-----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, AerRZmW/izvkpuIN8AwJHRgbfHqsd4vvpNscQZfSvOVvTMAIREqarONHK0nx3J6t mLWPl3Ygms1lzitPEm2rbA== 0000763049-98-000006.txt : 19980907 0000763049-98-000006.hdr.sgml : 19980907 ACCESSION NUMBER: 0000763049-98-000006 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19980731 FILED AS OF DATE: 19980904 SROS: NONE 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: 1031 FILING VALUES: FORM TYPE: 10QSB SEC ACT: SEC FILE NUMBER: 000-10884 FILM NUMBER: 98704572 BUSINESS ADDRESS: STREET 1: ONE INSIGNIA FINANCIAL PLAZA STREET 2: P O BOX 1089 CITY: GREENVILLE STATE: SC ZIP: 29602 BUSINESS PHONE: 8032391000 MAIL ADDRESS: STREET 1: ONE INSIGNIA FINANCIAL PLZ STREET 2: P O BOX 2347 CITY: GREENVILLE STATE: SC ZIP: 29602 10QSB 1 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 July 31, 1998 or [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from.........to......... Commission file number 0-10884 SHELTER PROPERTIES IV LIMITED PARTNERSHIP (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.) One Insignia Financial Plaza, 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 LIMITED PARTNERSHIP CONSOLIDATED BALANCE SHEET (Unaudited) (in thousands, except per unit data) July 31, 1998 Assets Cash and cash equivalents $ 2,620 Receivables and deposits 1,081 Restricted escrows 1,807 Other assets 422 Investment properties: Land $ 3,442 Buildings and related personal property 57,222 60,664 Less accumulated depreciation (33,710) 26,954 $32,884 Liabilities and Partners' (Deficit) Capital Liabilities Accounts payable $ 113 Tenant security deposit liabilities 255 Accrued property taxes 460 Other liabilities 253 Mortgage notes payable 23,642 Partners' (Deficit) Capital General partners $ (3) Limited partners (49,995 units issued and outstanding) 8,164 8,161 $32,884 See Accompanying Notes to Consolidated Financial Statements b) SHELTER PROPERTIES IV LIMITED PARTNERSHIP CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) (in thousands, except unit data) Three Months Ended Nine Months Ended July 31, July 31, 1998 1997 1998 1997 Revenues: Rental income $2,809 $2,667 $8,276 $7,869 Other income 137 154 378 472 Total revenues 2,946 2,821 8,654 8,341 Expenses: Operating 1,219 1,323 3,571 4,124 General and administrative 66 53 224 215 Depreciation 488 486 1,441 1,431 Interest 540 553 1,630 1,670 Property taxes 198 202 594 602 Loss on disposal of property -- -- -- 39 Total expenses 2,511 2,617 7,460 8,081 Net income $ 435 $ 204 $1,194 $ 260 Net income allocated to general partners (1%) $ 4 $ 2 $ 12 $ 3 Net income allocated to limited partners (99%) 431 202 1,182 257 $ 435 $ 204 $1,194 $ 260 Net income per limited partnership unit $ 8.62 $ 4.04 $23.64 $ 5.14 Distributions per limited partnership unit $ -- $ -- $16.07 $10.00 See Accompanying Notes to Consolidated Financial Statements ) SHELTER PROPERTIES IV LIMITED PARTNERSHIP 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, 1997 49,995 $ (7) $ 7,786 $ 7,779 Net income for the nine months ended July 31, 1998 -- 12 1,182 1,194 Partners' distributions -- (8) (804) (812) Partners' (deficit) capital at at July 31, 1998 49,995 $ (3) $ 8,164 $ 8,161 See Accompanying Notes to Consolidated Financial Statements d) SHELTER PROPERTIES IV LIMITED PARTNERSHIP CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (in thousands) Nine Months Ended July 31, 1998 1997 Cash flows from operating activities: Net income $ 1,194 $ 260 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation 1,441 1,431 Amortization of discounts and loan costs 211 207 Loss on disposal of property -- 39 Change in accounts: Receivables and deposits 148 144 Other assets 46 (68) Accounts payable 9 (155) Tenant security deposit liabilities (22) 4 Accrued property taxes (170) (171) Other liabilities 25 (265) Net cash provided by operating activities 2,882 1,426 Cash flows from investing activities: Property improvements and replacements (668) (727) Net deposits to restricted escrows (57) (54) Net cash used in investing activities (725) (781) Cash flows from financing activities: Partners' distributions (812) (505) Payments on mortgage notes payable (572) (530) Net cash used in financing activities (1,384) (1,035) Net increase (decrease) in cash and cash equivalents 773 (390) Cash and cash equivalents at beginning of period 1,847 2,291 Cash and cash equivalents at end of period $ 2,620 $ 1,901 Supplemental disclosure of cash flow information: Cash paid for interest $ 1,422 $ 1,462 See Accompanying Notes to Consolidated Financial Statements e) SHELTER PROPERTIES IV LIMITED PARTNERSHIP NOTES TO FINANCIAL STATEMENTS (Unaudited) July 31, 1998 NOTE A - BASIS OF PRESENTATION The accompanying unaudited consolidated financial statements of Shelter Properties IV Limited Partnership (the "Partnership") have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-QSB and 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 July 31, 1998, are not necessarily indicative of the results that may be expected for the fiscal year ending October 31, 1998. For further information, refer to the financial statements and footnotes thereto included in the Partnership's annual report on Form 10-KSB for the year ended October 31, 1997. Certain reclassifications have been made to the 1997 information to conform to the 1998 presentation. NOTE B - RECONCILIATION OF CASH FLOWS The following is a reconciliation of the subtotal on the accompanying statements of cash flows captioned "net cash provided by operating activities" to "net cash used in operations", as defined in