-----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, TJULLQlOap19XsqpZkJ8hl4rEFBzbUYiNM5fDLOvt1n9Gpy6POKDGXs/OBpB73Pq EqSrT/YPc0AZKPsgHQeKQA== 0000711642-00-000024.txt : 20000215 0000711642-00-000024.hdr.sgml : 20000215 ACCESSION NUMBER: 0000711642-00-000024 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19991231 FILED AS OF DATE: 20000214 FILER: COMPANY DATA: COMPANY CONFORMED NAME: SHELTER PROPERTIES VI LIMITED PARTNERSHIP CENTRAL INDEX KEY: 0000730013 STANDARD INDUSTRIAL CLASSIFICATION: REAL ESTATE [6500] IRS NUMBER: 570755618 STATE OF INCORPORATION: SC FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10QSB SEC ACT: SEC FILE NUMBER: 000-13261 FILM NUMBER: 542877 BUSINESS ADDRESS: STREET 1: 55 BEATTIE PLACE STREET 2: PO BOX 1089 CITY: GREENVILLE STATE: SC ZIP: 29602 BUSINESS PHONE: 3037578101 MAIL ADDRESS: STREET 1: 55 BEATTIE PLACE STREET 2: PO BOX 1089 CITY: GREENVILLE STATE: SC ZIP: 29602 10QSB 1 1ST QUARTER 10-QSB FORM 10-QSB--QUARTERLY OR TRANSITIONAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Quarterly or Transitional Report U.S. SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Form 10-QSB (Mark One) [ ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 [X] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from November 1, 1999 to December 31, 1999 Commission file number 0-13261 SHELTER PROPERTIES VI (Exact name of small business issuer as specified in its charter) South Carolina 57-0755618 (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 VI BALANCE SHEET (Unaudited) (in thousands, except per unit data) December 31, 1999 Assets Cash and cash equivalents $ 2,901 Receivables and deposits 662 Restricted escrows 766 Other assets 368 Investment properties: Land $ 4,950 Buildings and related personal property 50,536 ------ 55,486 Less accumulated depreciation (29,198) 26,288 ------ ------ $ 30,985 Liabilities and Partners' (Deficit) Capital Liabilities Accounts payable $ 210 Tenant security deposit liabilities 215 Accrued property taxes 655 Other liabilities 304 Distribution payable 428 Mortgage notes payable 25,302 Partners' (Deficit) Capital General partners $ (306) Limited partners (42,324 units issued and outstanding) 4,177 3,871 ------ ------ $ 30,985 See Accompanying Notes to Financial Statements b) SHELTER PROPERTIES VI STATEMENTS OF OPERATIONS (Unaudited) (in thousands, except unit data) Two Months Ended December 31, 1999 1998 ---- ---- (Restated) Revenues: Rental income $1,716 $1,623 Other income 123 135 ----- ----- Total revenues 1,839 1,758 ----- ----- Expenses: Operating 655 669 General and administrative 29 52 Depreciation 295 338 Interest 375 391 Property taxes 145 150 ----- ----- Total expenses 1,499 1,600 ----- ----- Income before cumulative effect of a change in accounting principle 340 158 Cumulative effect on prior years of a change in accounting for the cost of exterior painting and major landscaping -- 253 ----- ----- Net income $ 340 $ 411 ==== ==== Net income allocated to general partners (1%) $ 3 $ 4 Net income allocated to limited partners (99%) 337 407 ----- ----- $ 340 $ 411 ==== ==== Net income per limited partnership unit: Income before cumulative effect of a change in accounting principle $ 7.96 $ 3.70 Cumulative effect on prior years of a change in accounting for the cost of exterior painting and major landscaping -- 5.92 ----- ----- Net income $ 7.96 $ 9.62 ===== ===== Distributions per limited partnership unit $10.02 $49.45 ===== ===== See Accompanying Notes to Financial Statements c) SHELTER PROPERTIES VI STATEMENT OF CHANGES IN PARTNERS' (DEFICIT) CAPITAL (Unaudited) (in thousands, except unit data) Limited Partnership General Limited Units Partners Partners Total Original capital contributions 42,324 $ 2 $42,324 $42,326 ====== == ====== ====== Partners' (deficit) capital at October 31, 1999 42,324 $ (305) $ 4,264 $ 3,959 Distribution to partners -- (4) (424) (428) Net income for the two months ended December 31, 1999 -- 3 337 340 ------ ------ ------ ------ Partners' (deficit) capital at December 31, 1999 42,324 $ (306) $ 4,177 $ 3,871 ====== ===== ====== ====== See Accompanying Notes to Financial Statements d) SHELTER PROPERTIES VI STATEMENTS OF CASH FLOWS (Unaudited) (in thousands) Two Months Ended December 31, 1999 1998 Cash flows from operating activities: (Restated) Net income $ 340 $ 411 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation 295 338 Amortization of discounts and loan costs 41 47 Cumulative effect on prior years of a change in accounting principle -- (253) Change in accounts: Receivables and deposits 89 128 Other assets 103 4 Accounts payable (9) (89) Tenant security deposit liabilities 1 2 Accrued property taxes (111) (78) Other liabilities (164) 17 ------ ------ Net cash provided by operating activities 585 527 ------ ------ Cash flows from investing activities: Property improvements and replacements (328) (130) Net (deposits to) withdrawals from restricted escrows (10) 64 ------ ------ Net cash used in investing activities (338) (66) ------ ------ Cash flows from financing activities: Payments on mortgage notes payable (159) (149) Distribution paid to partners -- (2,100) ------ ------ Net cash used in financing activities (159) (2,249) ------ ------ Net increase (decrease) in cash and cash equivalents 88 (1,788) Cash and cash equivalents at beginning of period 2,813 3,111 ------ ------ Cash and cash equivalents at end of period $ 2,901 $ 1,323 ====== ====== Supplemental disclosure of cash flow information: Cash paid for interest $ 334 $ 344 ====== ====== Supplemental disclosure of non-cash transaction: Distribution payable $ 428 $ -- ====== ====== See Accompanying Notes to Financial Statements e) SHELTER PROPERTIES VI NOTES TO FINANCIAL STATEMENTS (Unaudited) Note A - Basis of Presentation The accompanying unaudited financial statements of Shelter Properties VI (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 VI Corporation (the "Corporate General Partner"), all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the two month period ended December 31, 1999, are not necessarily indicative of the results that may be expected for the fiscal year ending December 31, 2000. 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, 1999. Change in Fiscal Year End: The Partnership elected to change its fiscal year end from October 31 to December 31, effective for the period ending December 31, 1999. Change in Accounting Principle: During the two months ended December 31, 1999 (effective November 1, 1998), the Partnership changed its method of accounting to capitalize the cost of exterior painting and major landscaping. The Partnership believes that this accounting principle change is preferable because it provides a better matching of expenses with the related benefit of the expenditures and it is consistent with industry practice and the policies of the Corporate General Partner. The effect of the change for the two months ended December 31, 1998 was to decrease income before the change by approximately $13,000 ($.31 per limited partnership unit). The cumulative effect adjustment of approximately $253,000 is the result of applying retroactively the aforementioned accounting principle change and is included in income for the two months ended December 31, 1998. The accounting change will not have an affect on cash flow, funds available for distribution or fees payable to the Corporate General Partner and affiliates. 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 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. Two Months Ended December 31, 1999 1998 ---- ---- (in thousands) Net cash provided by operating activities $ 585 $ 527 Payments on mortgage notes payable (159) (149) Property improvements and replacements (328) (130) Change in restricted escrows, net (10) 64 Changes in reserves for net operating liabilities 98 16 Additional reserves (186) (328) ------ ------ Net cash used in operations $ -- $ -- === === The Corporate General Partner believed it to be in the best interest of the Partnership to reserve net cash from operations of approximately $186,000 and $328,000 at December 31, 1999 and 1998, respectively, to fund continuing capital improvements and repairs at the Partnership's six investment properties. Note D - 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 certain payments to affiliates for services and the reimbursement of certain expenses incurred by affiliates on behalf of the Partnership. The following transactions with the Corporate General Partner and/or its affiliates were charged to expense for each of the two months ended December 31, 1999 and 1998: 1999 1998 ---- ---- (in thousands) Property management fees (included in operating expenses) $ 90 $ 87 Reimbursement for services of affiliates (included in operating, general and administrative expenses, and investment properties) 34 35 During the two months ended December 31, 1999 and 1998, affiliates of the Corporate General Partner were entitled to receive 5% of gross receipts from all of the Registrant's properties as compensation for providing property management services. The Registrant paid to such affiliates approximately $90,000 and $87,000 for the two months ended December 31, 1999 and 1998, respectively. Affiliates of the Corporate General Partner received reimbursements of accountable administrative expenses amounting to approximately $34,000 and $35,000 for the two months ended December 31, 1999 and 1998, respectively. Several tender offers were made by various parties, including affiliates of the general partners, during the two months ended December 31, 1999 and the fiscal years ended October 31, 1999 and 1998. As a result of these tender offers, AIMCO and it affiliates currently own 23,628 units of limited partnership units in the Partnership representing 55.83% of the outstanding units. It is possible that AIMCO or its affiliates will make one or more additional offers to acquire additional limited partnership interests in the Partnership for cash or in exchange for units in the operating partnership of AIMCO. Consequently, AIMCO is in a position to influence all voting decisions with respect to the Registrant. Under the Partnership Agreement, unitholders holding a majority of the Units are entitled to take action with respect to a variety of matters. When voting on matters, AIMCO would in all likelihood vote the Units it acquired in a manner