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 June 30, 1995
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT
For the transition period.........to.........
Commission file number 0-14248
ANGELES PARTNERS XIV
(Exact name of small business issuer as specified in its charter)
California 95-3959771
(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 PARTNERS XIV
BALANCE SHEET
(Unaudited)
June 30, 1995
Assets
Cash:
Unrestricted $ 416,632
Restricted--tenant security
deposits 100,105
Accounts receivable, (net of allowance
for doubtful accounts of $35,054) 39,264
Escrows deposits for taxes 624,990
Restricted escrows 262,065
Other assets 934,214
Investment properties:
Land $ 4,943,257
Buildings and related personal
property 54,873,413
59,816,670
Less accumulated depreciation (28,696,340) 31,120,330
$ 33,497,600
Liabilities and Partners' Deficit
Liabilities
Accounts payable $ 49,874
Tenant security deposits 173,838
Accrued taxes 647,724
Accrued interest 3,108,913
Due to affiliates 671,833
Other liabilities 357,901
Notes payable, including
$13,271,259 in default 52,207,089
Partners' Deficit
General partners $ (620,554)
Limited partners (44,139 units
issued and outstanding) (23,099,018) (23,719,572)
$ 33,497,600
See Accompanying Notes to Financial Statements
1
b) ANGELES PARTNERS XIV
STATEMENTS OF OPERATIONS
(Unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
1995 1994 1995 1994
Revenues:
Rental income $ 1,991,915 $ 2,129,783 $ 3,976,808 $ 4,485,897
Other income 44,313 101,538 138,284 126,540
Total revenue 2,036,228 2,231,321 4,115,092 4,612,437
Expenses:
Operating 443,598 490,598 929,220 1,035,288
General and administrative 56,800 95,688 140,833 223,647
Property management fees 80,145 105,236 179,431 234,487
Maintenance 151,288 181,103 285,744 356,653
Depreciation 722,476 798,760 1,444,211 1,594,396
Amortization 30,837 44,696 54,219 91,765
Interest 1,510,130 1,614,133 2,907,721 3,480,734
Property taxes 109,560 142,308 215,468 364,865
Tenant reimbursements (16,953) 26,137 (20,088) (18,247)
Total expenses 3,087,881 3,498,659 6,136,759 7,363,588
Loss before gain on sale
of investment property,
loss on transfer of
property in foreclosure
and extraordinary item (1,051,653) (1,267,338) (2,021,667) (2,751,151)
Gain on sale of investment
property -- -- -- 601,633
Loss on transfer of
property in
foreclosure -- (570,258) -- (570,258)
Loss before extraordinary
item (1,051,653) (1,837,596) (2,021,667) (2,719,776)
Extraordinary item - gain
on early extinguishment
of debt -- 1,532,848 -- 2,468,515
Net loss $(1,051,653) $ (304,748) $(2,021,667) $ (251,261)
Net loss allocated to
general partners (1%) $ (10,517) $ (3,047) $ (20,217) $ (2,513)
Net loss allocated to
limited partners (99%) (1,041,136) (301,701) (2,001,450) (248,748)
Net loss $(1,051,653) $ (304,748) $(2,021,667) $ (251,261)
See Accompanying Notes to Financial Statements
2
ANGELES PARTNERS XIV
STATEMENTS OF OPERATIONS (Continued)
(Unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
1995 1994 1995 1994
Per limited partnership
unit:
Loss before extraordinary
item $ (23.59) $ (40.98) $ (45.34) $ (60.66)
Extraordinary item -- 34.19 -- 55.05
Net loss $ (23.59) $ (6.79) $ (45.34) $ (5.61)
See Accompanying Notes to Financial Statements
3
c) ANGELES PARTNERS XIV
STATEMENT OF CHANGES IN PARTNERS' CAPITAL (DEFICIT)
(Unaudited)
Limited
Partnership General Limited
Units Partners Partners Total
Original capital
contributions 44,390 $ 1,000 $ 44,390,000 $ 44,391,000
Partners' deficit at
December 31, 1994 44,139 $(600,337) $(21,097,568) $(21,697,905)
Net loss for the six months
ended June 30, 1995 -- (20,217) (2,001,450) (2,021,667)
Partners' deficit at
June 30, 1995 44,139 $(620,554) $(23,099,018) $(23,719,572)
See Accompanying Notes to Financial Statements
4
d) ANGELES PARTNERS XIV
STATEMENT OF CASH FLOWS
(Unaudited)
Six Months Ended
June 30,
1995 1994
Cash flows from operating activities:
Net loss $(2,021,667) $ (251,261)
Adjustments to reconcile net loss to net
cash provided by operating activities:
Depreciation 1,444,211 1,594,396
Amortization of discounts, loan costs,
and leasing commissions 135,143 226,807
Gain on early extinguishment of debt -- (2,468,515)
Gain on sale of investment property -- (601,633)
