-----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, RB6UPERmaPqy3e3drYH4ue0BJDJSsvgt2FuonKXKlXo7bolDNAQcym7729OvVky2 MOTd6NJz057axbreqmzuiw== /in/edgar/work/0000711642-00-000317/0000711642-00-000317.txt : 20001114 0000711642-00-000317.hdr.sgml : 20001114 ACCESSION NUMBER: 0000711642-00-000317 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20000930 FILED AS OF DATE: 20001113 FILER: COMPANY DATA: COMPANY CONFORMED NAME: SHELTER PROPERTIES IV LIMITED PARTNERSHIP CENTRAL INDEX KEY: 0000702174 STANDARD INDUSTRIAL CLASSIFICATION: [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: 760756 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 0001.txt QUARTER ENDED 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 0-10884 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) September 30, 2000
Assets Cash and cash equivalents $ 2,702 Receivables and deposits 302 Restricted escrows 704 Other assets 292 Investment properties: Land $ 2,759 Buildings and related personal property 49,014 51,773 Less accumulated depreciation (29,116) 22,657 $ 26,657 Liabilities and Partners' Capital Liabilities Accounts payable $ 697 Tenant security deposit liabilities 199 Accrued property taxes 550 Other liabilities 862 Mortgage notes payable 18,167 Partners' Capital General partners $ 94 Limited partners (49,995 units issued and outstanding) 6,088 6,182 $ 26,657 See Accompanying Notes to Consolidated Financial Statements
b) SHELTER PROPERTIES IV 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 $ 2,401 $ 2,823 $ 8,064 $ 8,378 Other income 165 110 518 344 Gain on sale of investment property (Note H) 12,350 -- 12,350 -- Total revenues 14,916 2,933 20,932 8,722 Expenses: Operating 1,199 1,317 3,782 3,554 General and administrative 209 97 382 273 Depreciation 604 474 1,618 1,423 Interest 451 523 1,478 1,581 Property taxes 195 199 604 602 Total expenses 2,658 2,610 7,864 7,433 Income before extraordinary item 12,258 323 13,068 1,289 Extraordinary loss on early extinguishment of debt (Note H) (246) -- (246) -- Net income $12,012 $ 323 $12,822 $ 1,289 Net income allocated to general partners (1%) $ 120 $ 3 $ 128 $ 13 Net income allocated to limited partners (99%) 11,892 320 12,694 1,276 $12,012 $ 323 $12,822 $ 1,289 Net income per limited partnership unit $237.86 $ 6.40 $253.90 $ 25.52 Distributions per limited partnership unit $234.89 $ -- $274.49 $ -- 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 December 31, 1999 49,995 $ (14) $ 7,117 $ 7,103 Distributions to partners (20) (13,723) (13,743) Net income for the nine months ended September 30, 2000 -- 128 12,694 12,822 Partners' capital at September 30, 2000 49,995 $ 94 $ 6,088 $ 6,182 See Accompanying Notes to Consolidated Financial Statements
d) SHELTER PROPERTIES IV CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (in thousands)
Nine Months Ended September 30, 2000 1999 Cash flows from operating activities: Net income $12,822 $ 1,289 Adjustments to reconcile net income to net cash provided by operating activities: Gain on sale of investment property (12,350) -- Loss on early extinguishment of debt 246 -- Depreciation 1,618 1,423 Amortization of discounts and loan costs 199 210 Change in accounts: Receivables and deposits 424 (279) Other assets 119 (302) Accounts payable (128) 106 Tenant security deposit liabilities (33) 10 Accrued property taxes 209 321 Other liabilities 575 (3) Net cash provided by operating activities 3,701 2,775 Cash flows from investing activities: Property improvements and replacements (2,540) (921) Net withdrawals from restricted escrows 197 853 Proceeds from the sale of investment property 17,385 -- Net cash provided by (used in) investing activities 15,042 (68) Cash flows from financing activities: Partners' distributions (14,743) -- Payments on mortgage notes payable (640) (622) Repayment of mortgage note payable (4,172) -- Debt extinguishment costs (116) -- Net cash used in financing activities (19,671) (622) Net (decrease) increase in cash and cash equivalents (928) 2,085 Cash and cash equivalents at beginning of period 3,630 1,273 Cash and cash equivalents at end of period $ 2,702 $ 3,358 Supplemental disclosure of cash flow information: Cash paid for interest $ 1,298 $ 1,370 Supplemental disclosure of non-cash flow information: Property improvements and replacements included in accounts payable $ 443 $ -- Distributions of approximately $1,000,000 were accrued at December 31, 1999 and paid in January 2000. 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 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 fiscal year ended October 31, 1999. 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, as announced in its Form 8-K filed on January 3, 2000. This Quarterly Report on Form 10-QSB presents the unaudited results of the Partnership's operations for the three and nine months ended September 30, 2000 and 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. 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 Nine Months Ended September 30, 2000 1999 (in thousands) Net cash provided by operating activities $ 3,701 $ 2,775 Payments on mortgage notes payable (640) (622) Property improvements and replacements (2,540) (921) Change in restricted escrows, net 197 853 Changes in reserves for net operating liabilities (1,166) 147 Additional reserves -- (2,232) Net cash used in operations $ (448) $ --
