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EX-32.1 - EXHIBIT 32.1 - ANGELES PARTNERS XIIap12ex32z1.htm
EX-31.2 - EXHIBIT 31.2 - ANGELES PARTNERS XIIap12_ex31z2.htm
EX-31.1 - EXHIBIT 31.1 - ANGELES PARTNERS XIIap12_ex31z1.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C.  20549

 

Form 10-K

(Mark One)

[X]   ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the fiscal year ended December 31, 2010

 

or

 

[ ]   TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from _________to _________

 

Commission file number 0-13309

 

ANGELES PARTNERS XII

(Exact name of registrant as specified in its charter)

 

California

95-3903623

(State or other jurisdiction of

(I.R.S. Employer

incorporation or organization)

Identification No.)

 

55 Beattie Place, PO Box 1089

Greenville, South Carolina  29602

(Address of principal executive offices)

 

Registrant's telephone number, including area code (864) 239-1000

 

Securities registered pursuant to Section 12(b) of the Act:

 

None

 

Securities registered pursuant to Section 12(g) of the Act:

 

Units of Limited Partnership Interest

(Title of class)

 

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes [ ] No [X]

 

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act. Yes [ ] No [X]

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 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 [ ]

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). [ ] Yes  [ ] No

 

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (229.405 of this chapter) is not contained herein, and will not be contained, to the best of the registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.  [X]

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer £

Accelerated filer £

Non-accelerated filer £(Do not check if a smaller reporting company)

Smaller reporting company S

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes [ ] No [X]

 

State the aggregate market value of the voting and non-voting partnership interests held by non-affiliates computed by reference to the price at which the partnership interests were last sold, or the average bid and asked price of such partnership interests as of the last business day of the registrant’s most recently completed second fiscal quarter. No market exists for the limited partnership interests of the Registrant, and, therefore, no aggregate market value can be determined.

 

DOCUMENTS INCORPORATED BY REFERENCE

None

 


FORWARD-LOOKING STATEMENTS

 

The Private Securities Litigation Reform Act of 1995 provides a “safe harbor” for forward-looking statements in certain circumstances. Certain information included in this Annual Report contains or may contain information that is forward-looking within the meaning of the federal securities laws, including, without limitation, statements regarding the Partnership’s ability to maintain current or meet projected occupancy, rental rates and property operating results and the effect of redevelopments. Actual results may differ materially from those described in these forward-looking statements and, in addition, will be affected by a variety of risks and factors, some of which are beyond the Partnership’s control, including, without limitation: financing risks, including the availability and cost of financing and the risk that the Partnership’s cash flows from operations may be insufficient to meet required payments of principal and interest; natural disasters and severe weather such as hurricanes; national and local economic conditions, including the pace of job growth and the level of unemployment; energy costs; the terms of governmental regulations that affect the Partnership’s properties and interpretations of those regulations; the competitive environment in which the Partnership operates; real estate risks, including fluctuations in real estate values and the general economic climate in local markets and competition for residents in such markets; insurance risk, including the cost of insurance; litigation, including costs associated with prosecuting or defending claims and any adverse outcomes; and possible environmental liabilities, including costs, fines or penalties that may be incurred due to necessary remediation of contamination of properties presently owned or previously owned by the Partnership. Readers should carefully review the Partnership’s consolidated financial statements and the notes thereto, as well as the other documents the Partnership files from time to time with the Securities and Exchange Commission.

 

 

                                       PART I

 

Item 1.     Business

 

Angeles Partners XII (the "Partnership" or "Registrant") is a publicly-held limited partnership organized under the California Uniform Limited Partnership Act pursuant to the amended Certificate and Agreement of Limited Partnership (herein referred to as the "Partnership Agreement") dated May 26, 1983.  The Partnership's managing general partner is Angeles Realty Corporation II ("ARC II" or the "Managing General Partner"), a California corporation. The Managing General Partner is a wholly-owned subsidiary of Apartment Investment and Management Company (“AIMCO”), a publicly traded real estate investment trust. The non-managing general partner (the “Non-Managing General Partner”) is AIMCO Properties, L.P., a wholly-owned subsidiary of AIMCO. The Managing General Partner and the Non-Managing General Partner are herein referred to collectively as the "General Partners". The Partnership Agreement provides that the Partnership is to terminate on December 31, 2035, unless terminated prior to such date. 

 

Commencing May 26, 1983, the Partnership offered up to 80,000 units of Limited Partnership Interest (the “Units”) at a purchase price of $1,000 per Unit with a minimum purchase of 5 Units pursuant to a Registration Statement filed with the Securities and Exchange Commission. The Managing General Partner contributed capital in the amount of $1,000 for a 1% interest in the Partnership. The offering terminated on February 13, 1985. Upon termination of the offering, the Partnership had sold 44,773 Units aggregating $44,773,000.

 

The Partnership is engaged in the business of operating and holding real estate properties for investment. In 1984 and 1985 during its acquisition phase, the Partnership acquired ten existing apartment properties and one existing commercial property. In 1990, the Partnership lost one of its apartment properties to foreclosure. During 1991, the Partnership acquired a 44.5% general partnership interest in a joint venture, Princeton Meadows Golf Course Joint Venture ("Joint Venture"), partnering with two affiliated partnerships. In 1999, the Partnership sold its only commercial property, one of its apartment properties and the Joint Venture sold its only investment property, Princeton Meadows Golf Course. In May 2001, the Partnership sold two of its apartment properties. In April and December 2005, the Partnership sold two of its six remaining apartment properties. As of December 31, 2010, the Partnership continues to own and operate four apartment complexes. (see "Item 2. Properties").

 

The Partnership has no employees. The Managing General Partner is vested with full authority as to the general management and supervision of the business and affairs of the Partnership.  Limited partners and the Non-Managing General Partner have no right to participate in the management or conduct of such business and affairs.  An affiliate of the Managing General Partner provides property management services for the Partnership's residential properties.

 

A further description of the Partnership's business is included in "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations" included in this Form 10-K.

 

Item 2.     Property

 

The following table sets forth the Partnership's investments in properties as of December 31, 2010:

 

 

Date of

 

 

Property

Purchase

Type of Ownership

Use

 

 

 

 

Hunters Glen Apts - IV

01/31/85

Fee ownership subject to first,

Apartment

 Plainsboro, New Jersey

 

second, and third mortgages (1)

264 units

 

 

 

 

Hunters Glen Apts - V

01/31/85

Fee ownership subject to first,

Apartment

 Plainsboro, New Jersey

 

second, and third mortgages (1)

304 units

 

 

 

 

Hunters Glen Apts - VI

01/31/85

Fee ownership subject to first,

Apartment

 Plainsboro, New Jersey

 

second, and third mortgages (1)

328 units

 

 

 

 

Twin Lake Towers

 

 

 

 Apartments

03/30/84

Fee ownership subject to

Apartments

 Westmont, Illinois

 

first mortgage (1)

399 units

 

(1)   Property is held by a limited partnership or limited liability corporation in which the Partnership ultimately owns a 100% interest.

 


Schedule of Properties

 

Set forth below for each of the Partnership’s properties is the gross carrying value, accumulated depreciation, depreciable life, method of depreciation and Federal tax basis.

 

 

Gross

 

 

Method

 

 

Carrying

Accumulated

Depreciable

of

Federal

Property

Value

Depreciation

Life

Depreciation

Tax Basis

 

(in thousands)

 

 

(in thousands)

 

 

 

 

 

 

Hunters Glen Apts-IV

$16,568

$13,706

5-30 yrs

Straight line

  $ 3,439

Hunters Glen Apts-V

 18,749

 15,566

5-40 yrs

Straight line

    3,782

Hunters Glen Apts-VI

 20,661

 17,137

5-40 yrs

Straight line

    3,737

Twin Lake Towers Apts

 38,886

 25,558

5-30 yrs

Straight line

   13,578

 

 

 

 

 

 

 

$94,864

$71,967

 

 

  $24,536

 

See "Note A – Organization and Summary of Significant Accounting Policies" of the consolidated financial statements included in "Item 8. Financial Statements and Supplementary Data" for a description of the Partnership's capitalization and depreciation policies.

 

Schedule of Property Indebtedness

 

The following table sets forth certain information relating to the loans encumbering the Partnership's properties.

 

 

Principal

 

 

 

Principal

 

Balance At

 

 

 

Balance

 

December 31,

Interest

Period

Maturity

Due At

Property

2010

Rate (1)

Amortized

Date

Maturity (2)

 

(in thousands)

 

 

 

(in thousands)

 

 

 

 

 

 

Hunters Glen Apts IV

 

 

 

 

 

  1st mortgage

$10,401

5.51%

30 yrs

12/2015

$ 9,374

2nd mortgage

  5,119

5.63%

30 yrs

12/2015

  4,622

3rd mortgage

  4,344

5.84%

30 yrs

12/2015

  3,959

Hunters Glen Apts V

 

 

 

 

 

  1st mortgage

 12,246

7.39%

30 yrs

12/2015

 11,357

2nd mortgage

  6,385

5.63%

30 yrs

12/2015

  5,765

3rd mortgage

  5,233

5.84%

30 yrs

12/2015

  4,771

Hunters Glen Apts VI

 

 

 

 

 

  1st mortgage

 12,746

7.39%

30 yrs

12/2015

 11,821

2nd mortgage

  6,645

5.63%

30 yrs

12/2015

  6,001

3rd mortgage

  5,447

5.84%

30 yrs

12/2015

  4,965

Twin Lake Towers Apts

 

 

 

 

 

  1st mortgage

 26,759

5.49%

30 yrs

04/2020

 22,331

 

$95,325

 

 

 

$84,966

 

 (1)  Fixed rate mortgages.

 

 (2)  See “Note B – Mortgage Notes Payable” to the consolidated financial statements included in “Item 8. Financial Statements and Supplementary Data" for information with respect to the Partnership's ability to prepay these loans and more specific details as to the terms of the loans.

 

On March 25, 2010, the Partnership refinanced the mortgage encumbering Twin Lake Towers Apartments.  The refinancing resulted in the replacement of the existing mortgage loan, which at the time of refinancing had a principal balance of approximately $9,131,000, with a new mortgage loan in the principal amount of $27,000,000.   The new loan bears interest at a rate of 5.49% per annum and requires monthly payments of principal and interest of approximately $153,000 beginning on May 1, 2010, through the April 1, 2020 maturity date.  The new mortgage loan has a balloon payment of approximately $22,331,000 due at maturity. The Partnership may prepay the mortgage at any time with 30 days written notice to the lender, subject to a prepayment penalty. The Partnership recorded a loss on the early extinguishment of debt of approximately $866,000, as a result of the write off of unamortized loan costs and the payment of a prepayment penalty of approximately $766,000. Total capitalized loan costs associated with the new mortgage were approximately $226,000.

