-----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, DwFjSOuwkzr5pv583NeIrYAwrxJA94nYtwqwjrI5TZOpitMBNfskMSKOUNkC6+So oK/KMb+2CjxfYuNO/MMsag== 0000711642-01-500025.txt : 20010511 0000711642-01-500025.hdr.sgml : 20010511 ACCESSION NUMBER: 0000711642-01-500025 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20010331 FILED AS OF DATE: 20010510 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: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10QSB SEC ACT: SEC FILE NUMBER: 000-10260 FILM NUMBER: 1628034 BUSINESS ADDRESS: STREET 1: 55 BEATTIE PLACE STREET 2: POST OFFICE BOX 1089 CITY: GREENVILLE STATE: SC ZIP: 29602 BUSINESS PHONE: 3037578101 MAIL ADDRESS: STREET 1: 1873 SOUTH BELLAIRE STREET STREET 2: 17TH FLOOR CITY: DENVER STATE: CO ZIP: 80222 10QSB 1 sp3.txt SP3 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 March 31, 2001 [ ] 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) March 31, 2001
Assets Cash and cash equivalents $ 590 Receivables and deposits 215 Restricted escrows 135 Other assets 486 Investment properties: Land $ 1,281 Buildings and related personal property 27,075 28,356 Less accumulated depreciation (17,416) 10,940 $ 12,366 Liabilities and Partners' Deficit Liabilities Accounts payable $ 64 Tenant security deposit liabilities 104 Accrued property taxes 103 Other liabilities 467 Mortgage notes payable 15,234 Partners' Deficit General partners $ (103) Limited partners (55,000 units issued and outstanding) (3,503) (3,606) $ 12,366 See Accompanying Notes to Consolidated Financial Statements
b) SHELTER PROPERTIES III CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) (in thousands, except unit data)
Three Months Ended March 31, 2001 2000 Revenues: Rental income $1,314 $1,317 Other income 129 104 Total revenues 1,443 1,421 Expenses: Operating 569 606 General and administrative 76 60 Depreciation 272 260 Interest 286 156 Property taxes 108 83 Total expenses 1,311 1,165 Net income $ 132 $ 256 Net income allocated to general partners (1%) $ 1 $ 3 Net income allocated to limited partners (99%) 131 253 $ 132 $ 256 Net income per limited partnership unit $ 2.38 $4.60 Distributions per limited partnership unit $17.28 $ -- See Accompanying Notes to Consolidated Financial Statements
c) SHELTER PROPERTIES III CONSOLIDATED STATEMENT OF CHANGES IN PARTNERS' DEFICIT (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 at December 31, 2000 55,000 $ (94) $(2,684) $(2,778) Distributions to partners (10) (950) (960) Net income for the three months ended March 31, 2001 -- 1 131 132 Partners' deficit at March 31, 2001 55,000 $ (103) $(3,503) $(3,606) See Accompanying Notes to Consolidated Financial Statements
d) SHELTER PROPERTIES III CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (in thousands)
Three Months Ended March 31, 2001 2000 Cash flows from operating activities: Net income $ 132 $ 256 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation 272 260 Amortization of discounts and loan costs 8 26 Change in accounts: Receivables and deposits 263 296 Other assets (89) (53) Accounts payable (30) (19) Tenant security deposit liabilities -- (1) Accrued property taxes (167) (59) Other liabilities 93 (57) Net cash provided by operating activities 482 649 Cash flows from investing activities: Property improvements and replacements (138) (202) Net withdrawals from (deposits to) restricted escrows 599 (168) Net cash provided by (used in) investing activities 461 (370) Cash flows from financing activities: Distributions to partners (960) -- Payments on mortgage notes payable (58) (68) Net cash used in financing activities (1,018) (68) Net (decrease) increase in cash and cash equivalents (75) 211 Cash and cash equivalents at beginning of period 665 655 Cash and cash equivalents at end of period $ 590 $ 866 Supplemental disclosure of cash flow information: Cash paid for interest $ 197 $ 154 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. The general partner responsible for management of the Partnership's business is Shelter Realty III Corporation, a South Carolina corporation (the "Corporate General Partner"). The Corporate General Partner is a subsidiary of Apartment Investment and Management Company ("AIMCO"), a publicly traded real estate investment trust. In the opinion of 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 month period ended March 31, 2001, are not necessarily indicative of the results that may be expected for the fiscal year ending December 31, 2001. 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, 2000. 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. Segment Reporting Statement of Financial Accounting Standards ("SFAS") No. 131, "Disclosure about Segments of an Enterprise and Related Information" 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. It also establishes standards for related disclosures about products and services, geographic areas, and major customers. As defined in SFAS No. 131, the Partnership has only one reportable segment. The Corporate General Partner believes that segment-based disclosures will not result in a more meaningful presentation than the consolidated financial statements as currently presented. Note B - 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 Three Months Ended March 31, 2001 2000 (in thousands) Net cash provided by operating activities $ 482 $ 649 Payments on mortgage notes payable (58) (68) Property improvements and replacements (138) (202) Change in restricted escrows, net 599 (168) Changes in reserves for net operating assets (70) (107) Additional reserves (391) (104) Net cash provided by operations $ 424 $ --
