-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, NCNxDlG/TmaMOJ9n+3hcJsOVioujrfJiFfkb48kELNEgpesGYa3fZ3ZP5h15Ojqj 2Bc2idQMzZ4zhk9go+d4mQ== 0000705752-97-000014.txt : 19971113 0000705752-97-000014.hdr.sgml : 19971113 ACCESSION NUMBER: 0000705752-97-000014 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19970930 FILED AS OF DATE: 19971113 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: SHELTER PROPERTIES III LTD PARTNERSHIP CENTRAL INDEX KEY: 0000353282 STANDARD INDUSTRIAL CLASSIFICATION: REAL ESTATE [6500] IRS NUMBER: 570718508 STATE OF INCORPORATION: SC FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10QSB SEC ACT: SEC FILE NUMBER: 000-10260 FILM NUMBER: 97716939 BUSINESS ADDRESS: STREET 1: ONE INSIGNIA FINANCIAL PLZ STREET 2: P O BOX 1089 CITY: GREENVILLE STATE: SC ZIP: 29602 BUSINESS PHONE: 8032391000 MAIL ADDRESS: STREET 1: ONE INSIGNIA FINANCIAL PLZ STREET 2: P O BOX 1089 CITY: GREENVILLE STATE: SC ZIP: 29602 10QSB 1 FORM 10-QSB--QUARTERLY REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 QUARTERLY OR TRANSITIONAL REPORT U.S. Securities and Exchange Commission Washington, D.C. 20549 FORM 10-QSB (Mark One) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 1997 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 0-10260 SHELTER PROPERTIES III LIMITED PARTNERSHIP (Exact name of small business issuer as specified in its charter) South Carolina 57-0718508 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) One Insignia Financial Plaza Greenville, South Carolina 29602 (Address of principal executive offices) (864) 239-1000 (Issuer's telephone number) Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X . No . PART I - FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS a) SHELTER PROPERTIES III LIMITED PARTNERSHIP CONSOLIDATED BALANCE SHEET (in thousands, except unit data) (Unaudited) September 30, 1997 Assets Cash and cash equivalents: Unrestricted $ 1,512 Restricted--tenant security deposits 127 Accounts receivable 38 Escrow for taxes 278 Restricted escrows 896 Other assets 282 Investment properties: Land $ 1,281 Buildings and related personal property 24,483 25,764 Less accumulated depreciation (13,988) 11,776 $14,909 Liabilities and Partners' Capital (Deficit) Liabilities Accounts payable $ 151 Tenant security deposits 127 Accrued property taxes 209 Other liabilities 375 Mortgage notes payable 8,319 Partners' Capital (Deficit) General partners' $ (76) Limited partners' (55,000 units issued and outstanding) 5,804 5,728 $14,909 See Accompanying Notes to Consolidated Financial Statements b) SHELTER PROPERTIES III LIMITED PARTNERSHIP CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands, except unit data) (Unaudited) Three Months Ended Nine Months Ended September 30, September 30, 1997 1996 1997 1996 Revenues: Rental income $1,305 $1,272 $3,861 $3,753 Other income 111 92 332 260 Total revenues 1,416 1,364 4,193 4,013 Expenses: Operating 526 456 1,481 1,363 General and administrative 49 46 151 158 Maintenance 218 233 570 626 Depreciation 240 236 700 686 Interest 188 195 572 585 Property taxes 84 99 263 261 Total expenses 1,305 1,265 3,737 3,679 Net income $ 111 $ 99 $ 456 $ 334 Net income allocated to general partners' (1%) $ 1 $ 1 $ 4 $ 3 Net income allocated to limited partners' (99%) 110 98 452 331 $ 111 $ 99 $ 456 $ 334 Net income per limited partnership unit $ 2.00 $ 1.78 $ 8.21 $ 6.01 See Accompanying Notes to Consolidated Financial Statements c) SHELTER PROPERTIES III LIMITED PARTNERSHIP CONSOLIDATED STATEMENT OF CHANGES IN PARTNERS' CAPITAL (DEFICIT) (in thousands, except unit data) (Unaudited) Limited Partnership General Limited Units Partners' Partners' Total Original capital contributions 55,000 $ 2 $27,500 $27,502 Partners' (deficit) capital at December 31, 1996 55,000 $ (73) $ 6,045 $ 5,972 Net income for the nine months ended September 30, 1997 -- 4 452 456 Distributions paid -- (7) (693) (700) Partners' (deficit) capital at September 30, 1997 55,000 $ (76) $ 5,804 $ 5,728 See Accompanying Notes to Consolidated Financial Statements d) SHELTER PROPERTIES III LIMITED PARTNERSHIP CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands) (Unaudited) Nine Months Ended September 30, 1997 1996 Cash flows from operating activities: Net income $ 456 $ 334 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation 700 686 Amortization of discounts and loan costs 72 71 Change in accounts: Restricted cash 10 3 Accounts receivable (13) 8 Escrows for taxes (9) (34) Other assets (47) (22) Accounts payable 101 (246) Tenant security deposit liabilities (10) (2) Accrued property taxes 5 140 Other liabilities (13) 5 Net cash provided by operating activities 1,252 943 Cash flows from investing activities: Property improvements and replacements (358) (409) Deposits to restricted escrows (27) (27) Receipts from restricted escrows -- 10 Net cash used in investing activities (385) (426) Cash flows from financing activities: Payments on mortgage notes payable (164) (152) Distributions paid (700) (250) Net cash used in financing activities (864) (402) Net increase in unrestricted cash and cash 3 115 equivalents Unrestricted cash and cash equivalents at beginning of period 1,509 1,294 Unrestricted cash and cash equivalents at end of period $1,512 $1,409 Supplemental disclosure of cash flow information: Cash paid for interest $ 501 $ 513 See Accompanying Notes to Consolidated Financial Statements e) SHELTER PROPERTIES III LIMITED PARTNERSHIP NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) NOTE A - BASIS OF PRESENTATION The accompanying unaudited consolidated financial statements of Shelter Properties III Limited Partnership (the "Partnership") have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-QSB and Article 310(b) of Regulation S-B. