2,600,000 promissory note being an amount
equal to $880,000 of accrued interest and late penalties. Finally, the
Partnership is delinquent in approximately $50,828 in taxes relating to
University Center Phase I & II at September 30, 1995.
The Partnership also had a note payable to Mesa Dunes, Wakonda and Town &
Country Partners ("Mesa Dunes") of $5,000,000, secured by its 50% interest in
Mesa Dunes, in default due to nonpayment of interest and, in February 1995, Mesa
Dunes notified the Partnership that it intended to foreclose on its collateral.
On April 1, 1995, Mesa Dunes foreclosed on its collateral and the Partnership
lost its 50% interest in Mesa Dunes.
The Partnership is presently paying non-debt related expenses of the
properties, is current on two first mortgage notes payable and is making partial
interest payments on certain mortgages in default. It is the General Partner's
intent at this time to continue to operate the Partnership as a going concern.
The financial statements do not include any adjustments to reflect the possible
future effects on the recoverability and classification of assets or amounts and
classification of liabilities that may result from these uncertainties.
Note B 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 nine month period
ended September 30, 1995, are not necessarily indicative of the results that may
be expected for the fiscal year ending December 31, 1995. 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, 1994.
Certain reclassifications have been made to the September 30, 1994,
information to conform to the September 30, 1995, presentation.
Note C - Investment in Joint Venture
The Partnership owns a 57% investment in Angeles Fort Worth Option Joint
Venture ("Fort Worth"). The investment in Fort Worth is included in "Equity
interest in net liabilities of joint venture" on the balance sheet. As
mentioned previously, the Partnership lost its 50% interest in Mesa Dunes
through foreclosure on April 1, 1995.
Condensed balance sheet information of Fort Worth at September 30, 1995, is
as follows:
Assets
Cash $ 30,493
Other assets 55,732
Total $ 86,225
Liabilities and Partners' Deficit
Notes payable in default $ 2,888,563
Other liabilities 2,402,690
Partners' deficit (5,205,028)
Total $ 86,225
Note C - Investment in Joint Venture (continued)
The condensed profit and loss statements of Fort Worth for the three and nine
months ended September 30, 1995 and 1994, are summarized as follows:
Three Months Ended September 30,
1995 1994
Revenue $ 2,041 $ 176,303
Costs and expenses (133,019) (422,302)
Net loss $ (130,978) $(245,999)
Nine Months Ended September 30,
1995 1994
Revenue $ 214,532 $ 573,448
Costs and expenses (456,352) (1,226,186)
Bad debt recovery 1,932,975 --
Loss on sale of investment
property (42,401) --
Net income (loss) $1,648,754 $ (652,738)
The Partnership's equity interest in the income of the joint ventures was
$1,122,799 for the nine months ended September 30, 1995, and $111,766 for the
nine months ended September 30, 1994.
On March 22, 1995, a tenant of the W.T. Waggoner Building purchased the
investment property for $300,000. The net proceeds to Fort Worth at the time of
the sale were $214,749 and the loss on the sale amounted to $42,401. As part of
the sales agreement, $55,420 was held in escrow to cover any unknown outstanding
payables and a mechanic's lien on the property. The General Partner believes
that this escrow is sufficient to cover any outstanding payables and that the
mechanic's lien is without merit.
The Partnership accounts for its 57% investment in Fort Worth using the
equity method of accounting. The Partnership accounted for its 50% investment
in Mesa Dunes using the equity method prior to losing its investment on April 1,
1995. Under the equity method, the Partnership records its equity interest in
earnings or losses of the joint ventures, however, the investment in the joint
ventures will be recorded at an amount less than zero (a liability) to the
extent of the Partnership's share of net liabilities of the joint ventures.
Note D 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 expenses were accrued or paid to the General Partner and
affiliates during the nine months ended September 30, 1995 and 1994:
1995 1994
Property management fees $ 71,819 $ 82,269
Reimbursement for services of
affiliates including $851,942 and
$777,656 accrued at September 30,
1995 and 1994, respectively 163,469 296,516
Marketing services -- 293
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.
In November 1992, Angeles Acceptance Pool, L.P. ("AAP"), a Delaware limited
partnership was organized to acquire and hold the obligations evidencing the
working capital loan previously provided to the Partnership by Angeles Capital
Investments, Inc. ("ACII"). Angeles Corporation ("Angeles") is the 99% limited
partner of AAP and Angeles Acceptance Directives, Inc.("AAD"), an affiliate of
the General Partner, was until April 14, 1995, the 1% general partner of AAP.
On April 14, 1995, as part of a settlement of claims between affiliates of the
General Partner and Angeles, AAD resigned as general partner of AAP and
simultaneously received a 1/2% limited partner interest in AAP.
