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 0-16116
ANGELES OPPORTUNITY PROPERTIES, LTD.
(Exact name of small business issuer as specified in its charter)
California 95-4052473
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
One Insignia Financial Plaza, P.O. Box 1089
Greenville, South Carolina 29602
(Address of principal executive offices) (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 OPPORTUNITY PROPERTIES, LTD.
CONSOLIDATED BALANCE SHEET
(Unaudited)
June 30, 1995
Assets
Cash:
Unrestricted $1,056,681
Restricted--tenant security deposits 46,915
Accounts receivable 66,684
Escrow for taxes 105,310
Restricted escrows 255,554
Other assets 216,365
Investment properties:
Land $ 955,873
Buildings and related personal property 6,776,049
7,731,922
Less accumulated depreciation (1,229,069) 6,502,853
$8,250,362
Liabilities and Partners' Capital
Liabilities
Accounts payable $ 35,401
Tenant security deposits 48,986
Accrued taxes 99,261
Other liabilities 100,058
Mortgage notes payable 4,408,665
Partners' (Deficit) Capital
General partner $ (68,111)
Limited partners (12,425 units issued
and outstanding) 3,626,102 3,557,991
$8,250,362
See Accompanying Notes to Consolidated Financial Statements
1
b) ANGELES OPPORTUNITY PROPERTIES, LTD.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
1995 1994 1995 1994
Revenues:
Rental income $528,195 $ 553,636 $1,091,725 $ 1,125,177
Other income 32,397 32,289 66,480 64,111
Total revenues 560,592 585,925 1,158,205 1,189,288
Expenses:
Operating 154,173 190,226 323,069 343,718
General and administrative 67,849 106,808 127,901 184,247
Property management fees 27,006 37,612 55,205 65,759
Maintenance 58,581 92,586 106,604 151,855
Depreciation 66,923 82,469 140,802 163,959
Amortization of lease
commissions 1,061 2,149 7,374 4,447
Interest 112,092 114,548 223,870 222,781
Property taxes 45,125 52,794 100,304 91,731
Tenant reimbursements (1,513) (9,339) (25,270) (16,265)
Total expenses 531,297 669,853 1,059,859 1,212,232
Income (loss) before gain
(loss) on sale/disposition
of investment property and
casualty gain 29,295 (83,928) 98,346 (22,944)
Loss on disposal of property -- (5,559) -- (5,559)
Gain on sale of property 465,830 -- 957,760 --
Casualty gain 17,456 20,702
Net income (loss) $512,581 $ (89,487) $1,076,808 $ (28,503)
See Accompanying Notes to Consolidated Financial Statements
2
b) ANGELES OPPORTUNITY PROPERTIES, LTD.
CONSOLIDATED STATEMENTS OF OPERATIONS (continued)
(Unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
1995 1994 1995 1994
Net income (loss) allocated
to general partner (1%) $ 5,126 $ (895) $ 10,768 $ (285)
Net income (loss) allocated
to limited partners (99%) 507,455 (88,592) 1,066,040 (28,218)
Net income (loss) $512,581 $ (89,487) $1,076,808 $ (28,503)
Net income (loss) per
limited partnership unit $ 40.84 $ (7.13) $ 85.80 $ (2.27)
See Accompanying Notes to Consolidated Financial Statements
3
c) ANGELES OPPORTUNITY PROPERTIES, LTD.