 

Rental Rates and Occupancy

 

Average annual rental rates and occupancy for 2010 and 2009 for each property were as follows:

 

 

Average Annual

Average Annual

 

Rental Rates

Occupancy

 

(per unit)

 

 

Property

2010

2009

2010

2009

 

 

 

 

 

Hunters Glen Apartments – IV

$11,913

$12,459

96%

95%

Hunters Glen Apartments – V

 11,837

 12,432

95%

93%

Hunters Glen Apartments – VI  (1)

 11,555

 12,151

95%

92%

Twin Lake Towers Apartments (2)

 11,376

 11,503

97%

92%

 

(1)   The Managing General Partner attributes the increase in occupancy at Hunters Glen Apartments VI to reduced competition in the local area and competitive pricing efforts.

 

(2)   The Managing General Partner attributes the increase in occupancy at Twin Lake Towers Apartments to units available for rent as a result of the completion of a redevelopment at the property and improved economic conditions in the local area.

 

The real estate industry is highly competitive. All of the Partnership’s properties are subject to competition from other residential apartment complexes in the area. The Managing General Partner believes that all of the properties are adequately insured. The residential properties are apartment complexes which lease units for terms of one year or less.  As of December 31, 2010, no residential tenant leases 10% or more of the available rental space.  The properties are in good physical condition, subject to normal depreciation and deterioration as is typical for assets of this type and age. 


 

Real Estate Taxes and Rates

 

Real estate taxes and rates in 2010 for each property were as follows:

 

 

2010

2010

 

Billing

Rate

 

(in thousands)

 

 

 

 

Hunters Glen Apartments-IV

$  370

2.27%

Hunters Glen Apartments-V

   427

2.27%

Hunters Glen Apartments-VI

   460

2.27%

Twin Lake Towers Apartments

   393

5.27%

 

Capital Improvements

 

Hunters Glen Apartments IV

 

During the year ended December 31, 2010, the Partnership completed approximately $198,000 of capital improvements at the property consisting primarily of water heaters and floor covering replacement. These improvements were funded from operating cash flow. The Partnership regularly evaluates the capital improvement needs of the property. While the Partnership has no material commitments for property improvements and replacements, certain routine capital expenditures are anticipated during 2011. Such capital improvements will depend on the physical condition of the property as well as the anticipated cash flow generated by the property.

 

Hunters Glen Apartments V

 

During the year ended December 31, 2010, the Partnership completed approximately $189,000 of capital improvements at the property consisting primarily of water heaters and floor covering replacement.  These improvements were funded from operating cash flow. The Partnership regularly evaluates the capital improvement needs of the property. While the Partnership has no material commitments for property improvements and replacements, certain routine capital expenditures are anticipated during 2011. Such capital improvements will depend on the physical condition of the property as well as the anticipated cash flow generated by the property.

 

Hunters Glen Apartments VI

 

During the year ended December 31, 2010, the Partnership completed approximately $194,000 of capital improvements at the property consisting primarily of water heaters, HVAC upgrades and floor covering replacement. These improvements were funded from operating cash flow. The Partnership regularly evaluates the capital improvement needs of the property. While the Partnership has no material commitments for property improvements and replacements, certain routine capital expenditures are anticipated during 2011. Such capital improvements will depend on the physical condition of the property as well as the anticipated cash flow generated by the property.

 

Twin Lake Towers Apartments

 

During the year ended December 31, 2010, the Partnership completed approximately $298,000 of capital improvements at the property, consisting primarily of fire safety equipment, balcony upgrades and floor covering replacement. These improvements were funded from operating cash flow. During the year ended December 31, 2010, the Partnership received a refund of approximately $34,000 from a bond deposit capitalized in a prior year in connection with the redevelopment of the property, which is reflected as a reduction of property improvements and replacements for the year ended December 31, 2010. The Partnership regularly evaluates the capital improvement needs of the property.  While the Partnership has no material commitments for property improvements and replacements, certain routine capital expenditures are anticipated during 2011. Such capital expenditures will depend on the physical condition of the property as well as replacement reserves and anticipated cash flow generated by the property.

 

Capital expenditures will be incurred only to the extent of cash available from operations or from Partnership reserves. To the extent that capital improvements are completed, the Partnership's distributable cash flow, if any, may be adversely affected, at least in the short term.

 

Item 3.     Legal Proceedings

 

As previously disclosed, AIMCO Properties, L.P. and NHP Management Company, both affiliates of the Managing General Partner, were defendants in a lawsuit, filed as a collective action in August 2003 in the United States District Court for the District of Columbia, alleging that they willfully violated the Fair Labor Standards Act (“FLSA”) by failing to pay maintenance workers overtime for time worked in excess of 40 hours per week (“overtime claims”). The plaintiffs also contended that AIMCO Properties, L.P. and NHP Management Company (“the Defendants”) failed to compensate maintenance workers for time that they were required to be "on-call" (“on-call claims”). In March 2007, the court in the District of Columbia decertified the collective action.  In July 2007, plaintiffs’ counsel filed individual cases in Federal court in 22 jurisdictions.  In the second quarter of 2008, AIMCO Properties, L.P. settled the overtime cases involving 652 plaintiffs and established a framework for resolving the 88 remaining “on-call” claims and the attorneys’ fees claimed by plaintiffs’ counsel. As a result, the lawsuits asserted in the 22 Federal courts were dismissed. During the fourth quarter of 2008, the Partnership paid approximately $39,000 for settlement amounts for alleged unpaid overtime to employees who had worked at the Partnership’s investment properties. During January 2011, the parties reached an agreement to settle the remaining “on-call claims” and the plaintiffs’ attorneys’ fees. The Partnership will be required to pay an additional amount of approximately $4,000 for settlement amounts to employees who worked at the Partnership’s investment properties for requiring the employees to respond to on-call emergencies and approximately $47,000 for plaintiffs’ attorneys’ fees.  These settlement amounts and attorneys’ fees totaling approximately $51,000 have been accrued as of December 31, 2010.  These settlements resolve the case in its entirety.

 


PART II

 

Item 5.     Market for the Registrant's Common Equity, Related Security Holder Matters and Issuer Purchases of Equity Securities

 

The Partnership, a publicly-held limited partnership, sold 44,773 Limited Partnership Units (the "Units") during its offering period through February 13, 1985.  As of December 31, 2010, the Partnership had 1,045 Limited Partners of record and 44,718 Units outstanding. As of December 31, 2010, affiliates of the Managing General Partner owned 33,750 Units or 75.47% of the outstanding Units.  No public trading market has developed for the Units, and it is not anticipated that such a market will develop in the future.

 

The Partnership distributed the following amounts during the years ended December 31, 2010 and 2009 (in thousands except per unit data):

 

 

Year Ended

Per Limited

Year Ended

Per Limited

 

December 31,

Partnership

December 31,

Partnership

 

2010

Unit

2009

Unit

 

 

 

 

 

Refinancing (1)

$ 3,900

$ 77.87

$    --

$    --

Operations

  1,180

  26.11

     --

     --

Total

$ 5,080

$103.98

$    --

$    --

 

(1)         Proceeds from the March 2010 refinancing of the mortgage encumbering Twin Lake Towers Apartments.

 

Future cash distributions will depend on the levels of cash generated from operations, the timing of debt maturities, property sales and/or refinancings. The Partnership’s cash available for distribution is reviewed on a monthly basis. There can be no assurance, however, that the Partnership will generate sufficient funds from operations, after planned capital improvement expenditures, to permit additional distributions to its partners during 2011 or subsequent periods. See “Item 2. Properties – Capital Improvements” for information relating to anticipated capital expenditures at the properties.

 

In addition to its indirect ownership of the general partner interests in the Partnership, AIMCO and its affiliates owned 33,750 Units in the Partnership representing 75.47% of the outstanding Units at December 31, 2010.  A number of these Units were acquired pursuant to tender offers made by AIMCO or its affiliates. It is possible that AIMCO or its affiliates will acquire additional Units in exchange for cash or a combination of cash and units in AIMCO Properties, L.P., the operating partnership of AIMCO, either through private purchases or tender offers. Pursuant to the Partnership Agreement, unitholders holding a majority of the Units are entitled to take action with respect to a variety of matters that include, but are not limited to, voting on certain amendments to the Partnership Agreement and voting to remove the Managing General Partner. As a result of its ownership of 75.47% of the outstanding Units, AIMCO and its affiliates are in a position to control all voting decisions with respect to the Partnership. Although the Managing General Partner owes fiduciary duties to the limited partners of the Partnership, the Managing General Partner also owes fiduciary duties to AIMCO as its sole stockholder. As a result, the duties of the Managing General Partner, as managing general partner, to the Partnership and its limited partners may come into conflict with the duties of the Managing General Partner to AIMCO as its sole stockholder.

 


Item 7.     Management's Discussion and Analysis of Financial Condition and Results of Operations

 

This item should be read in conjunction with the consolidated financial statements and other items contained elsewhere in this report.

 

The Partnership’s financial results depend upon a number of factors including the ability to attract and maintain tenants at the investment properties, interest rates on mortgage loans, costs incurred to operate the investment properties, general economic conditions and weather. As part of the ongoing business plan of the Partnership, the Managing General Partner monitors the rental market environment 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 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, the Managing General Partner may use rental concessions and rental rate reductions to offset softening market conditions; accordingly, there is no guarantee that the Managing General Partner will be able to sustain such a plan. Further, a number of factors that are outside the control of the Partnership such as the local economic climate and weather can adversely or positively affect the Partnership’s financial results.

 

Results of Operations

 

The Partnership recognized net losses of approximately $2,855,000 and $975,000 for the years ended December 31, 2010 and 2009, respectively.  Net loss increased due to an increase in total expenses and a decrease in total revenues.

 

Total expenses increased due to increases in operating, depreciation, interest and property tax expenses and the recognition of a loss on early extinguishment of debt during 2010 as a result of the refinancing of the mortgage encumbering Twin Lake Towers Apartments. General and administrative expense remained relatively constant for the comparable periods. Operating expense increased primarily due to increases in contract services, apartment turnover expenses and snow removal costs at Hunters Glen Apartments IV, V and VI, partially offset by a decrease in advertising costs at Twin Lakes Towers Apartments and utility expenses at Hunters Glen Apartments IV. Depreciation expense increased due to assets placed into service at Twin Lake Towers Apartments during the past twelve months, which are now being depreciated. Interest expense increased primarily due to a higher debt balance as a result of the March 2010 refinancing of the mortgage encumbering Twin Lake Towers Apartments and a decrease in the capitalization of construction period interest related to a redevelopment project at Twin Lake Towers Apartments, which was completed in 2009, partially offset by a decrease in interest on advances received from an affiliate of the Managing General Partner as a result of a lower average outstanding balance. Property tax expense increased due to an increase in the tax rate at all four investment properties, partially offset by a decrease in the assessed value of Twin Lake Towers Apartments.

 

Included in general and administrative expenses for the years ended December 31, 2010 and 2009 are a New Jersey tax based upon the number of resident and non-resident limited partners, reimbursements to the Managing General Partner as allowed under the Partnership Agreement, costs associated with the quarterly and annual communications with investors and regulatory agencies and the annual audit required by the Partnership Agreement.