This working capital loan funded the Partnership's operating deficits in
prior years. Total indebtedness which is included as a note payable, was
$198,172 at September 30, 1995, and September 30, 1994, with monthly interest
only payments at prime plus 2%. Principal is to be paid the earlier of i) the
availability of funds, ii) the sale of one or more properties owned by the
Partnership, or iii) November 25, 1997. Total interest expense for this loan
was $16,143 and $13,253 during the nine months ended September 30, 1995 and
1994, respectively.
Note D - Transactions with Affiliated Parties (continued)
AMIT currently provides financing to the Partnership in the total principal
amount of $6,400,000 secured by some of the Partnership's investment
properties. All of this debt is in default at September 30, 1995. Total
interest expense on this financing was $863,437 and $629,287 for the nine
months ended September 30, 1995 and 1994, respectively.
In July 1993, AMIT, a real estate investment trust, formerly affiliated with
Angeles, initiated litigation against Fort Worth, and other partnerships which
loaned money to AMIT seeking to avoid repayment of such obligations. The
Partnership subsequently filed a counterclaim against AMIT seeking to enforce
the obligation, the principal amount of which was $2,240,000 plus accrued
interest from March 1993 ("AMIT Obligation").
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% 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% of the vote).
Between the date of acquisition of these shares (November 24, 1992) and March
31, 1995, MAE GP had 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.
On November 9, 1994, Fort Worth executed a definitive Settlement Agreement to
settle the dispute with respect to the AMIT Obligation. The actual closing of
the Settlement occurred April 14, 1995. The Partnership's claim against AMIT
was satisfied by a cash payment to Fort Worth by AMIT totalling $1,932,975 (the
"Settlement Amount") plus interest at closing. These funds were transferred to
Angeles Income Properties, Ltd. IV, an affiliate of the General Partner (See
discussion below).
As part of the settlement, MAE GP granted to AMIT an option to acquire the
Class B Shares. 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.
Note D - Transactions with Affiliated Parties (continued)
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 these 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.
On December 22, 1994, the Partnership entered into an agreement with Fort
Worth and AIPL IV, whereby Fort Worth transferred, assigned and delivered to
AIPL IV all of Fort Worth's right, title and interests in and to all payment,
distributions, profits, returns of capital and benefits accruing from the
repayment by AMIT of the loans made to AMIT from Fort Worth. This transfer
effectively transferred all of the Partnership's right, title and interests in
and to all payment, distributions, profits, returns of capital and benefits
accruing from the repayment by AMIT of the loans made to AMIT from Fort Worth.
The Partnership has consented to this transfer, assignment and delivery. As a
result, the previously mentioned cash settlement that Fort Worth received from
AMIT was assigned to AIPL IV. AIPL IV had previously loaned $5,000,000 to Fort
Worth. Fort Worth had made no principal or interest payments on the debt. This
assignment was partial satisfaction of the debt Fort Worth has to AIPL IV.
On December 6, 1994, Mesa Dunes gave notice to the Partnership that the note
in the amount of $5,000,000 dated September 20, 1991, and originally due on
September 30, 1996, was in default because of failure to perform under the terms
and conditions of said note and security interest, including but not limited to,
failure to make interest payments. In February 1995, Mesa Dunes gave notice
that it intended to foreclose on its collateral. As mentioned previously, on
April 1, 1995, Mesa Dunes foreclosed on its collateral and the Partnership lost
its 50% interest in Mesa Dunes.
Item 2. Managements Discussion and Analysis and Plan of Operation
The Partnership's investment properties consist of one apartment complex, one
mobile home park and one commercial property. The following table sets forth
the average occupancy of the properties for the nine months ended September 30,
1995 and 1994:
Average
Occupancy
Property 1995 1994
Southgate Village Apartments
Bedford Heights, Ohio 92% 95%
Springdale Lake Estates Mobile Park
Belton, Missouri 77% 81%
University Park Center
Spring Lake Park, Minnesota 80% 85%
The Partnership realized net income of $247,029 for the nine months ended
September 30, 1995, as compared to a net loss of $1,703,945 for the nine months
ended September 30, 1994. The Partnership realized a net loss of $493,614 for
the three months ended September 30, 1995, as compared to a net loss of $556,956
for the three months ended September 30, 1994. The increase in net income for
the nine months ended September 30, 1995 versus the nine months ended September
30, 1994, is due to decreases in general and administrative expense and interest
expense. Complimenting these decreases was an increase in the equity in income
of the joint venture and a gain on early extinguishment of debt as a result of
the foreclosure of the Partnership's interest in Mesa Dunes by Mesa Dunes.