favorable to the interest of the Corporate General Partner because of their affiliation with the Corporate General Partner. Note E - Distributions During the two months ended December 31, 1999, a distribution was approved for approximately $428,000 (approximately $424,000 to the limited partners, $10.02 per limited partnership unit) from operations. The distribution was paid in January 2000. A cash distribution of approximately $2,100,000 was paid to the partners during the two months ended December 31, 1998. Approximately $1,412,000 ($33.36 per limited partnership unit) was paid to the limited partners from previously undistributed proceeds of a fiscal year 1995 property sale and approximately $688,000 (approximately $681,000 to the limited partners, $16.09 per limited partnership unit) was paid from operations. 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 six apartment complexes located in five states throughout the United States as follows: one each in Georgia, Iowa, Florida, and Colorado, and two 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 net income. The accounting policies of the reportable segment are the same as those described in the summary of significant accounting policies in the Partnership's Annual Report on Form 10-KSB for the year ended October 31, 1999. Factors management used to identify the Partnership's reportable segment: The Partnership's reportable segment consists of investment properties that offer similar products and services. Although each of the investment properties are managed separately, they have been aggregated into one segment as they provide services with similar types of products and customers. Segment information for the two month period ended December 31, 1999 and 1998, is shown in the tables below (in thousands). The "Other" column includes partnership administration related items and income and expense not allocated to the reportable segment. 1999 Residential Other Totals ---- ----------- ----- ------ Rental income $ 1,716 $ -- $ 1,716 Other income 120 3 123 Interest expense 375 -- 375 Depreciation 295 -- 295 General and administrative expense -- 29 29 Segment profit (loss) 366 (26) 340 Total assets 30,007 978 30,985 Capital expenditures for investment properties 328 -- 328 1998 Residential Other Totals ---- ----------- ----- ------ Rental income $ 1,623 $ -- $ 1,623 Other income 114 21 135 Interest expense 391 -- 391 Depreciation 338 -- 338 General and administrative expense -- 52 52 Cumulative effect on prior years of change in accounting principle 253 -- 253 Segment profit (loss) 442 (31) 411 Total assets 29,758 875 30,633 Capital expenditures for investment properties 130 -- 130 Note G - Legal Proceedings In March 1998, several putative unit holders of limited partnership units of the Partnership commenced an action entitled Rosalie Nuanes, et al. v. Insignia Financial Group, Inc., et al. in the Superior Court of the State of California for the County of San Mateo. The plaintiffs named as defendants, among others, the Partnership, the Corporate General Partner and several of their affiliated partnerships and corporate entities. The action purports to assert claims on behalf of a class of limited partners and derivatively on behalf of a number of limited partnerships (including the Partnership) which are named as nominal defendants, challenging the acquisition by Insignia Financial Group, Inc. ("Insignia") and entities which were, at one time, affiliates of Insignia ("Insignia Affiliates") of interests in certain general partner entities, past tender offers by Insignia Affiliates to acquire limited partnership units, the management of partnerships by Insignia Affiliates and the Insignia Merger (see "Note B - Transfer of Control"). The plaintiffs seek monetary damages and equitable relief, including judicial dissolution of the Partnership. On June 25, 1998, the Corporate General Partner filed a motion seeking dismissal of the action. In lieu of responding to the motion, the plaintiffs have filed an amended complaint. The Corporate General Partner filed demurrers to the amended complaint which were heard February 1999. Pending the ruling on such demurrers, settlement negotiations commenced. On November 2, 1999, the parties executed and filed a Stipulation of Settlement, settling claims, subject to final court approval, on behalf of the Partnership and all limited partners who own units as of November 3, 1999. Preliminary approval of the settlement was obtained on November 3, 1999 from the Superior Court of the State of California, County of San Mateo, at which time the Court set a final approval hearing for December 10, 1999. Prior to the December 10, 1999 hearing the Court received various objections to the settlement, including a challenge to the Court's preliminary approval based upon the alleged lack of authority of class plaintiffs' counsel to enter the settlement. On December 14, 1999, the Corporate General Partner and its affiliates terminated the proposed settlement. Certain plaintiffs have filed a motion to disqualify some of the plaintiffs' counsel in the action. The Corporate General Partner does not anticipate that costs associated with this case will be