-----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, IhDz6xv5BfsSZsPqvVh7f91bwxC6I0phP05oa7ieZie9+2Br0tuGzXNc7cuG9aEx 3g1JQ/Idg8pfAmwvfeNmww== 0000711642-00-000023.txt : 20000215 0000711642-00-000023.hdr.sgml : 20000215 ACCESSION NUMBER: 0000711642-00-000023 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19991101 FILED AS OF DATE: 20000214 FILER: COMPANY DATA: COMPANY CONFORMED NAME: SHELTER PROPERTIES IV LIMITED PARTNERSHIP CENTRAL INDEX KEY: 0000702174 STANDARD INDUSTRIAL CLASSIFICATION: REAL ESTATE [6500] IRS NUMBER: 570721760 STATE OF INCORPORATION: SC FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10QSB SEC ACT: SEC FILE NUMBER: 000-10884 FILM NUMBER: 541819 BUSINESS ADDRESS: STREET 1: 55 BEATTIE PL STREET 2: PO BOX 1089 CITY: GREENVILLE STATE: SC ZIP: 29602 BUSINESS PHONE: 3037578101 MAIL ADDRESS: STREET 1: 55 BEATTIE PL STREET 2: PO BOX 1089 CITY: GREENVILLE STATE: SC ZIP: 29602 10QSB 1 TWO MONTH 10-QSB 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) [ ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended ___________ [X] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from November 1, 1999 to December 31, 1999 Commission file number 0-10884 SHELTER PROPERTIES IV (Exact name of small business issuer as specified in its charter) South Carolina 57-0721760 (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 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__ PART I - FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS a) SHELTER PROPERTIES IV CONSOLIDATED BALANCE SHEET (Unaudited) (in thousands, except per unit data) December 31, 1999
Assets Cash and cash equivalents $ 3,630 Receivables and deposits 726 Restricted escrows 901 Other assets 510 Investment properties: Land $ 3,442 Buildings and related personal property 59,421 ------- 62,863 Less accumulated depreciation (36,714) 26,149 ------- ------- $ 31,916 Liabilities and Partners' (Deficit) Capital Liabilities Accounts payable $ 204 Tenant security deposit liabilities 232 Accrued property taxes 341 Other liabilities 287 Distributions payable 1,000 Mortgage notes payable 22,749 Partners' (Deficit) Capital General partners $ (14) Limited partners (49,995 units issued and outstanding) 7,117 7,103 ------- ------- $ 31,916
See Accompanying Notes to Consolidated Financial Statements b) SHELTER PROPERTIES IV CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) (in thousands, except unit data) Two Months Ended December 31, 1999 1998 ---- ---- (restated) Revenues: Rental income $1,840 $1,876 Other income 90 107 ----- ----- Total revenues 1,930 1,983 ----- ----- Expenses: Operating 865 773 General and administrative 48 46 Depreciation 398 366 Interest 345 356 Property taxes 137 114 ----- ----- Total expenses 1,793 1,655 ----- ----- Income before cumulative effect of a change in accounting principle 137 328 Cumulative effect on prior years of a change in accounting for the cost of exterior painting and major landscaping (Note A) -- 403 ----- ----- Net income $ 137 $ 731 ===== ==== Net income allocated to general partners (1%) $ 1 $ 7 Net income allocated to limited partners (99%) 136 724 ----- ---- $ 137 $ 731 ===== ==== Net income per limited partnership unit: Income before cumulative effect of a change in accounting principle 2.72 6.50 Cumulative effect on prior years of a change in accounting for the cost of exterior painting and major landscaping -- 7.98 ----- ----- $ 2.72 $14.48 ===== ===== Distributions per limited partnership unit $19.80 $47.52 ===== ===== See Accompanying Notes to Consolidated Financial Statements c) SHELTER PROPERTIES IV 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 50,000 $ 2 $50,000 $50,002 ====== ====== ====== ====== Partners' (deficit) capital at October 31, 1999 49,995 $ (5) $ 7,971 $ 7,966 Net income for the two months ended December 31, 1999 -- 1 136 137 Partners' distributions -- (10) (990) (1,000) ------ ------ ------ ------ Partners' (deficit) capital at December 31, 1999 49,995 $ (14) $ 7,117 $ 7,103 ====== ====== ====== ======
See Accompanying Notes to Consolidated Financial Statements d) SHELTER PROPERTIES IV CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (in thousands)
Two Months Ended December 31, 1999 1998 (restated) Cash flows from operating activities: Net income $ 137 $ 731 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation 398 366 Amortization of discounts and loan costs 47 46 Cumulative effect on prior year of a change in accounting principle -- (403) Change in accounts: Receivables and deposits 425 465 Other assets 32 4 Accounts payable (255) (3) Tenant security deposit liabilities (14) (5) Accrued property taxes (335) (371) Other liabilities (32) (34) ------ ------ Net cash provided by operating activities 403 796 ------ ------ Cash flows from investing activities: Property improvements and replacements (230) (259) Net (deposits to) withdrawals from restricted escrows (13) 89 ------ ------ Net cash used in investing activities (243) (170) ------ ------ Cash flows from financing activities: Partners' distributions -- (2,400) Payments on mortgage notes payable (144) (134) ------ ------ Net cash used in financing activities (144) (2,534) ------ ------ Net increase (decrease) in cash and cash equivalents 16 (1,908) Cash and cash equivalents at beginning of period 3,614 3,181 ------ ------ Cash and cash equivalents at end of period $ 3,630 $ 1,273 ====== ====== Supplemental disclosure of cash flow information: Cash paid for interest $ 298 $ 309 ====== ======