 

Total revenues decreased due to a decrease in rental income.  Other income remained relatively constant for the comparable periods. Rental income decreased due to a decrease in the average rental rate at all of the Partnership’s investment properties, partially offset by an increase in occupancy at all of the Partnership’s investment properties.

 

In 2009, the Partnership completed a major redevelopment project at Twin Lake Towers Apartments in order to become more competitive with other properties in the area and in an effort to increase net operating income at the property.  During the construction period, certain expenses were capitalized and are being depreciated over the remaining life of the related assets.  During the year ended December 31, 2009, approximately $76,000 of construction period interest, approximately $3,000 of construction period real estate taxes and approximately $1,000 of construction period insurance were capitalized.

 

Liquidity and Capital Resources

 

At December 31, 2010, the Partnership had cash and cash equivalents of approximately $526,000, compared with approximately $301,000 at December 31, 2009. Cash and cash equivalents increased approximately $225,000 due to approximately $2,917,000 of cash provided by operating activities, partially offset by approximately $1,527,000 and $1,165,000 of cash used in investing and financing activities, respectively. Cash used in investing activities consisted of net deposits to restricted escrows and property improvements and replacements. Cash used in financing activities consisted of the repayment of advances received from AIMCO Properties, L.P., repayment of the mortgage encumbering Twin Lake Towers Apartments, distributions to partners, principal payments made on the mortgages encumbering the Partnership’s investment properties, a prepayment penalty paid, and loan costs paid, partially offset by proceeds from the refinancing of the mortgage encumbering Twin Lake Towers Apartments and advances received from AIMCO Properties, L.P., an affiliate of the Managing General Partner. 

 

During the year ended December 31, 2010, AIMCO Properties, L.P., an affiliate of the Managing General Partner, advanced the Partnership approximately $687,000 to fund a refinance commitment fee at Twin Lake Towers Apartments and real estate taxes at Hunters Glen Apartments IV, V and VI. During the year ended December 31, 2009, AIMCO Properties, L.P. advanced the Partnership approximately $695,000 to fund operations at Hunters Glen Apartments IV, V and VI and Twin Lake Towers Apartments and approximately $2,130,000 to fund redevelopment costs at Twin Lake Towers Apartments. AIMCO Properties, L.P. charges interest on advances under the terms permitted by the Partnership Agreement. The interest rates charged on the outstanding advances made to the Partnership range from a market rate to prime plus 2.00%.  Affiliates of the Managing General Partner review the applicable market rate for the Partnership quarterly. The interest rate on the outstanding advances at December 31, 2010 was 3.25%. Interest expense was approximately $94,000 and $390,000 for the years ended December 31, 2010 and 2009, respectively.  During the years ended December 31, 2010 and 2009, the Partnership repaid advances and accrued interest of approximately $12,950,000 and $650,000, respectively. Total advances and accrued interest of approximately $15,000 and $12,184,000 were unpaid at December 31, 2010 and 2009, respectively, and are included in due to affiliates on the consolidated balance sheets included in “Item 8. Financial Statements and Supplementary Data”. The Partnership may receive additional advances of funds from AIMCO Properties, L.P., although AIMCO Properties, L.P. is not obligated to provide such advances. For more information on AIMCO Properties, L.P., including copies of its audited balance sheet, please see itsreports filed with the Securities and Exchange Commission. Subsequent to December 31, 2010, the Partnership repaid advances and accrued interest of approximately $15,000.In addition, subsequent to December 31, 2010, AIMCO Properties, L.P. advanced the Partnership approximately $1,395,000 to fund refinance commitment fees at Hunters Glen Apartments IV, V and VI.

 

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 properties to adequately maintain the physical assets and other operating needs of the Partnership and to comply with Federal, state, and local legal and regulatory requirements. The Managing General Partner monitors developments in the area of legal and regulatory compliance. The Partnership regularly evaluates the capital improvement needs of the properties. While the Partnership has no material commitments for property improvements and replacements, certain routine capital expenditures are anticipated during 2011. Such capital expenditures will depend on the physical condition of the properties as well as replacement reserves and anticipated cash flow generated by the properties. Capital expenditures will be incurred only if cash is available from operations or from Partnership reserves. To the extent that capital improvements are completed, the Partnership's distributable cash flow, if any, may be adversely affected at least in the short term.

 

The Partnership’s assets are thought to be generally sufficient for any near term needs (exclusive of capital improvements) of the Partnership. On March 25, 2010, the Partnership refinanced the mortgage encumbering Twin Lake Towers Apartments. The refinancing resulted in the replacement of the existing mortgage loan, which at the time of refinancing had a principal balance of approximately $9,131,000, with a new mortgage loan in the principal amount of $27,000,000. The new loan bears interest at a rate of 5.49% per annum and requires monthly payments of principal and interest of approximately $153,000 beginning on May 1, 2010, through the April 1, 2020 maturity date.  The new mortgage loan has a balloon payment of approximately $22,331,000 due at maturity. The Partnership may prepay the mortgage at any time with 30 days written notice to the lender, subject to a prepayment penalty. The Partnership recorded a loss on the early extinguishment of debt of approximately $866,000, as a result of the write off of unamortized loan costs and the payment of a prepayment penalty of approximately $766,000. Total capitalized loan costs associated with the new mortgage were approximately $226,000 and are included in other assets on the consolidated balance sheets included in “Item 8. Financial Statements and Supplementary Data”.

 

The Partnership's mortgage indebtedness encumbering Hunters Glen Apartments IV, V and VI of approximately $68,566,000 matures in December 2015 with a one-year extension option and balloon payments of approximately $62,635,000 due at maturity. The Managing General Partner will attempt to refinance the mortgages encumbering Hunters Glen Apartments IV, V, VI and Twin Lake Towers Apartments and/or sell the properties prior to such maturity dates. If the properties cannot be refinanced or sold for a sufficient amount, the Partnership will risk losing the properties through foreclosure.

 

The Partnership distributed the following amounts during the years ended December 31, 2010 and 2009 (in thousands except per unit data):

 

 

Year Ended

Per Limited

Year Ended

Per Limited

 

December 31,

Partnership

December 31,

Partnership

 

2010

Unit

2009

Unit

 

 

 

 

 

Refinancing (1)

$ 3,900

$ 77.87

$    --

$    --

Operations

  1,180

  26.11

     --

     --

Total

$ 5,080

$103.98

$    --

$    --

 

(1)   Proceeds from the March 2010 refinancing of the mortgage encumbering Twin Lake Towers Apartments.

 

Future cash distributions will depend on the levels of cash generated from operations, the timing of debt maturities, property sales and/or refinancings. The Partnership’s cash available for distribution is reviewed on a monthly basis. There can be no assurance, however, that the Partnership will generate sufficient funds from operations, after planned capital improvement expenditures, to permit additional distributions to its partners during 2011 or subsequent periods.

 

Critical Accounting Policies and Estimates

 

A summary of the Partnership’s significant accounting policies is included in "Note A – Organization and Summary of Significant Accounting Policies" which is included in the consolidated financial statements in "Item 8. Financial Statements and Supplementary Data". The Managing General Partner believes that the consistent application of these policies enables the Partnership to provide readers of the consolidated financial statements with useful and reliable information about the Partnership’s operating results and financial condition.  The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States requires the Partnership to make estimates and assumptions. These estimates and assumptions affect the reported amounts of assets and liabilities at the date of the financial statements as well as reported amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates.  Judgments and assessments of uncertainties are required in applying the Partnership’s accounting policies in many areas. The Partnership believes that of its significant accounting policies, the following may involve a higher degree of judgment and complexity.

 

Impairment of Long-Lived Assets

 

Investment properties are recorded at cost, less accumulated depreciation, unless the carrying amount of the asset is not recoverable. If events or circumstances indicate that the carrying amount of a property may not be recoverable, the Partnership will make an assessment of its recoverability by comparing the carrying amount to the Partnership’s estimate of the undiscounted future cash flows, excluding interest charges, of the property.   If the carrying amount exceeds the estimated aggregate undiscounted future cash flows, the Partnership would recognize an impairment loss to the extent the carrying amount exceeds the estimated fair value of the property.

 

Real property investment is subject to varying degrees of risk.  Several factors may adversely affect the economic performance and value of the Partnership’s investment properties.  These factors include, but are not limited to, general economic climate; competition from other apartment communities and other housing options; local conditions, such as loss of jobs or an increase in the supply of apartments that might adversely affect apartment occupancy or rental rates; changes in governmental regulations and the related cost of compliance; increases in operating costs (including real estate taxes) due to inflation and other factors, which may not be offset by increased rents; changes in tax laws and housing laws, including the enactment of rent control laws or other laws regulating multi-family housing; and changes in interest rates and the availability of financing. Any adverse changes in these and other factors could cause an impairment of the Partnership’s assets.

 

Capitalized Costs Related to Redevelopment and Construction Projects

 

The Partnership capitalizes costs incurred in connection with capital expenditure activities, including redevelopment and construction projects. Costs including interest, property taxes and insurance associated with redevelopment and construction projects are capitalized during periods in which redevelopment and construction projects are in progress. Included in these capitalized costs are payroll costs associated with time spent by site employees in connection with the planning, execution and control of all capital expenditure activities at the property level.

 

Revenue Recognition

 

The Partnership generally leases apartment units for twelve-month terms or less.  The Partnership will offer rental concessions during particularly slow months or in response to heavy competition from other similar complexes in the area.  Rental income attributable to leases, net of any concessions, is recognized on a straight-line basis over the term of the lease.  The Partnership evaluates all accounts receivable from residents and establishes an allowance, after the application of security deposits, for accounts greater than 30 days past due on current tenants and all receivables due from former tenants.


Item 8.     Financial Statements and Supplementary Data

 

ANGELES PARTNERS XII

 

LIST OF FINANCIAL STATEMENTS

 

      Report of Independent Registered Public Accounting Firm

 

      Consolidated Balance Sheets - December 31, 2010 and 2009

 

Consolidated Statements of Operations - Years ended December 31, 2010 and 2009

 

Consolidated Statements of Changes in Partners' Deficit - Years ended December 31, 2010 and 2009

 

Consolidated Statements of Cash Flows - Years ended December 31, 2010 and 2009

 

      Notes to Consolidated Financial Statements


Report of Independent Registered Public Accounting Firm

 

 

 

The Partners

Angeles Partners XII

 

 

We have audited the accompanying consolidated balance sheets of Angeles Partners XII as of December 31, 2010 and 2009, and the related consolidated statements of operations, changes in partners' deficit, and cash flows for each of the two years in the period ended December 31, 2010. These financial statements are the responsibility of the Partnership's management. Our responsibility is to express an opinion on these financial statements based on our audits.

 

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. We were not engaged to perform an audit of the Partnership’s internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Partnership’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

 

In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Angeles Partners XII at December 31, 2010 and 2009, and the consolidated results of its operations and its cash flows for each of the two years in the period ended December 31, 2010, in conformity with U.S. generally accepted accounting principles.

