-----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, MitjP4kAqhb5ut/KokZJN/ydjlpjVeHuQU86FMdBDA77Z36on2zBQSAiItN1H+ze 8quzaK2FHgQPZP4WIjVOUA== 0000730013-97-000001.txt : 19970130 0000730013-97-000001.hdr.sgml : 19970130 ACCESSION NUMBER: 0000730013-97-000001 CONFORMED SUBMISSION TYPE: 10KSB PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19961031 FILED AS OF DATE: 19970129 SROS: NONE 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: 1031 FILING VALUES: FORM TYPE: 10KSB SEC ACT: 1934 Act SEC FILE NUMBER: 000-13261 FILM NUMBER: 97512793 BUSINESS ADDRESS: STREET 1: ONE SINSIGNIA FINANCIAL PLAZA STREET 2: P O BOX 1089 CITY: GREENVILLE STATE: SC ZIP: 29602 BUSINESS PHONE: 8032391000 MAIL ADDRESS: STREET 1: ONE INSIGNIA FINANCIAL PLZ STREET 2: P O BOX 1089 CITY: GREENVILLE STATE: SC ZIP: 29602 10KSB 1 FORM 10-KSB--ANNUAL OR TRANSITIONAL REPORT UNDER SECTION 13 OR 15(D) (As last amended by 34-31905, eff. 4/26/93) [X] Annual Report Under Section 13 or 15(d) of the Securities Exchange Act of 1934 [Fee Required] For the fiscal year ended October 31, 1996 or [ ] Transition Report Under Section 13 or 15(d) of the Securities Exchange Act of 1934 [No Fee Required] For the transition period from.........to......... Commission file number 0-13261 SHELTER PROPERTIES VI LIMITED PARTNERSHIP (Name of small business issuer in its charter) South Carolina 57-0755618 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) One Insignia Financial Plaza, P.O. Box 1089 Greenville, South Carolina 29602 (Address of principal executive offices) (Zip Code) Issuer's telephone number (864) 239-1000 Securities registered under Section 12(b) of the Exchange Act: None Securities registered under Section 12(g) of the Exchange Act: Units of Limited Partnership Interest (Title of class) Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act of 1934 during the past 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 Check if there is no disclosure of delinquent filers in response to Item 405 of Regulation S-B contained in this form, and no disclosure will be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-KSB or any amendment to this Form 10-KSB. [X] State issuer's revenues for its most recent fiscal year. $10,079,000 State the aggregate market value of the voting partnership interests by non- affiliates computed by reference to the price at which the partnership interests were sold, or the average bid and asked prices of such partnership interests, as of a specified date within the past 60 days. Market value information for the Registrant's partnership interests is not available. Should a trading market develop for these interests, it is the Managing General Partners belief that such trading would not exceed $25,000,000. DOCUMENTS INCORPORATED BY REFERENCE 1. Portions of the Prospectus of Registrant dated March 22, 1984 (included in Registration Statement, No.2-86995, of Registrant) are incorporated by reference into Parts I and III. PART I ITEM 1. DESCRIPTION OF BUSINESS Shelter Properties VI Limited Partnership (the "Registrant" or the "Partnership") is engaged in the business of acquiring, operating and holding real properties for investment. The Registrant acquired eight existing apartment properties during 1984 and 1985 and has been operating such properties since that time with the exception of Northridge Landing Apartments, which the Partnership permitted a lender to foreclose upon on February 6, 1990. Also, on September 29, 1995, the Registrant sold Marble Hills Apartments as discussed in "Note B" to the financial statements. Commencing March 22, 1984, the Registrant offered through E. F. Hutton & Company Inc. ("Hutton") up to 34,900 Units of Limited Partnership Interest (the "Units") at a purchase price of $1,000 per Unit with a minimum purchase of 5 Units ($5,000), or 2 Units ($2,000) for an Individual Retirement Account. By means of Supplement No. 4 dated September 28, 1984, the Partnership offered for sale an additional 15,000 Units. An additional 100 Units were purchased by Shelter Realty VI Corporation ("the Corporate General Partner"). Limited partners are not required to make any additional capital contributions. The Units were registered under the Securities Act of 1933 via Registration Statement No. 2-86995 (the "Registration Statement"). Reference is made to the Prospectus of Registrant dated March 22, 1984 (the "Prospectus") contained in said Registration Statement, which is incorporated herein by reference thereto. The offering terminated in October 1984. Upon termination of the offering, the Registrant had accepted subscriptions for 42,324 Units, including 100 Units purchased by the Corporate General Partner, for an aggregate of $42,324,000. Unsold Units (numbering 7,676) were deregistered pursuant to Post Effective Amendment No. 1 to Registration Statement No. 2-93285 filed with the Securities and Exchange Commission on November 13, 1984. The Registrant invested approximately $30,300,000 of such proceeds in nine existing apartment properties and thereby completed its acquisition program in March 1985 at approximately the expenditure level estimated in the Prospectus. A further description of the Partnership's business is included in Management's Discussion and Analysis or Plan of Operation included in "Item 6" of this Form 10-KSB. The Registrant has no employees. Management and administrative services are performed by the Corporate General Partner and by Insignia Residential Group, L.P., an affiliate of Insignia Financial Group, Inc. ("Insignia"), the ultimate parent company of the Corporate General Partner. Pursuant to a management agreement between them, Insignia Residential Group, L.P. provides property management services to the Registrant. The real estate business in which the Partnership is engaged is highly competitive, and the Partnership is not a significant factor in this industry. The Registrant's properties are subject to competition from similar properties in the vicinity in which the properties are located. In addition, various limited partnerships have been formed by the General Partners and/or their affiliates to engage in business which may be competitive with the Registrant. ITEM 2. DESCRIPTION OF PROPERTIES On September 29, 1995, the Partnership sold Marble Hills Apartments to an unaffiliated party. The buyer assumed the mortgages, payable to Bank of America. The total outstanding balance on the mortgage notes payable, including interest, was approximately $3,353,000. The Partnership received net proceeds of approximately $2,412,000 after payment of closing costs. This disposition resulted in a gain of approximately $1,296,000. The following table sets forth the Registrant's investments in properties: Date of Property Purchase Type of Ownership Use Rocky Creek Apartments 6/29/84 Fee ownership subject Apartment Augusta, Georgia to first and second 120 units mortgages. Carriage House Apartments 6/29/84 Fee ownership subject Apartment Gastonia, North Carolina to first and second 102 units mortgages. Nottingham Square Apartments 8/31/84 Fee ownership subject Apartment Des Moines, Iowa to first and second 442 units mortgages. Foxfire Apartments/ 9/30/84 Fee ownership subject Apartment Barcelona Apartments 3/28/85 to first and second 353 units Durham, North Carolina mortgages. River Reach Apartments 1/30/85 Fee ownership subject Apartment Jacksonville, Florida to first and second 298 units mortgages. Village Garden Apartments 3/01/85 Fee ownership subject Apartment Fort Collins, Colorado to first and second 141 units mortgages. SCHEDULE OF PROPERTIES: (dollar amounts in thousands) Gross Carrying Accumulated Federal Property Value Depreciation Rate Method Tax Basis Rocky Creek $ 4,475 $ 1,946 5-35 yrs S/L $ 1,290 Augusta, GA Carriage House 3,796 1,906 5-27 yrs S/L 828 Gastonia, NC Nottingham Square 13,387 6,083 5-29 yrs S/L 4,906 Des Moines, IO Foxfire/Barcelona 11,275 5,225 5-31 yrs S/L 4,469 Durham, NC River Reach 14,144 6,033 5-27 yrs S/L 4,882 Jacksonville, FL Village Garden 3,942 1,607 5-30 yrs S/L 1,574 Fort Collins, CO Total $51,019 $22,800 $17,949 See "Note A" to financial statements in "Item 7" for a description of the Partnership's depreciation policy. SCHEDULE OF MORTGAGES: (dollar amounts in thousands) Principal Principal Balance At Stated Balance October 31, Interest Period Maturity Due At Property 1996 Rate Amortized Date Maturity Rocky Creek 1st Mortgage $ 2,194 7.60% (1) 11/15/02 $ 1,737 2nd Mortgage 74 7.60% (1) 11/15/02 74 Carriage House 1st Mortgage 2,022 7.60% (1) 11/15/02 1,601 2nd Mortgage 68 7.60% (1) 11/15/02 68 Nottingham Square 1st Mortgage 7,917 7.60% (1) 11/15/02 6,268 2nd