material to the Partnership's overall operations. The Partnership is unaware of any other pending or outstanding litigation that is not of a routine nature arising in the ordinary course of business. Item 2. Management's Discussion and Analysis or Plan of Operation The matters discussed in this Form 10-QSB contain certain forward-looking statements and involve risks and uncertainties (including changing market conditions, competitive and regulatory matters, etc.) detailed in the disclosures contained in this Form 10-QSB and the other filings with the Securities and Exchange Commission made by the Registrant from time to time. The discussion of the Registrant's business and results of operations, including forward-looking statements pertaining to such matters, does not take into account the effects of any changes to the Registrant's business and results of operations. Accordingly, actual results could differ materially from those projected in the forward-looking statements as a result of a number of factors, including those identified herein. The Partnership's investment properties consist of six apartment complexes. The following table sets forth the average occupancy of the properties for each of the two months ended December 31, 1999 and 1998: Average Occupancy Property 1999 1998 -------- ---- ---- Rocky Creek Apartments Augusta, Georgia 92% 94% Carriage House Apartments Gastonia, North Carolina (1) 93% 90% Nottingham Square Apartments Des Moines, Iowa (1) 97% 90% Foxfire/Barcelona Apartments Durham, North Carolina (2) 92% 97% River Reach Apartments Jacksonville, Florida 95% 94% Village Gardens Apartments Fort Collins, Colorado (3) 96% 99% (1) The increase in average occupancy at Carriage House Apartments and Nottingham Square Apartments is due to a more aggressive marketing campaign during 1999. (2) The decrease in average occupancy at Foxfire/Barcelona Apartments is due to the renting, during the two months ended December 31, 1998, of corporate units to a construction company that was building a hospital in the area. (3) The decrease in average occupancy at Village Gardens Apartments is due to a change in demographics of the market area. Results of Operations The Partnership realized net income of approximately $340,000 for the two months ended December 31, 1999, compared to net income of approximately $411,000 for the corresponding period in 1998. The decrease in net income for the two month period ended December 31, 1999, is primarily attributable to a cumulative effect on prior years of a change in accounting principle as of December 31, 1998 partially offset by an increase in total revenues and a decrease in total expenses for the two months ended December 31, 1999. Total revenues increased during the two month period ended December 31, 1999, as a result of an increase in rental income. Rental income increased due to the increase in average occupancy at three of the Partnership's six investment properties (see occupancy discussion above) and to the increase in average rental rates at all of the properties. The decrease in total expenses during the two month period ended December 31, 1999 is attributable to a decrease in depreciation, general and administrative, interest, and operating expenses. Depreciation decreased due to several assets at Rocky Creek and Village Gardens being fully depreciated. General and administrative expenses decreased due to a decrease in reimbursements to the Corporate General Partner and audit fees. Included in general and administrative expenses at both December 31, 1999 and 1998, are reimbursements to the Corporate General Partner allowed under the Partnership Agreement 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. Interest expense decreased as a result of principal payments being made on the debt encumbering all of the Partnership's properties. Operating expenses decreased primarily due to decreases in interior building improvements and major landscaping partially offset by increased water and sewer expenses at Nottingham Square. During the two months ended December 31, 1999 (effective November 1, 1998), the Partnership changed its method of accounting to capitalize the cost of exterior painting and major landscaping. The Partnership believes that this accounting principle change is preferable because it provides a better matching of expenses with the related benefit of the expenditures and it is consistent with industry practice and the policies of the Corporate General Partner. The effect of the change for the two months ended December 31, 1998 was to decrease income before the change by approximately $13,000 ($.31 per limited partnership unit). The cumulative effect adjustment of approximately $253,000 is the result of applying retroactively the aforementioned accounting principle change and is included in income for the two months ended December 31, 1998. The accounting change will not have an affect on cash flow, funds available for distribution or fees payable to the Corporate General Partner and affiliates. As part of the ongoing business plan of the Partnership, the Corporate General Partner monitors the rental market environment of each of its investment properties to assess