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of Shelter Realty III Corporation (the "Corporate General Partner"), all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three and nine month periods ended September 30, 1997, are not necessarily indicative of the results that may be expected for the fiscal year ending December 31, 1997. For further information, refer to the consolidated financial statements and footnotes thereto included in the Partnership's annual report on Form 10-KSB for the year ended December 31, 1996. Certain reclassifications have been made to the 1996 information to conform to the 1997 presentation. NOTE B - RECONCILIATION OF CASH FLOWS The following is a reconciliation of the subtotal on the accompanying statements of cash flows captioned "net cash provided by operating activities" to "net cash used in operations," as defined in the partnership agreement. However, "net cash used in operations" should not be considered an alternative to net income as an indicator of the Partnership's operating performance or to cash flows as a measure of liquidity (amounts in thousands): Nine Months Ended September 30, 1997 1996 Net cash provided by operating activities $1,252 $ 943 Payments on mortgage notes payable (164) (152) Property improvements and replacements (358) (409) Change in restricted escrows, net (27) (17) Changes in reserves for net operating liabilities (24) 148 Additional reserves (679) (515) Net cash used in operations $ -- $ (2) In 1997 and 1996, the Corporate General Partner believed it to be in the best interest of the Partnership to reserve an additional $679,000 and $515,000, respectively, to fund continuing capital improvements and maintenance items at the four properties. NOTE C - TRANSACTIONS WITH AFFILIATED PARTIES The Partnership has no employees and is dependent on the Corporate General Partner and its affiliates for the management and administration of all partnership activities. The Partnership Agreement provides for payments to affiliates for services and as reimbursement of certain expenses incurred by affiliates on behalf of the Partnership. The following amounts were paid or accrued to the Corporate General Partner and affiliates in 1997 and 1996: Nine Months Ended September 30, (in thousands) 1997 1996 Property management fees (included in operating expenses) $204 $197 Reimbursement for services of affiliates, including approximately $11,000 and $5,000 of construction oversight reimbursements in 1997 and 1996, respectively (included in general and administrative and maintenance expenses) 101 78 Due to general partner 185 185 For the period of January 1, 1996 to August 31, 1997, the Partnership insured its properties under a master policy through an agency and insurer unaffiliated with the Corporate General Partner. An affiliate of the Corporate General Partner acquired, in the acquisition of a business, certain financial obligations from an insurance agency which was later acquired by the agent who placed the master policy. The agent assumed the financial obligations to the affiliate of the Corporate General Partner, who received payments on these obligations from the agent. The amount of the Partnership's insurance premiums accruing to the benefit of the affiliate of the Corporate General Partner by virtue of the agent's obligations is not significant. On September 26, 1997, an affiliate of the General Partner purchased Lehman Brothers' Class "D" subordinated bonds of SASCO, 1992-M1. These bonds are secured by 55 multi-family apartment mortgage loan pairs held in Trust, including Essex Park Apartments, Colony House Apartments and Willowick Apartments owned by the Partnership. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION The Partnership's investment properties consist of four apartment complexes. The following table sets forth the average occupancy of the properties for each of the nine months ended September 30, 1997 and 1996: Average Occupancy Property 1997 1996 Essex Park Apartments Columbia, South Carolina 95% 94% Colony House Apartments Murfreesboro, Tennessee 89% 92% North River Village Apartments Atlanta, Georgia 91% 96% Willowick Apartments Greenville, South Carolina 92% 94% The Corporate General Partner attributes the decrease in occupancy at North River Village Apartments to increased competition as a result of newly constructed units which are also offering concessions. Also contributing to the decrease in occupancy is increased crime rates in the area, which is causing residents to move to gated complexes. The Partnership's net income for the three and nine month periods ended September 30, 1997, was approximately $111,000 and $456,000, respectively, compared to net income of approximately $99,000 and $334,000, respectively, for the corresponding periods of 1996. The increase in net income is primarily due to increases in total revenues for both the three and nine month periods. Also