The Corporate General Partner reserved approximately $391,000 and $104,000 at March 31, 2001 and 2000, respectively, to fund capital improvements and repairs at the Partnership's four investment 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 (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 three months ended March 31, 2001 and 2000. 2001 2000 (in thousands) Property management fees (included in operating expenses) $ 73 $ 72 Reimbursement for services of affiliates (included in operating and general and administrative expenses and investment properties) 46 27 Due to general partners (included in other liabilities) 185 185 Due from general partners (included in receivables and deposits) 11 11 During the three months ended March 31, 2001 and 2000, 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 $73,000 and $72,000 for the three months ended March 31, 2001 and 2000, respectively. An affiliate of the Corporate General Partner received reimbursement of accountable administrative expenses amounting to approximately $46,000 and $27,000 for the three months ended March 31, 2001 and 2000, 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 March 31, 2001, the level of return to the limited partners has not been met. In addition to its indirect ownership of the combined general partner interests in the Partnership, AIMCO and its affiliates currently own 34,527 limited partnership units in the Partnership representing 62.78% 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 partners. As a result of its ownership of 62.78% 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 D - Distributions During the three months ended March 31, 2001, the Partnership made distributions of approximately $960,000 (approximately $950,000 to the limited partners or $17.28 per limited partnership unit) from operations. Subsequent to March 31, 2001, the Partnership made a distribution of approximately $424,000 (approximately $420,000 to the limited partners or $7.63 per limited partnership unit) from operations. There were no distributions during the three months ended March 31, 2000. Note E - 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, among other things, the acquisition of interests in certain general partner entities by Insignia Financial Group, Inc. ("Insignia") and entities which were, at one time, affiliates of Insignia; past tender offers by the Insignia affiliates to acquire limited partnership units; management of the 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 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 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 and an appeal was taken from the order on October 5, 2000. On December 4, 2000, the Court appointed the law firm of Lieff Cabraser Heimann & Bernstein LLP as new lead counsel for plaintiffs and the putative class. Plaintiffs filed a third amended complaint on January 19, 2001. On March 2, 2001, the Corporate General Partner and its affiliates filed a demurrer to the third amended complaint. The demurrer is scheduled to be heard on May 14, 2001. The Court has also scheduled a hearing on a motion for class certification for August 27, 2001. Plaintiffs must file their motion for class certification no later than June 15, 2001. 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 operations. 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 three months ended March 31, 2001 and 2000: Average Occupancy Property 2001 2000 Essex Park Apartments Columbia, South Carolina 91% 91% Colony House Apartments Mufreesboro, Tennessee 88% 94% North River Village Apartments Atlanta, Georgia 88% 92% Willowick Apartments Greenville, South Carolina 93% 95% The Corporate General Partner attributes the decrease in occupancy at Colony House Apartments and North River Village Apartments to the competitive market of the apartment industry in the Mufreesboro and Atlanta areas. The decrease is also attributable to the purchase of new homes by tenants due to lower interest rates. Results of Operations The Registrant's net income for the three months ended March 31, 2001 was approximately $132,000 as compared to approximately $256,000 for the three months ended March 31, 2000. The decrease in net income was due to an increase in total expenses which were partially offset by an increase in total revenues. The increase in total expenses was primarily due to an increase in interest expense, property tax expense and general and administrative expenses which was slightly offset by a decrease in operating expenses. Interest expense increased due to the refinancings of the mortgages encumbering Colony House Apartments, Essex Park Apartments, and Willowick Apartments during December 2000. Property tax expense increased due to an increase in the assessed values and timing and receipt of invoices from the taxing authorities at Essex Park Apartments and Willowick Apartments which affected the recorded property tax accruals. General and administrative expenses increased due to an increase in audit fees and management reimbursements to the Corporate General Partner allowed under the Partnership Agreement. Operating expense decreased due to a decrease in maintenance expenses which was partially offset by an increase in property expenses at the Partnership's investment properties. Maintenance expense decreased largely because of the reduction in contract service providers that were employed by the investment properties. Property expense increased due to an increase in employee salaries and related benefits. Included in general and administrative expenses for the three months ended March 31, 2001 and 2000 are costs associated with the quarterly and annual communications with investors and regulatory agencies and the annual audit and appraisals required by the Partnership Agreement. Total revenues increased as a result of an increase in other income. Other income increased as a result of an increase in interest income as a result of higher average cash balances being maintained in interest bearing accounts. 