10QSB 1 sp6.txt SP6 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Form 10-QSB (Mark One) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 2003 [ ] 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 0-13261 SHELTER PROPERTIES VI (Exact Name of Registrant 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) PART I - FINANCIAL INFORMATION ITEM 1. Financial Statements SHELTER PROPERTIES VI BALANCE SHEET (Unaudited) (in thousands, except unit data) September 30, 2003
Assets Cash and cash equivalents $ 294 Receivables and deposits 178 Restricted escrows 247 Other assets 700 Investment properties: Land $ 2,613 Buildings and related personal property 28,298 30,911 Less accumulated depreciation (19,045) 11,866 $ 13,285 Liabilities and Partners' Deficit Liabilities Accounts payable $ 34 Tenant security deposit liabilities 94 Accrued property taxes 289 Other liabilities 238 Due to affiliates 342 Mortgage notes payable 18,731 Partners' Deficit General partners $ (13) Limited partners (42,324 units issued and outstanding) (6,430) (6,443) $ 13,285 See Accompanying Notes to Financial Statements
SHELTER PROPERTIES VI STATEMENTS OF OPERATIONS (Unaudited) (in thousands, except per unit data)
Three Months Ended Nine Months Ended September 30, September 30, 2003 2002 2003 2002 (Restated) (Restated) Revenues: Rental income $ 1,244 $ 1,293 $ 3,684 $ 3,896 Other income 108 121 317 327 Casualty gain (Note C) -- -- 19 -- Total revenues 1,352 1,414 4,020 4,223 Expenses: Operating 648 542 1,702 1,632 General and administrative 81 108 264 335 Depreciation 319 308 967 942 Interest 298 378 891 1,065 Property taxes 103 87 290 261 Total expenses 1,449 1,423 4,114 4,235 Loss from continuing operations (97) (9) (94) (12) Income from discontinued operations -- 154 267 564 Net (loss) income $ (97) $ 145 $ 173 $ 552 Net (loss) income allocated to general partners (1%) $ (1) $ 1 $ 2 $ 6 Net (loss) income allocated to limited partners (99%) (96) 144 171 546 $ (97) $ 145 $ 173 $ 552 Per limited partnership unit: Loss from continuing operations $ (2.27) $ (0.21) $ (2.20) $ (0.28) Income from discontinued operations -- 3.61 6.24 13.18 Net (loss) income $ (2.27) $ 3.40 $ 4.04 $ 12.90 Distributions per limited partnership unit $ 30.76 $ 13.37 $ 65.09 $103.08 See Accompanying Notes to Financial Statements
SHELTER PROPERTIES VI STATEMENT OF CHANGES IN PARTNERS' DEFICIT (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 at December 31, 2002 42,324 $ (1) $(3,846) $(3,847) Distributions to partners -- (14) (2,755) (2,769) Net income for the nine months ended September 30, 2003 -- 2 171 173 Partners' deficit at September 30, 2003 42,324 $ (13) $(6,430) $(6,443) See Accompanying Notes to Financial Statements
SHELTER PROPERTIES VI STATEMENTS OF CASH FLOWS (Unaudited) (in thousands)
Nine Months Ended September 30, 2003 2002 Cash flows from operating activities: Net income $ 173 $ 552 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation 967 1,397 Amortization of discounts and loan costs 49 177 Loss on early extinguishment of debt -- 58 Casualty gain (19) -- Change in accounts: Receivables and deposits 87 (467) Other assets (86) (72) Accounts payable (152) (58) Tenant security deposit liabilities 7 11 Accrued property taxes 227 43 Other liabilities 17 64 Net cash provided by operating activities 1,270 1,705 Cash flows from investing activities: Property improvements and replacements (411) (1,030) Net withdrawals from (deposits to) restricted escrows 505 (56) Insurance proceeds received 25 -- Net cash provided by (used in) investing activities 119 (1,086) Cash flows from financing activities: Repayment of mortgage notes payable -- (9,811) Proceeds from mortgage notes payable -- 14,892 Loan costs paid (18) (483) Payments on mortgage note payable (349) (610) Distributions to partners (2,769) (4,367) Advances from affiliates -- 320 Repayment of advances from affiliates -- (320) Net cash used in financing activities (3,136) (379) Net (decrease) increase in cash and cash equivalents (1,747) 240 Cash and cash equivalents at beginning of period 2,041 565 Cash and cash equivalents at end of period $ 294 $ 805 Supplemental disclosure of cash flow information: Cash paid for interest $ 913 $ 1,252 At December 31, 2001, approximately $139,000 of property improvements and replacements were included in accounts payable and are included in property improvements and replacements for the nine months ended September 30, 2002. See Accompanying Notes to Financial Statements
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. The general partner responsible for management of the Partnership's business is Shelter Realty VI Corporation ("the Corporate General Partner"). The Corporate General Partner is a subsidiary of Apartment Investment and Management Company ("AIMCO"), a publicly traded real estate investment trust. The non-corporate general partner, AIMCO Properties, L.P., is also an affiliate of AIMCO. 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 September 30, 2003, are not necessarily indicative of the results that may be expected for the fiscal year ending December 31, 2003. 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 December 31, 2002. Effective January 1, 2002, the Partnership adopted Statement of Financial Accounting Standards ("SFAS") No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets", which established standards for the way that business enterprises report information about long-lived assets that are either being held for sale or have already been disposed of by sale or other means. The standard requires that results of operations for a long-lived asset that is being held for sale or has already been disposed of be reported as a discontinued operation on the statement of operations. As a result, the accompanying statements of operations for the three and nine months ended September 30, 2002 have been restated as of January 1, 2002 to reflect the operations of Nottingham Square Apartments as income from discontinued operations due to the sale of Nottingham Square in December 2002. Note B - Reconciliation of Cash Flows The following is a reconciliation of "Net cash provided by operating activities" on the accompanying statements of cash flows to "Net cash from operations", as defined in the partnership agreement of the Partnership (the "Partnership Agreement"). However, "Net cash from 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. Nine Months Ended September 30, 2003 2002 (in thousands) Net cash provided by operating activities $ 1,270 $ 1,705 Payments on mortgage notes payable (349) (610) Property improvements and replacements (411) (1,030) Change in restricted escrows, net 505 (56) Changes in reserves for net operating liabilities (100) 479 Additions to operating reserves (915) (488) Net cash provided by operations $ -- $ -- At September 30, 2003 and 2002, the Corporate General Partner reserved approximately $915,000 and $488,000, respectively, to fund capital improvements at its properties. Note C - Casualty Event In August 2002, Carriage House Apartments experienced an electrical fire, causing damage to two units and an outside storage building. A casualty gain of approximately $19,000 was recorded during the nine months ended September 30, 2003, due to the receipt of insurance proceeds of approximately $25,000 net of the write off of undepreciated damaged assets of approximately $6,000. Note D - Refinancing of Mortgage Note Payable On May 15, 2002, the Partnership refinanced the mortgage encumbering River Reach Apartments. The refinancing replaced the first mortgage of approximately $6,048,000 and the second mortgage of approximately $252,000 with a new mortgage in the amount of $10,654,000. The new mortgage carries a stated interest rate of 7.16% compared to the 7.60% interest rate on the old mortgages. Payments on the mortgage loan are due monthly until the loan matures on June 1, 2022, at which time it is scheduled to be fully amortized. Total capitalized loan costs were approximately $292,000 during the nine months ended September 30, 2002. Additional loan costs of approximately $11,000 were capitalized during the nine months ended September 30, 2003. The Partnership recognized a loss on the early extinguishment of debt of approximately $48,000 during the nine months ended September 30, 2002 due to the write off of unamortized loan costs and debt discounts. This amount has been included in interest expense. In addition, the Partnership was required to deposit approximately $100,000 in a repair escrow account with the lender in order to complete required repairs at the property and approximately $87,000 of this amount remains outstanding as of September 30, 2003 and is included in restricted escrows. On September 16, 2002, the Partnership refinanced the mortgages encumbering Rocky Creek and Carriage House Apartments. These loans were initially refinanced under an interim credit facility ("Interim Credit Facility") which had a term of three months. The Interim Credit Facility included properties in other partnerships that are affiliated with the Partnership. However, the Interim Credit Facility created separate loans for each property that were not cross-collateralized of cross-defaulted with the other property loans. During the three month term of the Interim Credit Facility, the properties were required to make interest-only payments. The first month's interest, which was paid at the date of the refinancing, was calculated at LIBOR plus 70 basis points. Interest for the following two months was calculated at LIBOR plus 150 basis points and was due monthly. During December 2002 the loans encumbering Rocky Creek and Carriage House were sold to Fannie Mae under a permanent credit facility ("Permanent Credit Facility"). The Permanent Credit Facility has a maturity of five years, with one five-year extension option. This Permanent Credit Facility also creates separate loans for each property that are not cross-collateralized or cross-defaulted with the other property loans. Each note under this Permanent Credit Facility will begin as a variable rate loan with the option of converting to a fixed rate loan after three years. The interest rate on the variable rate loans is the Fannie Mae discounted mortgage-backed security index plus 85 basis points (1.90% at September 30, 2003), and will reset monthly. In addition, monthly principal payments are required based on a 30-year amortization schedule, using the interest rate in effect during the first month that the property is financed by the Permanent Credit Facility. The loans are prepayable without penalty. The refinancing of Rocky Creek Apartments loans replaced the first mortgage of approximately $1,753,000 and second mortgage of approximately $74,000 with a new mortgage in the amount of $2,340,000. Total capitalized loan costs were approximately $103,000 during the nine months ended September 30, 2002. Additional loan costs of approximately $4,000 were capitalized during the nine months ended September 30, 2003. The Partnership recognized a loss on the early extinguishment of debt of approximately $6,000 during the nine months ended September 30, 2002 due to the write off of unamortized loan costs and debt discounts. This amount is included in interest expense. The refinancing of Carriage House Apartments loans replaced the first mortgage of approximately $1,616,000 and second mortgage of approximately $68,000 with a new mortgage in the amount of $1,898,000. Total capitalized loan costs were approximately $88,000 during the nine months ended September 30, 2002. Additional loan costs of approximately $3,000 were capitalized during the nine months ended September 30, 2003. The Partnership recognized a loss on the early extinguishment of debt of approximately $4,000 during the nine months ended September 30, 2002 due to the write off of unamortized loan costs and debt discounts. This amount is included in interest expense. In addition, the Partnership was required to deposit approximately $198,000 in a repair escrow account with the lender in order to complete required repairs at the property and approximately $160,000 of this amount remains outstanding as of September 30, 2003 and is included in restricted escrows. Note E - Transactions with Affiliated Parties The Partnership has no employees and is dependent on the Corporate General Partner and its affiliates for the management and administration of all Partnership activities. The Partnership Agreement provides for (i) certain payments to affiliates for services and (ii) reimbursement of certain expenses incurred by affiliates on behalf of the Partnership. Affiliates of the Corporate General Partner are entitled to receive 5% of gross receipts from all of the Partnership's properties as compensation for providing property management services. The Partnership paid to such affiliates approximately $197,000 and $351,000 for the nine months ended September 30, 2003 and 2002, respectively, which is included in operating expenses and income from discontinued operations. Affiliates of the Corporate General Partner received reimbursements of accountable administrative expenses amounting to approximately $212,000 and $326,000 for the nine months ended September 30, 2003 and 2002, respectively, which are included in general and administrative expenses and investment properties. Included in these amounts are fees related to construction management services provided by an affiliate of the Corporate General Partner of approximately $16,000 and $68,000 for the nine months ended September 30, 2003 and 2002, respectively. The construction management service fees are calculated based on a percentage of current additions to investment properties. Pursuant to the Partnership Agreement and in connection with the sale of Foxfire/Barcelona Village during 2000 and