The Corporate General Partner believed it to be in the best interest of the Partnership to reserve net cash from operations of approximately $2,232,000 at September 30, 1999, to fund continuing capital improvements and repairs at the Partnership's three investment properties. Note D - Distributions During the nine months ended September 30, 2000, the Partnership declared and paid a distribution from operations of approximately $2,000,000 ($1,980,000 paid to limited partners or $39.60 per limited partnership unit) and paid a distribution of approximately $11,743,000 from sale proceeds ($11,743,000 paid to limited partners or $234.89 per limited partnership unit). In addition, a distribution from operations of approximately $1,000,000 ($990,000 to limited partners or $19.80 per limited partnership unit) was paid during the nine months ended September 30, 2000 relating to a distribution payable as of December 31, 1999. There were no distributions paid during the nine months ended September 30, 1999. 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 amounts were paid or accrued to the Corporate General Partner and its affiliates during the nine months ended September 30, 2000 and 1999: 2000 1999 (in thousands) Property management fees (included in operating expenses) $431 $437 Reimbursement for services of affiliates (included in operating, general and administrative expenses, and investment properties) 276 158 Due to affiliates (included in other liabilities) 90 -- Due to general partners (included in other liabilities) 178 -- 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 as compensation for providing property management services. The Registrant paid to such affiliates approximately $431,000 and $437,000 for the nine months ended September 30, 2000 and 1999, respectively. Affiliates of the Corporate General Partner received reimbursement of accountable administrative expenses amounting to approximately $276,000 and $158,000 for the nine months ended September 30, 2000 and 1999, respectively. Of this amount approximately $90,000 was accrued at September 30, 2000. In connection with the sale of Countrywood Village, the Corporate General Partner is allowed to receive a commission of up to 1% for its assistance in the sale. Payment of such commission is subordinate to the limited partners receiving a cumulative 7% return on their investment. This return has not yet been met and accordingly, the $178,000 owed to the Corporate General Partner was accrued and is included in 'Other Liabilities' at September 30, 2000. In addition to its indirect ownership of the general partner interest in the Partnership, AIMCO and its affiliates currently own 30,448 limited partnership units in the Partnership representing 60.902% 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 Corporate General Partner. As a result of its ownership of 60.902% 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 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 two apartment complexes, one each located in Florida and South Carolina. On August 1, 2000, the Partnership sold its third apartment complex located in 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 segment profit (loss) before depreciation. 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 fiscal 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 three and nine month periods ended September 30, 2000 and 1999 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. Three Months Ended September 30, 2000 Residential Other Totals Rental income $ 2,401 $ -- $ 2,401 Other income 152 13 165 Interest expense 451 -- 451 Depreciation 604 -- 604 General and administrative expense -- 209 209 Gain on sale of investment property 12,350 -- 12,350 Extraordinary loss on early (246) -- (246) extinguishment of debt Segment profit (loss) 12,208 (196) 12,012 Nine Months Ended September 30, 2000 Residential Other Totals Rental income $ 8,064 $ -- $ 8,064 Other income 497 21 518 Interest expense 1,478 -- 1,478 Depreciation 1,618 -- 1,618 General and administrative expense -- 382 382 Gain on sale of investment property 12,350 -- 12,350 Extraordinary loss on early extinguishment of debt (246) -- (246) Segment profit (loss) 13,183 (361) 12,822 Total assets 25,849 808 26,657 Capital expenditures 2,983 -- 2,983 Three Months Ended September 30, 1999 Residential Other Totals Rental income $ 2,823 $ -- $ 2,823 Other income 105 5 110 Interest expense 523 -- 523 Depreciation 474 -- 474 General and administrative expense -- 97 97 Segment profit (loss) 415 (92) 323 Nine Months Ended September 30, 1999 Residential Other Totals Rental income $ 8,378 $ -- $ 8,378 Other income 323 21 344 Interest expense 1,581 -- 1,581 Depreciation 1,423 -- 1,423 General and administrative expense -- 273 273 Segment profit (loss) 1,541 (252) 1,289 Total assets 31,193 827 32,020 Capital expenditures 921 -- 921 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. ("Insignia") 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. Note H - Sale of Property On August 1, 2000, the Partnership sold Countrywood Village to DCF, Sr., LLC, an unrelated third party, for net proceeds of approximately $17,385,000 after payment of closing costs. The Partnership realized a gain of approximately $12,350,000 as a result of the sale. In addition, the Partnership recorded an extraordinary loss on early extinguishment of debt of approximately $246,000 as a