0000950168-95-000793.txt : 19950925 0000950168-95-000793.hdr.sgml : 19950925 ACCESSION NUMBER: 0000950168-95-000793 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19950731 FILED AS OF DATE: 19950914 SROS: NONE 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: 1031 FILING VALUES: FORM TYPE: 10QSB SEC ACT: 1934 Act SEC FILE NUMBER: 000-10884 FILM NUMBER: 95573711 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 INSIGNIA SHELTER PROP IV 10QSB FORM 10-QSB--QUARTERLY REPORT UNDER SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Quarterly or Transitional Report (As last amended by 34-32231, eff. 6/3/93.) U. S. SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Form 10-QSB [X] QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended July 31, 1995 or [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period.........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) (Zip Code) Issuer's telephone number (803) 239-1000 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) July 31, 1995
Assets Cash: Unrestricted $ 1,385,718 Restricted--tenant security deposits 241,725 Investments 1,311,381 Accounts receivable 26,690 Escrow for taxes 511,906 Restricted escrows 1,637,259 Other assets 650,114 Investment properties: Land $ 3,442,097 Buildings and related personal property 54,359,430 57,801,527 Less accumulated depreciation (28,120,712) 29,680,815 $35,445,608 Liabilities and Partners' Capital (Deficit) Liabilities Accounts payable $ 281,726 Tenant security deposits 245,012 Accrued taxes 393,777 Other liabilities 334,193 Mortgage notes payable 25,182,574 Partners' Capital General partners $ 5,720 Limited partners (50,000 units issued and outstanding) 9,002,606 9,008,326 $35,445,608
See Accompanying Notes to Financial Statements 1 b) SHELTER PROPERTIES IV LIMITED PARTNERSHIP CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
Three Months Ended Nine Months Ended July 31, July 31, 1995 1994 1995 1994 Revenues: Rental income $2,492,118 $2,357,615 $7,323,895 $7,028,716 Other income 163,242 175,239 439,655 376,530 Total revenues 2,655,360 2,532,854 7,763,550 7,405,246 Expenses: Operating 754,716 757,649 2,164,701 2,141,091 General and administrative 177,795 50,109 331,628 184,759 Property management fees 130,318 121,223 381,121 362,751 Maintenance 454,630 352,984 1,737,225 1,119,202 Depreciation 441,731 390,291 1,303,432 1,229,166 Interest 574,394 583,666 1,730,314 1,757,356 Property taxes 164,819 183,647 506,144 513,877 Total expenses 2,698,403 2,439,569 8,154,565 7,308,202 Loss on disposal of property -- (814) -- (814) Net (loss) income $ (43,043) $ 92,471 $ (391,015) $ 96,230 Net (loss) income allocated to general partners (1%) $ (430) $ 925 $ (3,910) $ 962 Net (loss) income allocated to limited partners (99%) (42,613) 91,546 (387,105) 95,268 $ (43,043) $ 92,471 $ (391,015) $ 96,230 Net (loss) income per limited partnership unit $ (.85) $ 1.83 $ (7.74) $ 1.91
See Accompanying Notes to Financial Statements 2 c) SHELTER PROPERTIES IV LIMITED PARTNERSHIP CONSOLIDATED STATEMENT OF CHANGES IN PARTNERS' CAPITAL (DEFICIT) (Unaudited)
Limited Partnership General Limited Units Partners Partners Total Original capital contributions 50,000 $ 2,000 $50,000,000 $50,002,000 Partners' capital at October 31, 1994 50,000 $ 9,630 $ 9,389,711 $ 9,399,341 Net loss for the nine months ended July 31, 1995 -- (3,910) (387,105) (391,015) Partners' capital at July 31, 1995 50,000 $ 5,720 $ 9,002,606 $ 9,008,326
See Accompanying Notes to Financial Statements 3 d) SHELTER PROPERTIES IV LIMITED PARTNERSHIP CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) Nine Months Ended July 31, 1995 1994 Cash flows from operating activities: Net (loss) income $(391,015) $ 96,230 Adjustments to reconcile net (loss) income to net cash provided by operating activities: Depreciation 1,303,432 1,229,166 Amortization of discounts and loan costs 193,566 187,559 Loss on disposition of property -- 814 Change in accounts: Restricted cash (13,768) (7,425) Accounts receivable (4,721) 1,267 Escrows for taxes 143,956 300,131 Other assets 77,585 (30,695) Accounts payable 107,438 (366,117) Tenant security deposit liabilities 17,055 9,123 Accrued taxes (52,768) (226,039) Other liabilities (70,379) 55,076 Net cash provided by operating activities 1,310,381 1,249,090 Cash flows from investing activities: Property improvements and replacements (453,590) (316,282) Cash invested in short-term investments (3,144,537) (3,077,733) Cash received from matured investments 2,839,902 3,043,903 Deposits to restricted escrows (51,840) (90,311) Receipts from restricted escrows 93,258 90,636 Insurance proceeds from property damage -- 121,915 Net cash used in investing activities (716,807) (227,872) Cash flows from financing activities: Payments on mortgage notes payable $ (455,480) $ (422,247) Distributions paid -- (105,513) Net cash used in financing activities (455,480) (527,760) Net increase in cash 138,094 493,458 Cash at beginning of period 1,247,624 610,730 Cash at end of period $1,385,718 $ 1,104,188 Supplemental disclosure of cash flow information: Cash paid for interest $1,536,748 $ 1,569,980