Nottingham Square Apartments in December 2002, the Corporate General Partner is entitled to a commission of up to 1% for its assistance in the sale. Payment of such commission is subordinate to the limited partners receiving a cumulative 7% return on their investment. This return has not yet been met, and accordingly, the combined fees of approximately $342,000 have been accrued and are included in due to affiliates on the accompanying balance sheet at September 30, 2003. During the nine months ended September 30, 2002, the Partnership paid an affiliate of the Corporate General Partner approximately $149,000 for brokerage fees associated with the refinancing of River Reach Apartments, Rocky Creek Apartments and Carriage House Apartments. This amount is included in other assets as a loan cost on the accompanying balance sheet. During the nine months ended September 30, 2002, the Corporate General Partner advanced the Partnership funds to cover expenses related to the refinancing of River Reach Apartments totaling approximately $320,000. This advance was repaid by the Partnership prior to September 30, 2002. Interest was charged at prime plus 1%. Interest expense on this advance was approximately $1,000 for the nine months ended September 30, 2002. The Partnership insures its properties up to certain limits through coverage provided by AIMCO which is generally self-insured for a portion of losses and liabilities related to workers compensation, property casualty and vehicle liability. The Partnership insures its properties above the AIMCO limits through insurance policies obtained by AIMCO from insurers unaffiliated with the Corporate General Partner. During the nine months ended September 30, 2003 and 2002, the Partnership was charged by AIMCO and its affiliates approximately $75,000 and $142,000, respectively, for insurance coverage and fees associated with policy claims and administration. Note F - 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. (the "Nuanes action") in the Superior Court of the State of California for the County of San Mateo. The plaintiffs named as defendants, among others, the Partnership, its Corporate General Partner and several of their affiliated partnerships and corporate entities. The action purported to assert claims on behalf of a class of limited partners and derivatively on behalf of a number of limited partnerships (including the Partnership) that are named as nominal defendants, challenging, among other things, the acquisition of interests in certain Corporate General Partner entities by Insignia Financial Group, Inc. ("Insignia") and entities that were, at one time, affiliates of Insignia; past tender offers by the Insignia affiliates to acquire limited partnership units; management of the partnerships by the Insignia affiliates; and the series of transactions which closed on October 1, 1998 and February 26, 1999 whereby Insignia and Insignia Properties Trust, respectively, were merged into AIMCO. The plaintiffs sought monetary damages and equitable relief, including judicial dissolution of the Partnership. In addition, during the third quarter of 2001, a complaint (the "Heller action") was filed against the same defendants that are named in the Nuanes action, captioned Heller v. Insignia Financial Group. On or about August 6, 2001, plaintiffs filed a first amended complaint. The Heller action was brought as a purported derivative action, and asserted claims for, among other things, breach of fiduciary duty, unfair competition, conversion, unjust enrichment, and judicial dissolution. On January 8, 2003, the parties filed a Stipulation of Settlement in proposed settlement of the Nuanes action and the Heller action. In general terms, the proposed settlement provides for certification for settlement purposes of a settlement class consisting of all limited partners in this Partnership and others (the "Partnerships") as of December 20, 2002, the dismissal with prejudice and release of claims in the Nuanes and Heller litigation, payment by AIMCO of $9.9 million (which shall be distributed to settlement class members after deduction of attorney fees and costs of class counsel and certain costs of settlement) and up to $1 million toward the cost of independent appraisals of the Partnerships' properties by a Court appointed appraiser. An affiliate of the Corporate General Partner has also agreed to make at least one round of tender offers to purchase all of the partnership interests in the Partnerships within one year of final approval, if it is granted, and to provide partners with the independent appraisals at the time of these tenders. The proposed settlement also provided for the limitation of the allowable costs which the Corporate General Partner or its affiliates will charge the Partnerships in connection with this litigation and imposes limits on the class counsel fees and costs in this litigation. On April 11, 2003, notice was distributed to limited partners providing the details of the proposed settlement. On June 13, 2003, the Court granted final approval of the settlement and entered judgment in both the Nuanes and Heller actions. On August 12, 2003, an objector filed an appeal seeking to vacate and/or reverse the order approving the settlement and entering judgment thereto. The Corporate General Partner intends to file a respondent's brief in support of the order approving settlement and entering judgment thereto. The Corporate General Partner does not anticipate that any costs to the Partnership, whether legal or settlement costs, associated with these cases will be material to the Partnership's overall operations. On August 8, 2003 AIMCO Properties L.P., an affiliate of the Corporate General Partner, was served with a Complaint in the United States District Court, District of Columbia alleging that AIMCO Properties L.P. willfully violated the Fair Labor Standards Act (FLSA) by failing to pay maintenance workers overtime for all hours worked in excess of forty per week. The Complaint is styled as a Collective Action under the FLSA and seeks to certify state subclasses in California, Maryland, and the District of Columbia. Specifically, the plaintiffs contend that AIMCO Properties L.P. failed to compensate maintenance workers for time that they were required to be "on-call". Additionally, the Complaint alleges AIMCO Properties L.P. failed to comply with the FLSA in compensating maintenance workers for time that they worked in responding to a call while "on-call". The Complaint also attempts to certify a subclass for salaried service directors who are challenging their classification as exempt from the overtime provisions of the FLSA. AIMCO Properties L.P. has filed an answer to the Complaint denying the substantive allegations. Although the outcome of any litigation is uncertain, in the opinion of the Corporate General Partner the claims will not result in any material liability