-----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, UM3lRmTWNYCj9S0BjV1vSW6ub2jfP5eHJZHdWwvTVvbogQCnUC9m5c+IRaQcmZqU xzDNb44yU3PSXl9ay1Nltw== /in/edgar/work/0000711642-00-000278/0000711642-00-000278.txt : 20001109 0000711642-00-000278.hdr.sgml : 20001109 ACCESSION NUMBER: 0000711642-00-000278 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20000930 FILED AS OF DATE: 20001108 FILER: COMPANY DATA: COMPANY CONFORMED NAME: SHELTER PROPERTIES III LTD PARTNERSHIP CENTRAL INDEX KEY: 0000353282 STANDARD INDUSTRIAL CLASSIFICATION: [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: 755143 BUSINESS ADDRESS: STREET 1: 1873 SOUTH BELLAIRE STREET STREET 2: 17TH FLOOR CITY: DENVER STATE: CO ZIP: 80222 BUSINESS PHONE: 3037578101 MAIL ADDRESS: STREET 1: 1873 SOUTH BELLAIRE STREET STREET 2: 17TH FLOOR CITY: DENVER STATE: CO ZIP: 80222 10QSB 1 0001.txt QUARTER ENDING SEPTEMBER 30, 2000 FORM 10-QSB - QUARTERLY OR TRANSITIONAL 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, 2000 [ ] 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 (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.) 55 Beattie Place, P.O. Box 1089 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 CONSOLIDATED BALANCE SHEET (Unaudited) (in thousands, except per unit data) September 30, 2000 Assets Cash and cash equivalents $ 785 Receivables and deposits 184 Restricted escrows 730 Other assets 180 Investment properties: Land $ 1,281 Buildings and related personal property 26,811 28,092 Less accumulated depreciation (16,878) 11,214 $ 13,093 Liabilities and Partners' (Deficit) Capital Liabilities Accounts payable $ 59 Tenant security deposit liabilities 120 Accrued property taxes 280 Other liabilities 506 Mortgage notes payable 7,738 Partners' (Deficit) Capital General partners $ (89) Limited partners (55,000 units issued and outstanding) 4,479 4,390 $ 13,093 See Accompanying Notes to Consolidated Financial Statements b) SHELTER PROPERTIES III CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) (in thousands, except unit data)
Three Months Ended Nine Months Ended September 30, September 30, 2000 1999 2000 1999 Revenues: Rental income $1,306 $1,317 $3,982 $3,885 Other income 108 87 318 248 Total revenues 1,414 1,404 4,300 4,133 Expenses: Operating 638 634 1,843 1,833 General and administrative 114 59 261 176 Depreciation 259 220 786 662 Interest 177 180 514 548 Property taxes 107 95 286 289 Total expenses 1,295 1,188 3,690 3,508 Net income $ 119 $ 216 $ 610 $ 625 Net income allocated to general partners (1%) $ 1 $ 2 $ 6 $ 6 Net income allocated to limited partners (99%) 118 214 604 619 $ 119 $ 216 $ 610 $ 625 Net income per limited partnership unit $ 2.14 $ 3.89 $10.98 $11.25 Distributions per limited partnership unit $ -- $ 3.60 $10.44 $ 3.60 See Accompanying Notes to Consolidated Financial Statements
c) SHELTER PROPERTIES III CONSOLIDATED STATEMENT OF CHANGES IN PARTNERS' (DEFICIT) CAPITAL (Unaudited) (in thousands, except unit data)
Limited Partnership General Limited Units Partners Partners Total Original capital contributions 55,000 $ 2 $27,500 $27,502 Partners' (deficit) capital at December 31, 1999 55,000 $ (89) $ 4,449 $ 4,360 Distributions to partners (6) (574) (580) Net income for the nine months ended September 30, 2000 -- 6 604 610 Partners' (deficit) capital at September 30, 2000 55,000 $ (89) $ 4,479 $ 4,390 See Accompanying Notes to Consolidated Financial Statements
d) SHELTER PROPERTIES III CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (in thousands)
Nine Months Ended September 30, 2000 1999 Cash flows from operating activities: Net income $ 610 $ 625 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation 786 662 Amortization of discounts and loan costs 78 74 Change in accounts: Receivables and deposits 253 22 Other assets (29) (50) Accounts payable (55) 79 Tenant security deposit liabilities 14 (4) Accrued property taxes 123 25 Other liabilities 50 12 Net cash provided by operating activities 1,830 1,445 Cash flows from investing activities: Property improvements and replacements (755) (554) Net (deposits to) withdrawals from restricted escrows (160) 384 Net cash used in investing activities (915) (170) Cash flows from financing activities: Payments on mortgage notes payable (205) (190) Partners' distributions (580) (200) Net cash used in financing activities (785) (390) Net increase in cash and cash equivalents 130 885 Cash and cash equivalents at beginning of period 655 630 Cash and cash equivalents at end of period $ 785 $ 1,515 Supplemental disclosure of cash flow information: Cash paid for interest $ 460 $ 475 See Accompanying Notes to Consolidated Financial Statements