Mortgage 268 7.60% (1) 11/15/02 268 Foxfire/Barcelona 1st Mortgage 5,723 7.60% (1) 11/15/02 4,531 2nd Mortgage 193 7.60% (1) 11/15/02 193 River Reach 1st Mortgage 7,441 7.60% (1) 11/15/02 5,890 2nd Mortgage 252 7.60% (1) 11/15/02 252 Village Garden 1st Mortgage 2,576 7.60% (1) 11/15/02 2,039 2nd Mortgage 87 7.60% (1) 11/15/02 87 28,815 Less unamortized discounts (1,443) $ 27,372 (1) The principal balance is being amortized over 257 months with a balloon payment due November 15, 2002. The Partnership exercised interest rate buy-down options for each of the mortgage notes payable reducing the stated rate from 8.76% to 7.6%. The fee for the interest rate reduction amounted to approximately $2,433,000 and is being amortized as a loan discount using the interest method over the life of the loans. The unamortized discount is reflected as a reduction of the mortgage notes payable and increases the effective rate of the debt to 8.76%. The mortgage notes payable are nonrecourse and are secured by pledge of the respective apartment properties and by pledge of revenues from the respective apartment properties. The notes cannot be prepaid prior to November 15, 1997; thereafter, they require prepayment penalties if repaid prior to maturity and prohibit resale of the properties subject to existing indebtedness. Average annual rental rate and occupancy for 1996 and 1995 for each property: Average Annual Average Annual Rental Rates Occupancy 1996 1995 1996 1995 Rocky Creek $6,646 $6,610 86% 90% Carriage House 6,828 6,352 97% 98% Nottingham Square 6,663 6,539 93% 94% Foxfire/Barcelona 6,495 6,118 98% 98% River Reach 7,421 7,141 98% 99% Village Garden 6,937 6,232 95% 95% The Corporate General Partner attributes the decrease in occupancy at Rocky Creek to an increase in the number of tenants purchasing homes as well as the overall soft market conditions due to the layoffs at the Savannah River Site. As noted under "Item 1., Description of Business", the real estate industry is highly competitive. All of the properties of the Partnership are subject to competition from other residential apartment complexes in the area. The Corporate General Partner believes that all of the properties are adequately insured. The multi-family residential properties' lease terms are for one year or less. No individual tenant leases 10% or more of the available rental space. Real estate taxes and effective rates in 1996 for each property were: (dollar amounts in thousands) 1996 1996 Billing* Rate Rocky Creek $ 36 2.72% Carriage House 37 1.31% Nottingham Square 407 3.20% Foxfire/Barcelona 159 1.62% River Reach 225 2.08% Village Garden 37 8.58% *Due to this property having a fiscal year different than the real estate tax year, tax expense does not agree to the 1996 billing. ITEM 3. LEGAL PROCEEDINGS The general partner responsible for management of the Partnership's business is Shelter Realty VI Corporation, a South Carolina corporation (the "Corporate General Partner"). The only other general partner of the Partnership, N. Barton Tuck, Jr. is effectively prohibited by the Partnership's partnership agreement (the "Partnership Agreement") from participating in the management of the Partnership. The Corporate General Partner is an affiliate of Insignia Financial Group, Inc. ("Insignia"). The directors and officers of the Corporate General Partner also serve as executive officers of Insignia. The Corporate General Partner owns 100 Limited Partnership Units ("Units"). On or about April 26 and 27, 1995, six entities ("Affiliated Purchasers") affiliated with the Partnership commenced tender offers for limited partner interests in six limited partnerships, including the Partnership (collectively, the "Shelter Properties Partnerships"). On May 27, 1995, the Affiliated Purchasers acquired 7,985 units of the Partnership pursuant to the tender offer. On or about May 12, 1995, in the United States District Court for the District of South Carolina, certain limited partners of the Shelter Properties Partnerships commenced a lawsuit, on behalf of themselves, on behalf of a putative class of plaintiffs, and derivatively on behalf of the partnerships, challenging the actions taken by defendants (including Insignia, the acquiring entities and certain officers of Insignia) in the management of the Shelter Properties Partnerships and in connection with the tender offers and certain other matters. The plaintiffs alleged that, among other things: (i) the defendants intentionally mismanaged the Shelter Properties Partnerships and acted contrary to the limited partners' best interests by prolonging the existence of the partnerships in order to perpetuate the revenues derived by Insignia (an affiliate of the Corporate General Partner) and its affiliates from the Shelter Properties Partnerships; (ii) the defendants' actions reduced the demand for the Shelter Properties Partnerships' limited partner interests in the limited resale market by artificially depressing the trading prices for limited partners interests in order to create a favorable environment for the tender offers; (iii) through the tender offers, the acquiring entities sought to acquire effective voting control over the Shelter Properties Partnerships while paying highly inadequate prices; and (iv) the documents disseminated to the class in connection with the tender offers contained false and misleading statements and omissions of material facts concerning such issues as the advantages to limited partners of tendering pursuant to the tender offers, the true value of the interest, the true financial condition of the Shelter Properties Partnerships, the factors affecting the likelihood that properties owned by the Shelter Properties Partnerships will be sold or liquidated in the near future, the liquidity and true value of the limited partner interests, the reasons for the limited secondary market for limited partner interests, and the true nature of the market for the underlying real estate assets owned by the Shelter Properties Partnerships, all in violation of the federal securities laws. On September 27, 1995, the parties entered into a stipulation to settle the matter. The principal terms of the stipulation require supplemental payments to tendering limited partners aggregating approximately $6 million to be paid by the Affiliated Purchasers, of which approximately $722,000 is the Partnership's portion; waiver by the Shelter Properties Partnerships' general partners of any right to certain proceeds from a sale or refinancing of the partnerships' properties; some restrictions on Insignia's ability to vote the limited partner interests it acquired; payment of $1.25 million (which amount is divided among the various partnerships and acquiring entities) for plaintiffs' attorney fees and expenses in the litigation; and general releases of all the defendants. On June 24, 1996, after notice to the class and a hearing on the fairness and adequacy of the notice and the terms of settlement, the court orally approved the settlement. The court signed the formal order on July 30, 1996. No appeal was filed within thirty days after the court entered the formal order, and the settlement became effective on August 30, 1996. The Affiliated Purchasers made the payments to investors in accordance with the settlement in early September 1996. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS During the fiscal year ended October 31, 1996, no matter was submitted to a vote of unit holders through the solicitation of proxies or otherwise. PART II ITEM 5. MARKET FOR PARTNERSHIP EQUITY AND RELATED PARTNER MATTERS As of October 31, 1996, there was minimal trading of the Units in the secondary market establishing a high and low value of $270 and $240, respectively, per unit as quoted in the September 1996 Stanger Report. As of October 31, 1996, there were 3,097 holders of record owning an aggregate of 42,324 Units. No public trading has developed for the Units, and it is not anticipated that such a market will develop in the future. At October 31, 1995, distributions of $1,000,000 had been declared and accrued. These distributions were paid to the partners on December 14, 1995. Future cash distributions will depend on the levels of net cash generated from operations, refinancings, property sales and cash reserves. As of October 31, 1996, the Reserve Account was fully funded, however if it becomes necessary to draw upon the reserves, distributions may also be restricted by the requirement to deposit net operating income (as defined in the mortgage note) into the Reserve Account as disclosed in "Note A" of the financial statements. ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION This item should be read in conjunction with the financial statements and other items contained elsewhere in this report. RESULTS OF OPERATIONS The Partnership's net loss as reported in the financial statements for the year ended October 31, 1996, was approximately $61,000 compared to net income of approximately $772,000 for the corresponding period of 1995 (see "Note D" of the financial statements for a reconciliation of these amounts to the Partnership's federal taxable income (loss).) The change in net income (loss) from 1995 to 1996 is primarily attributable to the gain on the sale of the Marble Hill Apartment in 1995, (see "Note B" of the financial statements for additional information), which was in excess of the net income for the year. The decrease in rental income is due primarily to the sale of Marble Hills, mitigated by rental increases at all of the Partnership's properties. The increase in other income is due to an increase in the average amount of cash available to be invested in interest bearing certificates of deposit. Operating, maintenance, depreciation and interest expenses decreased primarily as a result of the sale of Marble Hills. Additionally the decrease in general and administrative expenses is due to decreased legal fees associated with the lawsuits disclosed in "Item 3. Legal Proceedings," as well as decreased professional expenses in connection with the Partnership's required responses to the tender offerings in 1995. Management relies on the annual appraisals performed by outside appraisers to assess the impairment of investment properties. There are three recognized approaches or techniques available to the appraiser. When applicable, these approaches are used to process the data considered significant to each to arrive at separate value indications. In all instances the experience of the appraiser, coupled with his objective judgment, plays a major role in arriving at the conclusions of the indicated value from which the final estimate of value is made. The three approaches commonly known are the cost approach, the sales comparison approach, and the income approach. The cost approach is often not considered to be reliable due to the lack of land sales and the significant amount of depreciation and, therefore, is often not presented. Upon receipt of the appraisals, any property which is stated on the books of the partnership above the estimated value given in the appraisal, is written down to the estimated value provided by the appraiser. The appraiser assumes a stabilized occupancy at the time of the appraisal and, therefore, any impairment of value is considered to be permanent by the Partnership. For the year ended October 31, 1996, no adjustments for impairment of value were necessary. As part of the ongoing business plan of the Partnership, the Corporate General Partner monitors the rental market environment of each of its investment properties to assess the feasibility of increasing rents, maintaining or increasing occupancy levels and protecting the Partnership from increases in expense. As part of this plan, the Corporate General Partner attempts to protect the Partnership from the burden of inflation-related increases in expenses by increasing rents and maintaining a high overall occupancy level. However, due to changing market conditions, which can result in the use of rental concessions and rental reductions to offset softening market conditions, there is no guarantee that the Corporate General Partner will be able to sustain such a plan. LIQUIDITY AND CAPITAL RESOURCES At October 31, 1996, the Partnership held unrestricted cash of approximately $3,106,000 compared to approximately $3,710,000 at October 31, 1995. Net cash provided by operating activities increased due to rental rate increases at all of the Partnership's properties, partially offset by an increase in other assets due to a Federal tax deposit required under Section 7519 of the Internal Revenue Code for future tax liabilities which may be incurred from the income of the Partnership's investment properties. Net cash provided by investing activities decreased primarily due to proceeds from the sale of Marble Hills in 1995. Excluding the Marble Hill sale proceeds, net cash used in investing activities was comparable for 1996 and 1995. Net cash used in financing activities increased due to the payment of approximately $1,000,000 of accrued distributions to partners in December of 1995. For 1997, the Partnership has budgeted approximately $175,000 for parking area improvements at Nottingham Square. Except for this project, the Partnership has no material capital programs scheduled to be performed in 1997, although certain routine capital expenditure and maintenance expenses have been budgeted. These capital expenditures and maintenance expenses will be incurred only if cash is available from operations or is received from Partnership reserves. 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 properties to adequately maintain the physical assets and other operating needs of the Partnership. Such assets are currently thought to be sufficient for any near-term needs of the Partnership. The mortgage indebtedness of approximately $27,372,000, net of discount, is being amortized over 257 months with a balloon payment of approximately $23,008,000 due on November 15, 2002, at which time the properties are expected to either be refinanced or sold. No cash distributions were paid during the 1995 fiscal year. Distributions of the proceeds from the sale of Marble Hills of approximately $1,000,000 were paid in the first quarter of 1996. Future cash distributions will depend on the levels of net cash generated from operations, refinancing, property sales and cash reserves. As of October 31, 1996, the Reserve Account was fully funded, however if it becomes necessary to draw upon these reserves, distributions may also be restricted by the requirement to deposit net operating income (as defined in the mortgage note) into the Reserve Account as disclosed in "Note A" of the financial statements. ITEM 7. FINANCIAL STATEMENTS SHELTER PROPERTIES VI LIMITED PARTNERSHIP LIST OF FINANCIAL STATEMENTS Report of Ernst & Young LLP, Independent Auditors Balance Sheet - October 31, 1996 Statements of Operations - Years ended October 31, 1996 and 1995 Statements of Changes in Partners' Capital (Deficit) - Years ended October 31, 1996 and 1995 Statements of Cash Flows - Years ended October 31, 1996 and 1995 Notes to Financial Statements Report of Ernst & Young LLP, Independent Auditors The Partners Shelter Properties VI Limited Partnership We have audited the accompanying balance sheet of Shelter Properties VI Limited Partnership as of October 31, 1996, and the related statements of operations, changes in partners' capital (deficit) and cash flows for each of the two years in the period ended October 31, 1996. These financial statements are the responsibility of the Partnership's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by the Partnership's management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Shelter Properties VI Limited Partnership as of October 31, 1996, and the results of its operations and its cash flows for each of the two years in the period ended October 31, 1996, in conformity with generally accepted accounting principles. /s/ERNST & YOUNG LLP Greenville, South Carolina December 10, 1996 SHELTER PROPERTIES VI LIMITED PARTNERSHIP BALANCE SHEET October 31, 1996 (in thousands, except unit data) Assets Cash and cash equivalents: Unrestricted $ 3,106 Restricted--tenant security deposits 199 Accounts receivable 20 Escrows for taxes 438 Restricted escrows 1,509 Other assets 720 Investment properties (Notes C & F): Land $ 4,950 Buildings and related personal property 46,069 51,019 Less accumulated depreciation (22,800) 28,219 $34,211 Liabilities and Partners' Capital (Deficit) Liabilities Accounts payable $ 253 Tenant security deposits 197 Accrued taxes 610 Other liabilities 353 Mortgage notes payable (Note C) 27,372 Partners' Capital (Deficit) General partners $ (304) Limited partners (42,324 units issued and outstanding) 5,730 5,426 $34,211 See Accompanying Notes to Financial Statements SHELTER PROPERTIES VI LIMITED PARTNERSHIP STATEMENTS OF OPERATIONS (in thousands, except unit data) Years Ended October 31, 1996 1995 Revenues: Rental income $ 9,418 $ 10,251 Other income 661 589 Total revenues 10,079 10,840 Expenses: Operating 2,949 3,316 General and administrative 293 478 Maintenance 1,481 1,659 Depreciation 1,973 2,173 Interest 2,517 2,823 Property taxes 927 915 Total expenses 10,140 