the feasibility of increasing rents, maintaining or increasing occupancy levels and protecting the Partnership from increases in expenses. As part of this plan, the Corporate General Partner attempts to protect the Partnership from the burden of inflation-related increases in expenses by increasing rents and maintaining a high overall occupancy level. However, due to changing market conditions, which can result in the use of rental concessions and rental reductions to offset softening market conditions, there is no guarantee that the Corporate General Partner will be able to sustain such a plan. Liquidity and Capital Resources At December 31, 1999, the Partnership had cash and cash equivalents of approximately $2,901,000 as compared to approximately $1,323,000 at December 31, 1998. Cash and cash equivalents increased approximately $88,000 for the two months ended December 31, 1999 from the Partnership's prior fiscal year of October 31, 1999. The increase was due to approximately $88,000 and is due to approximately $585,000 of cash provided by operating activities largely offset by approximately $338,000 of cash used in investing activities and approximately $159,000 of cash used in financing activities. Cash used in investing activities consisted of property improvements and replacements and net deposits to restricted escrows maintained by the mortgage lender. Cash used in financing activities consisted of payments of principal made on the mortgages encumbering the Registrant's properties. The Registrant invests its working capital reserves in money market accounts. The sufficiency of existing liquid assets to meet future liquidity and capital expenditure requirements is directly related to the level of capital expenditures required at the investment properties to adequately maintain the physical assets and other operating needs of the Partnership and to comply with Federal, state, local, legal, and regulatory requirements. Capital improvements planned for each of the Registrant's properties are detailed below. Rocky Creek During the two months ended December 31, 1999, the Partnership expended approximately $28,000 for capital improvements at Rocky Creek primarily consisting of floor covering and parking lot improvements. The improvements were funded from Partnership operating cash and reserves. The Partnership is currently evaluating the capital improvement needs of the property for the upcoming year. The minimum amount to be budgeted during the calendar year 2000 is expected to be $300 per unit or approximately $36,000. Additional improvements may be considered and will depend on the physical condition of the property as well as replacement reserves and anticipated cash flow generated by the property. Carriage House During the two months ended December 31, 1999, the Partnership expended approximately $68,000 for capital improvements at Carriage House primarily consisting of pool improvements, electrical upgrades, and carpeting. These improvements were funded from Partnership operating cash and reserves. The Partnership is currently evaluating the capital improvement needs of the property for the upcoming year. The minimum amount to be budgeted during the calendar year 2000 is expected to be $300 per unit or approximately $31,000. Additional improvements may be considered and will depend on the physical condition of the property as well as replacement reserves and anticipated cash flow generated by the property. Nottingham Square During the two months ended December 31, 1999, the Partnership expended approximately $30,000 for capital improvements at Nottingham Square primarily consisting of floor covering, other improvements, and pool upgrades. The Partnership is currently evaluating the capital improvement needs of the property for the upcoming year. The minimum amount to be budgeted during the calendar year 2000 is expected to be $300 per unit or approximately $133,000. Additional improvements may be considered and will depend on the physical condition of the property as well as replacement reserves and anticipated cash flow generated by the property. Foxfire/Barcelona During the two months ended December 31, 1999, the Partnership expended approximately $104,000 for capital improvements at Foxfire/Barcelona primarily consisting of electrical upgrades, other building improvements, and floor covering. The Partnership is currently evaluating the capital improvement needs of the property for the upcoming year. The minimum amount to be budgeted during the calendar year 2000 is expected to be $300 per unit or approximately $106,000. Additional improvements may be considered and will depend on the physical condition of the property as well as replacement reserves and anticipated cash flow generated by the property. River Reach During the two months ended December 31, 1999, the Partnership expended approximately $63,000 for capital improvements at River Reach primarily consisting of roof replacements and floor covering. These improvements were funded from Partnership operating cash and reserves. The Partnership is currently evaluating the capital improvement needs of the property for the upcoming year. The minimum amount to be budgeted