-----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, MSBEo35pDXC0YQho1TA7uoRpMPRhtiUjWTevse2lYwrlvflm31z+KKp3Ilessfkq 4RtLqfg0t3PeZWxWi9VErg== 0000730013-96-000001.txt : 19960131 0000730013-96-000001.hdr.sgml : 19960131 ACCESSION NUMBER: 0000730013-96-000001 CONFORMED SUBMISSION TYPE: 10KSB PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19951031 FILED AS OF DATE: 19960129 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: 96508111 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, 1995 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. $10,840,319 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. $9,975,823 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 nine 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. Furthermore, 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 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. Funds not expended because they are held as reserves have been invested by the Registrant, in accordance with the policy described in the Prospectus, in U. S. Government securities or other highly liquid, short-term investments where there is appropriate safety of principal. 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 Shelter Realty VI Corporation, the Corporate General Partner, and by Insignia Management 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 Management 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 $3,352,538. The Partnership received net proceeds of $2,412,138 after payment of closing costs. This disposition resulted in a gain of $1,296,229. 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:
Gross Carrying Accumulated Federal Property Value Depreciation Rate Method Tax Basis Rocky Creek $ 4,390,632 1,789,256 5-35 yrs S/L $ 1,390,633 Augusta, GA Carriage House 3,674,305 1,747,358 5-27 yrs S/L 907,787 Gastonia, NC Nottingham Square 13,204,432 5,686,950 5-29 yrs S/L 5,289,976 Des Moines, IO Foxfire/Barcelona 11,159,648 4,825,735 5-31 yrs S/L 4,991,286 Durham, NC River Reach 13,947,246 5,524,502 5-27 yrs S/L 5,272,163 Jacksonville, FL Village Garden 3,877,232 1,450,437 5-30 yrs S/L 1,713,618 Fort Collins, CO Total $50,253,495 $21,024,238 $19,565,463 See Note A to financial statements in Item 7 for a description of Partnership's depreciation policy.
Schedule of Mortgages:
Principal Principal Balance At Stated Balance October 31, Interest Period Maturity Due At Property 1995 Rate Amortized Date Maturity Rocky Creek 1st Mortgage $ 2,251,898 7.60% (1) 11/15/02 $1,736,788 2nd Mortgage 74,162 7.60% (1) 11/15/02 74,162 Carriage House 1st Mortgage 2,075,695 7.60% (1) 11/15/02 1,601,014 2nd Mortgage 68,358 7.60% (1) 11/15/02 68,358 Nottingham Square 1st Mortgage 8,126,463 7.60% (1) 11/15/02 6,267,752 2nd Mortgage 267,627 7.60% (1) 11/15/02 267,627 Foxfire/Barcelona 1st Mortgage 5,874,563 7.60% (1) 11/15/02 4,530,960 2nd Mortgage 193,466 7.60% (1) 11/15/02 193,466 River Reach 1st Mortgage 7,636,905 7.60% (1) 11/15/02 5,890,126 2nd Mortgage 251,505 7.60% (1) 11/15/02 251,505 Village Garden 1st Mortgage 2,643,551 7.60% (1) 11/15/02 2,038,923 2nd Mortgage 87,060 7.60% (1) 11/15/02 87,060 29,551,253 Less unamortized discounts (1,645,739) $27,905,514 (1) The principal balance is being amortized over 257 months with a balloon payment due November 15, 2002.
Average annual rental rate and occupancy for 1995 and 1994 for each property: Average Annual Average Annual Rental Rates Occupancy 1995 1994 1995 1994 Rocky Creek $6,610 $6,501 90% 91% Carriage House 6,352 5,930 98% 98% Nottingham Square 6,539 6,385 94% 95% Foxfire/Barcelona 6,118 5,812 98% 94% River Reach 7,141 6,901 99% 99% Village Garden 6,232 5,804 95% 97% The Corporate General Partner attributes the increase in occupancy at Foxfire to a reduction in the number of tenants purchasing homes as well as a strong market created by the property's proximity to the universities and hospitals in the Durham area. In addition, the Durham area experienced little growth in new apartment complexes over the last several years. During this time, Foxfire's overall reputation improved resulting in decreased turnover. 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 rates in 1995 for each property were: 1995 1995 Billing Rate Rocky Creek $ 35,391* 2.72% Carriage House 35,905* 1.26% Nottingham Square 360,258* 3.26% Foxfire/Barcelona 155,918* 1.62% River Reach 228,251* 2.20% Village Garden 42,968* 8.99% *Due to this property having a fiscal year different than the real estate tax year, tax expense does not agree to the 1995 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 indirect subsidiary of Insignia Financial Group, Inc. ("Insignia"). The directors and officers of the Corporate General Partner also serve as executive officers of Insignia. The Corporate General Partner owns 100 Limited Partnership Units ("Units"). On May 27, 1995, an affiliate of the Corporate General Partner (the "Affiliated Purchaser") acquired 7,985 Units at a price of $200.00 per Unit pursuant to a tender offer (the "Affiliate Offer") described below. The Corporate General Partner and the Affiliated Purchaser are, therefore, entitled to participate in cash distributions made by the Partnership to its Unit holders. The Partnership had not made cash distributions to Unit holders since 1986. However, before year end, distributions of $1,000,000 were declared. These distributions were paid subsequent to year end. Because the cash distributed represents proceeds from the sale of Marble Hills Apartments, the Corporate General Partner did not receive cash in respect of its general partner interest. In the future, the Corporate General Partner may be entitled to certain cash distributions in respect of its general partner interest. The Corporate General Partner has not received a cash distribution in respect of its general partner interest since 1986. As a result of the Affiliated Purchaser's acquisition of 18.9% of the outstanding Units, the Affiliated Purchaser, an affiliate of the Corporate General Partner and Insignia, may be in a position to significantly influence any vote of the Unit holders. The Partnership has paid Insignia Management Group, L.P. ("IMG"), an affiliate of the Corporate General Partner, property management fees equal to 5% of the Partnership's apartment revenues for property management services in each of the two years in the period ended October 31, 1995, pursuant to property management agreements. Property management fees paid to IMG amounted to $517,482 and $540,383, respectively, for the years ended October 31, 1994 and 1995. Insignia and its affiliates do not receive any fees from the Partnership for the asset management or partnership administration services they provide, although Insignia and its affiliates are reimbursed by the Partnership for the expenses they incur in connection with providing those services. The Partnership Agreement also provides for reimbursement to the Corporate General Partner and its affiliates for costs incurred in connection with administration of the Partnership's activities. Pursuant to these provisions and in addition to the property management fees referred to above, the Partnership paid the Corporate General Partner and its affiliates (including the reimbursements to Insignia and its affiliates in connection with asset management and partnership administration services) an aggregate of $191,686 and $164,528, respectively, for the years ended October 31, 1994 and 1995. In addition, at various times during the past two fiscal years an affiliate of Insignia has held a promissory note or preferred stock issued by an unaffiliated company that provides insurance brokerage services to the Partnership. The terms of the Affiliated Purchaser's financing of the Affiliate Offer may result in future potential conflicts of interest. The Affiliated Purchaser paid for the Units it purchased pursuant to the Affiliate Offer with funds provided by Insignia, and Insignia, in turn, obtained these funds from its working capital. It is possible, however, that in connection with its future financing activities, Insignia may cause or request the Affiliated Purchaser to pledge its Units as collateral for loans, or otherwise agree to terms which provide Insignia and the Affiliated Purchaser with incentives to generate substantial near-term cash flow from the Affiliated Purchaser's investment in the Units. In such a situation, the Corporate General Partner may experience a conflict of interest in seeking to reconcile the best interests of the Partnership with the need of its affiliates for cash flow from the Partnership's activities. On April 27, 1995, the Affiliated Purchaser commenced the Affiliate Offer for up to 30% of the Units at a price of $200.00 per Unit. The Affiliate Offer expired on May 26, 1995. On May 27, 1995, an affiliate of the Corporate General Partner, the Affiliated Purchaser, acquired 7,985 Units at a price of $200.00 per Unit pursuant to the Affiliate Offer. During the Affiliate Offer, Carl C. Icahn and certain of his associates contacted Insignia about pursuing a variety of possible transactions on a joint venture basis. During those discussions, representatives of Insignia advised Mr. Icahn and his representatives that Insignia did not wish to discourage or prevent any transaction which would produce additional value for Unit holders. During those conversations, Mr. Icahn and his representatives expressed a desire to make an equity investment in the Affiliated Purchaser with a view to sharing in the economic benefits, if any, to be derived by the Affiliated Purchaser from the Affiliate Offer. The representatives of Insignia declined to agree to such an arrangement. Following those discussions, at approximately 6:45 p.m. on Monday, May 22, 1995, the Corporate General Partner received a letter from High River Limited Partnership ("High River") which stated that High River was commencing, by public announcement, a cash tender offer for up to approximately 30% of the outstanding Units at a price