to the Partnership. The Partnership is unaware of any other pending or outstanding litigation matters involving it or its investment properties that are 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 report contain certain forward-looking statements, including, without limitation, statements regarding future financial performance and the effect of government regulations. Actual results may differ materially from those described in the forward-looking statements and will be affected by a variety of risks and factors including, without limitation: national and local economic conditions; the terms of governmental regulations that affect the Registrant and interpretations of those regulations; the competitive environment in which the Registrant operates; financing risks, including the risk that cash flows from operations may be insufficient to meet required payments of principal and interest; real estate risks, including variations of real estate values and the general economic climate in local markets and competition for tenants in such markets; litigation, including costs associated with prosecuting and defending claims and any adverse outcomes, and possible environmental liabilities. Readers should carefully review the Registrant's financial statements and the notes thereto, as well as the risk factors described in the documents the Registrant files from time to time with the Securities and Exchange Commission. The Partnership's investment properties consist of four apartment complexes. The following table sets forth the average occupancy of the properties for each of the nine months ended September 30, 2003 and 2002: Average Occupancy Property 2003 2002 Rocky Creek Apartments Augusta, Georgia 94% 93% Carriage House Apartments Gastonia, North Carolina 86% 92% River Reach Apartments Jacksonville, Florida 96% 96% Village Gardens Apartments Fort Collins, Colorado 72% 91% The Corporate General Partner attributes the decrease in average occupancy at Carriage House Apartments to difficult market conditions due to the sluggish economy. The decrease in occupancy at Village Gardens Apartments is due to military deployments, low mortgage interest rates and a slow economy in Fort Collins, Colorado. Results of Operations The Partnership realized a net loss of approximately $97,000 for the three months ended September 30, 2003 and net income of approximately $173,000 for the nine months ended September 30, 2003, compared to net income of approximately $145,000 and $552,000 for the three and nine months ended September 30, 2002, respectively. The decrease in net income for the three month period ended September 30, 2003 is due to a decrease in total revenues, an increase in total expenses and a decrease in income from discontinued operations. The decrease in net income for the nine month period ended September 30, 2003 is due to a decrease in total revenues and a decrease in income from discontinued operations, partially offset by a decrease in total expenses. Effective January 1, 2002, the Partnership adopted Statement of Financial Accounting Standards No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets", which established standards for the way that public business enterprises report information about long-lived assets that are either being held for sale or have already been disposed of by sale or other means. The standard requires that results of operations for a long-lived asset that is being held for sale or has already been disposed of be reported as a discontinued operation on the statement of operations. As a result, the accompanying statement of operations for the three and nine months ended September 30, 2002 has been restated as of January 1, 2002 to reflect the operations of Nottingham Square Apartments as income from discontinued operations due to the property's sale in December 2002. The income from discontinued operations for the nine months ended September 30, 2003 includes a refund of property taxes of approximately $193,000 and additional gain on disposal of property due to a change in the estimated costs of disposal of approximately $74,000 for the sale of Nottingham Square. On December 20, 2002, the Partnership sold Nottingham Square Apartments to an unaffiliated third party for $20,000,000. After payment of closing costs of approximately $327,000, the net proceeds received by the Partnership were approximately $19,673,000. The Partnership used a portion of the proceeds to repay the mortgage encumbering the property of approximately $10,300,000. The sale of the property resulted in a gain on the sale during the fourth quarter of 2002 of approximately $13,106,000. In addition, the Partnership recorded a loss on early extinguishment of debt of approximately $247,000, as a result of the write off of unamortized loan costs and debt discounts. Pursuant to the Partnership Agreement and in connection with the sale, the Corporate General Partner is entitled to a commission of up to 1% for its assistance with the sale. Payment of such commission is subordinate to the limited partners receiving a cumulative 7% return on their investment. This return has not yet been met and accordingly, approximately $200,000 was accrued and unpaid at September 30, 2003. The Partnership recognized a loss from continuing operations of approximately $97,000 and $94,000 for the three and nine months ended September 30, 2003, respectively, compared to a loss from continuing operations of approximately $9,000 and $12,000 for the corresponding periods in 2002. The increase in loss from continuing operations for the nine months ended September 30, 2003 was due to a decrease in total revenues partially offset by a decrease in total expenses. The increase in loss from continuing operations for the three months ended September 30, 2003 was due to a decrease in total revenues and an increase in total expenses. Total revenues decreased for both periods due to a decrease in rental income partially offset by a casualty gain at Carriage House Apartments during the nine months ended September 30, 2003. Rental income decreased primarily due to a decrease in occupancy at Carriage House and Village Gardens Apartments, reduced rental rates at Carriage House and Village Gardens Apartments and increased concession costs at Rocky Creek and Village Gardens Apartments partially offset by increased occupancy at Rocky Creek Apartments and increased rental rates at River Reach and Rocky Creek Apartments. In August 2002, Carriage House Apartments experienced an electrical fire, causing damage to two units and an outside storage building. A casualty gain of approximately $19,000 was recorded during the nine months ended September 30, 2003, due to the receipt of insurance proceeds of approximately $25,000 net of the write off of undepreciated damaged assets of approximately $6,000. Total expenses decreased for the nine months ended September 30, 2003 due to