Loss on transfer of property in foreclosure -- 570,258
Change in accounts:
Restricted cash (192) (6,857)
Accounts receivable 9,904 25,729
Escrows for taxes (246,439) 293,673
Other assets (54,454) (129,567)
Accounts payable (39,749) 111,253
Tenant security deposit liabilities 1,504 4,072
Accrued taxes 70,869 13,645
Accrued interest 1,358,035 1,488,171
Due to affiliates 87,418 --
Other liabilities 172,413 200,235
Net cash provided by operating
activities 916,996 1,070,406
Cash flows from investing activities:
Property improvements and replacements (181,184) (389,048)
Proceeds from sale of investment property -- 6,129,897
Deposits to restricted escrows (53,944) (47,514)
Withdrawals from restricted escrows 64,496 51,110
Net cash (used in) provided by
investing activities (170,632) 5,744,445
See Accompanying Notes to Financial Statements
5
d) ANGELES PARTNERS XIV
STATEMENTS OF CASH FLOWS (Continued)
(Unaudited)
Six Months Ended
June 30,
1995 1994
Cash flows from financing activities:
Payments on mortgage notes payable $ (445,547) $ (829,825)
Repayments of loans -- (6,101,222)
Loan cost (67,000) --
Net cash used in financing activities (512,547) (6,931,047)
Net increase (decrease) in cash 233,817 (116,196)
Cash at beginning of period 182,815 513,646
Cash at end of period $ 416,632 $ 397,450
Supplemental disclosure of cash
flow information:
Cash paid for interest $1,468,762 $ 1,715,981
Interest on notes transferred to
notes payable $ 686,930 $ 525,467
Foreclosures:
During the six months ended June 30, 1994, Building 57 of the Dayton
Industrial Complex was foreclosed upon by the lender. In connection
with the foreclosure, the following accounts were adjusted by the
following non-cash amounts:
Other assets $ (11,850)
Investment properties (1,928,358)
Interest payable 576,808
Mortgages payable 2,325,990
See Accompanying Notes to Financial Statements
6
e) ANGELES PARTNERS XIV
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
Note A - Going Concern
The accompanying unaudited financial statements have been prepared
assuming the Partnership will continue as a going concern. The
Partnership continues to suffer from inadequate liquidity and is in
default on certain of its debt obligations due principally to the
inability to make payments as due. Limited sources of additional
financing have been identified by the Partnership. The total amount of
debt in default at June 30, 1995, is $13,271,259.
Fox Crest Apartments is in default on its non-recourse first mortgage
in the amount of $6,590,459 due to its maturity in August 1994. The
lender has offered to refinance the debt and the Partnership is
negotiating with the lender for terms with a lower interest rate.
The Dayton Industrial Complex contains eight buildings. The
Partnership is in default on two of its non-recourse first mortgages in
the amount of $2,180,800 due to delinquent taxes of approximately
$46,000. The Partnership plans to pay these taxes during 1995. Miller
Valentine, the property manager for Dayton Industrial Complex and a
mortgage lender on the buildings has agreed to lend the Partnership up
to $500,000 for working capital requirements, of which $283,510 is
outstanding at June 30, 1995. The Partnership is investigating the
possibility of selling some or all of the buildings at Dayton Industrial
Complex.
The unsecured indebtedness to Angeles Mortgage Investment Trust
("AMIT") in the amount of $4,500,000 is in default due to non-payment of
interest. The lender is in the process of initiating negotiations to
amend these notes to require interest only payments based on available
cash flow, as defined. The mortgage secured by Waterford Square
Apartments and guaranteed by HUD is current and is not in default.
As a result of the above, there is substantial doubt about the
Partnership's ability to continue 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 classifications 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
Managing General Partner, all adjustments (consisting of normal
recurring accruals) considered necessary for a fair presentation have
been included. Operating results for the six month period ended June
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.