11,364 Gain on sale of property (Note B) -- 1,296 Net (loss) income (Note D) $ (61) $ 772 Net (loss) income allocated to general partner (1%) $ (1) $ 8 Net (loss) income allocated to limited partners (99%) (60) 764 $ (61) $ 772 Net (loss) income per limited partnership unit $ (1.42) $ 18.05 See Accompanying Notes to Financial Statements SHELTER PROPERTIES VI LIMITED PARTNERSHIP STATEMENTS OF CHANGES IN PARTNERS' CAPITAL (DEFICIT) (in thousands, except unit data) Limited Partnership General Limited Units Partners Partners Total Original capital contributions 42,324 $ 2 $42,324 $42,326 Partners' capital (deficit) at October 31,1994 42,324 $ (311) $ 6,026 $ 5,715 Net income for the year ended October 31, 1995 -- 8 764 772 Distributions payable to partners -- -- (1,000) (1,000) Partners' capital (deficit) at October 31, 1995 42,324 (303) 5,790 5,487 Net loss for the year ended October 31, 1996 -- (1) (60) (61) Partners' capital (deficit) at October 31, 1996 42,324 $ (304) $ 5,730 $ 5,426 See Accompanying Notes to Financial Statements SHELTER PROPERTIES VI LIMITED PARTNERSHIP STATEMENTS OF CASH FLOWS (in thousands) Years Ended October 31, 1996 1995 Cash flows from operating activities: Net (loss) income $ (61) $ 772 Adjustments to reconcile net (loss) income to net cash provided by operating activities: Depreciation 1,973 2,173 Amortization of discounts and loan costs 297 318 Casualty loss 1 -- Loss on disposal of property 4 42 Gain on sale of property -- (1,296) Change in accounts: Restricted cash (4) 22 Accounts receivable (3) (4) Escrows for taxes (38) 12 Other assets (110) (4) Accounts payable (123) (20) Tenant security deposit liabilities 12 (32) Accrued taxes 44 (17) Other liabilities (12) (16) Net cash provided by operating activities 1,980 1,950 Cash flows from investing activities: Property improvements and replacements (938) (940) Deposits to restricted escrows (62) (293) Receipts from restricted escrows 93 299 Net insurance proceeds from casualty loss 59 -- Proceeds from sale of property -- 2,412 Net cash (used in) provided by investing activities (848) 1,478 Cash flows from financing activities: Payments on mortgage notes payable (736) (753) Distributions to partners (1,000) -- Net cash used in financing activities (1,736) (753) Net (decrease) increase in cash balance (604) 2,675 Cash at beginning of period 3,710 1,035 Cash at end of period $ 3,106 $3,710 Supplemental disclosure of cash flow information: Cash paid for interest $ 2,221 $2,518 Supplemental disclosure of non-cash activity: Accounts payable was adjusted by approximately $89,000 at October 31, 1996, for non-cash amounts in connection with property improvements and replacements. See Accompanying Notes to Financial Statements SHELTER PROPERTIES VI LIMITED PARTNERSHIP Notes to Financial Statements (Unaudited) NOTE A - ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES Organization: Shelter Properties VI Limited Partnership (the Partnership or "Registrant") was organized as a limited partnership under the laws of the State of South Carolina pursuant to a Certificate and Agreement of Limited Partnership filed August 3, 1983. The general partner responsible for management of the Partnership's business is Shelter Realty VI Corporation, a South Carolina corporation (the "Corporate General Partner" or "General Partner"). The only other general partner of the Partnership, N. Barton Tuck, Jr. is effectively prohibited by the Partnership's partnership agreement (the "Partnership Agreement") from participating in the management of the Partnership. The Corporate General Partner is an affiliate of Insignia Financial Group, Inc. ("Insignia"). The directors and officers of the Corporate General Partner also serve as executive officers of Insignia. The partnership agreement terminates December 31, 2023. The Partnership commenced operations on June 29, 1984, and completed its acquisition of apartment properties on March 28, 1985. The Partnership operates six apartment properties located in the south, midwest and west. At October 31, 1996, affiliates of Insignia own 8,027 units of the Partnership. Use of Estimates: The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates. Allocation of Cash Distributions: Cash distributions by the Partnership are allocated between general and limited partners in accordance with the provisions of the partnership agreement. The partnership agreement provides that net cash from operations means revenue received less operating expenses paid, adjusted for certain specified items which primarily include mortgage payments on debt, property improvements and replacements not previously reserved, and the effects of other adjustments to reserves. In the following notes to financial statements, whenever "net cash from (used by) operations" is used, it has the aforementioned meaning. The following is a reconciliation of the subtotal in the accompanying statements of cash flows captioned net cash provided by operating activities to net cash used by operations, as defined in the partnership agreement. However, "net cash used by 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. 1996 1995 (in thousands) Net cash provided by operating activities $ 1,980 $ 1,950 Property improvements and replacements (938) (940) Payments on mortgage notes payable (736) (753) Changes in reserves for net operating liabilities 234 59 Change in restricted escrows, net 31 6 Additional operating reserves (571) (322) Net cash used by operations $ 0 $ 0 The General Partner believed it to be in the best interest of the Partnership to reserve net cash from operations of approximately $571,000 and $322,000 at October 31, 1996 and 1995, respectively, to fund continuing capital improvements at the six properties. Distributions made from reserves no longer considered necessary by the General Partner are considered to be additional net cash from operations for allocation purposes. At October 31, 1995, the General Partner declared a distribution of $1,000,000 from proceeds from the sale of Marble Hills Apartments which was paid December 15, 1995. The partnership agreement provides that 99% of distributions of net cash from operations are allocated to the limited partners until they receive net cash from operations for such fiscal year equal to 7% of their adjusted capital values (as defined in the partnership agreement), at which point the general partners will be allocated all net cash from operations until they have received distributions equal to 10% of the aggregate net cash from operations distributed to partners for such fiscal year. Thereafter, the general partners will be allocated 10% of any distributions of remaining net cash from operations for such fiscal year. All distributions of distributable net proceeds (as defined in the partnership agreement) from property dispositions and refinancings will be allocated to the limited partners until each limited partner has received an amount equal to a cumulative 7% per annum return based on the average of the limited partners' adjusted capital value, less any prior distributions of net cash from operations and distributable net proceeds, and has also received an amount equal to the limited partners' adjusted capital value. Thereafter, the general partners receive 1% of the selling prices of properties sold where they acted as a broker, and then the limited partners will be allocated 85% of any remaining distributions of distributable net proceeds and the general partners will receive 15%. Distributions may be restricted by the requirement to deposit net operating income (as defined in the mortgage note) into the Reserve Account until $1,000 per apartment unit is funded for each respective property. Undistributed Net Proceeds from Disposition: Net proceeds from the sale of Marble Hills Apartments totalled $2,412,000. In December of 1995, distributions of $1,000,000 were paid, leaving undistributed net proceeds from dispositions of $1,412,000. Allocation of Profits, Gains and Losses: Profits, gains and losses of the Partnership are allocated between general and limited partners in accordance with the provisions of the partnership agreement. For any fiscal year, to the extent that profits, not including gains from property dispositions, do not exceed distributions of net cash from operations, such profits are allocated in the same manner as such distributions. In any fiscal year in which profits, not including gains from property dispositions, exceed distributions of net cash from operations, such excess is treated on a cumulative basis as if it constituted an equivalent amount of distributable net proceeds and is allocated