of $230.00 per Unit (the "High River Offer"). High River sent similar letters to the Insignia affiliated corporate general partners of five other limited partnerships. On May 23, 1995, Insignia issued a press release which announced receipt of the letters. From 12:00 noon on Tuesday, May 23 through late in the evening of Wednesday, May 24, the Affiliated Purchaser, Insignia, and High River and their respective counsel had a series of meetings and telephone conversations to explore a possible joint venture relationship with respect to various real estate related investment opportunities, including the Affiliate Offer. Representatives of High River terminated the discussions. No agreement was reached with respect to the Affiliated Offer or any other matter. On the afternoon of Thursday, May 25, 1995, the Corporate General Partner received a second letter from High River stating that High River had initiated a tender offer for up to 40% of the outstanding Units at a price of $290.40 per Unit. High River also issued a press release announcing the High River Offer and that High River was commencing similar tender offers for units of limited partnership interest in five other partnerships in which other Insignia affiliates are the corporate general partners. Upon receiving the letter from High River, Insignia issued its own press release announcing the terms of the six High River offers. Also on May 25, 1995, the Corporate General Partner received a copy of a Complaint (the "High River Complaint") seeking, among other things, an order from the United States District Court for the District of Delaware enjoining the closing of the Affiliate Offer. The High River Complaint related to the Affiliate Offer and to five other tender offers made by affiliates of Insignia for units of limited partnership interests in other limited partnerships in which other affiliates of Insignia are general partners. The High River Complaint named as defendants the Affiliated Purchaser and each of the Insignia affiliates making the five other tender offers; the Corporate General Partner and the five other Insignia-affiliated general partners; and Insignia. The High River Complaint contained allegations that, among other things, the Affiliated Purchaser sought to acquire Units at highly inadequate prices, and that the Affiliate Offer contained numerous false and misleading statements and omissions of material facts. The alleged misstatements and omissions concerned, among other things, the true value of the units; the true financial conditions of the Partnership; the factors affecting the likelihood that properties owned by the Partnership will be sold or liquidated in the near future; the liquidity and value of the Units; the limited secondary market for Units; and the true nature of the market for underlying assets. The High River Complaint also alleged that the Affiliated Purchaser failed to comply with the requirements of Rule 13e-4 under the Securities Exchange Act of 1934. On Friday, May 26, 1995, the United States District Court for the District of Delaware denied High River's motion for a temporary restraining order to postpone the closing of the Affiliate Offer. On May 26, 1995, Insignia issued a press release announcing the Court's decision. High River subsequently voluntarily withdrew the High River Complaint without prejudice. On May 26, 1995, High River filed a Schedule 14D-1 relating to the High River Offer and containing an Offer to Purchase and a related Assignment of Partnership Interest. The Affiliate Offer expired as scheduled at midnight on May 26, 1995. As filed on May 26, 1995, the High River Offer was conditioned upon the Affiliate Offer being extended by at least 10 business days. High River issued a press release, dated May 26, 1995, announcing that the extension of the Affiliate Offer for 10 business days would be eliminated as a condition to the High River Offer. Also on May 26, the Chairman and Chief Executive Officer of Insignia received a letter from Mr. Icahn. In the letter, Mr. Icahn accused Insignia of disregarding its "fiduciary responsibilities." On Friday June 2, the High River Offer to Purchase and the related Assignment of Partnership Interests were mailed to Unit holders. On Monday, June 5, the Corporate General Partner delivered a letter to High River which requested that High River cure certain alleged critical omissions, misstatements, and deficiencies in the High River Offer by June 7, 1995. On June 7, the Corporate General Partner received a letter from Mr. Icahn stating that High River did not agree with the positions taken in the Corporate General Partner's June 5 letter. On June 8, 1995, the Corporate General Partner commenced an action against High River and Carl C. Icahn in the United States District Court for the District of South Carolina. The complaint alleged that the High River Offer misled Unit holders and violated federal securities laws. The Partnership sought relief from High River's and Mr. Icahn's actions in the form of an injunction against the High River Offer, a judgment declaring that the untrue statements in and omissions from the High River Offer constitute violations of the federal securities laws, and an order requiring High River to make appropriate disclosures to correct all of the false and misleading statements in and omissions from the High River Offer. The Partnership and the Corporate General Partner recommended that the Unit holders reject the High River Offer and not tender their Units pursuant to the High River Offer. The Partnership and the Corporate General Partner stated that they may reconsider their recommendation if High River makes additional disclosures to the Unit holders as the Corporate General Partner requested. For further information, see the Partnership's Solicitation/Recommendation Statement on Schedule 14D-9 which was filed with the Securities and Exchange Commission on June 9, 1995. On June 12, 1995, High River filed an amendment to its Schedule 14D-1 containing a Supplement to its Offer to Purchase. The Supplement amended the High River Offer to increase the number of Units being sought to all of the outstanding Units and amended certain disclosures in the Offer to Purchase. Persons claiming to own Units filed a purported class action and derivative suit in the United States District Court for the District of South Carolina seeking, among other things, an order enjoining the Affiliate Offer. On Thursday, May 18, 1995, the Court denied plaintiffs' motion for a temporary restraining order postponing the closing of the Affiliate Offer, which expired as scheduled on May 26, 1995. Counsel for the parties are engaged in settlement discussions and may continue such discussions. The Complaint applies to the Affiliate Offer and to five other tender offers being made by affiliates of Insignia for units of limited partnership interests in other limited partnerships in which other affiliates of Insignia serve as general partners. The Complaint names as defendants the Affiliated Purchaser and each of the Insignia affiliates, including the five other tender offerors; the Corporate General Partner and five other Insignia-affiliated general partners; and four individuals who are officers and/or directors of Insignia, the Corporate General Partner and/or the Affiliated Purchaser. The Complaint contains allegations that, among other things, the defendants have intentionally mismanaged the Partnership and the five other Partnerships (collectively the "Partnerships") and acted contrary to the limited partners' best interests in order to prolong the lives of the Partnerships and thus continue the revenues derived by Insignia from the Partnerships while at the same time reducing the demand for the Partnerships' units in the limited resale market for the units by artificially depressing the trading prices for the units, in order to create a favorable environment for the Affiliate Offer and the five other tender offers. In the Complaint the plaintiffs also allege that in the Affiliate Offer and the five other tender offers, the Affiliated Purchaser will acquire effective voting control over the Partnerships at highly inadequate prices, and that the offers to purchase and related tender offer documents contain numerous false and misleading statements and omissions of material facts. The alleged misstatements and omissions concern, among other things, the advantages to Unit holders of tendering Units pursuant to the Affiliate Offer; the true value of the Units; the true financial condition of the Partnerships; the factors affecting the likelihood that properties owned by the Partnerships will be sold or liquidated in the near future; the liquidity and value of the Units; the limited secondary market for Units; and the true nature of the market for underlying assets. On Friday, June 16, plaintiffs filed an amended complaint which contained allegations that, among other things, the defendants engaged in a plan by which they misappropriated the Partnerships' assets and fraudulently induced limited partners to sell units to the defendants at highly inadequate prices by causing the Partnerships to take actions that artificially depressed the prices available for units and by knowingly disseminating false and misleading statements and omissions of material facts. The plaintiffs alleged that the defendants breached fiduciary duties and violated federal securities law by closing the Affiliate Offer and the five other tender offers made by affiliates of Insignia for units in the other Partnerships with the knowledge that the limited partners were not aware of the High River Offer. The plaintiffs further alleged that the defendants, since the close of the Affiliate Offer, had caused the Partnerships to enter into several wasteful transactions that had no business purpose or benefit to the Partnerships solely in order to entrench themselves in their positions of control over the Partnerships, with the effect of