decreases in general and administrative and interest expenses, partially offset by increases in operating, depreciation, and property tax expenses. Interest expense decreased primarily due to the refinancing of several of the Partnership's properties in 2002 resulting in loss on early extinguishment of debt included in interest expense in 2002 and lowered interest rates for 2003. Operating expenses increased primarily due to increases in advertising and maintenance expenses. Advertising expense increased primarily due to increases in web advertising, newspaper advertising, and referral fees at Village Gardens Apartments. Maintenance expenses increased primarily due to increases in contract services at Carriage House and Village Gardens Apartments, painting supplies and interior building improvements at Carriage House Apartments, and floor covering repairs at Village Gardens Apartments. Depreciation expense increased due to fixed asset additions at the Partnership's properties. Property tax expense increased primarily due to a change in the estimated tax liability at Rocky Creek and River Reach Apartments. Total expenses for the three months ended September 30, 2003 increased primarily due to increases in operating, depreciation and property tax expenses as discussed above, partially offset by decreased general and administrative (as discussed below) and interest expenses (as discussed above). Operating expenses increased for the three month period due to increases in maintenance and property expenses. Maintenance expense increased due to increased contract services at River Reach and Village Gardens Apartments. Property expenses increased due to increased utilities expense at River Reach and Carriage House Apartments and increases in salaries and related benefits at Rocky Creek, River Reach and Village Gardens Apartments partially offset by a decrease in salaries and related benefits at Carriage House Apartments. General and administrative expenses decreased for the three and nine months ended September 30, 2003 due to a decrease in the costs of services included in management reimbursements to the Corporate General Partner allowed under the Partnership Agreement. In addition to management reimbursements, costs associated with the quarterly and annual communications with investors and regulatory agencies and the annual audit required by the Partnership Agreement are also included in general and administrative expenses. 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, the Corporate General Partner may use rental concessions and rental rate reductions to offset softening market conditions, accordingly, there is no guarantee that the Corporate General Partner will be able to sustain such a plan. Liquidity and Capital Resources At September 30, 2003, the Partnership held cash and cash equivalents of approximately $294,000 compared to approximately $805,000 at September 30, 2002. Cash and cash equivalents decreased approximately $1,747,000 since December 31, 2002 due to approximately $3,136,000 of cash used in financing activities partially offset by approximately $119,000 and $1,270,000 of cash provided by investing and operating activities, respectively. Cash used in financing activities consisted of loan costs paid, principal payments on the mortgages encumbering the Partnership's properties and distributions paid to partners. Cash provided by investing activities consisted of withdrawals from restricted escrows maintained by the mortgage lenders and insurance proceeds received, partially offset by property improvements and replacements. The Partnership invests its working capital reserves in interest bearing accounts. The sufficiency of existing liquid assets to meet future liquidity and capital expenditure requirements is directly related to the level of capital expenditures required at the investment properties to adequately maintain the physical assets and other operating needs of the Partnership and to comply with Federal, state and local legal and regulatory requirements. The Corporate General Partner monitors developments in the area of legal and regulatory compliance and is studying new federal laws, including the Sarbanes-Oxley Act of 2002. The Sarbanes-Oxley Act of 2002 mandates or suggests additional compliance measures with regard to governance, disclosure, audit and other areas. In light of these changes, the Partnership expects that it will incur higher expenses related to compliance, including increased legal and audit fees. Capital improvements planned for each of the Registrant's properties are detailed below. Rocky Creek Apartments During the nine months ended September 30, 2003, the Partnership completed approximately $34,000 in capital improvements at Rocky Creek Apartments primarily consisting of floor covering replacements. The improvements were funded from operating cash flow. The Partnership evaluates the capital improvement needs of the property during the year and currently expects to complete an additional $9,000 in capital improvements during the remainder of 2003. The additional capital improvements will consist primarily of floor covering replacements. Additional capital 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 Apartments During the nine months ended September 30, 2003, the Partnership completed approximately $171,000 in capital improvements at Carriage House Apartments primarily consisting of floor covering and appliance replacements, electrical upgrades and reconstruction costs related to a fire at the property. These improvements were funded from operating cash flow and insurance proceeds. The Partnership evaluates the capital improvement needs of the property during the year and currently expects to complete an additional $3,000 in capital improvements during the remainder of 2003. The additional capital improvements will consist primarily of floor covering replacements. Additional capital 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 Apartments During the nine months ended September 30, 2003, the Partnership completed approximately $136,000 in capital improvements at River Reach Apartments primarily consisting of floor covering and air conditioning unit replacements, water/sewer and electrical upgrades and roof replacements. These improvements were funded from operating cash flow. The Partnership evaluates the capital improvement needs of the property during the year and currently expects to complete an additional $27,000 in capital improvements during the remainder of 2003. The additional capital improvements will consist primarily of floor covering replacements. Additional capital 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 Apartments During the nine months ended September 30, 2003, the Partnership completed approximately $70,000 in capital improvements at Village Gardens Apartments primarily consisting of floor covering replacements, painting, interior