attributing to the increase in net income is the decrease in maintenance expense. The increase in rental income is a result of increased rental rates at all of the investment properties within the Partnership, except for Colony House Apartments. These rental rate increases have been slightly offset by a decrease in occupancy at all of the investment properties except for Essex Park Apartments which has increased in comparison to the prior year. The increase in other income has resulted from increased cash balances in interest bearing bank accounts and increased interest rates. The increase in other income is also attributable to utility fees being passed on to the tenants and the receipt of a tax refund from North River Village's taxing authority pertaining to the 1996 tax year. The decrease in maintenance expense is attributable to a decrease in exterior building improvements at both Colony House and Essex Park. These expenditures performed in 1996 were related to an effort to improve curb appeal and increase traffic. Partially offsetting the increase in net income was the increase in operating expense due to increased concessions at all of the investment properties, except Essex Park Apartments. Tax expense decreased for the three month period ended September 30, 1997 due to a decrease in assessed value at North River Village. Included in maintenance expenses for 1997 is approximately $71,000 of major repairs and maintenance comprised of major landscaping, construction oversight costs, window coverings and tennis court repairs. In 1996 maintenance expenses included approximately $124,000 of major repairs and maintenance comprised of exterior and interior building repairs and improvements, major landscaping, and exterior painting. As part of the ongoing business plan of the Partnership, the Corporate General Partner monitors the rental market environment of its investment property to assess the feasibility of increasing rent, maintaining or increasing occupancy levels and protecting the Partnership from increases in expense. As part of this plan, the Corporate General Partner attempts to protect the Partnership from the burden of inflation-related increases in expenses by increasing rents and maintaining a high overall occupancy level. However, due to changing market conditions which can result in the use of rental concessions and rental reductions to offset softening market conditions, there is no guarantee that the Corporate General Partner will be able to sustain such a plan. At September 30, 1997 the Partnership had unrestricted cash and cash equivalents of approximately $1,512,000 compared to approximately $1,409,000 at September 30, 1996. Net cash provided by operating activities increased primarily as a result of an increase in net income, as discussed above, an increase in accounts payable due to the timing of payments to vendors and a decrease in tax escrows. These increases were offset by an increase in accounts receivable resulting from the timing of collections from tenants and decreases in accrued taxes due to the timing of tax payments. Net cash used in investing activities decreased as a result of decreases in cash used to purchase property improvements and replacements. Net cash used in financing activity increased due to an increase in distributions during the nine month period ended September 30, 1997, as compared to the nine months ended September 30, 1996. 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. Such assets are currently thought to be sufficient for any near-term needs of the Partnership. The mortgage indebtedness of approximately $8,319,000, net of discount, is amortized over varying periods. In addition, the mortgage notes require balloon payments ranging from November 15, 2002, to October 15, 2003, at which time the properties will either be refinanced or sold. A cash distribution was made in the nine month period ended September 30, 1997 of $700,000. During the nine month period ended September 30, 1996, a cash distribution of $250,000 was paid. Future cash distributions will depend on the levels of net cash generated from operations, property sales, and the availability of cash reserves. PART II - OTHER INFORMATION ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K a) Exhibits: Exhibit 27, Financial Data Schedule, is filed as part of this report. b) Reports on Form 8-K: None filed during the quarter ended September 30, 1997. SIGNATURES In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. SHELTER PROPERTIES III LIMITED PARTNERSHIP By: Shelter Realty III Corporation Corporate General Partner By: /s/ William H. Jarrard, Jr. William H. Jarrard, Jr. President and Director By: /s/ Ronald Uretta Ronald Uretta Treasurer (Principal Financial Officer and Principal Accounting Officer) Date: November 13, 1997 EX-27 2
5 This schedule contains summary financial information extracted from Shelter Properties III Limited Partnership 1997 Third Quarter 10-QSB and is qualified in its entirety by reference to such 10-QSB filing. 0000353282 SHELTER PROPERTIES III LIMITED PARTNERSHIP 1,000 9-MOS DEC-31-1997 SEP-30-1997 1,512 0 38 0 0 0 25,764 13,988 14,909 0 8,319 0 0 0 5,728 14,909 0 4,193 0 0 3,737 0 572 0 0 0 0 0 0 456 8.21 0 Registrant has an unclassified balance sheet. Multiplier is 1.
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