impeding and possibly preventing nonaffiliated entities from making tender offers that offer higher value to unit holders than defendants paid. Subsequent to the filing of the lawsuit by the Corporate General Partner against High River and Carl C. Icahn, the Corporate General Partner and High River began discussions in an attempt to settle the lawsuit. On Friday, June 16, 1995, High River issued a press release announcing that the expiration date of the High River Offer was extended until 12:00 midnight, New York City time on Wednesday, June 28, 1995, and that High River and the Corporate General Partner were engaged in settlement discussions. On Saturday, June 17, the Affiliated Purchaser and Insignia entered into an agreement with Carl C. Icahn and High River (the "Agreement") and the Corporate General Partner, among others, entered into a letter agreement with High River (together with the Agreement, the "Agreements"). The Agreements provide generally that Insignia would not, and will not cause or permit its affiliates to, actively oppose the High River Offer, but rather would take a neutral stance with respect to the High River Offer, except in the case of a competing third party bid made prior to the expiration of the High River Offer or the occurrence of any event materially adversely affecting High River Offer. The High River Offer would proceed in accordance with its terms, as amended, and the Corporate General Partner would cooperate to facilitate the admission of High River as a substitute limited partner with respect to any Units High River purchases pursuant to the High River Offer in accordance with the terms of the Partnership Agreement and applicable law. The Agreements limited High River's ability to amend or extend the High River Offer. Apart from purchases made by High River pursuant to the High River Offer, neither High River nor Insignia nor any of their respective affiliates would purchase any additional Units pursuant to a tender offer and can only purchase additional Units from time to time under certain conditions specified in the Agreements. High River would vote on certain matters concerning the Partnership as directed by Insignia. In addition, High River and its affiliates are prohibited from soliciting proxies with respect to the Partnership or otherwise making proposals concerning the Partnership directly to other Unit holders. High River and Insignia have certain buy-sell rights with respect to the other's Units which may be exercised 18 months after the effective date of the Agreements and annually thereafter and at earlier or later dates under other circumstances specified in the Agreements, including the proposal of certain transactions otherwise protected by the Agreements. The party selling Units pursuant to the buy-sell transaction must sell or cause to be sold to the other party all Units beneficially owned by the first party and its affiliates. Litigation initiated by the Corporate General Partner concerning the High River Offer and litigation initiated by High River concerning the Affiliate Offer was dismissed with prejudice and mutual releases were exchanged. On June 20, High River issued a press release announcing that the expiration date of the High River Offer was extended until 12:00 midnight, New York City time on Monday, July 3, 1995. On July 20, 1995, the Partnership mailed a letter to limited partners of the Partnership who tendered limited partnership units to the Affiliated Purchaser in the recent tender offer. The letter notified the limited partners that the Affiliated Purchaser had offered to increase the amount paid to such limited partners by an additional 45%. On September 27, 1995, the parties to the purported class action and derivative suit described above, entered into a stipulation to settle the matter. The principal terms of the stipulation requires supplemental payments to tendering limited partners aggregating approximately $6 million to be paid by the Affiliated Purchaser; waiver by the Corporate General Partner and five other Insignia affiliated general partners of any right to certain proceeds from a sale or refinancing of the Partnership's properties; some restrictions on Insignia's ability to vote the limited partner interest it acquired; payment of $1.25 million for plaintiffs' attorney fees and expenses in the litigation; and general releases of all the defendants. The Partnership has accrued approximately $76,000 related to its allocated share of the $1.25 million. Provisional Court approval of the stipulation is required before it will be distributed to the class members for review. If a certain number of class members opt out, the settlement may be cancelled and no assurance can be given that this matter will be settled on the terms set forth above or otherwise. Item 4. Submission of Matters to a Vote of Security Holders During the fiscal year ended October 31, 1995, 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, 1995, there was minimal trading of the Units in the secondary market establishing a value of $200 per unit as quoted in the September 1995 Stanger Report. As disclosed in Item 3., Legal Proceedings, an affiliate of the Corporate General Partner purchased 7,985 Units at $290.51 per Unit. In addition, High River Limited Partnership purchased 2,961 at $290.40 per Unit. There were 3,111 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. No distributions were made during 1995 or 1994. However, at October 31, 1995, distributions of $1,000,000 had been declared which were paid subsequent to year end. Future cash distributions will depend on the levels of net cash generated from operations, refinancings, property sales and cash reserves. Distributions may also be restricted by the requirement to deposit net operating income (as defined in the mortgage note) into the Reserve Account until the Reserve Account is funded an amount equal to $1,000 per apartment unit for each respective unit. Item 6. Management's Discussion and Analysis or Plan of Operation This item should be read in conjunction with the financial statements and other income contained elsewhere in this report. Results of Operations The Partnership's net income as shown in the financial statements for the year ended October 31, 1995, was $771,792 versus a net loss of $972,804 for the same period in 1994 (see Note E of the financial statements for a reconciliation of these amounts to the Partnership's federal taxable losses.) The change from a net loss in 1994 to net income in 1995 is primarily attributable to the gain on the sale of Marble Hills Apartments in 1995. (See Note B of the financial statements for additional information). Also contributing to this change is an increase in rental income due to rental rate increases at various properties. In addition, other income increased due to an increase in various tenant charges, such as lease cancellation fees, pet fees, and application fees. Other income also reflected the receipt of 1993 and 1994 tax refunds in 1995 for Foxfire Apartments. Offsetting these increases is an increase in general and administrative expenses due to increased legal fees associated with the lawsuits disclosed in Item 3. Legal Proceedings, as well as increased professional expenses in connection with the tender offers. 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, 1995, the Partnership reported unrestricted cash of $3,309,302 versus $457,778 for October 31, 1994. Net cash provided by operating activities increased primarily due to the change from a net loss in 1994 to net profit in 1995 as discussed above, which was offset by the gain on sale of Marble Hills of approximately $1,300,000. In addition, the change in escrow for taxes reflects an increase in cash due to the timing of the transfers from the tax escrow to unrestricted cash in order to cover tax payments. The decrease in accrued taxes, reflecting the payment of the taxes, offsets this change. Also contributing to the change was a decrease in cash used in accounts payable due to the timing of payments. Offsetting the change was a decrease in other liabilities due to the timing of the payment of the appraisal cost in 1995. Net cash provided by investing activities increased primarily due to proceeds from the sale of Marble Hills of approximately $2,400,000. Offsetting this change are decreased receipts from restricted escrows due to the majority of the renovations required by the refinancing in 1992 having been completed in the prior two years. The 1995 improvements were primarily funded from property operations. Net cash used in financing activities increased due to an increase in principal payments on the mortgage notes payable. The sufficiency of existing liquid assets to meet future liquidity and capital expenditure requirements is directly related to the level of capital expenditures required at the property to adequately maintain the physical assets and other operating needs of the Partnership. Such assets are currently thought to be sufficient for any near-term needs of the Partnership. The mortgage indebtedness of $27,905,514, net of discount, is amortized over 257 months with a balloon payment of $23,007,741 due on November 15, 2002, at which time the properties will either be refinanced or sold. 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 $3,352,538. The Partnership received net proceeds of $2,412,138 after payment of closing costs. This disposition resulted in a gain of $1,296,229. No cash distributions were recorded in 1994 or 1995. However, at October 31, 1995, distributions of proceeds from the sale of Marble Hills of $1,000,000 had been declared which were paid subsequent to year end. Future cash distributions will depend on the levels of net cash generated from operations, refinancing, property sales and cash reserves. Distributions may also be restricted by the requirement to deposit net operating income (as defined in the mortgage note) into the Reserve Account until the $1,000 per apartment unit is funded for each respective property. Item 7. Financial Statements SHELTER PROPERTIES VI LIMITED PARTNERSHIP LIST OF FINANCIAL STATEMENTS Report of Independent Auditors Balance Sheet - October 31, 1995 Statements of Operations - Years ended October 31, 1995 and 1994 Statements of Changes in Partners' Capital (Deficit) - Years ended October 31, 1995 and 1994 Statements of Cash Flows - Years ended October 31, 1995 and 1994 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, 1995, 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, 1995. 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, 1995, and the results of its operations and its cash flows for each of the two years in the period ended October 31, 1995, in conformity with generally accepted accounting principles. /s/ERNST & YOUNG LLP Greenville, South Carolina December 12, 1995 SHELTER PROPERTIES VI LIMITED PARTNERSHIP BALANCE SHEET