The decrease in rental income during the three and nine months ended
September 30, 1995, as compared to the three and nine months ended September 30,
1994, is a result of a decreased occupancy for Southgate, Springdale and
University. Occupancy at Southgate is slightly lower, but for 1995 the
occupancy rate has been increasing due to better property management and full
time staffing. Springdale's occupancy is decreasing as competition in the area
increases and more tenants are buying houses. University's occupancy has also
decreased as a result of two large tenants vacating the premises during 1995.
The decrease in operating expenses for the three and nine months ended September
30, 1995, versus the three and nine months ended September 30, 1994, is due to a
decrease in office payroll and repairs and maintenance payroll for University
Center. The decrease in general and administrative expenses during the nine
months ended September 30, 1995, as compared to the nine months ended September
30, 1994, is primarily related to decreased expense reimbursements for asset
management, partnership accounting and investor services. Although revenue has
decreased, property management fees have increased. This is the result of
increased fees associated with University Center. Property management fees for
University Center Phase III and IV, which are in receivership, are not revenue
driven, but are a flat fee instead. The increase in maintenance expense for the
three and nine months ended September 30, 1995, as compared to the three and
nine months ended September 30, 1994, is primarily caused by increased contract
services for repairs and maintenance and an increase in snow removal costs. The
decrease in interest expense is due to the forgiveness of debt as the
Partnership's interest in Mesa Dunes was foreclosed upon in exchange for the
$5,000,000 debt that the Partnership owed to Mesa Dunes. Bad debt expense
relates to receivables deemed uncollectible from tenants at University Center
and have been reserved. Tenant reimbursements were significantly lower for the
nine months ended September 30, 1995, versus the nine months ended September 30,
1994. Due to changes in the management companies at University Park Center III,
the detail data needed to accurately estimate the receivable in 1994 was not
available.
The Partnership's equity in income of joint ventures is $1,122,799 for the
nine months ended September 30, 1995, and $111,766 for the nine months ended
September 30, 1994. The increase in equity in income of joint ventures can be
attributed to the bad debt recovery that Fort Worth realized on April 1, 1995,
as a result of a partial recovery of its investment in AMIT. In addition, the
increase in equity in income of joint venture can be attributed to the sale of
the W.T. Waggoner Building. As a result of the sale, Fort Worth realized a
decrease in revenues and a considerable decrease in costs and expenses.
The Partnership recognized a gain on forgiveness of debt at September 30,
1995, as a result of the loss of its 50% interest in Mesa Dunes. The gain on
forgiveness of debt amounted to $496,881 at September 30, 1995.
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, 1995, the Partnership had unrestricted cash of $442,994
compared to $302,088 at September 30, 1994. Net cash provided by operating
activities increased due to increased net income. The increase in cash flows
used in investing activities is due to increased capital improvements in 1995.
The decrease in cash provided by financing activities is due to proceeds from
long-term borrowings that were received in 1994 from AMIT in order to pay
property taxes that became due in the third quarter of 1994 for University
Center Phase IV.
The accompanying financial statements have been prepared assuming the
Partnership will continue as a going concern. The Partnership has incurred
recurring operating losses and is experiencing liquidity problems. It is also
in default on $7,250,000 of its mortgages and other notes payable due to its
inability to service the indebtedness on a current basis, including $6,400,000
indebtedness to AMIT.
Included in the debt to AMIT are two second mortgages secured by Southgate
Village Apartments and Springdale Lake Estates Mobile Home Park totalling
$4,600,000 which are in default due to nonpayment of interest. Also included in
the debt to AMIT are mortgage notes payable secured by University Park Center -
Phase IV in the amount of $1,800,000, which is recourse to the Partnership. In
addition, $850,000 in debt, which is secured by University Park Center - Phase
III is in default due to nonpayment of interest. As mentioned previously, on
July 21, 1995, and on May 24, 1995, Phase III and Phase IV were sold at a
foreclosure sale, respectively. Under foreclosure proceedings, the property was
sold to the lender, however, the Partnership has a one year redemption period
during which it may pay off the debt, including related accrued interest, and
retain the property. If the Partnership cannot pay the debt on the property,
the title to the property will transfer to the lender at the close of the one
year redemption period. AMIT issued a deficiency Judgement against the
Partnership on March 3, 1995 in the original amount of $451,406 for the
$1,800,000 note. The Judgement constitutes a first lien against University
Center Phase I and II, which is also collateral on a $2,600,000 promissory note
to AMIT. As of September 30, 1995, the General Partner is negotiating with AMIT
an Agreement for Deed in Lieu of Foreclosure for University Center Phase I and
II. If such negotiations are successful, the Partnership will lose Phase I and
II of the University Park Center, in exchange for (1) the satisfaction of the
Judgement, the balance of which is $460,979 at September 30, 1995, and (2) the
satisfaction of a portion of the outstanding amount of the $2,600,000 promissory
note being an amount equal to $880,000 of accrued interest and late penalties.