CONSOLIDATED STATEMENT OF CHANGES IN PARTNERS' CAPITAL (DEFICIT)
(Unaudited)
Limited
Partnership General Limited
Units Partners Partners Total
Original capital
contributions 12,425 $ 1,000 $12,425,000 $12,426,000
Partners' (deficit) capital
at December 31, 1994 12,425 $ (43,879) $ 6,024,997 $ 5,981,118
Distributions to partners -- (35,000) (3,464,935) (3,499,935)
Net income for the six
months ended June 30, 1995 -- 10,768 1,066,040 1,076,808
Partners' (deficit) capital
at June 30, 1995 12,425 $ (68,111) $ 3,626,102 $ 3,557,991
See Accompanying Notes to Consolidated Financial Statements
4
d) ANGELES OPPORTUNITY PROPERTIES, LTD.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Six Months Ended
June 30,
1995 1994
Cash flows from operating activities:
Net income (loss) $1,076,808 $ (28,503)
Adjustments to reconcile net income (loss) to
net cash provided by operating activities:
Depreciation 140,802 163,959
Amortization of discounts, loan costs,
and leasing commissions 22,548 11,968
Gain on sale of investment property (957,760) --
Casualty gain (20,702) --
Loss on disposal of property -- 5,559
Change in accounts:
Restricted cash 32,454 (18,485)
Accounts receivable 154 14,426
Escrows for taxes 108,229 110,450
Other assets (17,523) (10,352)
Accounts payable 6,875 (17,322)
Tenant security deposit liabilities (3,038) 305
Accrued taxes (88,549) (83,562)
Due to affiliates -- 9,364
Other liabilities (40,532) 21,481
Net cash provided by operating
activities 259,766 179,288
Cash flows from investing activities:
Property improvements and replacements (160,219) (66,264)
Proceeds from sale of investment property 3,392,871 --
Deposits to restricted escrows (22,038) (21,492)
Withdrawals from restricted escrows 2,051 25,217
Insurance proceeds 41,193 --
Net cash provided by (used in)
investing activities 3,253,858 (62,539)
See Accompanying Notes to Consolidated Financial Statements
5
d) ANGELES OPPORTUNITY PROPERTIES, LTD.
CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)
(Unaudited)
Six Months Ended
June 30,
1995 1994
Cash flows from financing activities:
Payments on mortgage notes payable $ (58,536) $ (52,973)
Distributions to partners (3,499,935) (54,972)
Net cash used in financing activities (3,558,471) (107,945)
Net (decrease) increase in cash (44,847) 8,804
Cash at beginning of period 1,101,528 799,634
Cash at end of period $ 1,056,681 $ 808,438
Supplemental disclosure of cash
flow information:
Cash paid for interest $ 209,698 $ 215,261
See Accompanying Notes to Consolidated Financial Statements
6
e) ANGELES OPPORTUNITY PROPERTIES, LTD.
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
Note A - 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 six month period ended June 30,
1995, are not necessarily indicative of the results that may be expected
for the fiscal year ended 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 June 30, 1994
information to conform to the June 30, 1995 presentation.
Note B - Note Receivable
The Partnership's assets included a note receivable ("Note") of
$1,070,000 from Rolling Greens Communities, Ltd. ("Borrower") net of a
write-down for in-substance foreclosure, as more fully described below,
of $780,000. This Note was collateralized by a first trust deed on
undeveloped commercial and mobile home park land adjacent to Rolling
Green Communities ("Rolling Greens"), and required interest only
payments computed at a 12.5% rate per annum with a maturity date of June
1997.
During 1992, a refinancing of the first mortgage on Rolling Greens
was consummated. As a concession to the new first mortgage holder,
Angeles Corporation ("Angeles"), a former affiliate of the General
Partner and/or its affiliates, released or caused to be released a lien
on the developed portion of the mobile home park, retaining a lien upon
undeveloped commercial and park zoned land as security for the Note. The
Partnership was informed and believes that the release of the lien was
without consideration to the Partnership.
Proceeds from the refinanced first mortgage and an additional
$450,000 that the Partnership advanced to the Borrower in 1992 under
this Note were used by the Borrower to pay off (i) third trust deed
financing that had been provided by Angeles Mortgage Investment Trust
("AMIT"), a real estate investment trust, and (ii) unsecured advances
payable to Angeles. Subsequent to the refinancing of the first mortgage
discussed above, the developed portion of Rolling Greens was sold to a
third party and a note receivable was received by the Partnership as
consideration. AMIT continues to have loans outstanding to the
Partnership that owns the interest in the Borrower.
7
Note B - Note Receivable - (continued)
Since the Partnership's Note from the Borrower is secured by land
that does not generate any cash flow, the Borrower has been unable to
make interest payments on a current basis and consequently defaulted on
the Note. The undeveloped land which serves as collateral for the
Partnership's Note is adjacent to the mobile home park that was recently
sold by the Borrower. Given its lack of direct access to public
highways, it was difficult to ascertain a market value for this
particular tract. The General Partner believed that the land securing
the $1,850,000 Note had an estimated net realizable value of
approximately $1,070,000, net of an estimated $80,000 in selling costs,
which was lower than the carrying value of the Note, and that the
decline in the value of the real estate was other than temporary.