October 31, 1995 Assets Cash: Unrestricted $ 3,309,302 Restricted--tenant security deposits 195,230 Investments (Note C) 400,256 Accounts receivable 16,567 Escrow for taxes 400,139 Restricted escrows 1,540,024 Other assets 704,905 Investment properties (Notes D & G): Land $ 4,949,503 Buildings and related personal property 45,303,992 50,253,495 Less accumulated depreciation (21,024,238) 29,229,257 $35,795,680 Liabilities and Partners' Capital (Deficit) Liabilities Accounts payable $ 287,330 Tenant security deposits 185,091 Accrued taxes 566,409 Other liabilities 1,364,241 Mortgage notes payable (Note D) 27,905,514 Partners' Capital (Deficit) General partners $ (303,242) Limited partners (42,324 units issued and outstanding) 5,790,337 5,487,095 $35,795,680 See Accompanying Notes to Financial Statements
SHELTER PROPERTIES VI LIMITED PARTNERSHIP STATEMENTS OF OPERATIONS
Years Ended October 31, 1995 1994 Revenues: Rental income $10,251,419 $ 9,914,030 Other income 588,900 525,494 Total revenues 10,840,319 10,439,524 Expenses: Operating 2,775,826 2,857,528 General and administrative 477,503 254,042 Property management fees 540,383 517,482 Maintenance 1,617,750 1,760,186 Depreciation 2,172,942 2,106,247 Interest 2,823,446 2,897,571 Property taxes 915,226 966,589 Total expenses 11,323,076 11,359,645 Loss on disposal of property (41,680) (52,683) Gain on sale of property (Note B) 1,296,229 -- Net income (loss) (Note E) $ 771,792 $ (972,804) Net income (loss) allocated to general partner (1%) $ 7,718 $ (9,728) Net income (loss) allocated to limited partners (99%) 764,074 (963,076) $ 771,792 $ (972,804) Net income (loss) per limited partnership unit $ 18.05 $ (22.75) See Accompanying Notes to Financial Statements
SHELTER PROPERTIES VI LIMITED PARTNERSHIP STATEMENT OF CHANGES IN PARTNERS' CAPITAL (DEFICIT)
Limited Partnership General Limited Units Partners Partners Total Original capital contributions 42,324 $ 2,000 $42,324,000 $42,326,000 Partners' (deficit) capital at October 31, 1993 42,324 $(301,232) $ 6,989,339 $ 6,688,107 Net loss for the year ended October 31, 1994 -- (9,728) (963,076) (972,804) Partners' (deficit) capital at October 31,1994 42,324 (310,960) 6,026,263 5,715,303 Net income for the year ended October 31, 1995 -- 7,718 764,074 771,792 Distributions payable to partners -- -- (1,000,000) (1,000,000) Partners' (deficit) capital at October 31, 1995 42,324 $(303,242) $ 5,790,337 $ 5,487,095 See Accompanying Notes to Financial Statements
SHELTER PROPERTIES VI LIMITED PARTNERSHIP STATEMENTS OF CASH FLOWS
Years Ended October 31, 1995 1994 Cash flows from operating activities: Net income (loss) $ 771,792 $ (972,804) Adjustments to reconcile net income (loss) to net cash provided by operating activities: Depreciation 2,172,942 2,106,247 Amortization of discounts and loan costs 318,158 310,976 Loss on disposal of property 41,680 52,683 Gain on sale of Marble Hills (1,296,229) -- Change in accounts: Restricted cash 21,879 (22,213) Accounts receivable (3,843) 18,930 Escrow for taxes 11,757 (8,372) Other assets (3,781) 4,769 Accounts payable (20,546) (57,795) Tenant security deposit liabilities (32,018) 22,213 Accrued taxes (16,731) 136,532 Other liabilities (15,642) 2,341 Net cash provided by operating activities 1,949,418 1,593,507 Cash flows from investing activities: Property improvements and replacements (940,133) (877,929) Cash invested in short-term investments (726,256) (1,297,263) Cash received from matured investments 903,527 1,190,117 Deposits to restricted escrows (293,278) (280,624) Receipts from restricted escrows 299,084 463,374 Proceeds from sale of Marble Hills 2,412,138 -- Net cash provided by (used in) investing activities 1,655,082 (802,325) Cash flows from financing activities: Payments on mortgage notes payable (752,976) (704,201) Net cash used in financing activities (752,976) (704,201) Net increase in cash balance 2,851,524 86,981 Cash at beginning of period 457,778 370,797 Cash at end of period $ 3,309,302 $ 457,778 Supplemental disclosure of cash flow information: Cash paid for interest $ 2,518,464 $ 2,586,596 See Accompanying Notes to Financial Statements
SHELTER PROPERTIES VI LIMITED PARTNERSHIP Notes to Financial Statements October 31, 1995 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"). The only other general partner of the Partnership, N. Barton Tuck, Jr. is effectively prohibited by the Partnership's partnership agreement (the "Partnership Agreement") from participating in the management of the Partnership. The Corporate General Partner is an indirect subsidiary of Insignia Financial Group, Inc. ("Insignia"). The directors and officers of the Corporate General Partner also serve as executive officers of Insignia. The 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 the west. 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. 1995 1994 Net cash provided by operating activities $ 1,949,418 $ 1,593,507 Property improvements and replacements (940,133) (877,929) Payments on mortgage notes payable (752,976) (704,201) Changes in reserves for net operating liabilities 58,925 (96,405) Change in restricted escrows, net 5,806 182,750 Additional operating reserves (322,000) (245,000) Net cash used by operations $ (960) $ (147,278) Note A - Organization and Significant Accounting Policies (Continued) Distributions made from reserves no longer considered necessary by the general partners are considered to be additional net cash from operations for allocation purposes. At October 31, 1995, the Corporate General Partner declared a distribution of $1,000,000 from proceeds from the sale of Marble Hills Apartments which was paid subsequent to year end. The General Partner has reserved an additional $322,000 to fund capital improvements and repairs at the properties. 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 of 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 the $1,000 per apartment unit is funded for each respective property. The Partnership reserved $245,000 at October 31, 1994, for deposit into this account. Undistributed Net Proceeds from Disposition: Net proceeds from the sale of Marble Hills Apartments totalled $2,412,138. Subsequent to October 31, 1995, distributions of $1,000,000 were paid, leaving undistributed net proceeds from dispositions of $1,412,138. Distribution Payable: At October 31, 1995, the Partnership had declared a distribution of $1,000,000 from the net proceeds from the sale of Marble Hills Apartments. This amount was included in other liabilities and was paid subsequent to year end. 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 disposition, 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 1995 and 1994 were allocated 99% to the limited partners and 1% to the general partners. Net income (loss) per limited partnership unit for each such year was computed as 99% of net income (loss) divided by 42,324 weighted average units outstanding. Other Reserves: The general partners may also designate a portion of cash generated from operations as other reserves in determining net cash from operations. Per the Partnership, the general partners 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 1995 and 1994 were $58,925 and $(96,405), 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 partners expect to continue to adjust other reserves based on the net change in the aforementioned account balances. Restricted Escrows: Capital Improvement Account - At the time of the REMIC refinancing in 1992, $1,429,458 of the proceeds were designated for a "capital improvement escrow" for certain capital improvements. At October 31, 1995, the balance remaining was $65,471. 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 they 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 $1,474,553. 