See Accompanying Notes to Financial Statements 4 e) SHELTER PROPERTIES IV LIMITED PARTNERSHIP NOTES TO FINANCIAL STATEMENTS (Unaudited) Note A - Basis of Presentation The accompanying unaudited financial statements 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 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, 1995, are not necessarily indicative of the results that may be expected for the fiscal year ending October 31, 1995. 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, 1994. Certain reclassifications have been made to the 1994 information to conform to the 1995 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, 1995 1994 Net cash provided by operating activities $1,310,381 $1,249,090 Payments on mortgage notes payable (455,480) (422,247) Property improvements and replacements (453,590) (316,282) Change in restricted escrows, net 41,418 325 Changes in reserves for net operating liabilities (204,398) 264,679 Insurance proceeds from property damage -- 121,915 Additional reserves (250,000) (905,000) Net cash provided by (used in) operations $ (11,669) $ (7,520)
In 1995 and 1994 the Corporate General Partner believed it to be in the best interest of the Partnership to reserve an additional $250,000 and $905,000, respectively, to fund continuing capital improvements at the three properties. 5 SHELTER PROPERTIES IV LIMITED PARTNERSHIP NOTES TO FINANCIAL STATEMENTS - continued (unaudited) Note C Transactions with Affiliated Parties The Partnership has no employees and is dependent on the Corporate General Partner and its affiliates for the management and administration of all partnership activities. The Partnership Agreement provides for payments to affiliates for services and as reimbursement of certain expenses incurred by affiliates on behalf of the Partnership. The following transactions with Insignia Financial Group, Inc. and affiliates were charged to expense in 1995 and 1994:
For the Nine Months Ended July 31, 1995 1994 Property management fees $381,121 $362,751 Data processing services 37,852 35,082 Marketing services 909 1,637 Reimbursement for services of affiliates 94,322 76,585
The Partnership insures its properties under a master policy through an agency and 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 current year's master policy. The current agent assumed the financial obligations to the affiliate of the Corporate General Partner, who 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. 6 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 the nine months ended July 31, 1995 and 1994:
Average Occupancy Property 1995 1994 Baymeadows Apartments Jacksonville, Florida 96% 96% Quail Run Apartments Columbia, South Carolina 95% 89% Countrywood Village Apartments Raleigh, North Carolina 95% 96%
The Corporate General Partner attributes the increase in occupancy at Quail Run to the increase in military personnel being transferred into the local base. The Partnership's net loss for the nine months ended July 31, 1995, was $391,015, with the third quarter having a loss of $43,043. The Partnership reported net income of $96,230 and $92,471 for the respective corresponding periods of 1994. The decrease in net income is primarily attributable to an increase in maintenance expense due to additional renovations in 1995 which included painting and exterior renovations of both Baymeadows and Countrywood. In addition, general and administrative expenses increased as a result of increased legal costs for an outstanding lawsuit as disclosed in Legal Proceedings below, as well as increased professional expenses in connection with the tender offers. Partially offsetting these items is an increase in rental income due to an increase in occupancy and periodic rental rate increases. In addition, other income increased due to additional tenant charges and increased revenue at Baymeadows' ancillary operations. Other income also increased due to additional cash being available for investments and higher interest rates. Offsetting these increases in other income was a decrease in other income at Quail Run due to a tax refund received in 1994 with no similar refund in 1995. 