the Partnership Agreement. However, "net cash used in operations" should not be considered an alternative to net income as an indicator of the Partnership's operating performance or to cash flows as a measure of liquidity. For the Nine Months Ended July 31, 1998 1997 (in thousands) Net cash provided by operating activities $ 2,882 $ 1,426 Payments on mortgage notes payable (572) (530) Property improvements and replacements (668) (727) Change in restricted escrows, net (57) (54) Changes in reserves for net operating liabilities (36) 511 Additional reserves (1,549) (326) Net cash provided by operations $ -- $ 300 The Corporate General Partner reserved approximately $1,549,000 and $326,000 on July 31, 1998 and 1997, respectively, to fund capital improvements and repairs at its 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 Corporate General Partner is a wholly-owned subsidiary of Insignia Properties Trust ("IPT"), an affiliate of Insignia Financial Group, Inc. ("Insignia"). The Partnership Agreement provides for payments to affiliates for services and as reimbursement of certain expenses incurred by affiliates on behalf of the Partnership. The following transactions with the Corporate General Partner and its affiliates were charged to expense in 1998 and 1997: For the Nine Months Ended July 31, 1998 1997 (in thousands) Property management fees (included in operating expenses) $430 $414 Reimbursement for services of affiliates (included in operating, general and administrative expenses, and investment properties) (1) 158 170 (1) Included in "reimbursements for services of affiliates" for the nine months ended July 31, 1998 and 1997, is approximately $8,000 and $26,000, respectively, in reimbursements for construction oversight costs. On March 17, 1998, Insignia entered into an agreement to merge its national residential property management operations, and its controlling interest in IPT, with Apartment Investment and Management Company ("AIMCO"), a publicly traded real estate investment trust. The closing, which is anticipated to happen in September or October of 1998, is subject to customary conditions, including government approvals and the approval of Insignia's shareholders. If the closing occurs, AIMCO will then control the Corporate General Partner of the Partnership. For the period November 1, 1996 to August 31, 1997, the Partnership insured its properties under a master policy through an agency affiliated with the Corporate General Partner with an insurer unaffiliated with the Corporate General Partner. An affiliate of the Corporate General Partner acquired, in the acquisition of a business, certain financial obligations from an insurance agency which was later acquired by the agent who placed the master policy. The agent assumed the financial obligations to the affiliate of the Corporate General Partner which receives payments on these obligations from the agent. The amount of the Partnership's insurance premiums accruing to the benefit of the affiliate of the Corporate General Partner by virtue of the agent's obligations is not significant. On July 21, 1998, an affiliate of Insignia commenced tender offers for limited partnership interests in six real estate limited partnerships (including the Partnership in which various Insignia affiliates act as general partner. The Purchaser offered to purchase up to 20,000 of the outstanding units of limited partnership interest in the Partnership at $500 per Unit, net to the seller in cash, upon the terms and subject to the conditions set forth in the Offer to Purchase dated July 21, 1998 (the "Offer to Purchase") and the related Assignment of Partnership Interest attached as Exhibits (a)(1) and (a)(2), respectively, to the Tender Offer Statement on Schedule 14D-1 originally filed with the Securities and Exchange Commission on July 21, 1998. Because of the existing and potential future conflicts of interest (described in the Partnership's Statements on Schedule 14D-9 filed with the Securities and Exchange Commission), neither the Partnership nor the General Partner expressed any opinion as to the Offer to Purchase and made no recommendation as to whether unit holders should tender their units in response to the Offer to Purchase. In addition, because of these conflicts of interest, as a result of the Purchaser's affiliation with various Insignia affiliates, the manner in which the Purchaser votes its limited partner interests in the Partnership may not always be consistent with the best interests of the other limited partners. The expiration date for the tender offers was extended to August 21, 1998. The Partnership is currently analyzing the final results of these offers. NOTE D - DISPOSAL OF PROPERTY The Partnership incurred a loss on disposal of approximately $39,000 due to a roof replacement project at Quail Run during the nine months ended July 31, 1997. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION 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 nine months ended July 31, 1998 and 1997: Average Occupancy Property 1998 1997 Baymeadows Apartments 93% 95% Jacksonville, Florida Quail Run Apartments 95% 92% Columbia, South Carolina Countrywood Village Apartments 93% 95% Raleigh, North Carolina The Corporate General Partner attributes the increase in average occupancy at Quail Run to an exterior painting project which was completed at the property during 1997 in an effort to enhance the curb appeal of the property. Results of Operations The Partnership's net income for the nine months ended July 31, 1998, was approximately $1,194,000 compared to approximately $260,000 for the corresponding period in 1997. The Partnership recorded net income of approximately $435,000 for the three months ended July 31, 1998, compared to net income of approximately $204,000 for the corresponding period of 1997. The increase in net income for the three and nine month periods ended July 31, 1998, compared to the corresponding periods of 1997 is primarily attributable to an increase in rental income as well as a decrease in operating expenses. The increase in rental income is attributable to the increase in average occupancy and average annual rental rates at Quail Run and an increase in average rental rates at Baymeadows and Countrywood Village, which more than offset these properties' decreases in average occupancy. The decrease in operating expenses is attributable to the completion of the exterior painting projects at Quail Run and Baymeadows during 1997. A parking lot repair project was also completed at Baymeadows during 1997. The decrease in operating expense was partially offset by an increase in major landscaping at Countrywood Village and Baymeadows, as well as an increase in interior painting and decorating expenses at Baymeadows during the nine months ended July 31, 1998. These costs were incurred to attract new tenants and increase occupancy at the properties. Additionally, the Partnership incurred a loss on disposal of property due to a roof replacement project at Quail Run during the period ended July 31, 1997. Offsetting the increase in net income for the nine month period ended July 31, 1998, compared to the corresponding period of 1997, is a decrease in other income. Other income decreased primarily due to a decrease in recreational income at Baymeadows as a result of closing the racquet club at the property. This facility had been losing money and it was determined to be in the best interest of the Partnership to close it to outside users at the end of 1997. The facility continues to be maintained and is available for the residents' use and enjoyment. Included in operating expense for the nine months ended July 31, 1998 is approximately $138,000 of major repairs and maintenance comprised primarily of major landscaping and window coverings. Included in operating expense for the nine months ended July 31, 1997 is approximately $606,000 of major repairs and maintenance comprised primarily of major landscaping, exterior building repairs and painting, parking lot repairs, window coverings and tennis court repairs. 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 expense. As part of this plan, the Corporate General Partner attempts to protect the Partnership from the burden of inflation-related increases in expenses by increasing rents and maintaining a high overall occupancy level. However, due to changing market conditions, which can result in the use of rental concessions and rental reductions to offset softening market conditions, there is no guarantee that the Corporate General Partner will be able to sustain such a plan. Liquidity and Capital Resources At July 31, 1998, the Partnership had cash and cash equivalents of approximately $2,620,000 as compared to approximately $1,901,000 at July 31, 1997. The net increase in cash and cash equivalents for the nine months ended July 31, 1998, was $773,000. The net decrease in cash and cash equivalents for the nine months ended July 31, 1997, was $390,000. Net cash provided by operating activities increased primarily due to the increase in net income as discussed above. The increase is also attributable to a decrease in other assets and an increase in accounts payable and other liabilities. The decrease in other assets is attributable to the timing of property and liability insurance payments. The increase in accounts payable and other liabilities is attributable to the status of major repairs and maintenance projects and the timing of payment of invoices. Net cash used in investing activities decreased due to the decrease in purchases of property improvements and replacements. Net cash used in financing activities increased due to increased distributions to partners and increased payments on mortgage notes payable during the nine months ended July 31, 1998. The Partnership has budgeted approximately $1,500,000 for capital improvements and major repairs and maintenance at the three properties in 1998. Budgeted capital improvements at Baymeadows include major carpet replacement, major landscaping, exterior painting, and gutter repairs. Budgeted capital improvements at Quail Run include roof replacement and major carpet replacement. Countrywood has budgeted major carpet replacement and landscaping in 1998. Of this work the major landscaping at Countrywood was completed during the first quarter. The remaining projects have been started with expenditures approximating budgeted amounts through July 1998. The additional capital expenditures will be incurred only if cash is available from operations or from partnership reserves mentioned previously. 