 

/s/ERNST & YOUNG LLP

 

 

Greenville, South Carolina

March 25, 2011


                                ANGELES PARTNERS XII

 

                             CONSOLIDATED BALANCE SHEETS

                          (in thousands, except unit data)

 

     

 

December 31,

 

 

2010

2009

 

Assets

 

 

Cash and cash equivalents

$    526

$    301

Receivables and deposits 

     626

     805

Restricted escrows (Note A)

     726

      --

Other assets

   1,364

   1,431

Investment properties (Notes B and E):

 

 

Land

   6,468

   6,468

Buildings and related personal property

  88,396

  87,551

 

  94,864

  94,019

Less accumulated depreciation

  (71,967)

  (67,227)

 

  22,897

  26,792

 

$ 26,139

$ 29,329

 

 

 

Liabilities and Partners' Deficit

 

 

Liabilities

 

 

Accounts payable

$    376

$    209

Tenant security deposit liabilities

     356

     377

Accrued property taxes

     424

     437

Other liabilities

   1,025

     747

Due to affiliates (Note D)

      15

  12,184

Mortgage notes payable (Note B)

  95,325

  78,822

 

  97,521

  92,776

 

 

 

Partners' Deficit

 

 

General partners

     (811)

     (352)

Limited partners

  (70,571)

  (63,095)

 

  (71,382)

  (63,447)

 

$ 26,139

$ 29,329

 

See Accompanying Notes to Consolidated Financial Statements


                                ANGELES PARTNERS XII

 

                        CONSOLIDATED STATEMENTS OF OPERATIONS

                        (in thousands, except per unit data)

 

 

Years Ended

 

December 31,

 

2010

2009

Revenues:

 

 

  Rental income

  $ 14,276

  $ 14,372

  Other income

     1,662

     1,667

Total revenues

    15,938

    16,039

 

 

 

Expenses:

 

 

  Operating

     5,287

     5,121

  General and administrative

       325

       316

  Depreciation

     4,740

     4,568

  Interest

     5,937

     5,414

  Property taxes

     1,638

     1,595

Loss on early extinguishment of debt (Note B)

       866

        --

Total expenses

    18,793

    17,014

 

 

 

Net loss (Note C)

  $ (2,855)

  $   (975)

 

 

 

Net loss allocated to general partners (1%)

  $    (29)

  $    (10)

Net loss allocated to limited partners (99%)

    (2,826)

      (965)

 

 

 

 

  $ (2,855)

  $   (975)

 

 

 

Net loss per limited partnership unit

  $ (63.20)

  $ (21.58)

 

 

 

Distributions per limited partnership unit

  $ 103.98

  $     --

 

See Accompanying Notes to Consolidated Financial Statements


                                ANGELES PARTNERS XII

 

               CONSOLIDATED STATEMENTS OF CHANGES IN PARTNERS' DEFICIT

                          (in thousands, except unit data)

 

 

 

 

Limited

 

 

 

 

Partnership

General

Limited

 

 

Units

Partners

Partners

Total

 

 

 

 

 

Original capital contributions

44,773

  $    1

  $ 44,773

  $ 44,774

 

 

 

 

 

Partners' deficit

 

 

 

 

  at December 31, 2008

44,718

  $ (342)

  $(62,130)

  $(62,472)

 

 

 

 

 

Net loss for the year ended

 

 

 

 

  December 31, 2009

    --

     (10)

      (965)

      (975)

 

 

 

 

 

Partners' deficit at

 

 

 

 

  December 31, 2009

44,718

    (352)

   (63,095)

   (63,447)

 

 

 

 

 

Distributions to partners

    --

    (430)

    (4,650)

    (5,080)

 

 

 

 

 

Net loss for the year ended

 

 

 

 

  December 31, 2010

    --

     (29)

    (2,826)

    (2,855)

 

 

 

 

 

Partners' deficit at

 

 

 

 

  December 31, 2010

44,718

  $ (811)

  $(70,571)

  $(71,382)

 

See Accompanying Notes to Consolidated Financial Statements


                                ANGELES PARTNERS XII

 

                        CONSOLIDATED STATEMENTS OF CASH FLOWS

                                   (in thousands)

 

 

Years Ended

 

December 31,

 

2010

2009

 Cash flows from operating activities:

 

 

 Net loss

 $ (2,855)

 $   (975)

 Adjustments to reconcile net loss to net cash provided by

 

 

 operating activities:

 

 

 Depreciation

   4,740

   4,568

 Amortization of loan costs

     215

     222

 Loss on early extinguishment of debt

     866

      --

 Change in accounts:

 

 

 Receivables and deposits

     179

     (108)

 Other assets

      (22)

      50

 Accounts payable

     123

      23

 Tenant security deposit liabilities

      (21)

      (93)

 Accrued property taxes

      (13)

      17

 Other liabilities

     278

      77

 Due to affiliates

     (573)

     207

 Net cash provided by operating activities

   2,917

   3,988

 

 

 

 Cash flows from investing activities:

 

 

 Net deposits to restricted escrows

     (726)

      --

 Property improvements and replacements

     (801)

   (4,840)

 Net cash used in investing activities

   (1,527)

   (4,840)

 

 

 

 Cash flows from financing activities:

 

 

 Payments on mortgage notes payable

   (1,366)

   (1,377)

 Repayment of mortgage note payable

   (9,131)

      --

 Proceeds from mortgage note payable

  27,000

      --

 Prepayment penalty paid

     (766)

      --

 Loan costs paid

     (226)

      --

 Advances from affiliate

     687

   2,825

 Repayment of advances from affiliate

  (12,283)

     (608)

 Distributions to partners

   (5,080)

      --

 Net cash (used in) provided by financing activities

   (1,165)

     840

 

 

 

 Net increase (decrease) in cash and cash equivalents

     225

      (12)

 Cash and cash equivalents at beginning of year

     301

     313

 

 

 

 Cash and cash equivalents at end of year

$    526

$    301

 

 

 

 Supplemental disclosure of cash flow information:

 

 

 Cash paid for interest, net of capitalized interest

$  6,213

$  4,570

 

 

 

 Supplemental disclosure of non-cash activity:

 

 

 Property improvements and replacements included in

 

 

 accounts payable

$     93

$     49

 

Included in property improvements and replacements for the year ended December 31, 2009 are approximately $1,769,000 of property improvements and replacements, which were included in accounts payable at December 31, 2008.

 

See Accompanying Notes to Consolidated Financial Statements


                                ANGELES PARTNERS XII

 

                     NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                                  December 31, 2010

 

 

Note A - Organization and Summary of Significant Accounting Policies

 

Organization: Angeles Partners XII (the "Partnership" or "Registrant") is a publicly-held limited partnership organized under the California Uniform Limited Partnership Act pursuant to the amended Certificate and Agreement of Limited Partnership (herein referred to as the "Partnership Agreement") dated May 26, 1983.  The Partnership's managing general partner is Angeles Realty Corporation II ("ARC II" or the "Managing General Partner"), a California corporation. The Managing General Partner is a wholly-owned subsidiary of Apartment Investment and Management Company ("AIMCO"), a publicly traded real estate investment trust. The non-managing general partner (the “Non-Managing General Partner”) is AIMCO Properties, L.P., a wholly owned subsidiary of AIMCO.  The Managing General Partner and the Non-Managing General Partner are herein collectively referred to as the "General Partners". The Partnership Agreement provides that the Partnership is to terminate on December 31, 2035, unless terminated prior to such date. As of December 31, 2010, the Partnership operates four residential properties in or near major urban areas in the United States.

 

Subsequent Events: The Partnership’s management evaluated subsequent events through the time this Annual Report on Form 10-K was filed.

 

Principles of Consolidation: The consolidated financial statements of the Partnership include the Partnership's interests in AP XII Associate GP, LLC and Hunters Glen Phase V GP, LLC, single member limited liability corporations, which are wholly-owned by the Partnership, and AP XII Associates, LP, which is wholly owned by the Partnership. All significant inter-entity balances have been eliminated. Minority interest is immaterial and not shown separately in the consolidated financial statements. 

 

Allocation of Profits, Gains, Losses and Distributions: The Partnership will allocate all profits, losses and distributions related to the operations of its investment properties 1% to the General Partners and 99% to the Limited Partners.  All profits, losses and distributions related to the sales and/or refinancing of its investment properties will be allocated in accordance with the Partnership Agreement.

 

Except as discussed below, the Partnership will allocate distributions 1% to the General Partners and 99% to the Limited Partners.

 

Upon the sale or other disposition, or refinancing, of any asset of the Partnership, the distributable net proceeds shall be distributed as follows: (i) to the Partners in proportion to their interests until the Limited Partners have received cumulative distributions equal to their original capital contributions reduced by the amount of any previous distributions;  (ii) to the Partners until the Limited Partners have received distributions from all sources equal to their 6% cumulative distribution; (iii) to the Managing General Partner until it has received an amount equal to 3% of the aggregate Disposition Prices of all properties or other investments sold or otherwise disposed of, or refinanced; (iv), to the Partners in proportion to their interests until the Limited Partners have received cumulative distributions from all sources equal to 150% of the Capital Contribution of the Limited Partners; (v) to the Managing General Partner until it has received an amount equal to 17.6% of the distributions made pursuant to (iv); and (vi) 85% to the Limited Partners and non-Managing General Partner in proportion to their interests and 15% ("Incentive Interest") to the Managing General Partner.

 

Use of Estimates: The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes.  Actual results could differ from those estimates.

 

Cash and Cash Equivalents: Cash and cash equivalents include cash on hand and in banks. At certain times, the amount of cash deposited at a bank may exceed the limit on insured deposits. Cash balances include approximately $268,000 and $126,000 at December 31, 2010 and 2009, respectively, that are maintained by an affiliated management company on behalf of affiliated entities in cash concentration accounts.

 

Tenant Security Deposits: The Partnership requires security deposits from lessees for the duration of the lease and such deposits are included in receivables and deposits. The security deposits are refunded when the tenant vacates, provided the tenant has not damaged the unit and is current on rental payments.

 

Restricted Escrows: In connection with the March 2010 refinancing of the mortgage encumbering Twin Lake Towers Apartments, the Partnership was required to establish repair and real estate tax escrows for the property. In addition, the Partnership was required to establish a replacement reserve account for the property. The balance in the escrow accounts at December 31, 2010 was approximately $726,000.

 

Deferred Costs: Loan costs of approximately $2,379,000 and $2,458,000 at December 31, 2010 and 2009, respectively, less accumulated amortization of approximately $1,222,000 and $1,212,000 at December 31, 2010 and 2009, respectively, are included in other assets on the consolidated balance sheets. The loan costs are amortized over the terms of the related loan agreements. Amortization expense for 2010 and 2009 was approximately $215,000 and $222,000, respectively, and is included in interest expense. Amortization expense is expected to be approximately $213,000 for each of the years 2011 through 2014 and approximately $208,000 for 2015.

 

Leasing commissions and other direct costs incurred in connection with successful leasing efforts are deferred and amortized over the terms of the related leases.  Amortization of these costs is included in operating expenses.