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. At July 31, 1995, the Partnership reported unrestricted cash of $1,385,718 versus $1,104,188 for the same period in 1994. Net cash provided from operations increased primarily due to the change in accounts payable resulting from the payment of 7 property improvements in 1994 for services rendered during fiscal 1993. Also contributing to this increase is the change in other assets resulting from the refund of taxes from the Internal Revenue Service that had to be prepaid in May 1994. Offsetting this change is the reporting of a net loss for the nine months ended July 31, 1995, versus net income for the same period in 1994 as previously discussed. Net cash used in investing activities increased primarily due to additional purchases of short-term investments and the receipt in 1994 of insurance proceeds for damages incurred in 1993 with no such receipt in 1995. Also contributing to this change is an increase in property improvements in the first nine months of 1995 over the same period in 1994. These property improvements are mainly due to major renovation projects at Baymeadows and Countrywood. Finally, the statement of cash flows includes a decrease in cash used in financing activities resulting from a distribution to the partners paid in the second quarter of 1994. This distribution was for withholding taxes due on behalf of the partners resulting from the income associated with the foreclosure of one of the Partnership's properties. 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 $25,182,574, net of discount, is amortized over 257 months with a balloon payment of $20,669,395 due on November 15, 2002, at which time the properties will either be refinanced or sold. Future cash distributions will depend on the levels of net cash generated from operations, property sales, and the availability of cash reserves. As previously discussed, the Partnership paid the withholding taxes in 1994 for the partners in connection with the gain reported on the foreclosure of one of the partnership's properties in 1993. No cash distributions were recorded during the first nine months of fiscal 1995. The Corporate General Partner presently anticipates that the Partnership will make a cash distribution to Unit holders in 1995. Although the timing and amount of such anticipated distribution has not been determined, the Partnership does not intend to make a cash distribution until later in 1995. 8 PART II - OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS The general partner responsible for management of the Partnership's business is Shelter Realty IV Corporation, a South Carolina corporation (the "Corporate General Partner"). The only other general partner of the Partnership, N. Barton Tuck, Jr. is effectively prohibited by the Partnership's partnership agreement (the "Partnership Agreement") from participating in the management of the Partnership. The Corporate General Partner is an indirect subsidiary of Insignia Financial Group, Inc. ("Insignia"). The directors and officers of the Corporate General Partner also serve as executive officers of Insignia. The Corporate General Partner owns 100 Limited Partnership Units ("Units"). On May 27, 1995, an affiliate of the Corporate General Partner (the "Affiliated Purchaser") acquired 11,050 Units at a price of $250.00 per Unit pursuant to a tender offer (the "Affiliate Offer") described below. The Corporate General Partner and the Affiliated Purchaser are, therefore, entitled to participate in cash distributions made by the Partnership to its Unit holders. The Partnership has not made cash distributions to Unit holders since 1985. In addition, the Partnership made withholding tax payments in 1994 to taxing authorities on behalf of the partners which was recorded as a distribution. The Corporate General Partner presently anticipates that the Partnership will make a cash distribution to Unit holders in 1995. Although the timing and amount of such anticipated distribution has not been determined, the Partnership does not intend to make a cash distribution until later in 1995 after the High River Offer is scheduled to expire. As a result, High River (as defined below) will receive the full cash distribution made during 1995 for those Units that it purchases in the High River Offer. The Partnership presently expects that any distribution made during 1995 would be in the range of $17.50 to $20.00 per Unit. In addition, the Corporate General Partner is entitled to certain cash distributions in respect of its general partner interest. The Corporate General Partner has not received a cash distribution in respect of its general partner interest since 1985. As a result of the Affiliated Purchaser's acquisition of 22.1% of the outstanding Units, the Affiliated Purchaser, an affiliate of the Corporate