during the calendar year 2000 is expected to be $300 per unit or approximately $89,000. Additional improvements may be considered and will depend on the physical condition of the property as well as replacement reserves and anticipated cash flow generated by the property. Village Gardens During the two months ended December 31, 1999, the Partnership expended approximately $35,000 for capital improvements at Village Gardens primarily consisting of other enhancements and floor covering. These improvements were funded from Partnership operating cash and reserves. The Partnership is currently evaluating the capital improvement needs of the property for the upcoming year. The minimum amount to be budgeted during the calendar year 2000 is expected to be $300 per unit or approximately $42,000. Additional improvements may be considered and will depend on the physical condition of the property as well as replacement reserves and anticipated cash flow generated by the property. The additional capital expenditures will be incurred only if cash is available from operations and Partnership reserves. To the extent that such budgeted capital improvements are completed, the Registrant's distributable cash flow, if any, may be adversely affected at least in the short term. The Partnership's current assets are thought to be sufficient for any near term needs (exclusive of capital improvements) of the Partnership. The mortgage indebtedness of approximately $25,302,000, net of discounts, is being amortized over 257 months with a balloon payment of approximately $23,008,000 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 Partnership will risk losing such properties through foreclosure. During the two months ended December 31, 1999, a distribution was approved for approximately $428,000 (approximately $424,000 to the limited partners, $10.02 per limited partnership unit) from operations. The distribution was paid in January 2000. A cash distribution of approximately $2,100,000 was paid to the partners during the two months ended December 31, 1998. Approximately $1,412,000 ($33.36 per limited partnership unit) was paid from the previously undistributed proceeds of a 1995 property sale and approximately $688,000 ($16.09 per limited partnership unit) was paid from operations. Future cash distributions will depend on the levels of net cash generated from operations, the availability of cash reserves, and the timing of debt maturities, refinancings, and/or property sales. The Partnership's distribution policy is reviewed on a semi-annual basis. There can be no assurance, however, that the Partnership will generate sufficient funds from operations, after required capital improvements, to permit further distributions to its partners in fiscal year 2000 or subsequent periods. Tender Offers Several tender offers were made by various parties, including affiliates of the general partners, during the two months ended December 31, 1999 and the fiscal years ended October 31, 1999 and 1998. As a result of these tender offers, AIMCO and it affiliates currently owns 23,628 units of limited partnership units in the Partnership representing 55.83% of the outstanding units. It is possible that AIMCO or its affiliates will make one or more additional offers to acquire additional limited partnership interests in the Partnership for cash or in exchange for units in the operating partnership of AIMCO. Consequently, AIMCO is in a position to influence all voting decisions with respect to the Registrant. Under the Partnership Agreement, unitholders holding a majority of the Units are entitled to take action with respect to a variety of matters. When voting on matters, AIMCO would in all likelihood vote the Units it acquired in a manner favorable to the interest of the Corporate General Partner because of their affiliation with the Corporate General Partner. Year 2000 Compliance General Description The Year 2000 issue is the result of computer programs being written using two digits rather than four digits to define the applicable year. The Partnership is dependent upon the Corporate General Partner and its affiliates for management and administrative services ("Managing Agent"). Any of the Managing Agent's computer programs or hardware that had date-sensitive software or embedded chips might have recognized a date using "00" as the year 1900 rather than the year 2000. This could have resulted in a system failure or miscalculations causing disruptions of operations, including, among other things, a temporary inability to process transactions, send invoices, or engage in similar normal business activities. Computer Hardware, Software and Operating Equipment In 1999, the Managing Agent completed all phases of its Year 2000 program by completing the replacement and repair of any hardware or software system or operating equipment that was not yet Year 2000 compliant. The Managing Agent's hardware and software systems and its operating equipment are now Year 2000 compliant. As of February 11, 2000, no material failure or erroneous results have occurred in the Managing Agent's computer applications related to the failure to reference the Year 2000. Third Parties To date, the