 

Investment Properties: Investment properties consist of four apartment complexes and are stated at cost, less accumulated depreciation, unless the carrying amount of the asset is not recoverable. The Partnership capitalizes costs incurred in connection with capital additions activities, including redevelopment and construction projects, other tangible property improvements and replacements of existing property components. Included in these capitalized costs are payroll costs associated with time spent by site employees in connection with the planning, execution and control of all capital additions activities at the property level.  The Partnership capitalizes interest, property taxes and insurance during periods in which redevelopment and construction projects are in progress. During the years ended December 31, 2010 and 2009, the Partnership capitalized construction period interest of approximately $2,000 and $86,000, respectively, construction period real estate taxes of approximately $1,000 and $7,000, respectively, and construction period insurance of less than $1,000 and approximately $2,000, respectively. Capitalized costs are depreciated over the estimated useful life of the asset. The Partnership charges to expense as incurred costs that do not relate to capital additions activities, including ordinary repairs, maintenance and resident turnover costs.

 

If events or circumstances indicate that the carrying amount of a property may not be recoverable, the Partnership will make an assessment of its recoverability by comparing the carrying amount to the Partnership’s estimate of the undiscounted future cash flows, excluding interest charges, of the property.   If the carrying amount exceeds the estimated aggregate undiscounted future cash flows, the Partnership would recognize an impairment loss to the extent the carrying amount exceeds the estimated fair value of the property. No adjustments for impairment of value were necessary for the years ending December 31, 2010 and 2009.

 

Segment Reporting: Financial Accounting Standards Board Accounting Standards Codification (“ASC”) Topic 280-10, “Segment Reporting”, established standards for the way that public business enterprises report information about operating segments in annual financial statements and requires that those enterprises report selected information about operating segments in interim financial reports. ASC Topic 280-10 also established standards for related disclosures about products and services, geographic areas, and major customers. As defined in ASC Topic 280-10, the Partnership has only one reportable segment.

 

Depreciation: Depreciation is provided by the straight-line method over the estimated lives of the apartment properties and related personal property. For Federal income tax purposes, the modified accelerated cost recovery method is used for depreciation of (1) real property additions over 27½ years and (2) personal property additions over 5 years.

 

Leases:  The Partnership generally leases apartment units for twelve-month terms or less.  The Partnership will offer rental concessions during particularly slow months or in response to heavy competition from other similar complexes in the area.  Rental income attributable to leases, net of any concessions, is recognized on a straight-line basis over the term of the lease.  The Partnership evaluates all accounts receivable from residents and establishes an allowance, after the application of security deposits, for accounts greater than 30 days past due on current tenants and all receivables due from former tenants.

 

Fair Value of Financial Instruments: ASC Topic 825, “Financial Instruments”, requires disclosure of fair value information about financial instruments, whether or not recognized in the balance sheet, for which it is practicable to estimate fair value. Fair value is defined as the amount at which the instruments could be exchanged in a current transaction between willing parties, other than in a forced or liquidation sale. The Partnership believes that the carrying amount of its financial instruments (except for mortgage notes payable) approximates their fair value due to the short-term maturity of these instruments. The Partnership estimates the fair value of its mortgage notes payable by discounting future cash flows using a discount rate commensurate with that currently believed to be available to the Partnership for similar term, mortgage notes payable.  At December 31, 2010, the fair value of the Partnership's mortgage notes payable at the Partnership's incremental borrowing rate approximated its carrying value.

 

Advertising Costs: The Partnership expenses the costs of advertising as incurred.  Advertising costs of approximately $138,000 and $191,000 for the years ended December 31, 2010 and 2009, respectively, are included in operating expense.

 


Note B – Mortgage Notes Payable

 

The principal terms of mortgage notes payable are as follows:

 

 

Principal

Balance At

December 31,

Monthly

 

 

Principal

 

Payment

Stated

 

Balance

 

Including

Interest

Maturity

Due At

Property

2010

2009

Interest

Rate

Date

Maturity

 

(in thousands)

(in thousands)

 

 

(in thousands)

 

 

 

 

 

 

 

Hunters Glen Apts IV

 

 

 

 

 

 

  1st mortgage

$10,401

$10,578

  $ 64

5.51%

12/2015

$ 9,374

2nd mortgage

  5,119

  5,204

    32

5.63%

12/2015

  4,622

3rd mortgage

  4,344

  4,409

    27

5.84%

12/2015

  3,959

Hunters Glen Apts V

 

 

 

 

 

 

  1st mortgage

 12,246

 12,391

    89

7.39%

12/2015

 11,357

2nd mortgage

  6,385

  6,491

    39

5.63%

12/2015

  5,765

3rd mortgage

  5,233

  5,312

    32

5.84%

12/2015

  4,771

Hunters Glen Apts VI

 

 

 

 

 

 

  1st mortgage

 12,746

 12,897

    93

7.39%

12/2015

 11,821

2nd mortgage

  6,645

  6,756

    41

5.63%

12/2015

  6,001

3rd mortgage

  5,447

  5,529

    34

5.84%

12/2015

  4,965

Twin Lake Towers Apts

 

 

 

 

 

 

  1st mortgage

 26,759

  9,255

   153

5.49%

04/2020

 22,331

 

$95,325

$78,822

  $604

 

 

$84,966

 

On March 25, 2010, the Partnership refinanced the mortgage encumbering Twin Lake Towers Apartments. The refinancing resulted in the replacement of the existing mortgage loan, which at the time of refinancing had a principal balance of approximately $9,131,000, with a new mortgage loan in the principal amount of $27,000,000. The new loan bears interest at a rate of 5.49% per annum and requires monthly payments of principal and interest of approximately $153,000 beginning on May 1, 2010, through the April 1, 2020 maturity date.  The new mortgage loan has a balloon payment of approximately $22,331,000 due at maturity. The Partnership may prepay the mortgage at any time with 30 days written notice to the lender, subject to a prepayment penalty. The Partnership recorded a loss on the early extinguishment of debt of approximately $866,000, as a result of the write off of unamortized loan costs and the payment of a prepayment penalty of approximately $766,000. Total capitalized loan costs associated with the new mortgage were approximately $226,000 and are included in other assets.

 

The mortgage notes payable are fixed rate mortgages that are non-recourse and are secured by a pledge of the Partnership’s investment properties and by a pledge of revenues from the respective investment properties. Certain of the notes include prepayment penalties if repaid prior to maturity. Further, the properties may not be sold subject to existing indebtedness.

 

Scheduled principal payments of mortgage notes payable subsequent to December 31, 2010, are as follows (in thousands):

 

2011

 $ 1,444

2012

   1,524

2013

   1,629

2014

   1,730

2015 

  64,353

Thereafter

  24,645

 

 $95,325

 

Note C - Income Taxes

 

The Partnership is classified as a partnership for Federal income tax purposes.  Accordingly, taxable income or loss of the Partnership is reported in the income tax returns of its partners and no provision for income taxes is made in the consolidated financial statements of the Partnership.

 

The following is a reconciliation of reported net loss and Federal taxable (loss) income (in thousands, except per unit data):

 

 

2010

2009

 

 

 

Net loss as reported

    $(2,855)

    $  (975)

Add (deduct):

 

 

  Depreciation differences

        341

       (217)

  Unearned income

         15

        (44)

  Other

         23

        (11)

Federal taxable loss

    $(2,476)

    $(1,247)

Federal taxable income per limited

 

 

  partnership unit

    $(54.81)

    $ 13.20 (1)

 

(1)   For 2009 allocations under the Internal Revenue Code section 704(b) result in the limited partners being allocated a non-pro rata amount of taxable income.

 

The following is a reconciliation between the Partnership's reported amounts and Federal tax basis of net liabilities (in thousands):

 

 

2010

2009

Net liabilities

    $(71,382)

    $(63,447)

Land and buildings

       4,412

       4,259

Accumulated depreciation

      (2,773)

      (3,114)

Syndication and distribution costs

       6,093

       6,093

Other

         209

         323

 

 

 

Net liabilities - Federal tax basis

    $(63,441)

    $(55,886)

 

Note D - Transactions with Affiliated Parties

 

The Partnership has no employees and depends on the Managing General Partner and its affiliates for the management and administration of all Partnership activities. The Partnership Agreement provides for certain payments to affiliates for services and reimbursement of certain expenses incurred by affiliates on behalf of the Partnership. 

 

Affiliates of the Managing General Partner receive 5% of gross receipts from all of the Partnership's properties as compensation for providing property management services. The Partnership paid to such affiliates approximately $787,000 and $794,000 for the years ended December 31, 2010 and 2009, respectively, which are included in operating expenses.  

 

The Partnership Agreement provides for a fee equal to 7.5% of "net cash from operations", as defined in the Partnership Agreement to be paid to the Managing General Partner for executive and administrative management services. One half of this fee is to be accrued and not paid unless the limited partners have received distributions equal to a 5% cumulative annual return on their adjusted capital investment as defined in the Partnership Agreement or there are net proceeds from the sale or refinancing of a property. During the year ended December 31, 2010, the Managing General Partner earned a fee of approximately $2,000. No fee was earned during the year ended December 31, 2009. At December 31, 2010, approximately $2,000 of such fees were owed to the Managing General Partner, which is included in other liabilities. There were no such fees owed to the Managing General Partner at December 31, 2009.

 

Affiliates of the Managing General Partner charged the Partnership for reimbursement of accountable administrative expenses amounting to approximately $158,000 and $352,000 for the years ended December 31, 2010 and 2009, respectively, which is included in general and administrative expenses and investment properties. The portion of these reimbursements included in investment properties for the years ended December 31, 2010 and 2009 are construction management services for certain capital improvement expenditures (not related to the redevelopment project) provided by an affiliate of the Managing General Partner of approximately $26,000 and $56,000, respectively. In connection with a redevelopment project completed in 2009 at Twin Lake Towers Apartments, an affiliate of the Managing General Partner received a redevelopment supervision fee of 4% of the actual redevelopment costs incurred. The Partnership was charged approximately $166,000 in redevelopment supervision fees during the year ended December 31, 2009, which are included in investment properties.