e) SHELTER PROPERTIES III NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) Note A - Basis of Presentation The accompanying unaudited consolidated financial statements of Shelter Properties III (the "Partnership" or "Registrant") have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-QSB and Item 310 (b) of Regulation S-B. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of 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, 2000 are not necessarily indicative of the results that may be expected for the year ending December 31, 2000. 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, 1999. Principles of Consolidation The financial statements include all of the accounts of the Partnership and its 99.99% owned partnership. The Corporate General Partner of the consolidated partnership is Shelter Realty III Corporation. Shelter Realty III Corporation may be removed as the general partner of the consolidated partnership by the Registrant; therefore, the consolidated partnership is controlled and consolidated by the Registrant. All significant interpartnership balances have been eliminated. Note B - Transfer of Control Pursuant to a series of transactions which closed on October 1, 1998 and February 26, 1999, Insignia Financial Group, Inc. and Insignia Properties Trust merged into Apartment Investment and Management Company ("AIMCO"), a publicly traded real estate investment trust, with AIMCO being the surviving corporation (the "Insignia Merger"). As a result, AIMCO acquired 100% ownership interest in the Corporate General Partner. The Corporate General Partner does not believe that this transaction has had or will have a material effect on the affairs and operations of the Partnership. Note C - Reconciliation of Cash Flows The following is a reconciliation of the subtotal on the accompanying consolidated 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.
For the Nine Months Ended September 30, 2000 1999 (in thousands) Net cash provided by operating activities $ 1,830 $ 1,445 Payments on mortgage notes payable (205) (190) Property improvements and replacements (755) (554) Change in restricted escrows, net (160) 384 Changes in reserves for net operating liabilities (356) (84) Additional reserves (132) (1,001) Net cash provided by operations $ 222 $ --
The Corporate General Partner reserved approximately $132,000 and $1,001,000 at September 30, 2000 and 1999, respectively, to fund capital improvements and repairs at the Partnership's four investment properties. Note D - 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 (i) payments to affiliates for services and (ii) 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 during the nine months ended September 30, 2000 and 1999. 2000 1999 (in thousands) Property management fees (included in operating expenses) $216 $211 Reimbursement for services of affiliates (included in operating and general and administrative expenses and investment properties) 145 92 Due to general partners 185 185 Due from general partners 11 11 During the nine months ended September 30, 2000 and 1999, affiliates of the Corporate General Partner were entitled to receive 5% of gross receipts from all of the Registrant's properties for providing property management services. The Registrant paid to such affiliates approximately $216,000 and $211,000 for the nine months ended September 30, 2000 and 1999, respectively. An affiliate of the Corporate General Partner received reimbursement of accountable administrative expenses amounting to approximately $145,000 and $92,000 for the nine months ended September 30, 2000 and 1999, respectively. During 1986 a liability of approximately $185,000 was incurred to the general partners for sales commissions earned. Pursuant to the Partnership Agreement, this liability cannot be paid until certain levels of returns are received by the limited partners. As of September 30, 2000, the level of return to the limited partners has not been met. 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. In addition to its indirect ownership of the general partner interest in the Partnership, AIMCO and its affiliates currently own 32,314 limited partnership units in the Partnership representing 58.75% of the outstanding units. 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 make one or more additional offers to acquire additional limited partnership interests in the Partnership for cash or in exchange for units in the operating partnership of AIMCO. Under the Partnership Agreement, unitholders holding a majority of the Units are entitled to take action with respect to a variety of matters, which would include without limitation, voting on certain amendments to the Partnership Agreement and voting to remove the General Partner. As a result of its ownership of 58.75% of the outstanding units, AIMCO is in a position to influence all voting decisions with respect to the Registrant. When voting on matters, AIMCO would in all likelihood vote the Units it acquired in a manner favorable to the interest of the Corporate General Partner because of their affiliation with the Corporate General Partner. Note E - Distributions