General Partner and Insignia, may be in a position to significantly influence any vote of the Unit holders. The Partnership has paid Insignia Management Group, L.P. ("IMG"), an affiliate of the Corporate General Partner, property management fees equal to 5% of the Partnership's apartment revenues for property management services in each of the three years in the period ended October 31, 1994, pursuant to property management agreements. Property management fees paid to IMG amounted to $492,733, $477,484, and $486,071, respectively, for the three years ended October 31, 1992, 1993, and 1994. Additionally, the Partnership paid IMG property management fees equal to $381,121 during the first three quarters of fiscal 1995. Insignia and its affiliates do not receive any fees from the Partnership for the asset management or partnership administration services they provide, although Insignia and its affiliates are reimbursed by the Partnership for the expenses they incur in connection with providing those services. The Partnership Agreement also provides for reimbursement to the Corporate General Partner and its affiliates for costs incurred in connection with administration of the Partnership's activities. Pursuant to these provisions and in addition to the property management fees referred to above, the Partnership paid the Corporate General Partner and its affiliates (including the reimbursements to Insignia and its affiliates in connection with asset management and partnership administration services) an aggregate of $172,088, $189,970, and $194,478, respectively, for the three years ended October 31, 1992, 1993, and 1994 and $133,083 during the first three quarters 9 of fiscal 1995. In 1992, an affiliate of Insignia assisted an unaffiliated third party engaged by the Partnership in connection with refinancings of the Partnership's properties, and received $244,500 from the third party for providing such assistance. In addition, at various times during the past three fiscal years an affiliate of Insignia has held a promissory note or preferred stock issued by an unaffiliated company that provides insurance brokerage services to the Partnership. The terms of the Affiliated Purchaser's financing of the Affiliate Offer may result in future potential conflicts of interest. The Affiliated Purchaser paid for the Units it purchased pursuant to the Affiliate Offer with funds provided by Insignia, and Insignia, in turn, obtained these funds from its working capital. It is possible, however, that in connection with its future financing activities, Insignia may cause or request the Affiliated Purchaser to pledge its Units as collateral for loans, or otherwise agree to terms which provide Insignia and the Affiliated Purchaser with incentives to generate substantial near-term cash flow from the Affiliated Purchaser's investment in the Units. In such a situation, the Corporate General Partner may experience a conflict of interest in seeking to reconcile the best interests of the Partnership with the need of its affiliates for cash flow from the Partnership's activities. On April 27, 1995, the Affiliated Purchaser commenced the Affiliate Offer for up to 30% of the Units at a price of $250.00 per Unit. The Affiliate Offer expired on May 26, 1995. On May 27, 1995, an affiliate of the Corporate General Partner, the Affiliated Purchaser, acquired 11,050 Units at a price of $250.00 per Unit pursuant to the Affiliate Offer. During the Affiliate Offer, Carl C. Icahn and certain of his associates contacted Insignia about pursuing a variety of possible transactions on a joint venture basis. During those discussions, representatives of Insignia advised Mr. Icahn and his representatives that Insignia did not wish to discourage or prevent any transaction which would produce additional value for Unit holders. During those conversations, Mr. Icahn and his representatives expressed a desire to make an equity investment in the Affiliated Purchaser with a view to sharing in the economic benefits, if any, to be derived by the Affiliated Purchaser from the Affiliate Offer. The representatives of Insignia declined to agree to such an arrangement. Following those discussions, at approximately 6:45 p.m. on Monday, May 22, 1995, the Corporate General Partner received a letter from High River Limited Partnership ("High River") which stated that High River was commencing, by public announcement, a cash tender offer for up to approximately 30% of the outstanding Units at a price of $287.50 per Unit (the "High River Offer"). High River sent similar letters to the Insignia affiliated corporate general partners of five other limited partnerships. On May 23, 1995, Insignia issued a press release