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 1/2 years and (2) personal property additions over 7 years. Present Value Discounts: Periodically, the Partnership incurs debt at below market rates for similar debt. Discounts are recorded on the basis of prevailing market rates and are amortized on an interest method over the life of the related debt. Loan Costs: Loan costs are included in other assets and are being amortized on a straight-line basis over the life of the loans. Cash: The Partnership considers only unrestricted cash to be cash. Certificates of deposit and repurchase agreements are considered to be investments. At certain times, the amount of cash deposited at a bank may exceed the limit on insured deposits. Investments: Securities held-to-maturity and available-for-sale: The Corporate General Partner determines the appropriate classification of debt securities at the time of purchase and reevaluates such designation as of each balance sheet date. Debt securities are classified as held-to-maturity when the Partnership has the positive intent and ability to hold the securities to maturity. Held- to-maturity securities are stated at amortized cost, adjusted for amortization of premiums and accretion of discounts to maturity. Such amortization is included in investment income. Interest on securities classified as held-to- maturity is included in investment income. Marketable equity securities and debt securities not classified as held-to- maturity are classified as available-for-sale. Presently, all of the Partnership's investments are classified as held-to-maturity. Available-for- sale securities are carried at fair value, with the unrealized gains and losses, net of tax, reported in a separate component of partner's capital. The amortized cost of debt securities in this category is adjusted for amortization of premiums and accretion of discounts to maturity. Such amortization is included in investment income. Realized gains and losses and declines in value judged to be other-than-temporary on available-for-sale securities are included in investment income. The cost of securities sold is based on the specific identification method. Interest and dividends on securities classified as available-for-sale are included in investment income. Note A - Organization and Significant Accounting Policies (Continued) 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. Restricted Cash-Tenant Security Deposits: The Partnership requires security deposits from all lessees for the duration of the lease. Deposits are refunded when the tenant vacates the apartment if there has been no damage to the unit. 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 appraised value. 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 judgement, 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, 1995, no adjustments for impairment of value were recorded. 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. Reclassifications: Certain reclassifications have been made to the 1994 information to conform to the 1995 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 $3,344,066. The carrying amount of the property was $4,459,975. The Partnership received net proceeds of $2,412,138 after payment of closing costs. This disposition resulted in a gain of $1,296,229. Operating revenues and expenses from Marble Hills were $1,214,106 and $1,205,865, respectively for 1995 and $1,242,170 and $1,365,331, respectively for 1994. Note C - Investments Investments, stated at cost, consist of the following at October 31, 1995:
Interest Face Maturity Rate Amount Cost Date First Union Corporation 5.25% $300,065 $298,715 11/01/95 Commercial Paper First Union Corporation 5.30% 100,442 100,000 11/17/95 Certificate of Deposit $400,507 398,715 Accrued Interest 1,541 $400,256
The Partnership's investments are classified as held-to-maturity. The Corporate General Partner believes the market value of the investments is approximately the same as the cost. Note D - Mortgage Notes Payable The principal terms of mortgage notes payable are as follows:
Principal Monthly Principal Balance At Payment Stated Balance October 31, Including Interest Maturity Due At Property 1995 Interest Rate Date Maturity Rocky Creek 1st Mortgage $ 2,251,898 $ 18,926 7.60% 11/15/02 $ 1,736,788 2nd Mortgage 74,162 470 7.60% 11/15/02 74,162 Carriage House 1st Mortgage 2,075,695 17,444 7.60% 11/15/02 1,601,014 2nd Mortgage 68,358 433 7.60% 11/15/02 68,358 Nottingham Square 1st Mortgage 8,126,463 68,297 7.60% 11/15/02 6,267,752 2nd Mortgage 267,627 1,694 7.60% 11/15/02 267,627 Foxfire/Barcelona 1st Mortgage 5,874,563 49,371 7.60% 11/15/02 4,530,960 2nd Mortgage 193,466 1,225 7.60% 11/15/02 193,466 River Reach 1st Mortgage 7,636,905 64,183 7.60% 11/15/02 5,890,126 2nd Mortgage 251,505 1,593 7.60% 11/15/02 251,505 Village Garden 1st Mortgage 2,643,551 22,217 7.60% 11/15/02 2,038,923 2nd Mortgage 87,060 551 7.60% 11/15/02 87,060 29,551,253 $246,404 Less unamortized discounts (1,645,739) $27,905,514
Note D - Mortgage Notes Payable (Continued) 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 $2,432,784 and is being amortized as a loan discount on the interest method over the life of the loans. The unamortized discount fee 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. Scheduled principal payments of mortgage notes payable subsequent to October 31, 1995, are as follows: 1996 $ 736,262 1997 794,209 1998 856,716 1999 924,143 2000 996,877 Thereafter 25,243,046 $29,551,253 Note E - 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 and Federal taxable loss: 1995 1994 Net income (loss) as reported $ 771,792 $ (972,804) Add (deduct): Fixed asset write-offs and casualty gain 41,679 52,683 Amortization of present value discounts (29,555) (37,644) Depreciation differences (731,423) (797,210) Change in prepaid rental 32,683 -- Gain on sale of property 1,136,993 -- Accrued legal fees 76,221 -- Other (6,381) (4,255) Federal taxable income (loss) $1,292,009 $(1,759,230) Federal taxable income (loss) per limited partnership unit $ 26.77 $ (41.15) Note E - Income Taxes (Continued) The following is a reconciliation between the Partnership's reported amounts and Federal tax basis of net assets and liabilities: Net assets as reported $5,487,095 Buildings and land 3,709,849 Accumulated depreciation (13,373,644) Syndication fees 5,285,806 Dividends declared 1,000,000 Other 207,002 Net assets - tax basis $ 2,316,108 Note F - 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. Balances and other transactions with affiliates of Insignia Financial Group, Inc. in 1995 and 1994 are: 1995 1994 Property management fees $540,383 $517,482 Data processing services 34,242 34,242 Marketing services 6,376 15,336 Reimbursement for services of affiliates 123,910 102,513 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 G - Real Estate and Accumulated Depreciation
Initial Cost To Partnership Cost Buildings Capitalized and Related (Written Down) Personal Subsequent to Description Encumbrances Land Property Acquisition Rocky Creek $ 2,326,060 $ 167,515 $ 3,820,928 $ 402,189 Augusta, Georgia Carriage House 2,144,053 165,885 3,038,062 470,358 Gastonia, North Carolina Nottingham Square 8,394,090 1,132,877 9,980,526 2,091,029 Des Moines, Iowa Foxfire/Barcelona 6,068,029 1,191,224 9,997,772 (29,348) Durham, North Carolina River Reach 7,888,410 1,872,002 10,854,047 1,221,197 Jacksonville, Florida Village Garden 2,730,611 420,000 3,049,662 407,570 Fort Collins, Colorado Totals $29,551,253 $4,949,503 $40,740,997 $ 4,562,995
Note G - Real Estate and Accumulated Depreciation (Continued)
Gross Amount At Which Carried October 31, 1995 Buildings And Related Personal Accumulated Date of Date Depreciable Description Land Property Total Depreciation Construction Acquired Life-Years Rocky Creek Apartments Augusta, Georgia $ 167,515 $ 4,223,117 $ 4,390,632 $ 1,789,256 1979 06/29/84 5-35 Carriage House Apartments Gastonia, North Carolina 165,885 3,508,420 3,674,305 1,747,358 1970-1971 06/29/84 5-27 Nottingham Square Apartments Des Moines, Iowa 1,132,877 12,071,555 13,204,432 5,686,950 1972 08/31/84 5-29 Foxfire/Barcelona Apts. Durham, North Carolina 1,191,224 9,968,424 11,159,648 4,825,735 1973 03/28/85 5-29 1975 09/30/84 5-31 River Reach Apartments Jacksonville, Florida 1,872,002 12,075,244 13,947,246 5,524,502 1971 01/30/85 5-27 Village Garden Apartments Fort Collins, Colorado 420,000 3,457,232 3,877,232 1,450,437 1974 03/01/85 5-30 Totals $4,949,503 $45,303,992 $50,253,495 $21,024,238
Reconciliation of Real Estate and Accumulated Depreciation : Years Ended October 31, 1995 1994 Real Estate Balance at beginning of year $57,322,950 $56,596,605 Property improvements 940,133 877,929 Sale of apartment property (7,853,287) -- Disposals of property (156,301) (151,584) Balance at end of year $50,253,495 $57,322,950 Accumulated Depreciation Balance at beginning of year $22,626,514 $20,619,168 Additions charged to expense 2,172,942 2,106,247 Sale of apartment property (3,660,597) -- Disposals of property (114,621) (98,901) Balance at end of year $21,024,238 $22,626,514 The aggregate cost of the real estate for Federal income tax purposes at October 31, 1995 and 1994, respectively, is $53,963,345 and $61,906,392. The accumulated depreciation taken for Federal income tax purposes at October 31, 1995 and 1994, respectively, is $34,397,882 and $37,306,083. 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 Purchaser 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 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 partnerships, (ii) the defendants' actions reduced the demand for the 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 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 partnerships, the factors affecting the likelihood that properties owned by the 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 Purchaser; waiver by the Shelter Properties Partnership's 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 for plaintiffs' attorney fees and expenses in the litigation; and general releases of all the defendants. The Partnership has accrued approximately $76,000 as its allocated share of the $1.25 million. Provisional Court approval of the stipulation is required before it will be distributed to the class members for review. If a certain number of class members opt out, the settlement may be cancelled. No assurance can be given that this matter will be settled on the terms, set forth above or otherwise. 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 57, 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. 49 President and Director Ronald Uretta 39 Vice President and Treasurer John K. Lines, Esq. 36 Vice President and Secretary Kelley M. Buechler 38 Assistant Secretary Mr. Jarrard, who had previously served as Vice President, became President in August 1994. In June 1994, Mr. Lines became Secretary and Ms. Buechler, who had previously held the position, became Assistant Secretary. William H. Jarrard has been President of the Corporate General Partner since August 1994 and Managing Director - Partnership Administration of Insignia since January 1991. During the five years prior to joining Insignia in 1991, he served in similar capacities for U. S. Shelter. Ronald Uretta has been Insignia's Chief Financial Officer and Treasurer since January 1992. Since September 1990, Mr. Uretta has also served as the Chief Financial Officer and Controller of Metropolitan Asset Group. From May 1988 until September 1990, Mr. Uretta was a self-employed financial consultant. From January 1978 until January 1988, Mr. Uretta was employed by Veltri Raynor & Company, independent certified public accountants. 