 

During the year ended December 31, 2010, AIMCO Properties, L.P., an affiliate of the Managing General Partner, advanced the Partnership approximately $687,000 to fund a refinance commitment fee at Twin Lake Towers Apartments and real estate taxes at Hunters Glen Apartments IV, V and VI.  During the year ended December 31, 2009, AIMCO Properties, L.P. advanced the Partnership approximately $695,000 to fund operations at Hunters Glen Apartments IV, V and VI and Twin Lake Towers Apartments and approximately $2,130,000 to fund redevelopment costs at Twin Lake Towers Apartments.  AIMCO Properties, L.P. charges interest on advances under the terms permitted by the Partnership Agreement. The interest rates charged on the outstanding advances made to the Partnership range from a market rate to prime plus 2.00%.  Affiliates of the Managing General Partner review the applicable market rate for the Partnership quarterly. The interest rate on the outstanding advances at December 31, 2010 was 3.25%. Interest expense was approximately $94,000 and $390,000 for the years ended December 31, 2010 and 2009, respectively.  During the years ended December 31, 2010 and 2009, the Partnership repaid advances and accrued interest of approximately $12,950,000 and $650,000, respectively. Total advances and accrued interest of approximately $15,000 and $12,184,000 were unpaid at December 31, 2010 and 2009, respectively, and are included in due to affiliates. The Partnership may receive additional advances of funds from AIMCO Properties, L.P., although AIMCO Properties, L.P. is not obligated to provide such advances. For more information on AIMCO Properties, L.P., including copies of its audited balance sheet, please see itsreports filed with the Securities and Exchange Commission. Subsequent to December 31, 2010, the Partnership repaid advances and accrued interest of approximately $15,000. In addition,subsequent to December 31, 2010, AIMCO Properties, L.P. advanced the Partnership approximately $1,395,000 to fund refinance commitment fees at Hunters Glen Apartments IV, V and VI.

 

Pursuant to the Partnership Agreement, the Managing General Partner is entitled to receive a distribution equal to 3% of the aggregate disposition price of sold properties. The Partnership paid a distribution of $186,000 to the Managing General Partner related to the sale of Cooper Point Plaza in 1999. During 2001, the Partnership paid distributions of approximately $85,000 and $375,000 related to the sales of Briarwood and Gateway Gardens Apartments, respectively. These distributions are subordinate to the limited partners receiving their original capital contributions plus a cumulative preferred return of 6% per annum of their adjusted capital investment, as defined in the Partnership Agreement. This return was met in conjunction with the distributions paid to the partners during the year ended December 31, 2010. Accordingly, the Managing General Partner is entitled to keep these amounts.

 

The Partnership insures its properties up to certain limits through coverage provided by AIMCO which is generally self-insured for a portion of losses and liabilities related to workers’ compensation, property casualty, general liability, and vehicle liability. The Partnership insures its properties above the AIMCO limits through insurance policies obtained by AIMCO from insurers unaffiliated with the Managing General Partner. During the years ended December 31, 2010 and 2009, the Partnership was charged by AIMCO and its affiliates approximately $252,000 and $197,000, respectively, for insurance coverage and fees associated with policy claims administration.

 

In addition to its indirect ownership of the general partner interests in the Partnership, AIMCO and its affiliates owned 33,750 limited partnership units (the "Units") in the Partnership representing 75.47% of the outstanding Units at December 31, 2010.  A number of these Units were acquired pursuant to tender offers made by AIMCO or its affiliates. It is possible that AIMCO or its affiliates will acquire additional Units in exchange for cash or a combination of cash and units in AIMCO Properties, L.P., the operating partnership of AIMCO, either through private purchases or tender offers. Pursuant to the Partnership Agreement, unitholders holding a majority of the Units are entitled to take action with respect to a variety of matters that include, but are not limited to, voting on certain amendments to the Partnership Agreement and voting to remove the Managing General Partner. As a result of its ownership of 75.47% of the outstanding Units, AIMCO and its affiliates are in a position to control all voting decisions with respect to the Partnership. Although the Managing General Partner owes fiduciary duties to the limited partners of the Partnership, the Managing General Partner also owes fiduciary duties to AIMCO as its sole stockholder. As a result, the duties of the Managing General Partner, as managing general partner, to the Partnership and its limited partners may come into conflict with the duties of the Managing General Partner to AIMCO as its sole stockholder.

 

Note E - Investment Properties and Accumulated Depreciation

 

 

 

Initial Cost

 

 

 

To Partnership

 

 

 

(in thousands)

 

 

 

 

 

 

 

 

 

Buildings

Cost

 

 

 

and Related

Capitalized

 

 

 

Personal

Subsequent

Description

Encumbrances

Land

Property

to Acquisition

 

(in thousands)

 

 

(in thousands)

Investment Properties

 

 

 

 

Hunters Glen Apts IV

   $19,864

 $ 1,552

$ 8,324

$ 6,692

Hunters Glen Apts V

 23,864

   1,820

  9,759

  7,170

Hunters Glen Apts VI

 24,838

   1,981

 10,620

  8,060

Twin Lake Towers Apts

 26,759

   1,115

 12,806

 24,965

  Totals

$95,325

 $ 6,468

$41,509

$46,887


 

 

Gross Amount At Which Carried

 

 

 

 

 

At December 31, 2010

 

 

 

 

 

(in thousands)

 

 

 

 

 

 

Buildings

 

 

 

 

 

 

And

 

 

 

 

 

 

Related

 

 

 

 

 

 

Personal

 

Accumulated

Date

Depreciable

Description

Land

Property

Total

Depreciation

Acquired

Life

 

 

 

 

(in thousands)

 

 

  Hunters Glen

    Apts IV

$1,552

$15,016

$16,568

$13,706

01/31/85

5-30 yrs

  Hunters Glen

    Apts V

 1,820

 16,929

 18,749

 15,566

01/31/85

5-40 yrs

  Hunters Glen

    Apts VI

 1,981

 18,680

 20,661

 17,137

01/31/85

5-40 yrs

 Twin Lake

    Towers Apts

 1,115

 37,771

 38,886

 25,558

03/30/84

5-30 yrs

  Totals

$6,468

$88,396

$94,864

$71,967

 

 

 

Reconciliation of "Investment Properties and Accumulated Depreciation":

 

 

Years Ended December 31,

 

2010

2009

 

(in thousands)

Investment Properties

 

 

Balance at beginning of year

$ 94,019

$ 90,899

  Property improvements

     879

   3,120

  Disposal of assets

      (34)

      --

Balance at end of year

$ 94,864

$ 94,019

 

 

 

Accumulated Depreciation

 

 

Balance at beginning of year

$ 67,227

$ 62,659

  Additions charged to expense

   4,740

   4,568

Balance at end of year

$ 71,967

$ 67,227

 

The aggregate cost of the real estate for Federal income tax purposes at December 31, 2010 and 2009 is approximately $99,276,000 and $98,278,000, respectively.  The accumulated depreciation for Federal income tax purposes as of December 31, 2010 and 2009 is approximately $74,740,000 and $70,341,000, respectively.

 

Note F – Distributions

 

The Partnership distributed the following amounts during the years ended December 31, 2010 and 2009 (in thousands except per unit data):

 

 

Year Ended

Per Limited

Year Ended

Per Limited

 

December 31,

Partnership

December 31,

Partnership

 

2010

Unit

2009

Unit

 

 

 

 

 

Refinancing (1)

$ 3,900

$ 77.87

$    --

$    --

Operations

  1,180

  26.11

     --

     --

Total

$ 5,080

$103.98

$    --

$    --

 

(1)            Proceeds from the March 2010 refinancing of the mortgage encumbering Twin Lake Towers Apartments.

 


Note G - Contingencies

 

As previously disclosed, AIMCO Properties, L.P. and NHP Management Company, both affiliates of the Managing General Partner, were defendants in a lawsuit, filed as a collective action in August 2003 in the United States District Court for the District of Columbia, alleging that they willfully violated the Fair Labor Standards Act (“FLSA”) by failing to pay maintenance workers overtime for time worked in excess of 40 hours per week (“overtime claims”). The plaintiffs also contended that AIMCO Properties, L.P. and NHP Management Company (“the Defendants”) failed to compensate maintenance workers for time that they were required to be "on-call" (“on-call claims”). In March 2007, the court in the District of Columbia decertified the collective action.  In July 2007, plaintiffs’ counsel filed individual cases in Federal court in 22 jurisdictions.  In the second quarter of 2008, AIMCO Properties, L.P. settled the overtime cases involving 652 plaintiffs and established a framework for resolving the 88 remaining “on-call” claims and the attorneys’ fees claimed by plaintiffs’ counsel. As a result, the lawsuits asserted in the 22 Federal courts were dismissed. During the fourth quarter of 2008, the Partnership paid approximately $39,000 for settlement amounts for alleged unpaid overtime to employees who had worked at the Partnership’s investment properties. uring January 2011, the parties reached an agreement to settle the remaining “on-call claims” and the plaintiffs’ attorneys’ fees. The Partnership will be required to pay an additional amount of approximately $4,000 for settlement amounts to employees who worked at the Partnership’s investment properties for requiring the employees to respond to on-call emergencies and approximately $47,000 for plaintiffs’ attorneys’ fees.  These settlement amounts and attorneys’ fees totaling approximately $51,000 have been accrued as of December 31, 2010.  These settlements resolve the case in its entirety.

 

The Partnership is unaware of any other pending or outstanding litigation matters involving it or its investment properties that are not of a routine nature arising in the ordinary course of business.

 

Environmental

 

Various Federal, state and local laws subject property owners or operators to liability for management, and the costs of removal or remediation, of certain potentially hazardous materials  present on a property, including lead-based paint, asbestos, polychlorinated biphenyls, petroleum-based fuels, and other miscellaneous materials. Such laws often impose liability without regard to whether the owner or operator knew of, or was responsible for, the release or presence of such materials. The presence of, or the failure to manage or remedy properly, these materials may adversely affect occupancy at affected apartment communities and the ability to sell or finance affected properties. In addition to the costs associated with investigation and remediation actions brought by government agencies, and potential fines or penalties imposed by such agencies in connection therewith, the improper management of these materials on a property could result in claims by private plaintiffs for personal injury, disease, disability or other infirmities. Various laws also impose liability for the cost of removal, remediation or disposal of these materials through a licensed disposal or treatment facility. Anyone who arranges for the disposal or treatment of these materials is potentially liable under such laws. These laws often impose liability whether or not the person arranging for the disposal ever owned or operated the disposal facility. In connection with the ownership, operation and management of its properties, the Partnership could potentially be responsible for environmental liabilities or costs associated with its properties.

 


ITEM 9.     Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

 

None.

 

Item 9A.    Controls and Procedures

 

(a)   Disclosure Controls and Procedures

 

The Partnership’s management, with the participation of the principal executive officer and principal financial officer of the Managing General Partner, who are the equivalent of the Partnership’s principal executive officer and principal financial officer, respectively, has evaluated the effectiveness of the Partnership’s disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) as of the end of the period covered by this report. Based on such evaluation, the principal executive officer and principal financial officer of the Managing General Partner, who are the equivalent of the Partnership’s principal executive officer and principal financial officer, respectively, have concluded that, as of the end of such period, the Partnership’s disclosure controls and procedures are effective. 

 

Management’s Report on Internal Control Over Financial Reporting

 

The Partnership’s management is responsible for establishing and maintaining adequate internal control over financial reporting. Internal control over financial reporting is defined in Rule 13a-15(f) and 15d-15(f) under the Exchange Act as a process designed by, or under the supervision of, the principal executive and principal financial officers of the Managing General Partner, who are the equivalent of the Partnership’s principal executive officer and principal financial officer, respectively, and effected by the Partnership’s management and other personnel to provide reasonable assurance regarding the reliability of financial reporting and the preparation of consolidated financial statements for external purposes in accordance with generally accepted accounting principles and includes those policies and procedures that:

 

·         pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of assets;

 

·         provide reasonable assurance that transactions are recorded as necessary to permit preparation of consolidated financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures are being made only in accordance with authorizations of the Partnership’s management; and

 

·         provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of assets that could have a material effect on the consolidated financial statements.