which announced receipt of the letters. From 12:00 noon on Tuesday, May 23 through late in the evening of Wednesday, May 24, the Affiliated Purchaser, Insignia, and High River and their respective counsel had a series of meetings and telephone conversations to explore a possible joint venture relationship with respect to various real estate related investment opportunities, including the Affiliate Offer. Representatives of High River terminated the discussions. No agreement was reached with respect to the Affiliated Offer or any other matter. On the afternoon of Thursday, May 25, 1995, the Corporate General Partner received a second letter from High River stating that High River had initiated a tender offer for up to 40% of the outstanding Units at a price of $363.00 per Unit. 10 High River also issued a press release announcing the High River Offer and that High River was commencing similar tender offers for units of limited partnership interest in five other partnerships in which other Insignia affiliates are the corporate general partners. Upon receiving the letter from High River, Insignia issued its own press release announcing the terms of the six High River offers. Also on May 25, 1995, the Corporate General Partner received a copy of a Complaint (the "High River Complaint") seeking, among other things, an order from the United States District Court for the District of Delaware enjoining the closing of the Affiliate Offer. The High River Complaint related to the Affiliate Offer and to five other tender offers made by affiliates of Insignia for units of limited partnership interests in other limited partnerships in which other affiliates of Insignia are general partners. The High River Complaint named as defendants the Affiliated Purchaser and each of the Insignia affiliates making the five other tender offers; the Corporate General Partner and the five other Insignia-affiliated general partners; and Insignia. The High River Complaint contained allegations that, among other things, the Affiliated Purchaser sought to acquire Units at highly inadequate prices, and that the Affiliate Offer contained numerous false and misleading statements and omissions of material facts. The alleged misstatements and omissions concerned, among other things, the true value of the units; the true financial conditions of the Partnership; the factors affecting the likelihood that properties owned by the Partnership will be sold or liquidated in the near future; the liquidity and value of the Units; the limited secondary market for Units; and the true nature of the market for underlying assets. The High River Complaint also alleged that the Affiliated Purchaser failed to comply with the requirements of Rule 13e-4 under the Securities Exchange Act of 1934. On Friday, May 26, 1995, the United States District Court for the District of Delaware denied High River's motion for a temporary restraining order to postpone the closing of the Affiliate Offer. On May 26, 1995, Insignia issued a press release announcing the Court's decision. High River subsequently voluntarily withdrew the High River Complaint without prejudice. On May 26, 1995, High River filed a Schedule 14D-1 relating to the High River Offer and containing an Offer to Purchase and a related Assignment of Partnership Interest. The Affiliate Offer expired as scheduled at midnight on May 26, 1995. As filed on May 26, 1995, the High River Offer was conditioned upon the Affiliate Offer being extended by at least 10 business days. High River issued a press release, dated May 26, 1995, announcing that the extension of the Affiliate Offer for 10 business days would be eliminated as a condition to the High River Offer. Also on May 26, the Chairman and Chief Executive Officer of Insignia received a letter from Mr. Icahn. In the letter, Mr. Icahn accused Insignia of disregarding its "fiduciary responsibilities." On Friday June 2, the High River Offer to Purchase and the related Assignment of Partnership Interests were mailed to Unit holders. On Monday, June 5, the Corporate General Partner delivered a letter to High River which requested that High River cure certain alleged critical omissions, misstatements, and deficiencies in the High River Offer by June 7, 1995. On June 7, the Corporate General Partner received a letter from Mr. Icahn stating that High River does not agree with the positions taken in the Corporate General Partner's June 5 letter. 