Supplemental disclosure of non-cash activity: At December 31, 1999 distributions payable and partners equity was adjusted by $1,000,000 for unpaid distributions. Also, investment properties, accumulated depreciation and other liabilities were adjusted by $23,000, $11,000 and $12,000, respectively due to write-off of assets as a result of a casualty. See Accompanying Notes to Consolidated Financial Statements e) SHELTER PROPERTIES IV NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) Note A - Basis of Presentation The accompanying unaudited consolidated financial statements of Shelter Properties IV (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 IV 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 two month period ended December 31, 1999, 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 October 31, 1999. Principles of Consolidation: The financial statements include all the accounts of the Partnership and its 99.99% owned partnership. The general partner of the consolidated partnership is the Corporate General Partner. The Corporate General Partner 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. Change in Accounting Principle: During the two months ended December 31, 1998, the Partnership changed its method of accounting to capitalize the cost of exterior painting and major landscaping. The Partnership believes that this accounting principle change is preferable because it provides a better matching of expenses with the related benefit of the expenditures and it is consistent with industry practice and the policies of the Corporate General Partner. The effect of the change for the two months ended December 31, 1998 was to decrease income before the change by approximately $24,000 ($.48 per limited partnership unit). The cumulative effect adjustment of approximately $403,000 is the result of applying the aforementioned change in accounting principle retroactively and is included in net income for the two months ended December 31, 1998. The accounting principle change will not have an effect on cashflow, funds available for distributions or fees payable to the general partners or affiliates. Change in Fiscal Year End: The Partnership elected to change its fiscal year from October 31, to December 31, effective for the period ending December 31, 1999. 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 of the Partnership (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 Two Months Ended December 31, 1999 1998 ---- ---- (in thousands) Net cash provided by operating activities $ 403 $ 796 Payments on mortgage notes payable (144) (134) Property improvements and replacements (230) (259) Change in restricted escrows, net (13) 89 Changes in reserves for net operating liabilities 179 (56) Additional reserves (195) (436) ----- ----- Net cash from operations $----- $----- ===== ===== The Corporate General Partner believed it to be in the best interest of the Partnership to reserve net cash from operations of approximately $195,000 and $436,000 at December 31, 1999 and 1998, respectively, to fund continuing capital improvements and repairs at the Partnership's three investment properties. Note D - Distributions A cash distribution from operations of approximately $1,000,000 was declared during the two months ended December 31, 1999, of which approximately $990,000 was payable to limited partners ($19.80 per limited partnership unit). This distribution was paid during January 2000. A cash distribution of approximately $2,400,000 was made from operations during the two months ended December 31, 1998, of which approximately $2,376,000 was paid to limited partners ($47.52 per limited partnership unit). Note E - 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) certain payments to affiliates for services and (ii) reimbursement of certain expenses incurred by affiliates on behalf of the Partnership. The following payments were made to the Corporate General Partner and its affiliates during the two months ended December 31, 1999 and 1998: 1999 1998 ---- ---- (in thousands) Property management fees (included in operating expenses) $ 97 $ 98 Reimbursement for services of affiliates (included in operating, general and administrative expenses, and investment properties) 33 30 During the two months ended December 31, 1999 and 1998, affiliates of the Corporate General Partner were entitled to receive 5% of gross receipts from all of the Registrant's properties as compensation for providing property management services. The Registrant paid to such affiliates approximately $97,000 and $98,000 for the two months ended December 31, 1999 and 1998, respectively. Affiliates of the Corporate General Partner received reimbursement of accountable administrative expenses amounting to approximately $33,000 and $30,000 for the two months ended December 31, 1999 and 1998, respectively. Several tender offers were made by various parties, including affiliates of the general partners, during the two months ended December 31, 1999 and the fiscal years ended October 31, 1999 and 1998. As a result of these tender offers, AIMCO and its affiliates currently own 28,913 units of limited partnership units in the Partnership representing 57.83% of the outstanding units. 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. Consequently, AIMCO is in a position to significantly influence all voting decisions with respect to the Registrant. Under the Partnership Agreement, unitholders holding a majority of the Units are entitled to take action with respect to a variety of matters. 