7
Note B - Basis of Presentation (continued)
Certain reclassifications have been made to the 1994 information to
conform to the 1995 presentation.
Note C - Transactions with Affiliated Parties
The Partnership has no employees and is dependent on the Managing
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 owed to the Managing General Partner and
affiliates during the six months ended June 30, 1995, and 1994 were paid
or accrued:
1995 1994
Property management fees $179,431 $234,487
Reimbursement for services of affiliates,
(Total of $671,833 and $478,410 accrued
at June 30, 1995 and 1994, respectively) 87,438 175,416
Marketing services 450 1,607
The Partnership insures its properties under a master policy through
an agency and insurer unaffiliated with the Managing General Partner.
An affiliate of the Managing 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 Managing General Partner, who
receives payments on these obligations from the agent. The amount of
the Partnership's insurance premiums accruing to the benefit of the
affiliate of the Managing 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 loans 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 Managing 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 Managing General Partner and Angeles, AAD resigned as general
partner of AAP and simultaneously received a 1/2% limited partner
interest in AAP. An affiliate of Angeles now serves as the general
partner of AAP.
8
Note C - Transactions with Affiliated Parties (continued)
These working capital loans funded the Partnership's operating
deficits in prior years. Total indebtedness was $4,576,493 at June 30,
1995, with monthly interest accruing at prime plus two percent.
Interest is to be paid based on excess cash flow, as defined. 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 $247,054 and $196,408
for the six months ended June 30, 1995 and 1994, respectively. Interest
of $592,400 was accrued at June 30, 1995.
AMIT currently provides notes payable to the Partnership and
secondary financing on one of the Partnership's investment properties.
Total indebtedness of $4,500,000 was in default at June 30, 1995. Total
interest expense on this financing was $438,510 and $329,134 for the six
months ended June 30, 1995 and 1994, respectively. Accrued interest was
$1,071,864 at June 30, 1995.
MAE GP Corporation ("MAE GP"), an affiliate of the Managing 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 33% 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 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. However, MAE GP may
choose to vote these shares as it deems appropriate in the future.
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 will 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 will 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.
9
Note C - Transactions with Affiliated Parties (continued)
The Partnership has agreed to pay Miller Valentine Realty ("MV")
property management fees, leasing commissions, and financing fees and
sales commissions upon the refinancing or sale of the properties. The
Partnership will receive the first $3,000,000 of excess cash from
operations, refinancing or sales of the properties. Thereafter, the
agreement provides that MV shall receive as incentive for providing
property management, leasing and asset management services to the
Partnership, two-thirds of the next $12,000,000 of excess cash proceeds
generated by the properties. Cash in excess of $15,000,000 shall be
shared equally by MV and the Partnership.
The agreement contemplates that the properties will be sold at an
opportune time but no later than 10 years after commencement of the
agreements (March 2, 1992). In addition, the agreement contains an
option for MV to buy the properties five years after the commencement
date of the agreement. The Managing General Partner does not anticipate
that there will be any proceeds available to the Partnership. Should the
Partnership elect not to sell, it would be obligated to purchase MV's
incentive interest based on the offered purchase price. The Partnership
intends to maintain ownership of the Dayton properties only as long as
they are under the management of MV. There is no certainty as to the
future of the Dayton properties otherwise.
10
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
The Partnership's investment properties consist of two apartment
complexes and one commercial property. The following table sets forth
the average occupancy of the properties for the six months ended June
30, 1995 and 1994:
Average
Occupancy
Property 1995 1994
Waterford Square Apartments
Huntsville, Alabama (1) 87% 85%
Fox Crest Apartments
Waukegan, Illinois 96% 94%
Dayton Industrial Complex
Dayton, Ohio 90% 93%
(1) This market area has been adversely affected by lay-offs in the
aerospace and defense industries, which are both major employers in the
area.
The Partnership realized a net loss of $2,021,667 for the six months
ended June 30, 1995, and a net loss of $251,261 for the six months ended
June 30, 1994. The Partnership realized a net loss of $1,051,653 for the
three months ended June 30, 1995, and a net loss of $304,748 for the
three months ended June 30, 1994. This increased loss can be attributed
to a $2,468,515 gain on early extinguishment of debt relating to the
sale of Buildings 64 & 66 and the foreclosure of Building 57 of the
Dayton Industrial Complex (See discussion below).