11 On June 8, 1995, the Corporate General Partner commenced an action against High River and Carl C. Icahn in the United States District Court for the District of South Carolina. The complaint alleged that the High River Offer misled Unit holders and violated federal securities laws. The Partnership sought relief from High River's and Mr. Icahn's actions in the form of an injunction against the High River Offer, a judgment declaring that the untrue statements in and omissions from the High River Offer constitute violations of the federal securities laws, and an order requiring High River to make appropriate disclosures to correct all of the false and misleading statements in and omissions from the High River Offer. The Partnership and the Corporate General Partner recommended that the Unit holders reject the High River Offer and not tender their Units pursuant to the High River Offer. The Partnership and the Corporate General Partner stated that they may reconsider their recommendation if High River makes additional disclosures to the Unit holders as the Corporate General Partner requested. For further information, see the Partnership's Solicitation/Recommendation Statement on Schedule 14D-9 which was filed with the Securities and Exchange Commission on June 9, 1995. On June 12, 1995, High River filed an amendment to its Schedule 14D-1 containing a Supplement to its Offer to Purchase. The Supplement amended the High River Offer to increase the number of Units being sought to all of the outstanding Units and amended certain disclosures in the Offer to Purchase. Persons claiming to own Units filed a purported class action and derivative suit in the United States District Court for the District of South Carolina seeking, among other things, an order enjoining the Affiliate Offer. On Thursday, May 18, 1995, the Court denied plaintiffs' motion for a temporary restraining order postponing the closing of the Affiliate Offer, which expired as scheduled on May 26, 1995. Counsel for the parties are engaged in settlement discussions and may continue such discussions. The Complaint applies to the Affiliate Offer and to five other tender offers being made by affiliates of Insignia for units of limited partnership interests in other limited partnerships in which other affiliates of Insignia serve as general partners. The Complaint names as defendants the Affiliated Purchaser and each of the Insignia affiliates, including the five other tender offerors; the Corporate General Partner and five other Insignia-affiliated general partners; and four individuals who are officers and/or directors of Insignia, the Corporate General Partner and/or the Affiliated Purchaser. The Complaint contains allegations that, among other things, the defendants have intentionally mismanaged the Partnership and the five other Partnerships (collectively the "Partnerships") and acted contrary to the limited partners' best interests in order to prolong the lives of the Partnerships and thus continue the revenues derived by Insignia from the Partnerships while at the same time reducing the demand for the Partnerships' units in the limited resale market for the units by artificially depressing the trading prices for the units, in order to create a favorable environment for the Affiliate Offer and the five other tender offers. In the Complaint the plaintiffs also allege that in the Affiliate Offer and the five other tender offers, the Affiliated Purchaser will acquire effective voting control over the Partnerships at highly inadequate prices, and that the offers to purchase and related tender offer documents contain numerous false and misleading statements and omissions of material facts. The alleged misstatements and omissions concern, among other things, the advantages to Unit holders of tendering Units pursuant to the Affiliate Offer; the true value of the Units; the true financial condition of the Partnerships; the 12 factors affecting the likelihood that properties owned by the Partnerships will be sold or liquidated in the near future; the liquidity and value of the Units; the limited secondary market for Units; and the true nature of the market for underlying assets. On Friday, June 16, plaintiffs filed an amended complaint which contained allegations that, among other things, the defendants engaged in a plan by which they misappropriated the Partnerships' assets and fraudulently induced limited partners to sell units to the defendants at highly inadequate prices by causing the Partnerships to take actions that artificially depressed the prices available for units and by knowingly disseminating false and misleading statements and omissions of material facts. The plaintiffs alleged that the defendants breached fiduciary duties and violated federal securities law by closing the Affiliate Offer and the five other tender offers made by affiliates of Insignia for units in the other Partnerships with the knowledge that the limited partners were