 

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Projections of any evaluation of effectiveness to future periods are subject to the risks that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

 

The Partnership’s management assessed the effectiveness of the Partnership’s internal control over financial reporting as of December 31, 2010.  In making this assessment, the Partnership’s management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control-Integrated Framework.

 

Based on their assessment, the Partnership’s management concluded that, as of December 31, 2010, the Partnership’s internal control over financial reporting is effective.

 

This annual report does not include an attestation report of the Partnership’s registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by the Partnership’s registered public accounting firm pursuant to rules of the Securities and Exchange Commission that permit the Partnership to provide only management’s report in this annual report.

 

(b)   Changes in Internal Control Over Financial Reporting.

 

There has been no change in the Partnership’s internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the fourth quarter of 2010 that has materially affected, or is reasonably likely to materially affect, the Partnership’s internal control over financial reporting.

 

Item 9B.    Other Information

 

None.

 


                                      PART III

 

Item 10.    Directors, Executive Officers and Corporate Governance

 

The names of the directors and officers of Angeles Realty Corporation II ("ARC II" or the "Managing General Partner"), their ages and the nature of all positions with ARC II are set forth below. There are no family relationships between or among any officers or directors.

 

Name

Age

Position

 

 

 

Steven D. Cordes

39

Director and Senior Vice President

John Bezzant

48

Director and Executive Vice President

Ernest M. Freedman

40

Executive Vice President and Chief Financial Officer

Lisa R. Cohn

42

Executive Vice President, General Counsel and Secretary

Paul Beldin

37

Senior Vice President and Chief Accounting Officer

Stephen B. Waters

49

Senior Director of Partnership Accounting

 

Steven D. Cordes was appointed as a Director of the Managing General Partner effective March 2, 2009.  Mr. Cordes has been a Senior Vice President of the Managing General Partner and AIMCO since May 2007.  Mr. Cordes joined AIMCO in 2001 as a Vice President of Capital Markets with responsibility for AIMCO’s joint ventures and equity capital markets activity.  Prior to joining AIMCO, Mr. Cordes was a manager in the financial consulting practice of PricewaterhouseCoopers.  Effective March 2009, Mr. Cordes was appointed to serve as the equivalent of the chief executive officer of the Partnership.  Mr. Cordes brings particular expertise to the Board in the areas of asset management as well as finance and accounting.

 

John Bezzant was appointed as a Director of the Managing General Partner effective December 16, 2009.  Mr. Bezzant was appointed Executive Vice President of the Managing General Partner and AIMCO in January 2011 and prior to that time was a Senior Vice President of the Managing General Partner and AIMCO since joining AIMCO in June 2006.  Prior to joining AIMCO, Mr. Bezzant spent over 20 years with Prologis, Inc. and Catellus Development Corporation in a variety of executive positions, including those with responsibility for transactions, fund management, asset management, leasing and operations.  Mr. Bezzant brings particular expertise to the Board in the areas of real estate finance, property operations, sales and development.

 

Ernest M. Freedman was appointed Executive Vice President and Chief Financial Officer of the Managing General Partner and AIMCO in November 2009.   Mr. Freedman joined AIMCO in 2007 as Senior Vice President of Financial Planning and Analysis and has served as Senior Vice President of Finance since February 2009, responsible for financial planning, tax, accounting and related areas.  Prior to joining AIMCO, from 2004 to 2007, Mr. Freedman served as chief financial officer of HEI Hotels and Resorts.

 

Lisa R. Cohn was appointed Executive Vice President, General Counsel and Secretary of the Managing General Partner and AIMCO in December 2007.  From January 2004 to December 2007, Ms. Cohn served as Senior Vice President and Assistant General Counsel of AIMCO.  Ms. Cohn joined AIMCO in July 2002 as Vice President and Assistant General Counsel.  Prior to joining AIMCO, Ms. Cohn was in private practice with the law firm of Hogan and Hartson LLP.

 

Paul Beldin joined AIMCO in May 2008 and has served as Senior Vice President and Chief Accounting Officer of AIMCO and the Managing General Partner since that time.  Prior to joining AIMCO, Mr. Beldin served as controller and then as chief financial officer of America First Apartment Investors, Inc., a publicly traded multifamily real estate investment trust, from May 2005 to September 2007 when the company was acquired by Sentinel Real Estate Corporation.  Prior to joining America First Apartment Investors, Inc., Mr. Beldin was a senior manager at Deloitte and Touche LLP, where he was employed from August 1996 to May 2005, including two years as an audit manager in SEC services at Deloitte’s national office.

 

Stephen B. Waters was appointed Senior Director of Partnership Accounting of AIMCO and the Managing General Partner in June 2009.  Mr. Waters has responsibility for partnership accounting with AIMCO and serves as the principal financial officer of the Managing General Partner.  Mr. Waters joined AIMCO as a Director of Real Estate Accounting in September 1999 and was appointed Vice President of the Managing General Partner and AIMCO in April 2004.  Prior to joining AIMCO, Mr. Waters was a senior manager at Ernst & Young LLP.

 

The Registrant is not aware of the involvement in any legal proceedings with respect to the directors and executive officers listed in this Item 10.

 

One or more of the above persons are also directors and/or officers of a general partner (or general partner of a general partner) of limited partnerships which either have a class of securities registered pursuant to Section 12(g) of the Securities Exchange Act of 1934, or are subject to the reporting requirements of Section 15(d) of such Act. Further, one or more of the above persons are also officers of Apartment Investment and Management Company and the general partner of AIMCO Properties, L.P., entities that have a class of securities registered pursuant to Section 12(g) of the Securities Exchange Act of 1934, or are subject to the reporting requirements of Section 15 (d) of such Act.

 

The board of directors of the Managing General Partner does not have a separate audit committee. As such, the board of directors of the Managing General Partner fulfills the functions of an audit committee. The board of directors has determined that Steven D. Cordes meets the requirement of an "audit committee financial expert".

 

The directors and officers of the Managing General Partner with authority over the Partnership are all employees of subsidiaries of AIMCO. AIMCO has adopted a code of ethics that applies to such directors and officers that is posted on AIMCO's website (www.AIMCO.com). AIMCO's website is not incorporated by reference to this filing.

 

Item 11.    Executive Compensation

 

None of the directors and officers of the Managing General Partner received any remuneration from the Partnership during the years ended December 31, 2010 and 2009.

 


Item 12.    Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

 

Except as noted below, no person or entity was known by the Partnership to be the beneficial owner of more than 5% of the Limited Partner Units (the “Units”) of the Partnership as of December 31, 2010.

 

Entity

Number of Units

Percentages

 

 

 

Cooper River Properties, LLC

 

 

  (an affiliate of AIMCO)

 4,607

10.30%

Broad River Properties

 

 

  (an affiliate of AIMCO)

 8,002

17.89%

AIMCO IPLP

 

 

  (an affiliate of AIMCO)

 1,824

 4.08%

AIMCO Properties, LP

 

 

  (an affiliate of AIMCO)

19,317

43.20%

 

Cooper River Properties, LLC, Broad River Properties and AIMCO IPLP are indirectly ultimately owned by AIMCO.  Their business address is 55 Beattie Place, Greenville, SC 29601.

 

AIMCO Properties, LP is indirectly ultimately controlled by AIMCO.  Its business address is 4582 S. Ulster St. Parkway, Suite 1100, Denver, Colorado 80237.

 

The Partnership knows of no contractual arrangements, the operation of the terms of which may at a subsequent date result in a change in control of the Partnership, except for: Article 12.1 of the Partnership Agreement which provides that upon a vote of the Limited Partners holding more than 50% of the then outstanding Units the General Partners may be expelled from the Partnership upon 90 days written notice. In the event that successor general partners have been elected by Limited Partners holding more than 50% of the then outstanding Units and if said Limited Partners elect to continue the business of the Partnership, the Partnership is required to pay in cash to the expelled Managing General Partner an amount equal to the accrued and unpaid management fee described in Article 10 of the Partnership Agreement and to purchase the General Partners' interest in the Partnership on the effective date of the expulsion, which shall be an amount equal to the difference between (i) the balance of the General Partner's capital account and (ii) the fair market value of the share of Distributable Net Proceeds to which the General Partners would be entitled.  Such determination of the fair market value of the share of Distributable Net Proceeds is defined in Article 12.2(ii) of the Partnership Agreement.

 

Item 13.    Certain Relationships and Related Transactions and Director Independence

 

The Partnership has no employees and depends on the Managing General Partner and its affiliates for the management and administration of all Partnership activities. The Partnership Agreement provides for certain payments to affiliates for services and reimbursement of certain expenses incurred by affiliates on behalf of the Partnership. 

 

Affiliates of the Managing General Partner receive 5% of gross receipts from all of the Partnership's properties as compensation for providing property management services. The Partnership paid to such affiliates approximately $787,000 and $794,000 for the years ended December 31, 2010 and 2009, respectively, which are included in operating expenses on the consolidated statements of operations included in “Item 8. Financial Statements and Supplementary Data”.

 

The Partnership Agreement provides for a fee equal to 7.5% of "net cash from operations", as defined in the Partnership Agreement to be paid to the Managing General Partner for executive and administrative management services. One half of this fee is to be accrued and not paid unless the limited partners have received distributions equal to a 5% cumulative annual return on their adjusted capital investment as defined in the Partnership Agreement or there are net proceeds from the sale or refinancing of a property. During the year ended December 31, 2010, the Managing General Partner earned a fee of approximately $2,000. No fee was earned during the year ended December 31, 2009. At December 31, 2010, approximately $2,000 of such fees were owed to the Managing General Partner, which is included in other liabilities on the consolidated balance sheets included in “Item 8. Financial Statements and Supplementary Data”. There were no such fees owed to the Managing General Partner at December 31, 2009.

 

Affiliates of the Managing General Partner charged the Partnership for reimbursement of accountable administrative expenses amounting to approximately $158,000 and $352,000 for the years ended December 31, 2010 and 2009, respectively, which is included in general and administrative expenses and investment properties on the consolidated financial statements included in “Item 8. Financial Statements and Supplementary Data”. The portion of these reimbursements included in investment properties for the years ended December 31, 2010 and 2009 are construction management services for certain capital improvement expenditures (not related to the redevelopment project) provided by an affiliate of the Managing General Partner of approximately $26,000 and $56,000, respectively. In connection with a redevelopment project completed in 2009 at Twin Lake Towers Apartments, an affiliate of the Managing General Partner received a redevelopment supervision fee of 4% of the actual redevelopment costs incurred.  The Partnership was charged approximately $166,000 in redevelopment supervision fees during the year ended December 31, 2009 which is included in investment properties on the consolidated balance sheets included in “Item 8. Financial Statements and Supplementary Data”.