The Partnership sold Buildings 64 and 66 of the Dayton Industrial
Complex on February 18, 1994, and sold Building 54 of the Dayton
Industrial Complex on December 28, 1994. Also, on June 18, 1994, the
Partnership lost Building 57 of the Dayton Industrial Complex through
foreclosure. As a result of these transactions, the Partnership
realized decreases in rental revenue and in the following expenses for
the three and six months ended June 30, 1995, versus the three and six
months ended June 30, 1994: operating, property management fees,
maintenance, depreciation, amortization, interest and property taxes.
General and administrative expense decreased primarily due to a decrease
in reimbursements for partnership accounting, investor relations and
asset management services.
The increase in other income during the six months ended June 30,
1995, as compared to the six months ended June 30, 1994, is a result of
increased lease cancellation fees, deposits forfeited and other
miscellaneous fees and collections associated with the Foxcrest
investment property.
As mentioned previously, the Partnership sold Buildings 64 and 66 of
the Dayton Industrial Complex on February 18, 1994. In addition, on
June 18, 1994, the Partnership lost Building 57 of the Dayton Industrial
Complex through foreclosure. The net gain on the sale of Buildings 64
and 66 amounted to $1,537,300 of which $601,633 represented a net gain
on the transfer of property in the sale and $935,667 represented a net
gain on extinguishment of the related debt. The net gain on the
foreclosure of Building 57 amounted to $962,590.
11
As part of the ongoing business plan of the Partnership, the Managing
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 expense. As part of this plan the
Managing 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 Managing General Partner will be able to
sustain such a plan.
At June 30, 1995, the Partnership had unrestricted cash of $416,632
compared to $397,450 at June 30, 1994. Cash provided by operating
activities decreased as a result of decreases in rents due to the loss
of the Dayton Industrial Complex Buildings 54, 57, 64 and 66. In
addition, cash provided by operating activities decreased due to a
decrease in accounts payable and increases in escrows for taxes and
insurance. Cash flows from investing activities decreased due to
$6,129,897 in sales proceeds received in the first quarter of 1994.
Offsetting the decrease in cash flows from investing activities was a
decrease in cash used in financing activities. This decrease is also
related to the sale of the properties. As a result of the sale, the
Partnership repaid $6,101,222 of principal relating to the sold
properties.
The Partnership continues to suffer from inadequate liquidity. In
addition, there are no identified capital resources available to the
Partnership, except those funds that Miller-Valentine Realty has agreed
to lend to the Partnership relating to the Dayton Industrial Complex
(see discussion below). As a result, the Partnership has not had cash
available to perform the substantial rehabilitation necessary at each of
the investment properties. As noted above, the Partnership had one
property foreclosed in 1994 and three properties sold in 1994.
On March 20, 1995, the Partnership executed a sales contract on
Building 47 of the Dayton Industrial Complex. The sales price is
$4,192,500 and will be used to pay off the first mortgage and pay-down
the second mortgage. There will be no excess proceeds to the
Partnership. The sale is expected to be consummated in August 1995.
Fox Crest Apartments is in default on its non-recourse first mortgage
in the amount of $6,590,459 due to its maturity in August 1994. The
lender has offered to refinance the debt and the Partnership is
negotiating with the lender for terms with a lower interest rate.
The Dayton Industrial Complex contains eight buildings. The
Partnership is in default on two of its non-recourse first mortgages in
the amount of $2,180,800 due to delinquent taxes of approximately
$46,000. The Partnership plans to pay these taxes during 1995. The
Partnership is investigating the possibility of selling some or all of
the buildings at Dayton Industrial Complex.
The unsecured indebtedness to Angeles Mortgage Investment Trust
("AMIT") in the amount of $4,500,000 is in default due to non-payment of
interest. The lender is in the process of initiating negotiations to
amend these notes to require interest only payments based on available
cash flow. The mortgage secured by Waterford Square Apartments and
guaranteed by HUD is current and is not in default.
12
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 33% 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 declined to vote these shares. Since
that date, MAE GP voted its shares at the 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. However, MAE GP may choose to
vote these shares as it deems appropriate in the future.
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 will 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 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.