During the nine months ended September 30, 2000, cash distributions of approximately $580,000 ($574,000 of which was paid to the limited partners, $10.44 per limited partnership unit) were paid from operations. Included in this amount was approximately $15,000 which consisted of withholding taxes paid to the state of South Carolina on behalf of the limited partners. During the nine months ended September 30, 1999, a cash distribution of approximately $200,000 ($198,000 to the limited partners, $3.60 per limited partnership unit) was paid from operations. Subsequent to September 30, 2000, an operating distribution of approximately $222,000 was declared and paid ($220,000 of which was paid to the limited partners, $4.00 per limited partnership unit). Note F - Segment Reporting Description of the types of products and services from which the reportable segment derives its revenue: The Partnership has one reportable segment: residential properties. The Partnership's residential property segment consists of four apartment complexes located in Georgia, South Carolina (2), and Tennessee. The Partnership rents apartment units to tenants for terms that are typically twelve months or less. Measurement of segment profit or loss: The Partnership evaluates performance based on segment profit (loss) before depreciation. The accounting policies of the reportable segment are the same as those described in the Partnership's Annual Report on Form 10-KSB for the year ended December 31, 1999. Factors management used to identify the enterprise's reportable segment: The Partnership's reportable segment consists of investment properties that offer similar products and services. Although each of the investment properties is managed separately, they have been aggregated into one segment as they provide services with similar types of products and customers. Segment information for the three and nine months ended September 30, 2000 and 1999 is shown in the tables below. The "Other" column includes partnership administration related items and income and expense not allocated to the reportable segment. Three Months Ended September 30, 2000 Residential Other Totals (in thousands) Rental income $ 1,306 $ -- $ 1,306 Other income 106 2 108 Interest expense 177 -- 177 Depreciation 259 -- 259 General and administrative expense -- 114 114 Segment profit (loss) 231 (112) 119 Nine Months Ended September 30, 2000 Residential Other Totals (in thousands) Rental income $ 3,982 $ -- $ 3,982 Other income 312 6 318 Interest expense 514 -- 514 Depreciation 786 -- 786 General and administrative expense -- 261 261 Segment profit (loss) 865 (255) 610 Total assets 12,878 215 13,093 Capital expenditures for investment properties 755 -- 755 Three Months Ended September 30, 1999 Residential Other Totals (in thousands) Rental income $ 1,317 $ -- $ 1,317 Other income 85 2 87 Interest expense 180 -- 180 Depreciation 220 -- 220 General and administrative expense -- 59 59 Segment profit (loss) 273 (57) 216 Nine months Ended September 30, 1999 Residential Other Totals (in thousands) Rental income $ 3,885 $ -- $ 3,885 Other income 236 12 248 Interest expense 548 -- 548 Depreciation 662 -- 662 General and administrative expense -- 176 176 Segment profit (loss) 789 (164) 625 Total assets 13,440 215 13,655 Capital expenditures for investment properties 554 -- 554 Note G - Legal Proceedings In March 1998, several putative unit holders of limited partnership units of the Partnership commenced an action entitled Rosalie Nuanes, et al. v. Insignia Financial Group, Inc., et al. in the Superior Court of the State of California for the County of San Mateo. The plaintiffs named as defendants, among others, the Partnership, its Corporate General Partner and several of their affiliated partnerships and corporate entities. The action purports to assert claims on behalf of a class of limited partners and derivatively on behalf of a number of limited partnerships (including the Partnership) which are named as nominal defendants, challenging the acquisition of interests in certain general partner entities by Insignia Financial Group, Inc. and entities which were, at one time, affiliates of Insignia; past tender offers by the Insignia affiliates to acquire limited partnership units; the management of partnerships by the Insignia affiliates; and the Insignia Merger. The plaintiffs seek monetary damages and equitable relief, including judicial dissolution of the Partnership. On June 25, 1998, the Corporate General Partner filed a motion seeking dismissal of the action. In lieu of responding to the motion, the plaintiffs have filed an amended complaint. The Corporate General Partner filed demurrers to the amended complaint which were heard February 1999. Pending the ruling on such demurrers, settlement negotiations commenced. On November 2, 1999, the parties executed and filed a Stipulation of Settlement, settling