result of unamortized debt discount being written off and the payment of a prepayment penalty of approximately $116,000 relating to the prepayment of the mortgage encumbering the property. In connection with the sale, the Corporate General Partner is allowed to receive a commission of up to 1% for its assistance in the sale. Payment of such commission is subordinate to the limited partners receiving a cumulative 7% return on their investment. This return has not yet been met and accordingly, the $178,000 owed to the Corporate General Partner was accrued and is included in 'Other Liabilities' at September 30, 2000. In August 2000, the Partnership made a distribution of approximately $11,743,000 representing proceeds from the sale of Countrywood Village. Revenues included in the accompanying consolidated statements of operations related to this property were approximately $1,586,000 and $2,031,000 for the nine months ended September 30, 2000 and 1999, respectively. 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 two 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 Baymeadows Apartments Jacksonville, Florida 93% 93% Quail Run Apartments Columbia, South Carolina 90% 93% The Corporate General Partner attributes the decrease in average occupancy at Quail Run to increased competition in the local market as a result of the addition of five new apartment complexes in the local area. Results of Operations The Partnership recorded net income of approximately $12,012,000 for the three months ended September 30, 2000 compared to net income of approximately $323,000 for the corresponding period in 1999. The Partnership's net income for the nine months ended September 30, 2000 was approximately $12,822,000 compared to net income of approximately $1,289,000 for the corresponding period in 1999. The increase in net income for the three and nine month periods ended September 30, 2000 compared with the three and nine month periods ended September 30, 1999 is primarily due to the gain on the sale of Countrywood Village partially offset by the extraordinary loss on early extinguishment of debt recognized in connection with the sale. On August 1, 2000, the Partnership sold Countrywood Village to DCF, Sr., LLC, an unrelated third party, for net proceeds of approximately $17,385,000 after payment of closing costs. The Partnership realized a gain of approximately $12,350,000 as a result of the sale. In addition, the Partnership recorded an extraordinary loss on early extinguishment of debt of approximately $246,000 as a result of unamortized debt discount being written off and the payment of a prepayment penalty of approximately $116,000 relating to the prepayment of the mortgage encumbering the property. Excluding the impact of the sale of Countrywood Village, net income for the nine months ended September 30, 2000 and 1999 was approximately $288,000 and $641,000 respectively. The net loss for the three months ended September 30, 2000 was approximately $66,000 versus net income for the three months ended September 30, 1999 of approximately $98,000. The decrease in net income for the three and nine month periods ended September 30, 2000 as compared to the three and nine month periods ended September 30, 1999 was primarily due to an increase in total expenses partially offset by an increase in total revenues. Total expenses increased for the three and nine months ended September 30, 2000 as compared to the three and nine months ended September 30, 1999, predominately due to an increase in depreciation expense at both Baymeadows and Quail Run in addition to an increase in general and administrative expenses. For the nine months ended September 30, 2000 an increase in operating expense at Baymeadows also contributed to the increase in total expenses. For the three months ended September 30, 2000 operating expenses remained relatively constant. All other expenses remained relatively constant for the comparable three and nine month periods. The increase in depreciation expense is attributed to an increase in capital improvements completed during the past year which are now being depreciated. On an overall basis the operating expenses of Baymeadows have increased during the last quarter of 1999 and into 2000 as a result of increases in salaries, commissions and other related benefits as well as increases in utilities, interior painting, floor covering repairs and sewer repairs. These repairs were completed to upgrade Baymeadows so that it may improve its position in the Jacksonville market. General and administrative expenses increased for the three and nine month periods ended September 30, 2000 as a result of an increase in the services and the cost of such services provided by the Corporate General Partner and its affiliates. Included in general and administrative expenses for the three and nine month periods ended September 30, 2000 and 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. The increase in total revenues is due to increases in both rental and other income. Rental income increased due to increases in average rental rates at Baymeadows and Quail Run, slightly offset by decreases in occupancy at Quail Run Apartments in addition to an increase in concession costs at both properties. Other income increased primarily due to increases in lease cancellation fees and late charges at Baymeadows Apartments, local telephone income at all properties and interest income. Interest income increased as a result of larger average cash balances invested in interest bearing accounts. 