 

During the year ended December 31, 2010, AIMCO Properties, L.P., an affiliate of the Managing General Partner, advanced the Partnership approximately $687,000 to fund a refinance commitment fee at Twin Lake Towers Apartments and real estate taxes at Hunters Glen Apartments IV, V and VI.  During the year ended December 31, 2009, AIMCO Properties, L.P. advanced the Partnership approximately $695,000 to fund operations at Hunters Glen Apartments IV, V and VI and Twin Lake Towers Apartments and approximately $2,130,000 to fund redevelopment costs at Twin Lake Towers Apartments.  AIMCO Properties, L.P. charges interest on advances under the terms permitted by the Partnership Agreement. The interest rates charged on the outstanding advances made to the Partnership range from a market rate to prime plus 2.00%. Affiliates of the Managing General Partner review the applicable market rate for the Partnership quarterly. The interest rate on the outstanding advances at December 31, 2010 was 3.25%. Interest expense was approximately $94,000 and $390,000 for the years ended December 31, 2010 and 2009, respectively.  During the years ended December 31, 2010 and 2009, the Partnership repaid advances and accrued interest of approximately $12,950,000 and $650,000, respectively. Total advances and accrued interest of approximately $15,000 and $12,184,000 were unpaid at December 31, 2010 and 2009, respectively, and are included in due to affiliates on the consolidated balance sheets included in “Item 8. Financial Statements and Supplementary Data”. The Partnership may receive additional advances of funds from AIMCO Properties, L.P., although AIMCO Properties, L.P. is not obligated to provide such advances. For more information on AIMCO Properties, L.P., including copies of its audited balance sheet, please see itsreports filed with the Securities and Exchange Commission. Subsequent to December 31, 2010, the Partnership repaid advances and accrued interest of approximately $15,000.In addition, subsequent to December 31, 2010, AIMCO Properties, L.P. advanced the Partnership approximately $1,395,000 to fund refinance commitment fees at Hunters Glen Apartments IV, V and VI.

 

Pursuant to the Partnership Agreement, the Managing General Partner is entitled to receive a distribution equal to 3% of the aggregate disposition price of sold properties. The Partnership paid a distribution of $186,000 to the Managing General Partner related to the sale of Cooper Point Plaza in 1999. During 2001, the Partnership paid distributions of approximately $85,000 and $375,000 related to the sales of Briarwood and Gateway Gardens Apartments, respectively. These distributions are subordinate to the limited partners receiving their original capital contributions plus a cumulative preferred return of 6% per annum of their adjusted capital investment, as defined in the Partnership Agreement. This return was met in conjunction with the distributions paid to the partners during the year ended December 31, 2010. Accordingly, the Managing General Partner is entitled to keep these amounts.

 

The Partnership insures its properties up to certain limits through coverage provided by AIMCO which is generally self-insured for a portion of losses and liabilities related to workers’ compensation, property casualty, general liability, and vehicle liability. The Partnership insures its properties above the AIMCO limits through insurance policies obtained by AIMCO from insurers unaffiliated with the Managing General Partner. During the years ended December 31, 2010 and 2009, the Partnership was charged by AIMCO and its affiliates approximately $252,000 and $197,000, respectively, for insurance coverage and fees associated with policy claims administration.

 

In addition to its indirect ownership of the general partner interests in the Partnership, AIMCO and its affiliates owned 33,750 Units in the Partnership representing 75.47% of the outstanding Units at December 31, 2010.  A number of these Units were acquired pursuant to tender offers made by AIMCO or its affiliates. It is possible that AIMCO or its affiliates will acquire additional Units in exchange for cash or a combination of cash and units in AIMCO Properties, L.P., the operating partnership of AIMCO, either through private purchases or tender offers. Pursuant to the Partnership Agreement, unitholders holding a majority of the Units are entitled to take action with respect to a variety of matters that include, but are not limited to, voting on certain amendments to the Partnership Agreement and voting to remove the Managing General Partner. As a result of its ownership of 75.47% of the outstanding Units, AIMCO and its affiliates are in a position to control all voting decisions with respect to the Partnership. Although the Managing General Partner owes fiduciary duties to the limited partners of the Partnership, the Managing General Partner also owes fiduciary duties to AIMCO as its sole stockholder. As a result, the duties of the Managing General Partner, as managing general partner, to the Partnership and its limited partners may come into conflict with the duties of the Managing General Partner to AIMCO as its sole stockholder.

 

Neither of the Managing General Partner's directors is independent under the independence standards established for New York Stock Exchange listed companies as both directors are employed by the parent of the Managing General Partner.

 

Item 14.    Principal Accounting Fees and Services

 

The Managing General Partner has reappointed Ernst & Young, LLP as independent auditors to audit the consolidated financial statements of the Partnership for 2011. The aggregate fees billed for services rendered by Ernst & Young, LLP for 2010 and 2009 are described below.

 

Audit Fees. Fees for audit services totaled approximately $61,000 and $59,000 for 2010 and 2009, respectively. Fees for audit services also include fees for the reviews of the Partnership’s Quarterly Reports on Form 10-Q.

 

Tax Fees. Fees for tax services totaled approximately $14,000 and $13,000 for 2010 and 2009, respectively.


PART IV

 

Item 15.    Exhibits, Financial Statement Schedules

 

(a)   The following consolidated financial statements of the Registrant are included in Item 8:

 

Consolidated Balance Sheets at December 31, 2010 and 2009.

 

Consolidated Statements of Operations for the years ended December 31, 2010 and 2009.

 

Consolidated Statements of Changes in Partners' Deficit for the years ended December 31, 2010 and 2009.

 

Consolidated Statements of Cash Flows for the years ended December 31, 2010 and 2009.

 

Notes to Consolidated Financial Statements.

 

Schedules are omitted for the reason that they are inapplicable or equivalent information has been included elsewhere herein.

 

b)   Exhibits:

 

See Exhibit Index.

 

The agreements included as exhibits to this Form 10-K contain representations and warranties by each of the parties to the applicable agreement. These representations and warranties have been made solely for the benefit of the other parties to the applicable agreement and:

 

  • should not in all instances be treated as categorical statements of fact, but rather as a way of allocating the risk to one of the parties if those statements prove to be inaccurate;

 

  • have been qualified by disclosures that were made to the other party in connection with the negotiation of the applicable agreement, which disclosures are not necessarily reflected in the agreement;

 

  • may apply standards of materiality in a way that is different from what may be viewed as material to an investor; and

 

  • were made only as of the date of the applicable agreement or such other date or dates as may be specified in the agreement and are subject to more recent developments.

 

Accordingly, these representations and warranties may not describe the actual state of affairs as of the date they were made or at any other time. The Partnership acknowledges that, notwithstanding the inclusion of the foregoing cautionary statements, it is responsible for considering whether additional specific disclosures of material information regarding material contractual provisions are required to make the statements in this Form 10-K not misleading. Additional information about the Partnership may be found elsewhere in this Form 10-K and the Partnership’s other public filings, which are available without charge through the SEC’s website at http://www.sec.gov. 

 


SIGNATURES

 

 

 

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

 

ANGELES PARTNERS XII

 

(A California Limited Partnership)

 

 

 

By:   Angeles Realty Corporation II

 

      Managing General Partner

 

 

 

By:   /s/Steven D. Cordes

 

      Steven D. Cordes

 

      Senior Vice President

 

 

 

By:   /s/Stephen B. Waters

 

      Stephen B. Waters

 

      Senior Director of Partnership

      Accounting

 

 

 

Date: March 25, 2011

 

 

Pursuant to the requirements of the Securities Exchange Act of 1934 this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

 

/s/John Bezzant

Director and Executive

Date: March 25, 2011

John Bezzant

Vice President

 

 

 

 

/s/ Steven D. Cordes

Director and Senior

Date: March 25, 2011

Steven D. Cordes

Vice President

 

 

 

 

/s/Stephen B. Waters

Senior Director of Partnership

Date: March 25, 2011

Stephen B. Waters

Accounting

 

 


ANGELES PARTNERS XII

 

EXHIBIT INDEX

 

 

Exhibit Number   Description of Exhibit

 

 

  3.1            Amended Certificate and Agreement of Limited Partnership dated May 26, 1983 filed in Form S-11 dated June 2, 1983 and is incorporated herein by reference.

 

3.2            Amendment to the Amended Certificate and Agreement of Limited Partnership Agreement, dated October 22, 2007. (Incorporated by reference to the Registrant’s Current Report on Form 10-QSB for the quarterly period ended September 30, 2007)

 

10.36          Multifamily Note dated December 1, 2005 between Hunters Glen AP XII L.P., a South Carolina limited partnership and GMAC Commercial Mortgage Bank in reference to Hunters Glen IV and filed December 7, 2005 with the Registrant’s Current Report on Form 8-K dated December 1, 2005 and incorporated herein by reference.

 

10.37          Amended and Restated Multifamily Note dated December 1, 2005 between Hunters Glen AP XII L.P., a South Carolina limited partnership and GMAC Commercial Mortgage Bank in reference to Hunters Glen IV and filed December 7, 2005 with the Registrant’s Current Report on Form 8-K dated December 1, 2005 and incorporated herein by reference.

 

10.38          Multifamily Note dated December 1, 2005 between Hunters Glen AP XII L.P., a South Carolina limited partnership and GMAC Commercial Mortgage Bank in reference to Hunters Glen V and VI and filed December 7, 2005 with the Registrant’s Current Report on Form 8-K dated December 1, 2005 and incorporated herein by reference.

 

10.39          Amended and Restated Multifamily Note dated December 1, 2005 between Hunters Glen AP XII L.P., a South Carolina limited partnership and GMAC Commercial Mortgage Bank in reference to Hunters Glen V and VI and filed December 7, 2005 with the Registrant’s Current Report on Form 8-K dated December 1, 2005 and incorporated herein by reference.

 

10.40          Form of Multifamily Note between Capmark Bank and Hunters Glen AP XII L.P, a South Carolina limited partnership in reference to Hunters Glen IV Apartments. Incorporated by reference to the Registrant’s Current Report on Form 8-K dated August 31, 2007.

 

10.41          Form of Multifamily Note between Capmark Bank and Hunters Glen AP XII L.P, a South Carolina limited partnership in reference to Hunters Glen V and VI Apartments. Incorporated by reference to the Registrant’s Current Report on Form 8-K dated August 31, 2007.

 

  10.42          Multifamily Note between AP XII Twin Lake Towers, LLC, a Delaware limited liability company, and Keycorp Real Estate Capital Markets, Inc., an Ohio corporation, related to Twin Lake Towers Apartments. Incorporated by reference to the Registrant’s Current Report on Form 8-K dated March 25, 2010.

 

  31.1           Certification of equivalent of Chief Executive Officer pursuant to Securities Exchange Act Rules 13a-14(a)/15d-14(a), as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

 

31.2           Certification of equivalent of Chief Financial Officer pursuant to Securities Exchange Act Rules 13a-14(a)/15d-14(a), as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

 

  32.1           Certification of the equivalent of the Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.