Accordingly, the Partnership had recorded the Note as an in-substance
foreclosure at the estimated fair value of the underlying collateral and
recorded a write-down for in-substance foreclosed property of $650,000
in the fourth quarter of 1992 and an additional $130,000 in the fourth
quarter of 1993. Also, the Partnership ceased recording interest income
or late fees on this Note due to the low probability that these fees
would be collected. During the first quarter of 1993, the Partnership
recorded $61,281 in interest and late fees. These amounts were fully
reserved in the second quarter of 1993.
On April 29, 1994, the Partnership, the Borrower and AMIT entered
into an agreement as to the distribution of the sales proceeds generated
by the sale of certain real estate owned by the Borrower, as follows: i)
$50,000 was retained in an escrow account for the purpose of paying
operating and legal expenses of the Borrower, (an additional sum of
$22,000 was retained in the escrow account for the purpose of paying
1994 real estate taxes), ii) $125,000 was paid towards the principal
balance outstanding to Angeles Acceptance Pool, L.P. ("AAP"), an
affiliate of the General Partner, plus unpaid interest accrued of
$19,447 on that balance, iii) $561,741 was distributed to the
Partnership to be applied towards the reduction of the outstanding
balance due by the Borrower to the Partnership, iv) the remaining
balance was distributed 57.18% to AMIT and 42.82% to the Partnership.
In addition, the Partnership executed and delivered to AMIT an
assignment of a 57.18% interest in the Note.
On August 29, 1994, the Partnership received $1,061,440 in proceeds
as a partial settlement from the above described Note.
During the first quarter of 1995, the Partnership initiated
foreclosure proceedings under the terms of the Note against the Borrower
relating to the raw land which is security for the Note.
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%
8
Note B - Note Receivable (continued)
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 would remit to MAE GP an additional $94,000.
Simultaneously with the execution of the option, MAE GP executed an
irrevocable proxy in favor of AMIT the result of which is MAE GP will be
able to vote the Class B shares on all matters except those involving
transactions between AMIT and MAE GP affiliated borrowers or the
election of any MAE GP affiliate as an officer or trustee of AMIT. On
those matters, MAE GP granted to the AMIT trustees, in their capacity as
trustees of AMIT, proxies with regard to the Class B shares 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.
Note C - 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 six
months ended June 30, 1995 and 1994:
1995 1994
Property management fees $55,205 $ 65,759
Reimbursement for services of affiliates 77,385 102,822
Marketing services 238 23
9
Note C - Transactions with Affiliated Parties (continued)
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.
See Note B for discussion of the transaction with AMIT.
10
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 six months ended June 30, 1995 and 1994:
Average
Occupancy
Property 1995 1994
Lake Meadows Apartments
Garland, Texas 94% 96%
Lakewood Apartments
Tomball, Texas 96% 95%
For the three and six months ended June 30, 1995, the Partnership
generated net income of $512,581 and $1,076,808, respectively, as
compared to a net loss for the three and six months ended June 30, 1994,
of $89,487 and $28,503, respectively. The increase in income in 1995
can primarily be attributed to the gain recognized on the sale of
Oquendo Warehouse during the first six months of 1995 (See discussion
below).
Overall, expenses for the three and six months ended June 30, 1995,
decreased as compared to the three and six months ended June 30, 1994.
The decreases in operating expenses, property management fees,
maintenance expense and depreciation expense can all be attributed to
the sale of Oquendo Warehouse (See discussion below). Lower corporate
unit expense, employee apartments and benefits and utility expenses at
Lakewood Apartments also contributed to the decrease in operating
expenses for the three and six months ended June 30, 1995, versus the
three and six months ended June 30, 1994. General and administrative
expenses decreased primarily due to decreased partnership accounting,
investor relations, and asset management cost reimbursements. The
decrease in maintenance expense can also be attributed to decreases in
contract cleaning and landscaping at Lakewood Apartments. Property tax
expense increased for the six months ended June 30, 1995, as compared to
the six months ended June 30, 1994, due to a tax refund received by
Lakewood Apartments during 1994. However, the slight decrease in
property tax expense for the second quarter of 1995 as compared to the
second quarter of 1994 can also be attributed to the sale of Oquendo
Warehouse. Tenant reimbursements increased for the six months ended
June 30, 1995 as compared to the six months ended June 30, 1994, due to
actual reimbursements for 1994 exceeding estimates. The difference was
recorded during the first quarter of 1995. Tenant reimbursements
decreased for the second quarter of 1995 versus the second quarter of
1994 due to the sale of Oquendo Warehouse.