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 F - Segment Reporting Description of the types of products and services from which the reportable segment derives its revenues: The Partnership has one reportable segment: residential properties consisting of three apartment complexes located in Florida, South Carolina, and North Carolina. 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 net income. The accounting policies of the reportable segment are the same as those described in the summary of significant accounting policies in the Partnership's Annual Report on Form 10-KSB for the year ended October 31, 1999. Factors management used to identify the Partnership's reportable segment: The Partnership's reportable segment consists of investment properties that offer similar products and services. Although each of the investment properties are managed separately, they have been aggregated into one segment as they provide services with similar types of products and customers. Segment information for the two month periods ended December 31, 1999 and 1998 is shown in the tables below (in thousands). The "Other" column includes partnership administration related items and income and expense not allocated to the reportable segment. 1999 Residential Other Totals ---- ----------- ----- ------ Rental income $ 1,840 $ -- $ 1,840 Other income 88 2 90 Interest expense 345 -- 345 Depreciation 398 -- 398 General and administrative expense -- 48 48 Segment profit (loss) 183 (46) 137 Total assets 30,534 1,382 31,916 Capital expenditures for investment properties 230 -- 230 1998 Residential Other Totals ---- ----------- ----- ------ Rental income $ 1,876 $ -- $ 1,876 Other income 88 19 107 Interest expense 356 -- 356 Depreciation 366 -- 366 General and administrative expense -- 46 46 Cumulative effect on prior years of a change in accounting principle 403 -- 403 Segment profit (loss) 758 (27) 731 Total assets 30,308 465 30,773 Capital expenditures for investment properties 259 -- 259 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, the 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 by Insignia Financial Group, Inc. ("Insignia") and entities which were, at one time, affiliates of Insignia ("Insignia Affiliates") of interests in certain general partner entities, past tender offers by Insignia Affiliates to acquire limited partnership units, the management of partnerships by Insignia Affiliates and the Insignia Merger (see "Note B - Transfer of Control"). 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 own units as of November 3, 1999. Preliminary approval of the settlement was obtained on November 3, 1999 from the Superior Court of the State of California, County of San Mateo, 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 class plaintiffs' counsel to enter the settlement. On December 14, 1999, the Corporate General Partner and its affiliates terminated the proposed settlement. Certain plaintiffs have filed a motion to disqualify some of the plaintiffs' counsel in the action. 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 discussion 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 three apartment complexes. The following table sets forth the average occupancy of the properties for each of the two months ended December 31, 1999 and 1998: Average Occupancy Property 1999 1998 -------- ---- ---- Baymeadows Apartments Jacksonville, Florida 93% 95% Quail Run Apartments Columbia, South Carolina 93% 92% Countrywood Village Apartments Raleigh, North Carolina 90% 92% Results of Operations The Partnership's net income before cumulative effect of a change in accounting principle for the two months ended December 31, 1999 was approximately $137,000 compared to approximately $328,000 for the corresponding period in 1998. The decrease in income before cumulative effect of a change in accounting principle for the comparable two months periods is due to a decrease in total revenues and an increase in total expenses. The decrease in total revenues is primarily due to a decrease in rental income. Rental income decreased due to a decrease in occupancy at both Baymeadows and Countrywood Village which more than offset an increase in average rental rates at all three investment properties. Total expenses increased for the two months ended December 31, 1999 as compared to the two months ended December 31, 1998, due to increases in operating and property tax expenses at Baymeadows and depreciation at all three of the properties. Operating expense increased at Baymeadows due to increases in salaries, commissions and other related benefits as well as increases in sewer repair, floor covering repairs and interior painting at Baymeadows. The general partners are currently in the process of evaluating an increase in expenditures to upgrade Baymeadows so that it may improve its position in the Jacksonville market. As of this report, approximately $1,350,000 has been approved to be spent on upgrading the property. Depreciation expense increased at all three properties due to the increase in capital improvements and replacements made over the past twelve months. Included in general and administrative expense for the two month period ended December 31, 1999 are reimbursements to the Corporate General Partner allowed under the Partnership Agreement. In addition, costs associated with the quarterly and annual communications with investors and regulatory agencies and the annual audit and appraisals