decoration, and lighting upgrades. These improvements were funded from operating cash flow and replacement reserves. The Partnership evaluates the capital improvement needs of the property during the year and currently expects to complete an additional $23,000 in capital improvements during the remainder of 2003. The additional capital improvements will consist primarily of interior painting and floor covering replacements. Additional capital 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 Partnership's distributable cash flow, if any, may be adversely affected at least in the short term. On May 15, 2002, the Partnership refinanced the mortgage encumbering River Reach Apartments. The refinancing replaced the first mortgage of approximately $6,048,000 and the second mortgage of approximately $252,000 with a new mortgage in the amount of $10,654,000. The new mortgage carries a stated interest rate of 7.16% compared to the 7.60% interest rate on the old mortgages. Payments on the mortgage loan are due monthly until the loan matures on June 1, 2022, at which time it is scheduled to be fully amortized. Total capitalized loan costs were approximately $292,000 during the nine months ended September 30, 2002. Additional loan costs of approximately $11,000 were capitalized during the nine months ended September 30, 2003. The Partnership recognized a loss on the early extinguishment of debt of approximately $48,000 during the nine months ended September 30, 2002 due to the write off of unamortized loan costs and debt discounts. This amount has been included in interest expense. In addition, the Partnership was required to deposit approximately $100,000 in a repair escrow account with the lender in order to complete required repairs at the property and approximately $87,000 of this amount remains outstanding as of September 30, 2003 and is included in restricted escrows. On September 16, 2002, the Partnership refinanced the mortgages encumbering Rocky Creek and Carriage House Apartments. These loans were initially refinanced under an interim credit facility ("Interim Credit Facility") which had a term of three months. The Interim Credit Facility included properties in other partnerships that are affiliated with the Partnership. However, the Interim Credit Facility created separate loans for each property that were not cross-collateralized or cross-defaulted with the other property loans. During the three month term of the Interim Credit Facility, the properties were required to make interest-only payments. The first month's interest, which was paid at the date of the refinancing, was calculated at LIBOR plus 70 basis points. Interest for the following two months was calculated at LIBOR plus 150 basis points and was due monthly. During December 2002 the loans encumbering Rocky Creek and Carriage House were sold to Fannie Mae under a permanent credit facility ("Permanent Credit Facility"). The Permanent Credit Facility has a maturity of five years, with one five-year extension option. This Permanent Credit Facility also creates separate loans for each property that are not cross-collateralized or cross-defaulted with the other property loans. Each note under this Permanent Credit Facility will begin as a variable rate loan with the option of converting to a fixed rate loan after three years. The interest rate on the variable rate loans is the Fannie Mae discounted mortgage-backed security index plus 85 basis points (1.90% at September 30, 2003), and will reset monthly. In addition, monthly principal payments are required based on a 30-year amortization schedule, using the interest rate in effect during the first month that the property is financed by the Permanent Credit Facility. The loans are prepayable without penalty. The refinancing of Rocky Creek Apartments loans replaced the first mortgage of approximately $1,753,000 and second mortgage of approximately $74,000 with a new mortgage in the amount of $2,340,000. Total capitalized loan costs were approximately $103,000 during the nine months ended September 30, 2002. Additional loan costs of approximately $4,000 were capitalized during the nine months ended September 30, 2003. The Partnership recognized a loss on the early extinguishment of debt of approximately $6,000 during the nine months ended September 30, 2002 due to the write off of unamortized loan costs and debt discounts. This amount is included in interest expense. The refinancing of Carriage House Apartments loans replaced the first mortgage of approximately $1,616,000 and second mortgage of approximately $68,000 with a new mortgage in the amount of $1,898,000. Total capitalized loan costs were approximately $88,000 during the nine months ended September 30, 2002. Additional loan costs of approximately $3,000 were capitalized during the nine months ended September 30, 2003. The Partnership recognized a loss on the early extinguishment of debt of approximately $4,000 during the nine months ended September 30, 2002 due to the write off of unamortized loan costs and debt discounts. This amount is included in interest expense. In addition, the Partnership was required to deposit approximately $198,000 in a repair escrow account with the lender in order to complete required repairs at the property and approximately $160,000 of this amount remains outstanding as of September 30, 2003 and is included in restricted escrows. The Partnership's assets are thought to be sufficient for any near term needs (exclusive of capital improvements) of the Partnership. The mortgages encumbering River Reach and Village Gardens Apartments aggregating approximately $14,561,000 mature in June 2022 and January 2021, respectively, at which time the mortgages are scheduled to be fully amortized. The mortgages encumbering Rocky Creek and Carriage House Apartments aggregating approximately $4,170,000 mature on September 16, 2007 at which time balloon payments totaling approximately $3,736,000 are due. The Corporate General Partner has the option to extend the maturity date on the Rocky Creek and Carriage House Apartments loans for another five years. After that period the Corporate General Partner will attempt to refinance such indebtedness and/or sell the properties prior to the optional extended maturity date. If the properties cannot be refinanced or sold, the Partnership will risk losing such properties through foreclosure. The Partnership distributed the following amounts during the nine months ended September 30, 2003 and 2002 (in thousands, except per unit data):
Nine Months Ended Per Limited Nine Months Ended Per Limited September 30, Partnership September 30, Partnership 2003 Unit 2002 Unit Operations $ 1,441 $ 33.72 $ 406 $ 9.49 Refinance (1) -- -- 3,961 93.59 Sale (2) 1,328 31.37 -- -- $ 2,769 $ 65.09 $ 4,367 $103.08 (1) From the refinance of River Reach Apartments in 2002. (2) From the sale of Nottingham Square Apartments in 2002.