Managing Agent is not aware of any significant supplier or subcontractor (external agent) or financial institution of the Partnership that has a Year 2000 issue that would have a material impact on the Partnership's results of operations, liquidity or capital resources. However, the Managing Agent has no means of ensuring or determining the Year 2000 compliance of external agents. At this time, the Managing Agent does not believe that a Year 2000 issue of any non-compliant external agent will have a material impact on the Partnership's financial position or results of operations. Costs The total cost of the Managing Agent's Year 2000 project was approximately $3.2 million and was funded from operating cash flows. Risks Associated with the Year 2000 The Managing Agent completed all necessary phases of its Year 2000 program in 1999, and did not experience system or equipment malfunctions related to a failure to reference the Year 2000. The Managing Agent or Partnership have not been materially adversely effected by disruptions in the economy generally resulting from the Year 2000 issue. At this time, the Managing Agent does not believe that the Partnership's businesses, results of operations or financial condition will be materially adversely effected by the Year 2000 issue. Contingency Plans Associated with the Year 2000 The Managing Agent has not had to implement contingency plans such as manual workarounds or selecting new relationships for its banking or elevator operation activities in order to avoid the Year 2000 issue. PART II - OTHER INFORMATION ITEM 1. LEGAL PROCEDINGS In March 1998, several putative unit holders of limited partnership units of the Partnership commenced an action entitled Rosalie Nuanes, et al. v. Insignia Financial Group, Inc., et al. in the Superior Court of the State of California for the County of San Mateo. The plaintiffs named as defendants, among others, the Partnership, the Corporate General Partner and several of their affiliated partnerships and corporate entities. The action purports to assert claims on behalf of a class of limited partners and derivatively on behalf of a number of limited partnerships (including the Partnership) which are named as nominal defendants, challenging the acquisition by Insignia Financial Group, Inc. ("Insignia") and entities which were, at one time, affiliates of Insignia ("Insignia Affiliates") of interests in certain general partner entities, past tender offers by Insignia Affiliates to acquire limited partnership units, the management of partnerships by Insignia Affiliates and the Insignia Merger (see "Note B - Transfer of Control"). The plaintiffs seek monetary damages and equitable relief, including judicial dissolution of the Partnership. On June 25, 1998, the Corporate General Partner filed a motion seeking dismissal of the action. In lieu of responding to the motion, the plaintiffs have filed an amended complaint. The Corporate General Partner filed demurrers to the amended complaint which were heard February 1999. Pending the ruling on such demurrers, settlement negotiations commenced. On November 2, 1999, the parties executed and filed a Stipulation of Settlement ("Stipulation"), settling claims, subject to final court approval, on behalf of the Partnership and all limited partners who own units as of November 3, 1999. Preliminary approval of the settlement was obtained on November 3, 1999 from the Superior Court of the State of California, County of San Mateo, at which time the Court set a final approval hearing for December 10, 1999. Prior to the December 10, 1999 hearing the Court received various objections to the settlement, including a challenge to the Court's preliminary approval based upon the alleged lack of authority of class plaintiffs' counsel to enter the settlement. On December 14, 1999, the Corporate General Partner and its affiliates terminated the proposed settlement. Certain plaintiffs have filed a motion to disqualify some of the plaintiffs' counsel in the action. The Corporate General Partner does not anticipate that costs associated with this case will be material to the Partnership's overall operations. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K a) Exhibits: Exhibit 27, Financial Data Schedule, is filed as an exhibit to this report. b) Reports on Form 8-K filed: None filed during the two months ended December 31, 1999. 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 VI By: Shelter Realty VI Corporation Corporate General Partner By: /s/Patrick J. Foye Patrick J. Foye Executive Vice President and Director By: /s/Martha L. Long Martha L. Long Senior Vice President and Controller Date: February 14, 2000 EX-27 2 FDS --
5 This schedule contains summary financial information extracted from Shelter Properties VI 1999 Transitional Report on 10-QSB and is qualified in its entirety by reference to such 10-QSB filing. 0000730013 Shelter Properties VI 1,000 2-MOS DEC-31-1999 NOV-1-1999 DEC-31-1999 2,901 0 662 0 0 0 55,486 29,198 30,985 0 25,302 0 0 0 3,871 30,985 0 1,839 0 0 1,124 0 375 0 0 0 0 0 0 340 7.96 0 Registrant has an unclassified balance sheet. Multiplier is 1.
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