required by the Partnership Agreement are also included. During the two months ended December 31, 1998, the Partnership changed its method of accounting to capitalize the cost of exterior painting and major landscaping. The Partnership believes that this accounting principle change is preferable because it provides a better matching of expenses with the related benefit of the expenditures and it is consistent with industry practice and the policies of the Corporate General Partner. The effect of the change for the two months ended December 31, 1998 was to decrease income before the change by approximately $24,000 ($.48 per limited partnership unit). The cumulative effect adjustment of approximately $403,000 is the result of applying the aforementioned change in accounting principle retroactively and is included in net income for the two months ended December 31, 1998. The accounting principle change will not have an effect on cashflow, funds available for distributions or fees payable to the general partners or affiliates. As part of the ongoing business plan of the Partnership, the Corporate General Partner monitors the rental market environment of each of its investment properties to assess the feasibility of increasing rents, maintaining or increasing occupancy levels and protecting the Partnership from increases in expenses. As part of this plan, the 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 December 31, 1999, the Partnership had cash and cash equivalents of approximately $3,630,000 as compared to approximately $1,273,000 at December 31, 1998. Cash and cash equivalents increased approximately $16,000 for the two months ended December 31, 1999 from the Registrant's prior fiscal year end of October 31, 1999. The increase was due to approximately $403,000 of net cash provided by operating activities which was partially offset by approximately $243,000 of cash used in investing activities and approximately $144,000 of cash used in financing activities. Cash used in financing activities consisted of payments of principal made on the mortgages encumbering the Registrant's properties. Cash used in investing activities consisted of property improvements and replacements, and to a lesser extent, net deposits to restricted escrows maintained by the mortgage lender. 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 Partnership and to comply with Federal, state, local, legal, and regulatory requirements. Capital improvements planned for each of the Registrant's properties are detailed below. Baymeadows Apartments: The Partnership completed approximately $97,000 in capital expenditures at Baymeadows Apartments as of December 31, 1999, consisting primarily of flooring, appliance and drapery replacements, and plumbing work. These improvements were funded primarily from replacement reserves. The general partners are currently in the process of evaluating an increase in expenditures to upgrade Baymeadows so that it may improve its position in the Jacksonville market. As of this report, approximately $1,350,000 has been approved to be spent on upgrading the property. Quail Run Apartments: The Partnership completed approximately $48,000 in capital expenditures at Quail Run Apartments as of December 31, 1999, consisting primarily of electrical improvements, plumbing work and a roofing project. These improvements were funded primarily from replacement reserves. The Partnership is currently evaluating the capital improvement needs of the property for the upcoming year. The minimum amount to be budgeted is expected to be $300 per unit or approximately $100,000. Additional improvements may be considered and will depend on the physical condition of the property as well as replacement reserves and anticipated cash flow generated by the property. Countrywood Village Apartments: The Partnership completed approximately $85,000 in capital expenditures at Countrywood Apartments as of December 31, 1999, consisting primarily of parking area improvements, interior decoration and pool improvements. These improvements were funded primarily from replacement reserves. The Partnership is currently evaluating the capital improvement needs of the property for the upcoming year. The minimum amount to be budgeted is expected to be $300 per unit or approximately $115,000. Additional improvements may be considered and will depend on the physical condition of the property as well as replacement reserves and anticipated cash flow generated by the property. 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 $22,749,000, net of discount, is amortized over 257 months with a balloon payment of approximately $20,669,000 due on November 15, 2002. 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. A cash distribution from operations of approximately $1,000,000 was declared during the two months ended December 31, 1999, of which approximately $990,000 was payable to limited partners ($19.80 per limited partnership unit). This distribution was paid during January 2000. A cash distribution of approximately $2,400,000 was made from operations during the two months ended December 31, 1998, of which approximately $2,376,000 was paid to limited partners ($47.52 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 required capital expenditures, to permit any additional distributions to its partners in the year 2000 or subsequent periods. Tender Offer Several tender offers were made by various parties, including affiliates of the general partners, during the two months ended December 31, 1999 and the fiscal years ended October 31, 1999 and 1998. As a result of these tender offers, AIMCO and its affiliates currently own 28,913 units of limited partnership units in the Partnership representing 57.83% of the outstanding units. 