In March 1992, the Partnership entered into an incentive management
agreement with Miller-Valentine Realty, an Ohio corporation ("MV"). An
affiliate of MV was the original seller of the Dayton Industrial Complex
to the Partnership. Pursuant to the agreement, MV was appointed
exclusive leasing agent, property manager and sales agent for these
properties. As part of the agreement, MV secured the agreement of its
affiliate which holds the secured mortgages on these properties to
change their terms to reflect that interest on such debt will be paid
only to the extent of the properties' cash flows, after payment of
operating expenses and senior financing costs. Interest on the second
mortgages that is not paid on a current basis will continue to accrue
and will be due upon sale or refinancing of the properties.
Additionally, MV has agreed to lend the Partnership up to $500,000
relating to the Dayton Industrial Complex for working capital
requirements. The balance of such loan proceeds will be used for
capital improvements at the properties, as and when deemed appropriate
and necessary by MV; payment of tenant improvements necessary for
leasing space; and to cover any shortfalls in operating expenses or debt
service payments. The balance under this arrangement is $283,510 at
June 30, 1995. It is questionable whether MV will fund the remainder.
The loan will bear interest at 10% per annum with principal and interest
payments deferred until all necessary repairs, expenses and other
arrearages have been fully funded and anticipated income from the
properties appears sufficient so that all operating expenses, real
estate taxes, and debt service can continue to be
13
paid timely. This loan will be secured by the properties, but is
nonrecourse to any other assets of the Partnership. MV will also
attempt to refinance the properties and has secured the agreement of the
holder of the second mortgages on the properties to be subordinate to
any such refinancing.
The Partnership has agreed to pay MV property management fees,
leasing commissions, financing fees and sales commissions upon the
refinancing or sale of the properties. The Partnership will receive the
first $3,000,000 of excess from operations, refinancing or sales of the
properties. Thereafter, the agreement provides that MV shall receive as
incentive for providing property management, leasing and asset
management services to the Partnership, two-thirds of the next
$12,000,000 of excess cash proceeds generated by the properties. Cash
in excess of $15,000,000 shall be shared equally by MV and the
Partnership.
The agreement contemplates that the properties will be sold at an
opportune time but no later than 10 years after commencement of the
agreement (March 2, 1992). In addition, the agreement contains an
option for MV to buy the properties five years after the commencement
date of the agreement. Should the Partnership elect not to sell, it
would be obligated to purchase MV's incentive interest based on the
offered purchase price. The Partnership intends to maintain ownership
of the Dayton properties only as long as they are under the management
of MV. There is no certainty as to the future of the Dayton properties
otherwise.
As a result of the above, there is substantial doubt about the
Partnership's ability to continue 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 or
classification of liabilities that may result from the outcome of these
uncertainties.
14
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
AMIT, an affiliate of the Managing General Partner, made a loan to
the Partnership on August 28, 1991, in the amount of $3,000,000, secured
by the Partnership's real property known as Fox Crest Apartments, on a
non-recourse basis. AMIT now asserts that the 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. 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 Managing General Partner of the Partnership at a time
when such person was not in fact an officer of such entity. In the
event AMIT prevails in its assertion that the loan is a recourse, rather
than a non-recourse loan, the Partnership may have a claim against
Angeles for any damages caused by Angeles' conduct in purporting to
enter into the amendment. 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. While a plan of reorganization in the Angeles bankruptcy
case was confirmed in March 1995, Angeles reserved the right to object
to certain claims. Angeles has in fact indicated that it will object to
the above described claim. The pursuit of this claim would be expensive
and the outcome uncertain. In considering all of its options, the
Partnership decided that the costs of pursuing this claim are not
warranted in light of all of the relevant facts and circumstances. The
Partnership has been in and continues to have discussions with AMIT
regarding resolution of this issue. No agreement has been reached with
AMIT at this time.
MAE GP, an affiliate of the Managing 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 33% 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 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. However, MAE GP may
choose to vote these shares as it deems appropriate in the future.
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 on April 14, 1995, as payment for the option. Upon
exercise of the option, AMIT will remit to MAE GP an additional $94,000.
15
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.
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
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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 PARTNERS XIV
By: Angeles Realty Corporation II
Managing General Partner
By:
Carroll D. Vinson
President
By:
Robert D. Long, Jr.
Controller and Principal Accounting
Officer
Date: August 9, 1995
17
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 PARTNERS XIV
By: Angeles Realty Corporation II
Managing 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: August 9, 1995
17