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 cash available for distribution is reviewed on a monthly basis. There can be no assurance that the Partnership will generate sufficient funds from operations, after required capital improvements, to permit additional distributions to its partners during the remainder of 2003 or subsequent periods. Other In addition to its indirect ownership of the general partner interests in the Partnership, AIMCO and its affiliates owned 27,773 limited partnership units (the "Units") in the Partnership representing 65.62% of the outstanding Units at September 30, 2003. A number of these Units were acquired pursuant to tender offers made by AIMCO or its affiliates. It is possible that AIMCO or its affiliates will acquire additional Units in exchange for cash or a combination of cash and units in AIMCO Properties, L.P., the operating partnership of AIMCO, either through private purchases or tender offers. Pursuant to the Partnership Agreement, unitholders holding a majority of the Units are entitled to take action with respect to a variety of matters that include, but are not limited to, voting on certain amendments to the Partnership Agreement and voting to remove the Corporate General Partner. As a result of its ownership of 65.62% of the outstanding Units, AIMCO and its affiliates are in a position to control all voting decisions with respect to the Partnership. Although the Corporate General Partner owes fiduciary duties to the limited partners of the Partnership, the Corporate General Partner also owes fiduciary duties to AIMCO as its sole stockholder. As a result, the duties of the Corporate General Partner, as managing general partner, to the Partnership and its limited partners may come into conflict with the duties of the Corporate General Partner to AIMCO, as its sole stockholder. Critical Accounting Policies and Estimates The financial statements are prepared in accordance with accounting principles generally accepted in the United States which require the Partnership to make estimates and assumptions. The Partnership believes that of its significant accounting policies, the following may involve a higher degree of judgment and complexity. Impairment of Long-Lived Assets Investment properties are recorded at cost, less accumulated depreciation, unless considered impaired. If events or circumstances indicate that the carrying amount of a property may be impaired, the Partnership will make an assessment of its recoverability by estimating the undiscounted future cash flows, excluding interest charges, of the property. If the carrying amount exceeds the aggregate future cash flows, the Partnership would recognize an impairment loss to the extent the carrying amount exceeds the fair value of the property. Real property investments are subject to varying degrees of risk. Several factors may adversely affect the economic performance and value of the Partnership's investment properties. These factors include, but are not limited to, changes in national, regional and local economic climate; local conditions, such as an oversupply of multifamily properties; competition from other available multifamily property owners and changes in market rental rates. Any adverse changes in these factors could cause impairment of the Partnership's assets. Revenue Recognition The Partnership generally leases apartment units for twelve-month terms or less. Rental income attributable to leases is recognized monthly as it is earned and the Partnership fully reserves all balances outstanding over thirty days. The Partnership will offer rental concessions during particularly slow months or in response to heavy competition from other similar complexes in the area. Any concessions given at the inception of the lease are amortized over the life of the lease. Item 3. Controls and Procedures (a) Disclosure Controls and Procedures. The Partnership's management, with the participation of the principal executive officer and principal financial officer of the Corporate General Partner, who are the equivalent of the Partnership's principal executive officer and principal financial officer, respectively, has evaluated the effectiveness of the Partnership's disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the "Exchange Act")) as of the end of the period covered by this report. Based on such evaluation, the principal executive officer and principal financial officer of the Corporate General Partner, who are the equivalent of the Partnership's principal executive officer and principal financial officer, respectively, have concluded that, as of the end of such period, the Partnership's disclosure controls and procedures are effective. (b) Internal Control Over Financial Reporting. There have not been any changes in the Partnership's internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the fiscal quarter to which this report relates that have materially affected, or are reasonably likely to materially affect, the Partnership's internal control over financial reporting. PART II - OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS In March 1998, several putative unit holders of limited partnership units of the Partnership commenced an action entitled Rosalie Nuanes, et al. v. Insignia Financial Group, Inc., et al. (the "Nuanes action") in the Superior Court of the State of California for the County of San Mateo. The plaintiffs named as defendants, among others, the Partnership, its Corporate General Partner and several of their affiliated partnerships and corporate entities. The action purported to assert claims on behalf of a class of limited partners and derivatively on behalf of a number of limited partnerships (including the Partnership) that are named as nominal defendants, challenging, among other things, the acquisition of interests in certain Corporate General Partner entities by Insignia Financial Group, Inc. ("Insignia") and entities that were, at one time, affiliates of Insignia; past tender offers by the Insignia affiliates to acquire limited partnership units; management of the partnerships by the Insignia affiliates; and the series of transactions which closed on October 1, 1998 and February 26, 1999 whereby Insignia and Insignia Properties Trust, respectively, were merged into AIMCO. The plaintiffs sought monetary damages and equitable relief, including judicial dissolution of the Partnership. In addition, during the third quarter of 2001, a complaint (the "Heller action") was filed against the same defendants that are named in the Nuanes action, captioned Heller v. Insignia Financial Group. On or about August 6, 2001, plaintiffs filed a first amended complaint. The Heller action was brought as a purported