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 is 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 for U. S. Shelter. Ms. Buechler is a graduate of the University of North Carolina. 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, 1995. Number Entity of Units Percentage SP VI Acquisition, LLC 7,985 18.87% 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, 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 Management Group, L.P. pursuant to which Insignia Management 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 Management Group, L.P. receives a property management fee equal to 5% of apartment revenues. During the fiscal year ended October 31, 1995, Insignia Management Group, L.P. received $540,383 in fees for property management. For a more detailed description of the management fee that Insignia Management 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 F 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 1995: Current report on Form 8-K dated September 29, 1995, as filed with the Securities and Exchange Commission on October 12, 1995, in connection with the sale of Marble Hills Apartments. 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, 1996 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, 1996 William H. Jarrard, Jr. President /s/Ronald Uretta Date: January 29, 1996 Ronald Uretta 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 Limited Partnership's 1995 10-KSB and is qualified in its entirety by reference to such 10-KSB filing. 0000730013 SHELTER PROPERTIES VI LIMITED PARTNERSHIP 1 12-MOS OCT-31-1995 OCT-31-1995 3,309,302 400,256 16,567 0 0 0 50,253,495 21,024,238 35,795,680 0 27,905,514 0 0 0 5,487,095 35,795,680 0 10,840,319 0 0 11,323,076 0 2,823,446 771,792 0 771,792 0 0 0 771,792 18.05 0 The Registrant has an unclassified balance sheet.
EX-10 3 EXHIBIT 10(iv)(a) AGREEMENT OF PURCHASE AND SALE THIS AGREEMENT OF PURCHASE AND SALE (this "Agreement"), dated as of June 2 , 1995, by and between SHELTER PROPERTIES VI LIMITED PARTNERSHIP, a South Carolina limited partnership ("Seller") and UNITED DOMINION REALTY TRUST, INC., a Virginia corporation ("United Dominion") recites and provides: RECITALS A. Seller is the fee simple owner of a certain parcel of real estate referred to as The Marble Hill Apartments, a 253 unit apartment complex located at 9711 Marble Hill Drive, Henrico County, Virginia, on a site containing approximately 17.092 acres of land and more particularly described in the attached Exhibit A, together with all improvements thereon and appurtenances thereto belonging, and all tangible and intangible personal property owned by the Seller and used in the rental, operation, and maintenance of the apartment property (collectively, the "Property"). B. United Dominion desires to purchase and Seller desires to sell the Property on the terms and conditions hereinafter set forth. AGREEMENT NOW, THEREFORE, for and in consideration of the premises, the mutual covenants and agreements contained herein, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Seller agrees to transfer the Property and United Dominion agrees to acquire the Property upon the following terms and conditions: 1. Purchase Price. The total purchase price of the Property shall be Five Million Nine Hundred Twenty-Five Thousand and No/100 Dollars ($5,925,000.00) ("Purchase Price"), which shall be payable in the following manner: (a) United Dominion shall receive a credit against the Purchase Price in an amount equal to the "Deposit" (as hereinafter defined); (b) United Dominion shall assume the note dated as of October 28 1992, made by Seller, payable to First Commonwealth Realty Credit Corporation, in the original principal amount of $3,440,463.00 (the "First Note") and United Dominion shall receive a credit against the Purchase Price in an amount equal to the outstanding principal balance of the First Note as of the date of "Settlement" (as hereinafter defined). The outstanding principal balance of the First Note, as of the date hereof, is approximately $3,263,839.84; (c) United Dominion shall assume the note dated as of October 28 1992, made by Seller, payable to First Commonwealth Realty Credit Corporation, in the original principal amount of $106,406.00 (the "Second Note") and United Dominion shall receive a credit against the Purchase Price in an amount equal to the outstanding principal balance of the Second Note as of the date of Settlement. The outstanding principal balance of the Second Note as of the date hereof, is approximately $106,406.00; (d) United Dominion shall pay the balance of the Purchase Price, as adjusted in accordance with the terms of this Agreement, to the Seller at Settlement, in cash by a cashier's check certified check or wire transfer in immediately available funds. 2. Deposit. Upon acceptance of this Agreement by Seller, and receipt of a fully executed original of this Agreement by United Dominion ("Seller's Acceptance"), United Dominion shall promptly deposit Fifty Thousand Dollars ($50,000.00), as a good faith deposit (which shall be kept in an interest bearing account with interest being added to the deposit for the benefit of United Dominion) (the "Deposit") with a title insurance company selected by United Dominion ("Escrow Agent") which shall either be applied by United Dominion toward the payment of the Purchase Price or returned to United Dominion if, as per the terms of this Agreement, this Agreement is terminated. 3. Settlement. Closing of the purchase and sale of the Property ("Settlement") shall take place within ten (10) days after the satisfaction of the conditions precedent set forth in Section 4(i), but in no event later than September 30, 1995, at United Dominion's offices in Richmond, Virginia. 4. Conditions Precedent and Additional Covenants. (a) Seller shall, at Settlement, convey good and marketable fee simple title to the Property by special warranty deed in the form attached as Exhibit B, which a title insurance company acceptable to United Dominion (the "Title Company") will insure as such at or below its standard rate, free and clear of all liens, and subject to only such easements, restrictions, and other matters acceptable to Dominion at its sole discretion, (the "Permitted Exceptions"). United Dominion shall give Seller notice of any defects in title within five (5) days of receipt by United Dominion of a commitment to insure title to the Property obtained by United Dominion from the Title Company. The failure by United Dominion to deliver such notice shall constitute the acceptance by United Dominion of the matters set forth in the commitment. In the event United Dominion notifies Seller of a title defect, Seller shall have thirty (30) days to cure same to United Dominion's reasonable satisfaction, and the date for Settlement shall be extended for the period necessary to cure same. If the title defect cannot be or is not cured within the thirty (30) days (it being agreed that Seller shall have no obligation to effect any such cure), then United Dominion may at its sole option either void this Agreement or waive the title defect and proceed to Settlement; (b) United Dominion shall obtain within the hereinafter defined Inspection Period a current as-built survey of the Property delineating the boundary lines of the Property, the location of the improvements, set-backs and other zoning matters, physical encroachments, all rights-of-way and easements thereon, contiguous public road, and on which the surveyor certifies that the Property is not located in a designated floodplain. The survey shall be adequate for the Title Company to delete any exception for survey in the owner's title policy; (c) Seller shall, at Settlement, convey the Property free and clear of all management and leasing agreements, maintenance, trash removal, laundry, cable television, directory advertising, or other maintenance or service contract, obligations or agreements for the operation of the Property, except for those which have been approved by United Dominion, in writing. Within ten (10) days after Seller's delivery pursuant to paragraphs 6(m) and 6(n) hereof, United Dominion agrees to designate which of such contracts, obligations, or agreements United Dominion will approve and assume. Failure to deliver this designation timely shall constitute disapproval and rejection of all such contracts, obligations and agreements. (d) United Dominion shall obtain a physical inspection of the Property, performed at the risk and responsibility of United Dominion, including, but not limited to a report from a professional engineer or architect on the condition of the structures, roofs, siding, mechanical systems, electrical, plumbing, utilities, drainage, site improvements, and the absence of hazardous or toxic substances, and United Dominion being satisfied at its sole discretion with the results of the inspection and the physical condition of the Property. Seller shall deliver the Property to United Dominion at Settlement with all vacant units in a ready-to-rent condition, which shall include, but not be limited to clean carpets, no unrepaired damage to doors, walls, ceiling, floors or windows, and freshly painted walls, and all units shall contain working kitchen appliances, water heaters and HVAC, except for any units vacated by tenants within 48 hours of the Settlement Date. Seller agrees to pay United Dominion a credit of $300.00 for any apartment vacated by tenants within 48 hours of the Settlement Date and which is not in ready-to-rent condition at Settlement. (e) United Dominion shall obtain an