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 March 31, 2001, the Registrant had cash and cash equivalents of approximately $590,000 as compared to approximately $866,000 at March 31, 2000. Cash and cash equivalents decreased approximately $75,000 for the three months ended March 31, 2001 from the Registrant's year end, primarily due to approximately $1,018,000 of cash used in financing activities, which was partially offset by approximately $482,000 of cash provided by operating activities and approximately $461,000 of cash provided by investing activities. Cash provided by investing activities consisted of net withdrawals from restricted escrow accounts maintained by the mortgage lender which was partially offset by cash used for property improvements and replacements at all four of the Partnership's properties. Cash used in financing activities consisted of payments of principal made on the mortgages encumbering the Registrant's properties and distributions to partners. The Registrant invests its working capital reserves in interest bearing 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 completed approximately $28,000 in capital expenditures as of March 31, 2001, consisting primarily of floor covering replacement, painting, and appliance replacements and exterior painting. These improvements were funded primarily from Partnership operations. The Partnership has budgeted, but is not limited to, approximately $151,000 for capital improvements during 2001 at Essex Park Apartments, consisting primarily of appliance and floor covering replacements and air conditioning replacements. Colony House Apartments The Partnership has completed approximately $36,000 in capital expenditures as of March 31, 2001, consisting primarily of floor covering and appliance replacements, structural improvements, and air conditioning replacements. These improvements were funded primarily from Partnership operations. The Partnership has budgeted, but is not limited to, approximately $76,000 for capital improvements during 2001 at Colony House Apartments consisting primarily of appliance and floor covering replacements and other building improvements. North River Village Apartments The Partnership has completed approximately $63,000 in capital expenditures as of March 31, 2001, consisting primarily of floor covering and appliance replacements and structural improvements. These improvements were funded primarily from Partnership operations. The Partnership has budgeted, but is not limited to, approximately $37,000 for capital improvements during 2001 at North River Village Apartments, consisting primarily of appliance and floor covering replacements and structural improvements. The Partnership is currently reviewing the proposed budget. Willowick Apartments The Partnership has completed approximately $11,000 in capital expenditures as of March 31, 2001, consisting primarily of floor covering and appliance replacements. These improvements were funded primarily from Partnership operations. The Partnership has budgeted, but is not limited to, approximately $66,000 for capital improvements during 2001 at Willowick Apartments, consisting primarily of appliance and floor covering replacements, air conditioning improvements, and landscaping. 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 $15,234,000, net of discount, is amortized over varying periods with balloon payments due from October 2003 to January 2021. The Corporate General Partner will attempt to refinance such indebtedness and/or sell the properties prior to such maturity date. If the properties cannot be refinanced or sold for a sufficient amount, the Registrant will risk losing such properties through foreclosure. During the three months ended March 31, 2001, the Partnership made distributions of approximately $960,000 (approximately $950,000 to the limited partners or $17.28 per limited partnership unit) from operations. Subsequent to the three months ended March 31, 2001, the Partnership made a distribution of approximately $424,000 (approximately $420,000 to the limited partners or $7.63 per limited partnership unit) from operations. 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 monthly 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 2001 or subsequent periods. In addition, the Partnership may be restricted from making distributions if the amount in the reserve account for North River Village Apartments maintained by the mortgage lender is less than $200 per apartment unit. As of March 31, 2001 the reserve account was fully funded with approximately $54,000 on deposit with the mortgage lender. In addition to its indirect ownership of the combined general partner interests in the Partnership, AIMCO and its affiliates currently own 34,527 limited partnership units in the Partnership representing 62.78% 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 partners. As a result of its ownership of 62.78% 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. 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, among other things, the acquisition of interests in certain general partner entities by Insignia Financial Group, Inc. ("Insignia") and entities which were, at one time, affiliates of Insignia; past tender offers by the Insignia affiliates to acquire limited partnership units; management of the 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 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 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 and an appeal was taken from the order on October 5, 2000. On December 4, 2000, the Court appointed the law firm of Lieff Cabraser Heimann & Bernstein LLP as new lead counsel for plaintiffs and the putative class. Plaintiffs filed a third amended complaint on January 19, 2001. On March 2, 2001, the Corporate General Partner and its affiliates filed a demurrer to the third amended complaint. The demurrer is scheduled to be heard on May 14, 2001. The Court has also scheduled a hearing on a motion for class certification for August 27, 2001. Plaintiffs must file their motion for class certification no later than June 15, 2001. 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: None. b) Reports on Form 8-K filed during the quarter ended March 31, 2001: 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: May 10, 2001 -----END PRIVACY-ENHANCED MESSAGE-----