together with, and in the same manner as, that portion of gain described in the second sentence of the following paragraph. Any gain from property dispositions attributable to the excess, if any, of the indebtedness relating to a property immediately prior to the disposition of such property over the Partnership's adjusted basis in the property shall be allocated to each partner having a negative capital account balance, to the extent of such negative balance. The balance of any gain shall be treated on a cumulative basis as if it constituted an equivalent amount of distributable net proceeds and shall be allocated to the general partners to the extent that general partners would have received distributable net proceeds in connection therewith; the balance shall be allocated to the limited partners. However, the interest of the general partners will be equal to at least 1% of each gain at all times during the existence of the Partnership. All losses, including losses attributable to property dispositions, are allocated 99% to the limited partners and 1% to the general partners. Accordingly, net income (losses) as shown in the statements of operations and changes in partners' capital for 1996 and 1995 were allocated 99% to the limited partners and 1% to the general partners. Net income per limited partnership unit for each such year was computed as 99% of net income divided by 42,324 weighted average units outstanding. Other Reserves: The General Partner may also designate a portion of cash generated from operations as other reserves in determining net cash from operations. Per the Partnership Agreement, the General Partner designated as other reserves an amount equal to the net liabilities related to the operations of apartment properties during the current fiscal year that are expected to require the use of cash during the next fiscal year. The changes in other reserves during 1996 and 1995 were approximately $234,000 and $59,000, respectively, which amounts were determined by considering changes in the balances of restricted cash, accounts receivable, escrow for taxes, other assets, accounts payable, tenant security deposit liabilities, accrued taxes and other liabilities. At this time, the General Partner expects to continue to adjust other reserves based on the net change in the aforementioned account balances. Restricted Escrows: Capital Improvement Account - In 1992, the Partnership mortgaged the real estate assets of its properties under the terms of a multiple-asset real estate mortgage investment conduit ("REMIC"). At the time of the REMIC refinancing, $1,429,000 of the proceeds were designated for a "capital improvement escrow" for certain capital improvements. At October 31, 1996, the balance remaining was approximately $14,000. Upon completion of the scheduled property improvements, any excess funds will be returned to the properties for property operations. Reserve Account - In addition to the Capital Improvement Account, a general Reserve Account was established in 1992 with the refinancing proceeds for each mortgaged property. These funds were established to cover necessary repairs and replacements of existing improvements, debt service, out of pocket expenses incurred for ordinary and necessary administrative tasks, and payment of real property taxes and insurance premiums. The Partnership is required to deposit net operating income (as defined in the mortgage note) from each property to the respective reserve account until the accounts equal $1,000 per apartment unit for each respective property. The minimum balance of $400 per apartment unit, as well as the requirement of $1,000 per apartment unit, has currently been attained. The current balance is approximately $1,495,000. Escrows for Taxes: These escrows are held by the Partnership and are designated for the payment of real estate taxes. Depreciation: Depreciation is provided by the straight-line method over the estimated lives of the apartment properties and related personal property. For Federal income tax purposes, the accelerated cost recovery method is used (1) for real property over 15 years for the initial cost of Carriage House Apartments, 18 years for other additions acquired before May 9, 1985, and 19 years for additions after May 8, 1985, and before January 1, 1987, and (2) for personal property over 5 years for additions prior to January 1, 1987. As a result of the Tax Reform Act of 1986, for additions after December 31, 1986, the modified accelerated cost recovery method is used for depreciation of (1) real property additions over 27.5 years and (2) personal property additions over 7 years. Loan Costs: Loan costs of approximately $943,000 less accumulated amortization of approximately $368,000 are included in other assets and are being amortized on a straight-line basis over the life of the loans. Cash and Cash Equivalents: Unrestricted Cash: Unrestricted cash includes cash on hand and in banks, demand deposits, money market funds, and certificates of deposit with original maturities less than 90 days. At certain times, the amount of cash deposited at a bank may exceed the limit on insured deposits. Restricted Cash - Tenant Security Deposits: The Partnership requires security deposits from all lessees for the duration of the lease and such deposits are considered restricted cash. Deposits are refunded when the tenant vacates the apartment, provided the tenant has not damaged its space and is current on its rental payments. Leases: The Partnership generally leases apartment units for twelve-month terms or less. The Partnership recognizes income as earned on its leases. In addition, the Corporate General Partner's policy is to offer rental concessions during particularly slow months or in response to heavy competition from other similar complexes in the area. Concessions are charged to expense as incurred. Investment Properties: Investment properties consist of six apartment complexes and are stated at cost. Costs of apartment properties that have been permanently impaired have been written down to the appraised value at the time of impairment. The Corporate General Partner relies on the annual appraisals performed by the outside appraisers for the estimated value of the Partnership's properties. There are three recognized approaches or techniques available to the appraiser. When applicable, these approaches are used to process the data considered significant to each to arrive at separate value indications. In all instances the experience of the appraiser, coupled with his objective judgment, plays a major role in arriving at the conclusions of the indicated value from which the final estimate of value is made. The three approaches commonly known are the cost approach, the sales comparison approach, and the income approach. The cost approach is often not considered to be reliable due to the lack of land sales and the significant amount of depreciation and, therefore, is often not presented. Upon receipt of the appraisals, any property which is stated on the books of the Partnership above the estimated value given in the appraisal, is written down to the estimated value given by the appraiser. The appraiser assumes a stabilized occupancy at the time of the appraisal and, therefore, any impairment of value is considered to be permanent by the Corporate General Partner. For the year ended October 31, 1996, no adjustments for impairment of value were necessary. As of October 31, 1995, the Partnership adopted "FASB Statement No. 121, Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of," which requires impairment losses to be recognized for long- lived assets used in operations when indicators of impairment are present and the undiscounted cash flows are not sufficient to recover the assets' carrying amount. The impairment loss is measured by comparing the fair value of the asset to its carrying amount. The adoption of "FASB No. 121" did not have a material effect on the Partnership's financial statements. Advertising: The Partnership expenses the costs of advertising as incurred. Advertising expense, which is included in operating expenses, was approximately $121,000 and $128,000 for the years ended October 31, 1996 and 1995, respectively. Fair Value: In 1996, the Partnership implemented "Statement of Financial Accounting Standards No. 107, Disclosure about Fair Value of Financial Instruments," which requires disclosure of fair value information about financial instruments for which it is practicable to estimate that value. The carrying amount of the Partnership's cash and cash equivalents approximates fair value due to short-term maturities of