inspection of the Property by a certified bonded treatment company showing that there is not active infestation or damage caused by termites or other wood destroying insects and United Dominion being satisfied at its sole discretion with the results of the inspection and the condition of the Property, and the issuance to United Dominion of a wood replacement bond from a certified bonded treatment company at Buyer's sole cost and expense, provided, however, Seller agrees to give Buyer a Seven Thousand Dollar ($7,000) credit at Settlement towards such termite bond; (f) United Dominion shall review the tenant leases, tenant files, correspondence relating to the Property and books and records of the Property including, but not limited to, operating statements for the past two (2) calendar years and the current year to date, and review all existing contracts and/or agreements for maintenance, and any other services provided to the Property; (f1) United Dominion, or any assignee, shall, within ten (10) days of the Seller's Acceptance, submit an application to the beneficiaries under the Notes with respect to the assumption of the Notes and related documents. In connection with such assumption, any reserves deposited with First Commonwealth Realty Credit Corporation ("First Commonwealth") by Seller shall be returned to Seller by First Commonwealth, or if any reserves are assigned to Buyer, Buyer shall reimburse Seller at Settlement in the amount of the assigned reserves; (f2) United Dominion shall review the First Note, Second Note (the First Note and Second Note are hereinafter referred to collectively as the "Notes") and all documents executed or delivered in connection with the Notes, including but not limited to any deeds of trust or mortgages and modifications thereof, loan agreements and financing statements; (f3) United Dominion shall receive the final approval by all required parties of the transfer of the Property subject to the financing; (g) United Dominion shall obtain the approval of the purchase by its Investment Committee. (h) United Dominion shall perform its undertaking and make its various inspections and reviews under paragraphs 4(a), (b), (d), (e), (f), and (g) within thirty (30) days of Seller's Acceptance (the "Inspection Period"). If, during such Inspection Period, as a result of this work or for any other reason or for no reason, United Dominion shall determine at its sole discretion that it is not satisfied with the Property or the result of any of its inspections or reviews in any respect, then United Dominion shall have the right to terminate this Agreement by giving Seller written notice of termination, in which event United Dominion's Deposit, including any interest thereon, shall promptly be returned to Dominion; (h1) United Dominion shall perform its undertaking and make its various inspections and reviews under paragraphs 4(f2) and (f3) within ninety (90) days of Seller's Acceptance (the "Review Period"). If, during such Review Period, United Dominion shall not have satisfied the conditions or not be satisfied with its review of paragraphs 4(f2) and (f3) then United Dominion shall have the right to terminate this Agreement by giving Seller written notice of termination, in which event United Dominion's Deposit, including any interest thereon, shall promptly be returned to Dominion; (i) The obligation of United Dominion to purchase the Property under this Agreement is conditioned under the following: the representations and warranties of Seller made in this Agreement shall be true and correct and in effect as of the date of Settlement as if then made, there shall have occurred no material adverse change in the physical and/or financial condition of the Property since the date of expiration of its Inspection Period, Seller shall have performed all of its covenants and other obligations required under this Agreement, and the receipt of all estoppels of the beneficiaries and trustees of the Notes and loan documents that United Dominion shall deem necessary, in its sole discretion, for the assumption of the Notes; (j) The obligation of Seller to sell the Property pursuant to this Agreement shall be conditioned upon United Dominion's performance of each of its covenants and other obligations required under this Agreement; (k) If any condition set forth in this Agreement cannot or will not be satisfied prior to Settlement, or upon the occurrence of any other event that would entitle United Dominion to terminate this Agreement, and its obligations hereunder, United Dominion, at its option may elect either: (1) to terminate this Agreement, in which event the Deposit shall be promptly returned to United Dominion and all rights and obligations of the Seller and United Dominion hereunder shall terminate immediately; or; (2) to waive its right to terminate and, instead, proceed to Settlement. (l) If at Settlement, the Property has less than 233 Occupied Units (as the term is defined herein), United Dominion shall receive a credit against the Purchase Price of $1,335.00 for each non-occupied unit below the threshold of 233 units; if at Settlement the Property has 218, or less Occupied Units, United Dominion shall receive a credit against the Purchase Price of $20,000 plus $2,670.00 for each non-occupied unit blow the threshold of 218 units; if at Settlement the Property has 206, or less Occupied Units, United Dominion, at its option, shall either (i) receive a credit against the Purchase Price of $52,000 plus $4,005.00 for each non-occupied unit below the threshold of 206 units, or (ii) terminate the Agreement. For purposes of this Agreement, an Occupied Unit shall be defined as follows: (1) A unit occupied by a current resident whose current lease will not expire before Settlement and whose rent is current or no more than ten (10) days in arrears. (2) A unit occupied by a current resident whose current lease will expire and has been renewed, or converted to a month-to-month tenancy, before Settlement at or above the Renewal Rent for the corresponding unit type shown on Exhibit C attached hereto and whose rent is current or no more than ten (10) days in arrears. (3) A unit occupied by a new resident at or above the New Rent for the corresponding unit type shown on Exhibit C who qualifies under the Minimum Rental Standards, as shown on Exhibit C and whose rent is current or not more than ten (10) days in arrears. (4) A unit pre-leased for future occupancy at, or above the New Rent for the corresponding unit type by a tenant who qualifies under the Minimum Rental Standards, and who has paid the required security deposit with respect to the lease which commences within thirty (30) days of Settlement, and whose unit is in ready-to-rent condition, provided, however, the number of units qualifying under this Section 4(l)(4) shall not exceed twelve (12). 5. Prorations. Rents and other income from the Property and real estate and personal property ad valorem taxes, and other operating expenses from the Property shall be prorated on the basis of a 365 day year through the day preceding the day of Settlement. All maintenance and service contracts and utility charges shall be determined to the day preceding Settlement and paid by Seller and appropriate prorations shall be made in the event that United Dominion assumes such contracts. If Settlement is extended by mutual agreement, all adjustments shall be made as of the day prior to the extended date. All prepaid rents shall be paid to United Dominion at Settlement. All other rents and other income from the Property collected by Seller during the month of Settlement shall first be applied to the month of Settlement for the purpose of prorations. Delinquent rents shall not be credited to Seller at Settlement. Any delinquent rent for the period of Seller's period of ownership collected by United Dominion after Settlement shall be delivered to Seller after deducting United Dominion's cost of collection. United Dominion shall have no affirmative obligation to collect any delinquent rent owed to Seller. Each party shall pay its own expenses in conjunction with Settlement and Seller and United Dominion will share equally with the cost of the following: as-built survey; all recording and transfer taxes and fees and documentary stamps; and title research, binder, and insurance policy costs. 6. Delivery of Documents Upon Execution. Except as otherwise provided, Seller shall deliver to United Dominion within five (5) days of the execution of this Agreement, all of the following: (a) A copy of Seller's latest title insurance policy on the Property; (b) Copies of any "as-built" surveys and topographical surveys of the Property in Seller's possession or control; (c) Copies of any plans and specifications for the Property in Seller's possession or control, including any and all plans and specifications, bid packages, and proposals for Property renovations shall be made available at the Property to Buyer for review. Buyer may temporarily remove any plans and specifications for the purpose of copying, which copying shall be done at its expense; (d) Copies of any soil test for the Property in Seller's possession or control; (e) Copies of any termite inspection reports, termite repair bonds or any other termite bond for the Property in Seller's possession or control; (f) Copies of the Property's operating results for the past two (2) calendar years and monthly operating statements for the current year to date; (g) Complete rent rolls for the Property, certified to be complete and correct by Seller, for the most recent four (4) months; (h) A copy of the standard lease form currently in use at the Property; (i) Copies of the most recent and prior two (2) years of real estate and personal property tax bills for the Property and any subsequent notices of reassessment; (j) A list of all utility accounts for all utilities serving the Property, designating which are house meters and which are vacant units, including any telephone directory advertisements and copies of bills for each account for the past twelve (12) months; (k) A list of all Property employees, their job titles and descriptions, their present salaries or wages, benefits and term of their employment; (l) A current schedule of tenant security deposits and interest thereon, certified to be complete and correct by the Seller; (m) Copies of all operating and maintenance agreements and service contracts, including cable television agreements and easements in effect at the Property and paid by Seller; (n) A copy of any laundry lease or agreement in effect at the Property; (o) A list of all tangible personal property to be transferred in this transaction, excluding any proprietary software used by Seller in connection with the management of the Property; (p) A copy of any environmental reports with respect to the Property; (q) Complete copies of the Notes and all related documents, including but not limited to, any deeds of trust or mortgages, modifications thereof, loan agreements and financial statements. 