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. Consequently, AIMCO is in a position to significantly influence all voting decisions with respect to the Registrant. Under the Partnership Agreement, unitholders holding a majority of the Units are entitled to take action with respect to a variety of matters. 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. Year 2000 Compliance General Description The Year 2000 issue is the result of computer programs being written using two digits rather than four digits to define the applicable year. The Partnership is dependent upon the Corporate General Partner and its affiliates for management and administrative services ("Managing Agent"). Any of the Managing Agent's computer programs or hardware that had date-sensitive software or embedded chips might have recognized a date using "00" as the year 1900 rather than the year 2000. This could have resulted in a system failure or miscalculations causing disruptions of operations, including, among other things, a temporary inability to process transactions, send invoices, or engage in similar normal business activities. Computer Hardware, Software and Operating Equipment In 1999, the Managing Agent completed all phases of its Year 2000 program by completing the replacement and repair of any hardware or software system or operating equipment that was not yet Year 2000 compliant. The Managing Agent's hardware and software systems and its operating equipment are now Year 2000 compliant. As of February 11, 2000, no material failure or erroneous results have occurred in the Managing Agent's computer applications related to the failure to reference the Year 2000. Third Parties To date, the Managing Agent is not aware of any significant supplier or subcontractor (external agent) or financial institution of the Partnership that has a Year 2000 issue that would have a material impact on the Partnership's results of operations, liquidity or capital resources. However, the Managing Agent has no means of ensuring or determining the Year 2000 compliance of external agents. At this time, the Managing Agent does not believe that a Year 2000 issue of any non-compliant external agent will have a material impact on the Partnership's financial position or results of operations. Costs The total cost of the Managing Agent's Year 2000 project was approximately $3.2 million and was funded from operating cash flows. Risks Associated with the Year 2000 The Managing Agent completed all necessary phases of its Year 2000 program in 1999, and did not experience system or equipment malfunctions related to a failure to reference the Year 2000. The Managing Agent or Partnership have not been materially adversely effected by disruptions in the economy generally resulting from the Year 2000 issue. At this time, the Managing Agent does not believe that the Partnership's businesses, results of operations or financial condition will be materially adversely effected by the Year 2000 issue. Contingency Plans Associated with the Year 2000 The Managing Agent has not had to implement contingency plans such as manual workarounds or selecting new relationships for its banking or elevator operation activities in order to avoid the Year 2000 issue. PART II - OTHER INFORMATION ITEM 1. LEGAL PROCEDINGS 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, the 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 by Insignia Financial Group, Inc. ("Insignia") and entities which were, at one time, affiliates of Insignia ("Insignia Affiliates") of interests in certain general partner entities, past tender offers by Insignia Affiliates to acquire limited partnership units, the management of partnerships by Insignia Affiliates and the Insignia Merger (see "Note B - Transfer of Control"). 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 own units as of November 3, 1999. Preliminary approval of the settlement was obtained on November 3, 1999 from the Superior Court of the State of California, County of San Mateo, 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 class plaintiffs' counsel to enter the settlement. On December 14, 1999, the Corporate General Partner and its affiliates terminated the proposed settlement. Certain plaintiffs have filed a motion to disqualify some of the plaintiffs' counsel in the action. 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 two months ended December 31, 1999: 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 IV By: Shelter Realty IV Corporation Corporate General Partner By: /s/Patrick J. Foye Patrick J. Foye Executive Vice President and Director By: /s/Martha L. Long Martha L. Long Senior Vice President and Controller Date: February 14, 2000 EX-27 2 FDS --
5 This schedule contains summary financial information extracted from Shelter Properties IV 1999 Transitional Report on 10-QSB and is qualified in its entirety by reference to such 10-QSB filing. 0000702174 Shelter Properties IV 1,000 2-MOS DEC-31-1999 NOV-1-1999 DEC-31-1999 3,630 0 726 0 0 0 62,863 36,714 31,916 0 22,749 0 0 0 7,103 31,916 0 1,930 0 0 1,793 0 345 0 0 0 0 0 0 137 2.72 0 Registrant has an unclassified balance sheet. Multiplier is 1.
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