claims, subject to final court approval, on behalf of the Partnership and all limited partners who owned units as of November 3, 1999. Preliminary approval of the settlement was obtained on November 3, 1999 from the Court, at which time the Court set a final approval hearing for December 10, 1999. Prior to the December 10, 1999 hearing, the Court received various objections to the settlement, including a challenge to the Court's preliminary approval based upon the alleged lack of authority of prior lead counsel to enter the settlement. On December 14, 1999, the Corporate General Partner and its affiliates terminated the proposed settlement. In February 2000, counsel for some of the named plaintiffs filed a motion to disqualify plaintiff's lead and liaison counsel who negotiated the settlement. On June 27, 2000, the Court entered an order disqualifying them from the case. The Court is considering applications for lead counsel and has currently scheduled a hearing on the matter for November 20, 2000. The Corporate General Partner does not anticipate that costs associated with this case will be material to the Partnership's overall operations. The Partnership is unaware of any other pending or outstanding litigation that is not of a routine nature arising in the ordinary course of business. Item 2. Management's Discussion and Analysis or Plan of Operation The matters discussed in this Form 10-QSB contain certain forward-looking statements and involve risks and uncertainties (including changing market conditions, competitive and regulatory matters, etc.) detailed in the disclosures contained in this Form 10-QSB and the other filings with the Securities and Exchange Commission made by the Registrant from time to time. The discussions of the Registrant's business and results of operations, including forward-looking statements pertaining to such matters, does not take into account the effects of any changes to the Registrant's business and results of operation. Accordingly, actual results could differ materially from those projected in the forward-looking statements as a result of a number of factors, including those identified herein. 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, 2000 and 1999: Average Occupancy Property 2000 1999 Essex Park Apartments Columbia, South Carolina 91% 92% Colony House Apartments Mufreesboro, Tennessee 91% 92% North River Village Apartments Atlanta, Georgia 95% 95% Willowick Apartments Greenville, South Carolina 96% 94% Results of Operations The Registrant's net income for the three and nine months ended September 30, 2000 was approximately $119,000 and $610,000, respectively, as compared to approximately $216,000 and $625,000 for the three and nine months ended September 30, 1999. The decrease in net income for both periods is due to an increase in total expenses partially offset by an increase in total revenues. Total revenues increased due to an increase in rental income for the nine months ended September 30, 2000 and an increase in other income for the three and nine months ended September 30, 2000. Rental income increased due to an increase in the average rental rates at all four of the Registrant's properties. Other income increased primarily due to an increase in miscellaneous income at North Village Apartments, and to a lesser extent, an increase in interest income. Total expenses increased for the three and nine months ended September 30, 2000 due to an increase in depreciation and general and administrative expenses, which were partially offset by a decrease in interest expense. Depreciation expense increased due to increased property improvements and replacements at all four of the investment properties which are now being depreciated. Interest expense decreased slightly for the three month period and more significantly for the nine month period primarily due to the reduction of principal balances on the properties' mortgages. Operating and property tax expense remained relatively constant for the three and nine months ended September 30, 2000. General and administrative expense increased for the three and nine month periods ended September 30, 2000 as a result of an increase in costs associated with the annual audit and management reimbursements to the Corporate General Partner allowed under the Partnership Agreement. Included in general and administrative expenses for the nine months ended September 30, 2000 and 1999 were costs associated with the quarterly and annual communications with investors and regulatory agencies and the annual appraisals required by the Partnership Agreement. As part of the ongoing business plan of the Registrant, the Corporate General Partner monitors the rental market environments 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 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. Liquidity and Capital Resources At September 30, 2000, the Partnership