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 September 30, 2000, the Partnership had cash and cash equivalents of approximately $2,702,000 as compared to approximately $3,358,000 at September 30, 1999. Cash and cash equivalents decreased approximately $928,000 for the nine months ended September 30, 2000 from the Registrant's year end of December 31, 1999. The decrease was due to approximately $19,671,000 of cash used in financing activities, which was partially offset by approximately $15,042,000 of cash provided by investing activities and approximately $3,701,000 of cash provided by operating activities. Cash used in financing activities consisted primarily of distributions to partners and, to lesser extent, payments of principal made on the mortgages encumbering the Registrant's properties along with payments associated with paying off the Countrywood Village mortgage. Cash provided by investing activities consisted primarily of net proceeds from the sale of Countrywood Village and net withdrawals from restricted escrows maintained by the mortgage lender, partially offset by property improvements and replacements. 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 and local legal and regulatory requirements. Capital improvements planned for each of the Registrant's properties are detailed below. Baymeadows Apartments: The Partnership has budgeted, but is not limited to, approximately $3,401,000 in capital improvements at Baymeadows Apartments for 2000 consisting primarily of pool upgrades, plumbing upgrades, roof replacements, structural improvements, carpet and vinyl replacements, new appliances, new cabinets, and air conditioning upgrades. As of September 30, 2000, the Partnership has spent approximately $2,652,000 in budgeted improvements consisting primarily of plumbing upgrades, structural upgrades, roof replacements, pool upgrades, appliances, and carpet and vinyl replacements. These improvements were funded from operating cash flow. Quail Run Apartments: The Partnership has budgeted, but is not limited to, approximately $232,000 in capital improvements at Quail Run Apartments for 2000 consisting primarily of new appliances, carpet and vinyl replacements, and fencing upgrades. As of September 30, 2000, the Partnership has spent approximately $229,000 in budgeted improvements consisting primarily of carpet and vinyl replacements, new appliances and lighting upgrades. These improvements were funded from operating cash flow. Countrywood Village Apartments: The Partnership had budgeted approximately $125,000 in capital improvements at Countrywood apartments for 2000 consisting primarily of carpet and vinyl replacements, cabinet replacements, new appliances and air conditioning upgrades. Prior to the sale of the property on August 1, 2000, the Partnership had spent approximately $102,000 in budgeted improvements consisting primarily of carpet and vinyl replacements and new appliances. These improvements were funded from operating cash flow. 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 $18,167,000, net of discount, is amortized over 257 months with a balloon payment of approximately $16,907,000 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. During the nine months ended September 30, 2000, the Partnership declared and paid a distribution from operations of approximately $2,000,000 ($1,980,000 paid to limited partners or $39.60 per limited partnership unit) and paid a distribution of approximately $11,743,000 from sale proceeds ($11,743,000 paid to limited partners or $234.89 per limited partnership unit). In addition a distribution from operations of approximately $1,000,000 ($990,000 to limited partners or $19.80 per limited partnership unit) was paid during the nine months ended September 30, 2000 relating to a distribution payable as of December 31, 1999. There were no distributions paid during the nine months ended September 30, 1999. 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 for the remainder of 2000 or subsequent periods. In addition, the Partnership may be restricted from making distributions if the amount in the reserve account for each property is less than $400 per apartment unit at such property or a total of approximately $494,000. As of September 30, 2000, the reserve account was fully funded with approximately $691,000 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. ("Insignia") 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: Current report on Form 8-K filed August 14, 2000 disclosing the sale of Countrywood Village Apartments. 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 Its 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 13, 2000 EX-27 2 0002.txt THIRD QUARTER 10-QSB
5 This schedule contains summary financial information extracted from SHELTER PROPERTIES IV 2000 Third Quarter 10-QSB and is qualified in its entirety by reference to such 10-QSB filing. 0000702174 SHELTER PROPERTIES IV 1,000 9-MOS DEC-31-2000 JUL-01-2000 SEP-30-2000 2,702 0 302 0 0 0 51,773 29,116 26,657 0 18,167 0 0 0 6,182 26,657 0 20,932 0 7,864 0 0 1,478 0 0 0 0 (246) 0 12,822 253.90 0 Registrant has an unclassified balance sheet. Multiplier is 1.
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