On January 20, 1995, the Partnership sold one building at Oquendo
Warehouse, located at 3550 W. Quail Avenue in Las Vegas, Nevada to the
tenant occupying the building, Czarnowski Display Service, Inc. Total
consideration was $1,325,000 resulting in a gain on sale of the property
of $491,930. On May 5, 1995, the Partnership sold the remaining two
buildings at Oquendo Warehouse, located at 3655 W. Quail and 3600 W.
Oquendo in Las Vegas, Nevada, to an unrelated third party. Total
consideration was $2,250,000 resulting in a gain on the sale of the
property of $465,830. Due to the above transactions, a total gain on
sale of the property of $957,760 was realized for the six months ended
June 30, 1995. The General Partner believed that the sale of the
property was in the best interest of the Partnership.
11
On March 27, 1995, Lake Meadows Apartments, one of the Partnership's
investment properties, sustained damage to the roofs of the apartment
units due to a severe hailstorm. This casualty will be covered by
insurance. The roofs were written off as of March 31, 1995, and a
receivable was established for the insurance proceeds. Due to the
receipt of additional insurance proceeds over the book value of roofs
written off a casualty gain of $20,702 was recorded.
During the second quarter of 1994, the investment property, Oquendo
Warehouses, replaced a roof on one of its buildings. The cost of the
new roof was in excess of the book value of the old roof. The write off
of the old roof resulted in a $5,559 loss on the disposition of the
property.
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 June 30, 1995, the Partnership had unrestricted cash of $1,056,681
as compared to $808,438 at June 30, 1994. Net cash provided by
operating activities increased primarily due to the increased net income
for the six months ended June 30, 1995. Net cash provided by investing
activities increased due to the cash proceeds received relating to the
sale of Oquendo Warehouse during the first six months of 1995. Also,
net cash used in financing activities increased due to the cash
distribution to partners during the second quarter of 1995.
The sufficiency of existing liquid assets to meet future liquidity
and capital expenditure requirements is directly related to the level of
capital expenditures required at the various properties to adequately
maintain the physical assets and other operating needs of the
Partnership. Such assets are currently thought to be sufficient for any
near-term needs of the Partnership. The mortgage indebtedness of
$4,408,665, net of discount, is amortized over 10 years and 37 years
with maturity dates of October 2003 and March 2008, at which time the
properties will either be refinanced or sold. Total cash distributed
was $3,499,935 for the six months ended June 30, 1995, consisting of
$3,464,935 to the limited partners and $35,000 to the General Partner.
Future cash distributions will depend on the levels of net cash
generated from operations, property sales, and the availability of cash
reserves.
12
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Registrant is unaware of any 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 -
10.7 Commercial Contract to Buy Real Estate between Angeles
Opportunity Properties, Ltd. and Paul Willet, Mark Nagle and
Kim Nagle dated August 1, 1994, documenting the sale of Oquendo
Warehouse located at 3550 West Quail Avenue.
10.8 Contract of Sale between Angeles Opportunity
Properties, Ltd. and Roberts Ranch Venture L.P. dated March 30,
1995, documenting the sale of Oquendo Warehouse located at
3655 West Quail and 3600 West Oquendo.
Exhibit 27, Financial Data Schedule, is filed as an exhibit to
this report.
b) Reports on Form 8-K:
A form 8-K dated May 5, 1995 was filed reporting the sale of
two buildings at Oquendo Warehouse, located at 3655 W. Quail
and 3600 W. Oquendo in Las Vegas, Nevada.
13
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.
Controller and
Principal Accounting Officer
Date: August 10, 1995
14
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:
Carroll D. Vinson
President
By:
Robert D. Long, Jr.
Controller and
Principal Accounting Officer
Date: August 14, 1995
15