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 property to adequately maintain the physical assets and other operating needs of the Partnership. Such assets are currently thought to be sufficient for any near-term needs of the Partnership. The mortgage indebtedness of approximately $23,642,000 net of discount, is amortized over 257 months with a balloon payment of approximately $20,669,000 due on November 15, 2002, at which time the properties will either be refinanced or sold. Cash distributions of approximately $812,000 and $505,000 were made during the nine months ended July 31, 1998 and 1997, respectively. These distributions were made from property operations. Future cash distributions will depend on the levels of net cash generated from operations, property sales and the availability of cash reserves. The Corporate General Partner anticipates a distribution to be made in the fourth quarter of fiscal 1998. Year 2000 The Partnership is dependent upon the Corporate General Partner and Insignia for management and administrative services. Insignia has completed an assessment and will have to modify or replace portions of its software so that its computer systems will function properly with respect to dates in the year 2000 and thereafter (the "Year 2000 Issue"). The project is estimated to be completed not later than December 31, 1998, which is prior to any anticipated impact on its operating systems. The Corporate General Partner believes that with modifications to existing software and conversions to new software, the Year 2000 Issue will not pose significant operational problems for its computer systems. However, if such modifications and conversions are not made, or are not completed timely, the Year 2000 Issue could have a material impact on the operations of the Partnership. Other Certain items discussed in this quarterly report may constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 (the "Reform Act") and as such may involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of the Partnership to be materially different from any future results, performance or achievements expressed or implied by such forward- looking statements. Such forward-looking statements speak only as of the date of this quarterly report. The Partnership expressly disclaims any obligation or undertaking to release publicly any updates or revisions to any forward-looking statements contained herein to reflect any change in the Partnership's expectations with regard thereto or any change in events, conditions or circumstances on which any such statement is based. PART II - OTHER INFORMATION ITEM 1. LEGAL PROCEEDING 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 complaint 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 its 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 as well as a recently announced agreement between Insignia and Apartment Investment and Management Company. The complaint seeks 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, plaintiffs have recently filed an amended complaint. The Corporate General Partner believes the action to be without merit, and intends to vigorously defend it. On July 30, 1998, certain entities claiming to own limited partnership interests in certain limited partnerships whose general partners are affiliates of Insignia filed a complaint in the Superior Court of the State of California, County of Los Angeles. The action involves 44 real estate limited partnerships (including the Partnership) in which the plaintiffs allegedly own interests and which Insignia affiliates allegedly manage or control (the "Subject Partnerships"). The complaint names as defendants Insignia, several Insignia affiliates alleged to be managing partners of the Subject Partnerships, the Partnership and the Corporate General Partner. Plaintiffs allege that they have requested from, but have been denied by each of the Subject Partnerships, lists of their respective limited partners for the purpose of making tender offers to purchase up to 4.9% of the limited partner units of each of the Subject Partnerships. The complaint also alleges that certain of the defendants made tender offers to purchase limited partner units in many of the Subject Partnerships, with the alleged result that plaintiffs have been deprived of the benefits they would have realized from ownership of the additional units. The plaintiffs assert eleven causes of action, including breach of contract, unfair business practices, and violations of the partnership statutes of the states in which the Subject Partnerships are organized. Plaintiffs seek compensatory, punitive and treble damages. The Partnership was only recently served with the complaint and has not yet responded to it. The Partnership believes the claims to be without merit and intends to defend the action vigorously. The Partnership is unaware of any other pending or outstanding litigation that is not of a routine nature. The Corporate General Partner believes that all such pending or outstanding litigation will be resolved without a material adverse effect upon the business, financial condition or operations of the Partnership. 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 in the quarter ended July 31, 1998: 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 LIMITED PARTNERSHIP By: Shelter Realty IV Corporation Corporate General Partner By: /s/ William H. Jarrard, Jr. William H. Jarrard, Jr. President and Director By: /s/ Ronald Uretta Ronald Uretta Vice President and Treasurer Date: September 4, 1998 EX-27 2
5 This schedule contains summary financial information extracted from Shelter Properties IV Limited Partnership 1998 Third Quarter 10-QSB and is qualified in its entirety by reference to such 10-QSB filing. 0000702174 SHELTER PROPERTIES IV LIMITED PARTNERSHIP 1,000 9-MOS OCT-31-1998 JUL-31-1998 2,620 0 0 0 0 0 60,664 33,710 32,884 0 23,642 0 0 0 8,161 32,884 0 8,654 0 0 7,460 0 1,630 0 0 0 0 0 0 1,194 23.64 0 Registrant has an unclassified balance sheet. Multiplier is 1.
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