The Partnership also had a note payable to Mesa Dunes of $5,000,000, secured
by its 50% interest in Mesa Dunes, in default due to nonpayment of interest. In
February 1995, Mesa Dunes notified the Partnership that it intended to foreclose
on its collateral. On April 1, 1995, Mesa Dunes foreclosed on its collateral and
the Partnership lost its 50% interest in Mesa Dunes.
The Partnership is presently paying non-debt related expenses of the
properties, is current on two first mortgage notes payable and is making partial
interest payments on certain mortgages in default. It is the General Partner's
intent at this time to continue to operate the Partnership as a going concern.
The financial statements do not include any adjustments to reflect the possible
future effects on the recoverability and classification of assets or amounts and
classification of liabilities that may result from these uncertainties.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
In July 1993, Angeles Mortgage Investment Trust ("AMIT"), a real estate
investment trust formerly affiliated with Angeles Corporation ("Angeles"),
initiated litigation against Fort Worth and other partnerships which loaned
money to AMIT seeking to avoid repayment of such obligations. The Partnership
subsequently filed a counterclaim against AMIT seeking to enforce the
obligation, the principal amount of which is $2,240,000 plus accrued interest
from March 1993 ("AMIT obligation").
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% 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% of the vote).
Between the date of acquisition of these shares (November 24, 1992) and March
31, 1995, MAE GP had 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.
On November 9, 1994, Fort Worth executed a definitive Settlement Agreement
to settle the dispute with respect to the AMIT Obligation. The actual closing
of the Settlement occurred April 14, 1995. The Partnership's claim was
satisfied by a cash payment to Fort Worth by AMIT totalling $1,932,975 (the
"Settlement Amount") plus interest at closing.
As part of the settlement, MAE GP granted to AMIT an option to acquire the
Class B Shares. 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 on
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 these 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.
Also, AMIT made a loan to the Partnership on June 29, 1990, in the amount
of $2,600,000, secured by the Partnership's real property known as Springdale
Lake Estates Mobile Home Park. This loan was made on a non-recourse basis.
AMIT now asserts that this loan is recourse by virtue of a certain amendment
purportedly entered into as of November 1, 1992, but which the Partnership has
been informed and believes was actually executed in December of 1992 ("Note
Modification"). The Partnership has been further informed and believes that the
amendment may have been executed at the direction of Angeles by an individual in
his purported capacity as an officer of the General Partner of the Partnership
at a time when such person was not in fact an officer of such entity.
Accordingly, the Partnership filed a Proof of Claim in the Angeles bankruptcy
proceeding with respect to such purported amendment. Additionally, the
Partnership filed a Proof of Claim in the Angeles Funding Corporation and
Angeles Real Estate Corporation bankruptcy proceedings on similar grounds. Both
Angeles Funding Corporation and Angeles Real Estate Corporation are affiliates
of Angeles. Angeles has agreed to cooperate with the Partnership in any action
commenced by or against them by AMIT asserting that the $2,600,000 obligation
owed to AMIT is recourse to the Partnership. Angeles further agreed to waive
the attorney-client privilege with respect to the Note Modification.
Accordingly, the Partnership withdrew its Proof of Claim on August 9, 1995. The
Partnership has had and continues to have discussions with AMIT regarding
resolution of this issue. No agreement has been reached with AMIT at this time.
Also, Angeles, either directly or through an affiliate, maintained a
central disbursement account (the "Account") for the properties and partnerships
managed by Angeles and its affiliates, including the Registrant. Angeles
caused the Partnership to make deposits to the Account ostensibly to fund the
payment of certain obligations of the Partnership. Angeles further caused
checks on such Account to be written to or on behalf of certain other
partnerships. At least $2,286 deposited by or on behalf of the Partnership was
used for purposes other than satisfying the liabilities of the Partnership.
However, subsequently the General Partner of the Partnership has determined that
the cost involved to pursue such claim would likely exceed any amount received,
if in fact such claim were to be resolved in favor of the Partnership.
Therefore, the Partnership withdrew this claim on August 9, 1995.
Additionally, the Partnership has filed a Proof of Claim in the bankruptcy
proceeding of Angeles concerning the Partnership's indebtedness to AAP. The
Proof of Claim alleges that instead of causing the Partnership to pay AAP on
account of such debt in the amount of $605,000, Angeles either itself or through
an affiliate, caused the Partnership to make payment to another Angeles
affiliate. To the extent that such action results in the Partnership not
receiving credit for the payments so made, the Partnership would have been
damaged in an amount equal to the misappropriated payments. On August 9, 1995,
AAP acknowledged constructive receipt of such payment and, therefore, the
General Partner withdrew this claim.
The Registrant is unaware of any other 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.
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 Income Properties, Ltd. V
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.
Controller and Principal
Accounting Officer
Date: November 14, 1995