derivative action, and asserted claims for, among other things, breach of fiduciary duty, unfair competition, conversion, unjust enrichment, and judicial dissolution. On January 8, 2003, the parties filed a Stipulation of Settlement in proposed settlement of the Nuanes action and the Heller action. In general terms, the proposed settlement provides for certification for settlement purposes of a settlement class consisting of all limited partners in this Partnership and others (the "Partnerships") as of December 20, 2002, the dismissal with prejudice and release of claims in the Nuanes and Heller litigation, payment by AIMCO of $9.9 million (which shall be distributed to settlement class members after deduction of attorney fees and costs of class counsel and certain costs of settlement) and up to $1 million toward the cost of independent appraisals of the Partnerships' properties by a Court appointed appraiser. An affiliate of the Corporate General Partner has also agreed to make at least one round of tender offers to purchase all of the partnership interests in the Partnerships within one year of final approval, if it is granted, and to provide partners with the independent appraisals at the time of these tenders. The proposed settlement also provided for the limitation of the allowable costs which the Corporate General Partner or its affiliates will charge the Partnerships in connection with this litigation and imposes limits on the class counsel fees and costs in this litigation. On April 11, 2003, notice was distributed to limited partners providing the details of the proposed settlement. On June 13, 2003, the Court granted final approval of the settlement and entered judgment in both the Nuanes and Heller actions. On August 12, 2003, an objector filed an appeal seeking to vacate and/or reverse the order approving the settlement and entering judgment thereto. The Corporate General Partner intends to file a respondent's brief in support of the order approving settlement and entering judgment thereto. The Corporate General Partner does not anticipate that any costs to the Partnership, whether legal or settlement costs, associated with these cases will be material to the Partnership's overall operations. On August 8, 2003 AIMCO Properties L.P., an affiliate of the Corporate General Partner, was served with a Complaint in the United States District Court, District of Columbia alleging that AIMCO Properties L.P. willfully violated the Fair Labor Standards Act (FLSA) by failing to pay maintenance workers overtime for all hours worked in excess of forty per week. The Complaint is styled as a Collective Action under the FLSA and seeks to certify state subclasses in California, Maryland, and the District of Columbia. Specifically, the plaintiffs contend that AIMCO Properties L.P. failed to compensate maintenance workers for time that they were required to be "on-call". Additionally, the Complaint alleges AIMCO Properties L.P. failed to comply with the FLSA in compensating maintenance workers for time that they worked in responding to a call while "on-call". The Complaint also attempts to certify a subclass for salaried service directors who are challenging their classification as exempt from the overtime provisions of the FLSA. AIMCO Properties L.P. has filed an answer to the Complaint denying the substantive allegations. Although the outcome of any litigation is uncertain, in the opinion of the Corporate General Partner the claims will not result in any material liability to the Partnership. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K a) Exhibits: 4(a), Amended and Restated Certificate and Agreement of Limited Partnership (included as Exhibit A to the Prospectus of Registrant dated March 22, 1984 contained in Amendment No. 1 to Registration Statement No. 2-86995, of Registrant filed March 21, 1984 (the "Prospectus") and incorporated herein by reference). 31.1 Certification of equivalent of Chief Executive Officer pursuant to Securities Exchange Act Rules 13a-14(a)/15d-14(a), as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. 31.2 Certification of equivalent of Chief Financial Officer pursuant to Securities Exchange Act Rules 13a-14(a)/15d-14(a), as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. 32.1, Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. b) Reports on Form 8-K: None filed during the quarter ended September 30, 2003. 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 By: /s/Paul J. McAuliffe Paul J. McAuliffe Executive Vice President and Chief Financial Officer Date: November 12, 2003 Exhibit 31.1 CERTIFICATION I, Patrick J. Foye, certify that: 1. I have reviewed this quarterly report on Form 10-QSB of Shelter Properties VI; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have: (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; (b) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and (c) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: November 12, 2003 /s/Patrick J. Foye Patrick J. Foye Executive Vice President of Shelter Realty VI Corporation, equivalent of the chief executive officer of the Partnership Exhibit 31.2 CERTIFICATION I, Paul J. McAuliffe, certify that: 1. I have reviewed this quarterly report on Form 10-QSB of Shelter Properties VI; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have: (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; (b) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and (c) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: November 12, 2003 /s/Paul J. McAuliffe Paul J. McAuliffe Executive Vice President and Chief Financial Officer of Shelter Realty VI Corporation, equivalent of the chief financial officer of the Partnership Exhibit 32.1 Certification of CEO and CFO Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 In connection with the Quarterly Report on Form 10-QSB of Shelter Properties VI Limited Partnership (the "Partnership"), for the quarterly period ended September 30, 2003 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), Patrick J. Foye, as the equivalent of the chief executive officer of the Partnership, and Paul J. McAuliffe, as the equivalent of the chief financial officer of the Partnership, each hereby certifies, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to the best of his knowledge: (1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Partnership. /s/Patrick J. Foye Name: Patrick J. Foye Date: November 12, 2003 /s/Paul J. McAuliffe Name: Paul J. McAuliffe Date: November 12, 2003 This certification is furnished with this Report pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and shall not be deemed filed by the Partnership for purposes of Section 18 of the Securities Exchange Act of 1934, as amended.