had cash and cash equivalents of approximately $785,000 compared to approximately $1,515,000 at September 30, 1999. The increase in cash and cash equivalents of approximately $130,000 for the nine months ended September 30, 2000, from the Partnership's calendar year end, is due to approximately $1,830,000 of cash provided by operating activities which was partially offset by approximately $785,000 of cash used in financing activities and approximately $915,000 of cash used in investing activities. Cash used in investing activities consisted of property improvements and replacements and, to a lesser extent, net deposits to escrow accounts maintained by the mortgage lender. Cash used in financing activities consisted of partner distributions and, to a lesser extent, payments of principal made on the mortgages encumbering the Registrant's properties. The Registrant invests its working capital reserves in money market accounts. 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 investment properties to adequately maintain the physical assets and other operating needs of the Registrant and to comply with Federal, state, local, legal, and regulatory requirements. Capital improvements completed at each of the Registrant's properties are detailed below. Essex Park Apartments The Partnership has budgeted approximately $223,000 for capital improvements during 2000 at Essex Park Apartments, consisting primarily of appliances, floor coverings, plumbing improvements, and other building improvements. The Partnership has completed approximately $139,000 in capital expenditures as of September 30, 2000, consisting primarily of fencing improvements, floor covering and appliance replacements and other building improvements. These improvements were funded from operations. Colony House Apartments The Partnership has budgeted approximately $117,000 for capital improvements during 2000 at Colony House Apartments consisting primarily of appliances, floor coverings, swimming pool improvements, air conditioning improvements and other building improvements. The Partnership has completed approximately $334,000 in capital expenditures as of September 30, 2000, consisting primarily of floor covering and appliance replacements, air conditioning improvements, swimming pool improvements. These improvements were funded from operations. North River Village Apartments The Partnership has budgeted approximately $214,000 for capital improvements during 2000 at North River Village Apartments, consisting primarily of appliances, floor coverings and plumbing improvements. The Partnership has completed approximately $203,000 in capital expenditures as of September 30, 2000, consisting primarily of floor covering and HVAC replacements, plumbing improvements, parking lot improvements, swimming pool improvements, and other building improvements. These improvements were funded from operations. Willowick Apartments The Partnership has budgeted approximately $107,000 for capital improvements during 2000 at Willowick Apartments, consisting primarily of appliances, floor coverings, major landscaping and clubhouse renovations. The Partnership has completed approximately $79,000 in capital expenditures as of September 30, 2000, consisting primarily of floor covering, lighting and appliance replacements and other building improvements. These improvements were funded from operations. The additional capital expenditures will be incurred only if cash is available from operations and Partnership reserves. To the extent that such budgeted capital improvements are completed, the Registrant's distributable cash flow, if any, may be adversely affected at least in the short term. The Registrant's current assets are thought to be sufficient for any near term needs (exclusive of capital improvements) of the Registrant. The mortgage indebtedness of approximately $7,738,000, net of discount, is amortized over varying periods with balloon payments due from November 15, 2002 to October 15, 2003. The Corporate General Partner will attempt to refinance such indebtedness and/or sell the properties prior to such maturity dates. If the properties cannot be refinanced or sold for a sufficient amount, the Registrant will risk losing such properties through foreclosure. During the nine months ended September 30, 2000, cash distributions of approximately $580,000 ($574,000 of which was paid to the limited partners, $10.44 per limited partnership unit) were paid from operations. Included in this amount was approximately $15,000 which consisted of withholding taxes paid to the state of South Carolina on behalf of the limited partners. During the nine months ended September 30, 1999, a cash distribution of approximately $200,000 ($198,000 to the limited partners, $3.60 per limited partnership unit) was paid from operations. Subsequent to September 30, 2000, an operating distribution of approximately $222,000 