cash equivalents. The Partnership estimates the fair value of its fixed rate mortgages by discounted cash flow analysis, based on estimated borrowing rates currently available to the Partnership. Reclassifications: Certain reclassifications have been made to the 1995 information to conform to the 1996 presentation. NOTE B - SALE OF MARBLE HILLS APARTMENTS On September 29, 1995, the Partnership sold Marble Hills Apartments to an unaffiliated party. The buyer assumed the related mortgage notes payable. The total outstanding balance on the mortgage notes payable was approximately $3,344,000. The carrying amount of the property was approximately $4,460,000. The Partnership received net proceeds of approximately $2,412,000 after payment of closing costs. This disposition resulted in a gain of approximately $1,296,000. Operating revenues and expenses from Marble Hills were approximately $1,214,000 and $1,206,000, respectively for 1995. NOTE C - MORTGAGE NOTES PAYABLE The principal terms of mortgage notes payable are as follows (dollar amounts in thousands): Principal Monthly Principal Balance At Payment Stated Balance October 31, Including Interest Maturity Due At Property 1996 Interest Rate Date Maturity Rocky Creek 1st Mortgage $ 2,194 $ 19 7.60% 11/15/02 $ 1,737 2nd Mortgage 74 (a) 7.60% 11/15/02 74 Carriage House 1st Mortgage 2,022 17 7.60% 11/15/02 1,601 2nd Mortgage 68 (a) 7.60% 11/15/02 68 Nottingham Square 1st Mortgage 7,917 68 7.60% 11/15/02 6,268 2nd Mortgage 268 2 7.60% 11/15/02 268 Foxfire/Barcelona 1st Mortgage 5,723 49 7.60% 11/15/02 4,531 2nd Mortgage 193 1 7.60% 11/15/02 193 River Reach 1st Mortgage 7,441 64 7.60% 11/15/02 5,890 2nd Mortgage 252 2 7.60% 11/15/02 252 Village Garden 1st Mortgage 2,576 22 7.60% 11/15/02 2,039 2nd Mortgage 87 1 7.60% 11/15/02 87 28,815 $ 245 Less unamortized discounts (1,443) $ 27,372 (a) Monthly payment including interest is less than $1,000. The Partnership exercised interest rate buy-down options for each of the mortgage notes payable reducing the stated rate from 8.76% to 7.6%. The fee for the interest rate reduction amounted to approximately $2,433,000 and is being amortized as a loan discount using the interest method over the life of the loans. The unamortized discount is reflected as a reduction of the mortgage notes payable and increases the effective rate of the debt to 8.76%. The mortgage notes payable are nonrecourse and are secured by pledge of the respective apartment properties and by pledge of revenues from the respective apartment properties. The notes cannot be prepaid prior to November 15, 1997; thereafter, they require prepayment penalties if repaid prior to maturity and prohibit resale of the properties subject to existing indebtedness. The estimated fair value of the Partnership's aggregate debt is approximately $28,815,000. This estimate is not necessarily indicative of the amounts the Partnership might pay in actual market transactions. Scheduled principal payments of mortgage notes payable subsequent to October 31, 1996, are as follows (in thousands): 1997 $ 794 1998 857 1999 924 2000 997 2001 1,075 Thereafter 24,168 $28,815 NOTE D - INCOME TAXES The Partnership has received a ruling from the Internal Revenue Service that it will be classified as a partnership for Federal income tax purposes. Accordingly, no provision for income taxes is made in the financial statements of the Partnership. Taxable income or loss of the Partnership is reported in the income tax returns of its partners. The following is a reconciliation of reported net (loss) income and Federal taxable (loss) income (in thousands, except unit data): 1996 1995 Net (loss) income as reported $ (61) $ 772 Add (deduct): Fixed asset write-offs and casualty gain (2) 42 Amortization of present value discounts (16) (30) Depreciation differences (628) (732) Change in prepaid rental income (33) 33 Gain on sale of property -- 1,137 Accrued legal fees (76) 76 Other (6) (6) Federal taxable (loss) income $ (822) $1,292 Federal taxable (loss) income per limited partnership unit $ (19.23) $26.77 The following is a reconciliation between the Partnership's reported amounts and Federal tax basis of net assets and liabilities (in thousands): Net assets as reported $ 5,426 Buildings and land 3,928 Accumulated depreciation (14,199) Syndication fees 5,286 Other 53 Net assets - tax basis $ 494 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 payments to affiliates for services and as reimbursement of certain expenses incurred by affiliates on behalf of the Partnership. Property management fees of approximately $497,000 and $540,000 were paid to affiliates of the General Partner for the years ended 1996 and 1995, respectively. These fees are included in operating expenses. The Partnership agreement also provides for reimbursement to the General Partner and its affiliates for costs incurred in connection with the administration of partnership activities. Reimbursements for services of affiliates of approximately $184,000 and $158,000 were paid to the General Partner and affiliates for the years ended 1996 and 1995, respectively. The reimbursements for services of affiliates for 1996, include approximately $9,000 of reimbursements for construction oversight costs. The Partnership insures its properties under a master policy through an agency and insurer unaffiliated with the Corporate General Partner. An affiliate of the Corporate General Partner acquired, in the acquisition of a business, certain financial obligations from an insurance agency which was later acquired by the agent who placed the current year's master policy. The current agent assumed the financial obligations to the affiliate of the Corporate General Partner who receives payments on these obligations from the agent. The amount of the Partnership's insurance premiums accruing to the benefit of the affiliate of the Corporate General Partner by virtue of the agent's obligations is not significant. NOTE F - INVESTMENT PROPERTIES AND ACCUMULATED DEPRECIATION
Initial Cost To Partnership Buildings Cost and Related Capitalized Personal Subsequent to Description Encumbrances Land Property Acquisition (in thousands) Rocky Creek $ 2,268 $ 168 $ 3,821 $ 486 Augusta, Georgia Carriage House 2,090 166 3,038 592 Gastonia, North Carolina Nottingham Square 8,185 1,133 9,980 2,274 Des Moines, Iowa Foxfire/Barcelona 5,916 1,191 9,998 86 Durham, North Carolina River Reach 7,693 1,872 10,854 1,418 Jacksonville, Florida Village Garden 2,663 420 3,050 472 Fort Collins, Colorado Totals $28,815 $4,950 $40,741 $5,328
Gross Amount at Which Carried October 31, 1996 Buildings And Related Personal Accumulated Date of Date Depreciable Description Land Property Total Depreciation Construction Acquired Life-Years (Amounts in thousands) Rocky Creek Apartments Augusta, Georgia $ 168 $ 4,307 $ 4,475 $ 1,946 1979 06/29/84 5-35 Carriage House Apartments Gastonia, North Carolina 166 3,630 3,796 1,906 1970-1971 06/29/84 5-27 Nottingham Square Apartments Des Moines, Iowa 1,133 12,254 13,387 6,083 1972 08/31/84 5-29 Foxfire/Barcelona Apartments Durham, North Carolina 1,191 10,084 11,275 5,225 1973 03/28/85 5-29 1975 09/30/84 5-31 River Reach Apartments Jacksonville, Florida 1,872 12,272 14,144 6,033 1971 01/30/85 5-27 Village Garden Apartments Fort Collins, Colorado 420 3,522 3,942 1,607 1974 03/01/85 5-30 Totals $4,950 $46,069 $51,019 $22,800