not aware of the High River Offer. The plaintiffs further alleged that the defendants, since the close of the Affiliate Offer, had caused the Partnerships to enter into several wasteful transactions that had no business purpose or benefit to the Partnerships solely in order to entrench themselves in their positions of control over the Partnerships, with the effect of impeding and possibly preventing nonaffiliated entities from making tender offers that offer higher value to unit holders than defendants paid. Subsequent to the filing of the lawsuit by the Corporate General Partner against High River and Carl C. Icahn, the Corporate General Partner and High River began discussions in an attempt to settle the lawsuit. On Friday, June 16, 1995, High River issued a press release announcing that the expiration date of the High River Offer was extended until 12:00 midnight, New York City time on Wednesday, June 28, 1995, and that High River and the Corporate General Partner were engaged in settlement discussions. On Saturday, June 17, the Affiliated Purchaser and Insignia entered into an agreement with Carl C. Icahn and High River (the "Agreement") and the Corporate General Partner, among others, entered into a letter agreement with High River (together with the Agreement, the "Agreements"). The Agreements provide generally that Insignia would not, and will not cause or permit its affiliates to, actively oppose the High River Offer, but rather would take a neutral stance with respect to the High River Offer, except in the case of a competing third party bid made prior to the expiration of the High River Offer or the occurrence of any event materially adversely affecting High River Offer. The High River Offer would proceed in accordance with its terms, as amended, and the Corporate General Partner would cooperate to facilitate the admission of High River as a substitute limited partner with respect to any Units High River purchases pursuant to the High River Offer in accordance with the terms of the Partnership Agreement and applicable law. The Agreements limit High River's ability to amend or extend the High River Offer. Apart from purchases made by High River pursuant to the High River Offer, neither High River nor Insignia nor any of their respective affiliates would purchase any additional Units pursuant to a tender offer and can only purchase additional Units from time to time under certain conditions specified in the Agreements. High River would vote on certain matters concerning the Partnership as directed by Insignia. In addition, High River and its affiliates are prohibited from soliciting proxies with respect to the Partnership or otherwise making proposals concerning the Partnership directly to other Unit holders. High River and Insignia have certain buy-sell rights with respect to the other's Units which may be exercised 18 months after the effective date of the Agreements and annually thereafter and at earlier 13 or later dates under other circumstances specified in the Agreements, including the proposal of certain transactions otherwise protected by the Agreements. The party selling Units pursuant to the buy-sell transaction must sell or cause to be sold to the other party all Units beneficially owned by the first party and its affiliates. Litigation initiated by the Corporate General Partner concerning the High River Offer and litigation initiated by High River concerning the Affiliate Offer was dismissed with prejudice and mutual releases were exchanged. On June 20, High River issued a press release announcing that the expiration date of the High River Offer was extended until 12:00 midnight, New York City time on Monday, July 3, 1995. On July 20, 1995, the Partnership mailed a letter to limited partners of the Partnership who tendered limited partnership units to the Affiliated Purchaser in the recent tender offer. The letter notifies the limited partners that the Affiliated Purchaser has offered to increase the amount paid to such limited partners by an additional 45%. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K a) Exhibits: None b) Reports on Form 8-K filed in the third quarter ended July 31, 1995: Current report on Form 8-K dated July 20, 1995, as filed with the Securities and Exchange Commission on July 25, 1995. 14 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 Treasurer (Principal Financial Officer and Principal Accounting Officer) Date: September 14, 1995 15 EX-27 2 EXHIBIT 27
5 1,000 9-MOS OCT-31-1994 JUL-31-1995 1,385,718 1,311,381 26,690 0 0 3,477,420 57,801,527 28,120,712 35,445,608 1,254,708 25,182,574 0 0 0 9,008,326 35,445,608 0 7,763,550 0 0 8,154,565 0 1,730,314 (391,015) 0 0 0 0 0 (391,015) (7.74) 0