was declared and paid ($220,000 of which was paid to the limited partners, $4.00 per limited partnership unit). Future cash distributions will depend on the levels of net cash generated from operations, the availability of cash reserves, and the timing of debt maturities, refinancings, and/or property sales. The Partnership's distribution policy is reviewed on a quarterly basis. There can be no assurance, however, that the Partnership will generate sufficient funds from operations, after planned capital improvement expenditures, to permit any additional distributions to its partners in 2000 or subsequent periods. In addition, the Partnership may be restricted from making distributions if the amount in the reserve account for each property maintained by the mortgage lender is less than $400 per apartment unit at Colony House Apartments, Essex Park Apartments, and Willowick Apartments and $200 per apartment unit at North River Village Apartments. As of September 30, 2000 the reserve account was fully funded with approximately $652,000 on deposit with the mortgage lender. PART II - OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS In March 1998, several putative unit holders of limited partnership units of the Partnership commenced an action entitled Rosalie Nuanes, et al. v. Insignia Financial Group, Inc., et al. in the Superior Court of the State of California for the County of San Mateo. The plaintiffs named as defendants, among others, the Partnership, its Corporate General Partner and several of their affiliated partnerships and corporate entities. The action purports to assert claims on behalf of a class of limited partners and derivatively on behalf of a number of limited partnerships (including the Partnership) which are named as nominal defendants, challenging the acquisition of interests in certain general partner entities by Insignia Financial Group, Inc. and entities which were, at one time, affiliates of Insignia; past tender offers by the Insignia affiliates to acquire limited partnership units; the management of partnerships by the Insignia affiliates; and the Insignia Merger. The plaintiffs seek monetary damages and equitable relief, including judicial dissolution of the Partnership. On June 25, 1998, the Corporate General Partner filed a motion seeking dismissal of the action. In lieu of responding to the motion, the plaintiffs have filed an amended complaint. The Corporate General Partner filed demurrers to the amended complaint which were heard February 1999. Pending the ruling on such demurrers, settlement negotiations commenced. On November 2, 1999, the parties executed and filed a Stipulation of Settlement, settling claims, subject to final court approval, on behalf of the Partnership and all limited partners who owned units as of November 3, 1999. Preliminary approval of the settlement was obtained on November 3, 1999 from the Court, at which time the Court set a final approval hearing for December 10, 1999. Prior to the December 10, 1999 hearing, the Court received various objections to the settlement, including a challenge to the Court's preliminary approval based upon the alleged lack of authority of prior lead counsel to enter the settlement. On December 14, 1999, the Corporate General Partner and its affiliates terminated the proposed settlement. In February 2000, counsel for some of the named plaintiffs filed a motion to disqualify plaintiff's lead and liaison counsel who negotiated the settlement. On June 27, 2000, the Court entered an order disqualifying them from the case. The Court is considering applications for lead counsel and has currently scheduled a hearing on the matter for November 20, 2000. The Corporate General Partner does not anticipate that costs associated with this case will be material to the Partnership's overall operations. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K a) Exhibits: Exhibit 27, Financial Data Schedule, is filed as an exhibit to this report. b) Reports on Form 8-K filed during the quarter ended September 30, 2000: None. SIGNATURES In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. SHELTER PROPERTIES III By: Shelter Realty III Corporation Corporate General Partner By: /s/Patrick J. Foye Patrick J. Foye Executive Vice President By: /s/Martha L. Long Martha L. Long Senior Vice President and Controller Date: November 8, 2000 EX-27 2 0002.txt THIRD QUARTER 10-QSB
5 This schedule contains summary financial information extracted from SHELTER PROPERTIES III 2000 Third Quarter 10-QSB and is qualified in its entirety by reference to such 10-QSB filing. 0000353282 SHELTER PROPERTIES III 1,000 9-MOS DEC-31-2000 JUL-01-2000 SEP-30-2000 785 0 184 0 0 0 28,092 16,878 13,093 0 7,738 0 0 0 4,390 13,093 0 4,300 0 0 3,690 0 514 0 0 0 0 0 0 610 10.98 0 Registrant has an unclassified balance sheet. Multiplier is 1.
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