Reconciliation of "Investment Properties and Accumulated Depreciation" (in thousands): Years Ended October 31, 1996 1995 Investment Properties Balance at beginning of year $ 50,254 $ 57,323 Property improvements 1,027 940 Sale of apartment property -- (7,853) Disposals of property (262) (156) Balance at end of year $ 51,019 $ 50,254 Accumulated Depreciation Balance at beginning of year $ 21,024 $ 22,627 Additions charged to expense 1,973 2,173 Sale of apartment property -- (3,661) Disposals of property (197) (115) Balance at end of year $ 22,800 $ 21,024 The aggregate cost of the real estate for Federal income tax purposes at October 31, 1996 and 1995, respectively, is approximately $54,947,000 and $53,963,000. The accumulated depreciation taken for Federal income tax purposes at October 31, 1996 and 1995, respectively, is approximately $36,998,000 and $34,398,000. NOTE G - CASUALTY LOSS During the first quarter of 1996, the Partnership recorded a casualty loss resulting from a fire which destroyed three units at the Nottingham Square Apartments. Although the damage was covered by insurance, the damage resulted in a loss of approximately $1,000. The loss resulted from the basis of the property plus expenses to replace the interior damaged exceeding the insurance proceeds received. During the second quarter of 1996, a storm damaged the roofs at the Nottingham Square Apartments. The Partnership is currently negotiating a settlement with the insurance company. The Registrant does not anticipate this casualty to result in a material loss to the Partnership. NOTE H - CONTINGENCIES The Corporate General Partner owns 100 Limited Partnership Units ("Units"). On or about April 26 and 27, 1995, six entities ("Affiliated Purchaser") affiliated with the Partnership commenced tender offers for limited partner interests in six limited partnerships, including the Partnership (collectively, the "Shelter Properties Partnerships"). On May 27, 1995, the Affiliated Purchasers acquired 7,985 units of the Partnership pursuant to the tender offer. On or about May 12, 1995, in the United States District Court for the District of South Carolina, certain limited partners of the Shelter Properties Partnerships commenced a lawsuit, on behalf of themselves, on behalf of a putative class of plaintiffs, and derivatively on behalf of the partnerships, challenging the actions taken by defendants (including Insignia, the acquiring entities and certain officers of Insignia) in the management of the Shelter Properties Partnerships and in connection with the tender offers and certain other matters. The plaintiffs alleged that, among other things: (i) the defendants intentionally mismanaged the Shelter Properties Partnerships and acted contrary to the limited partners' best interests by prolonging the existence of the partnerships in order to perpetuate the revenues derived by Insignia and its affiliates from the Shelter Properties Partnerships, (ii) the defendants' actions reduced the demand for the Shelter Properties Partnerships' limited partner interests in the limited resale market by artificially depressing the trading prices for limited partners interests in order to create a favorable environment for the tender offers; (iii) through the tender offers, the acquiring entities sought to acquire effective voting control over the Shelter Properties Partnerships while paying highly inadequate prices; and (iv) the documents disseminated to the class in connection with the tender offers contained false and misleading statements and omissions of material facts concerning such issues as the advantages to limited partners of tendering pursuant to the tender offers, the true value of the interest, the true financial condition of the Shelter Properties Partnerships, the factors affecting the likelihood that properties owned by the Shelter Properties Partnerships will be sold or liquidated in the near future, the liquidity and true value of the limited partner interests, the reasons for the limited secondary market for limited partner interests, and the true nature of the market for the underlying real estate assets owned by the partnerships all in violation of the federal securities laws. On September 27, 1995, the parties entered into a stipulation to settle the matter. The principal terms of the stipulation require supplemental payments to tendering limited partners aggregating approximately $6 million to be paid by Affiliated Purchasers of which approximately $722,000 is the Partnership's portion; waiver by the Shelter Properties Partnerships' general partners of any right to certain proceeds from a sale or refinancing of the partnerships' properties; some restrictions on Insignia's ability to vote the limited partner interests it acquired; payment of $1.25 million (which amount is divided among the various partnerships and acquiring entities) for plaintiffs' attorney fees and expenses in the litigation; and general releases of all the defendants. On June 24, 1996, after notice to the class and a hearing on the fairness and adequacy of the notice and the terms of settlement, the court orally approved the settlement. The court signed the formal order on July 30, 1996. No appeal was filed within thirty days after the court entered the formal order, and the settlement became effective on August 30, 1996. The Affiliated Purchasers made the payments to investors in accordance with the settlement in early September 1996. ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None PART III ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS, COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT The Registrant has no officers or directors. The Individual and Corporate General Partners are as follows: Individual General Partner - N. Barton Tuck, Jr., age 58, is the Individual General Partner of the Registrant. Mr. Tuck is Chairman of GolfSouth Management, Inc. Until August 1990, he served as Chairman and Chief Executive Officer of U.S. Shelter Corporation ("Shelter"), the former parent of AmReal Corporation (parent of the Corporate General Partner of the Partnership). For six years prior to 1966, Mr. Tuck was employed in Greenville, South Carolina by the certified public accounting firm of S.D. Leidesdorf & Company. From 1966 to 1970, he was a registered representative with the investment banking firm of Harris Upham & Co., Inc. in Greenville, South Carolina. Since 1970, Mr. Tuck has been engaged in arranging equity investments for individuals and partnerships. Mr. Tuck is a graduate of the University of North Carolina. Mr. Tuck has delegated to the Corporate General Partner all of his authority, as a general partner of the Partnership, to manage and control the Partnership and its business and affairs. Corporate General Partner - The names and ages of, as well as the positions and offices held by, the executive officers and directors of Shelter Realty VI Corporation are set forth below. There are no family relationships between or among any officers or directors. Name Age Position William H. Jarrard, Jr. 50 President and Director Ronald Uretta 40 Vice President and Treasurer John K. Lines, Esq. 37 Vice President and Secretary Kelley M. Buechler 39 Assistant Secretary Mr. Jarrard, who had previously served as Vice President, became President in August 1994. In June 1994, Mr. Lines became Vice President and Secretary and Ms. Buechler, who had previously held the position of Secretary, became Assistant Secretary. William H. Jarrard has been Managing Director - Partnership Administration of Insignia since January 1991. Mr. Jarrard served as Managing Director - Partnership Administration and Asset Management from July 1994 until January 1996. Ronald Uretta has been Insignia's Treasurer since January 1992. Since August 1996, he has also served as Chief Operating Officer. He has also served as Secretary from January 1992 to June 1994 and as Chief Financial Officer from January 1992 to August 1996. Since September 1990, Mr. Uretta has also served as the Chief Financial Officer and Controller of Metropolitan Asset Group. John K. Lines, Esq. has been Vice President and Secretary of the Corporate General Partner since August 1994, Insignia's General Counsel since June 1994, and General Counsel and Secretary since July 1994. From May 1993 until June 1994, Mr. Lines was the Assistant General Counsel and Vice President of Ocwen Financial Corporation, West Palm Beach, Florida. From October 1991 until May 1993, Mr. Lines was a Senior Attorney with Banc One Corporation, Columbus, Ohio. From May 1984 until October 1991, Mr. Lines was an attorney with Squire Sanders & Dempsey, Columbus, Ohio. Kelley M. Buechler has been Assistant Secretary of the Corporate General Partner and Assistant Secretary of Insignia since 1991. During the five years prior to joining Insignia in 1991, she served in similar capacities with U. S. Shelter. ITEM 10. EXECUTIVE COMPENSATION Neither the Individual General Partner nor any of the directors and officers of the Corporate General Partner received any remuneration from the Registrant. ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT Except as noted below, no person was known by the Registrant to be the beneficial owner of more than 5% of the Limited Partnership Units of the Registrant as of October 31, 1996. Number Entity of Units Percentage SP VI Acquisition, LLC 8,027 18.97% High River Limited Partnership 2,961 7.00% No director or officer of the Corporate General Partner owns any Units. The Corporate General Partner owns 100 Units as required by the terms of the partnership agreement. ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS The Individual General Partner and the Corporate General Partner received no cash distributions from operations as General or Limited Partners during or with respect to, the fiscal year ended October 31, 1996. During 1996, the Corporate General Partner received approximately $2,000 and an affiliate of the Corporate General Partner received approximately $189,000 of accrued distributions from the sale of Marble Hills in 1995. For a description of the share of cash distributions from operations, if any, to which the general partners are entitled, reference is made to the material contained in the Prospectus under the heading "PROFITS AND LOSSES AND CASH DISTRIBUTIONS." The Registrant has a property management agreement with Insignia Residential Group, L.P. pursuant to which Insignia Residential Group, L.P. has assumed direct responsibility for day-to-day management of the Partnership's properties. This service includes the supervision of leasing, rent collection, maintenance, budgeting, employment of personnel, payment of operating expenses, etc. Insignia Residential Group, L.P. receives a property management fee equal to 5% of apartment revenues. During the fiscal year ended October 31, 1996, Insignia Residential Group, L.P. received $497,000 in fees for property management. For a more detailed description of the management fee that Insignia Residential Group, L.P. is entitled to receive, see the material contained in the Prospectus under the heading "CONFLICTS OF INTEREST - Property Management Services." For a further description of payments made by the Registrant to affiliates for services and as reimbursement of certain expenses incurred by affiliates on behalf of the Registrant, see "Note E" of the financial statements included as part of this report. ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits: Exhibit 27, Financial Data Schedule, is filed as an exhibit to this report. (b) Reports on Form 8-K filed in the fourth quarter of fiscal year in 1996: None. SIGNATURES In accordance with Section 13 or 15(d) of the Exchange Act, the Registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. SHELTER PROPERTIES VI LIMITED PARTNERSHIP By: Shelter Realty VI Corporation Corporate General Partner By: /s/ William H. Jarrard, Jr. William H. Jarrard, Jr. President Date: January 29, 1997 In accordance with the Exchange Act, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the date indicated. /s/ William H. Jarrard, Jr. Date: January 29, 1997 William H. Jarrard, Jr. President and Director /s/ Ronald Uretta Date: January 29, 1997 Ronald Uretta Vice President and Treasurer (Principal Financial Officer and Principal Accounting Officer) EXHIBIT INDEX Exhibit 3 See Exhibit 4(a) 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]. (b) Subscription Agreement and Signature Page [included as Exhibits 4(A) and 4(B) 8 to the Prospectus and incorporated herein by reference]. 10(i) Contracts related to acquisition of properties: (a) Purchase Agreement dated March 19, 1984 between ICA-Broad Reach Limited Partnership and U.S. Shelter Corporation to acquire River Village Apartments.* (b) Purchase Agreement dated March 8, 1984 between Rocky Creek Associates Limited Partnership and U.S. Shelter Corporation to acquire Rocky Creek Apartments.* (c) Purchase Agreement dated January 16, 1984 between Carriage House Associates Limited Partnership and U.S. Shelter Corporation to acquire Carriage House Apartments.* *Filed as Exhibits 10(D) through 10(F), respectively, to Amendment No. 1 of Registration Statement No. 2-86995 of Registrant filed March 21, 1984 and incorporated herein by reference. (d) Purchase Agreement dated May 8, 1984 between Daniel Realty Corporation and U.S. Shelter Corporation to acquire Marble Hill Apartments. [Filed as Exhibit 10(G) to Post-Effective Amendment No. 1 of Registration Statement No. 2-86995 of Registrant filed June 25, 1984 and incorporated herein by reference.] (e) Purchase Agreement dated June 6, 1984 between Urbandale Charleston Court Associates and U.S. Shelter Corporation to acquire Nottingham Square Apartments. [Filed as Exhibit 10(H) to Post-Effective Amendment No. 2 of Registration Statement No. 2-86995 of Registrant filed July 18, 1984 and incorporated herein by reference.] (f) Purchase Agreement dated July 10, 1984 between National Properties Investors II and U.S. Shelter Corporation to acquire Foxfire Apartments. [Filed as Exhibit 10(I) to Post-Effective Amendment No. 2 of Registration Statement No. 2-86995 of Registrant filed July 18, 1984 and incorporated herein by reference.] (g) Purchase Agreement dated August 24, 1984 between American Century Corporation and U.S. Shelter Corporation to acquire River Reach Apartments. [Filed as Exhibit 10(I) to Post-Effective Amendment No. 2 of Registration Statement No. 2-86995 of Registrant filed July 18, 1984 and incorporated herein by reference.] (h) Purchase Agreement dated January 7, 1985 between Village Garden Apartments Fort Collins, Ltd. and U.S. Shelter Corporation to acquire Village Garden Apartments. [Filed as Exhibit a(5) to Form 10-Q For the Quarter Ended January 31, 1985 filed March 14, 1985 and incorporated herein by reference. (i) Purchase Agreement dated January 18, 1985 between Barcelona Investors and U.S. Shelter Corporation to acquire Barcelona Apartments. [Filed as Exhibit a(6) to Form 10-Q For the Quarter Ended January 31, 1985 filed March 14, 1985 and incorporated herein by reference.] (ii) Form of Management Agreement with U.S. Shelter Corporation subsequently assigned to Shelter Management Group, L.P. (now know as Insignia Management Group, L.P.) [Filed with Amendment No. 1 of Registration Statement No. 2- 86995 of Registrant filed March 21, 1984 and incorporated herein by reference.] (iii) Contracts related to refinancing of debt: (a) First Deeds of Trust and Security Agreements dated October 28, 1992 between Shelter Properties VI Limited Partnership and Joseph Philip Forte (Trustee) and First Commonwealth Realty Credit Corporation, a Virginia Corporation, securing the following properties: Rocky Creek, Carriage House, Marble Hills, Nottingham, Foxfire/Barcelona, River Reach and Village Gardens.* (b) Second Deeds of Trust and Security Agreements dated October 28, 1992 between Shelter Properties VI Limited Partnership and Joseph Philip Forte (Trustee) and First Commonwealth Realty Credit Corporation, a Virginia Corporation, securing the following properties: Rocky Creek, Carriage House, Marble Hills, Nottingham, Foxfire/Barcelona, River Reach and Village Gardens.* (c) First Assignments of Leases and Rents dated October 28, 1992 between Shelter Properties VI Limited Partnership and Joseph Philip Forte (Trustee) and First Commonwealth Realty Credit Corporation, a Virginia Corporation, securing the following properties: Rocky Creek, Carriage House, Marble Hills, Nottingham, Foxfire/Barcelona, River Reach and Village Gardens. (d) Second Assignments of Leases and Rents dated October 28, 1992 between Shelter Properties VI Limited Partnership and Joseph Philip Forte (Trustee) and First Commonwealth Realty Credit Corporation, a Virginia Corporation, securing the following properties: Rocky Creek, Carriage House, Marble Hills, Nottingham, Foxfire/Barcelona, River Reach and Village Gardens.* (e) First Deeds of Trust Notes dated October 28, 1992 between Shelter Properties VI Limited Partnership and First Commonwealth Realty Credit Corporation, relating to the following properties: Rocky Creek, Carriage House, Marble Hills, Nottingham, Foxfire/Barcelona, River Reach and Village Gardens.* (f) Second Deeds of Trust Notes dated October 28, 1992 between Shelter Properties VI Limited Partnership and First Commonwealth Realty Credit Corporation, relating to the following properties: Rocky Creek, Carriage House, Marble Hills, Nottingham, Foxfire/Barcelona, River Reach and Village Gardens.* *Filed as Exhibits 10 (iii) a through 10 (iii) f, respectively, to Form 10-KSB - Annual or Transitional Report filed January 29, 1993 and incorporated herein by reference. (iv) Contracts related to disposition of properties: (a) Agreement of Purchase and Sale dated June 2, 1995, between Shelter Properties VI Limited Partnership and United Dominion Realty Trust, Inc., relating to Marble Hills Apartments. 28 Prospectus of Registrant dated March 22, 1984 (included in Registration Statement No. 2-86995) and incorporated herein by reference. EX-27 2
5 This schedule contains summary financial information extracted from Shelter Properties VI 1996 Year End 10-KSB and is qualified in its entirety by reference to such 10-KSB filing. 0000730013 SHELTER PROPERTIES VI 1,000 12-MOS OCT-31-1996 OCT-31-1996 3,106 0 20 0 0 0 51,019 22,800 34,211 0 27,372 0 0 0 5,426 34,211 0 10,079 0 0 10,140 0 2,517 0 0 0 0 0 0 (61) (1.42) 0 Registrant has an unclassified balance sheet. Multiplier is 1.
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