7. Delivery of Documents at Settlement and Possession. (a) Possession, subject to existing leases, shall be given at Settlement; (b) Seller shall deliver to United Dominion at Settlement a special warranty deed in form attached as Exhibit B, subject only to the Permitted Exceptions; (c) Seller shall also deliver to United Dominion on or before Settlement the following in form and substance mutually satisfactory to counsel for Seller and United Dominion: (i) A bill of sale from Seller transferring all of the tangible and intangible personal property that is owned by Seller and used in rental, operation and maintenance of the Property. Additionally the bill of sale shall contain language sufficient to warrant special title of all major items of personal property conveyed including and by way of example, appliances, motor vehicles, office furniture, and equipment, maintenance hardware, and pool equipment; (ii) An affidavit in form acceptable to the Title Company sufficient to remove any exception for mechanics' and materialmen's liens and parties in possession except for tenants under unrecorded leases; (iii) An assignment of leases, a current operating statement and a current rent roll showing apartment number, tenant, beginning term, ending term, monthly rent, and the rent paid for the current month certified to be complete and correct by the Seller plus the original of each of the leases in effect at the Property as of the day of Settlement (which leases shall remain at the Property site throughout the transaction); (iv) A schedule of all security deposits, the liability for which United Dominion agrees to assume, showing apartment number, tenant's name, tenant security deposit and accrued interest, if any, on the security deposit as per applicable law and the applicable lease, certified to be complete and correct by the Seller plus a certified or casher's check or a credit to the Purchase Price for the amount of all security deposits an accrued interest thereon as per the schedule; (v) An assignment of all assignable permits, licenses, authorizations and certifications necessary for the lawful use of the Property as an apartment complex; (vi) Such copies of Certificates of Occupancy, health permits and any business licenses applicable to the Property as are in possession of Seller, if any; (vii) An assignment of any assignable termite bonds or warranties and any assignable construction or fixture or equipment warranties or guarantees in effect at the Property as are in possession of Seller, if any; (viii) An opinion of Seller's counsel, stating that Seller has the power and authority to execute and deliver this Agreement, the deed and relating documents, that the person executing the documents are duly authorized to do so, without future consent of any other party, and that upon their execution, the documents shall be binding upon Seller; (ix) An affidavit certifying that the Seller is not a foreign entity under the Foreign Investment in Real Property Act and any similar affidavits required by Virginia law; (x) An affidavit stating United Dominion's right to have audited Seller's books and records relating to the Property, at United Dominion's expense, at a time reasonably convenient to Seller, but before December 31, 1995, if United Dominion is advised by its legal counsel to obtain as audit for submittal to the Securities and Exchange Commission or any other regulatory body; (xi) All such other documents that are normally transferred at Settlement or are reasonably requested by United Dominion. (d) United Dominion shall deliver at Settlement a cashier's check or wired funds in immediately available funds made payable to Seller as per Paragraph 1 of this Agreement. (e) United Dominion shall also deliver to Seller on or before Settlement the following, in form and substance mutually satisfactory to counsel for Seller and United Dominion: (i) A certified copy of the Resolution or action of United Dominion's Investment Committee authorizing its purchase of the Property under this Agreement; (ii) An opinion of counsel for United Dominion stating that United Dominion has the power and authority to execute and deliver this Agreement, and to perform its obligations hereunder, that the persons executing this Agreement and any documents required to be delivered by United Dominion hereunder are duly authorized to do so, without further consent of any other party, and that upon their execution, the documents shall be binding upon United Dominion; (iii) All such other documents that are normally transferred or required at Settlement or are reasonably requested by Seller. (f) Seller and United Dominion agree to cooperate for the purpose of causing any and all loan assumption documents required to be executed in connection with the assumption by United Dominion, or its assignee, of the Notes and any related loan documents to be delivered on or before Settlement. 8. Representations and Warranties of Seller. (a) Seller warrants that to Seller's best knowledge all of the information provided by Seller is correct and complete in all respects and does not contain any untrue statement of a material fact; (b) Seller warrants that it has received no notice of any has no knowledge of any pending or threatened litigation or other judicial proceeding, affecting the Property, including without limitation, condemnation or exercise of the right of eminent domain; (c) Seller warrants that it has received no notice of and has no knowledge of any notice from any government agency that the Property is in violation any zoning or other ordinances or regulations; (d) Seller warrants that it has received no notice of any has no knowledge of any pending or threatened rent strikes, tenant organizations, tenant unions, or tenant interpleader actions; (e) Except for information contained in the Phase I Site Assessment and Bulk Asbestos Survey prepared by Dames and Moore, dated May 6, 1992, Seller warrants that it has no knowledge of any hazardous substance, pollutants or containments, or hazardous waste, including, but not limited to asbestos, PCBs and urea formaldehyde, having been generated, released, store or deposited over, beneath or on the Property or forming any part of any improvement or structure located on the Property, from any source whatsoever, by the Seller, its predecessors in interest in the Property or any other person. To Seller's knowledge, there has never been located on the Property an underground storage tank used to store hazardous substances, pollutants, or contaminants, hazardous waste or petroleum products. United Dominion acknowledges that Seller has made no independent investigation of these matters; (f) Seller both covenants and warrants that Seller will cooperate with United Dominion in its inspection activities to be performed pursuant to paragraph 4(h) above, that Seller will respond promptly and accurately to any injuries made by United Dominion with regard to the Property and/or its operation by Seller, and that Seller shall provide United Dominion with full access to the Property and to Seller's records with regard thereto. (g) Seller both covenants and warrants that Seller is not in default under the Notes or any other documents related thereto and has filed with the beneficiaries of the Notes all reports and certifications required pursuant to the Notes or any other documents related thereto. 9. Risk of Loss. Until Settlement, all risk of any loss or damage to all or part of the Property, including eminent domain, shall be and remain on Seller. In the event that such loss or damage shall occur, Seller shall give United Dominion written notice pursuant to this Agreement of such loss or damage along with its estimate of the amount of the loss or damage, within five (5) calendar days of such event occurring. In the event of any such loss due to eminent domain or damage sue to casualty in which the estimate of the loss is greater than One Hundred Thousand Dollars ($100,000.00), then within five (5) calendar days after receipt of Seller's written notice, Dominion, at its option by written notice to Seller, may elect to void this Agreement in which event its Deposit shall be promptly returned. In the event that Dominion does not elect to void this Agreement or in the event that the loss is One Hundred Thousand Dollars ($100,000.00) or less, at Settlement, Seller shall assign to Dominion all of its rights, title and interest to the proceeds of any insurance or award covering such loss or damage, and credit the Purchase Price at Settlement with the amount of any deductible of such insurance. Dominion shall provide its own insurance on the Property at Settlement. 10. Notice. Whenever any notice may be given or is required to be given under the terms of this Agreement, the same shall be deemed given if in writing and either sent by certified mail, return receipt requested, postage prepaid or by a national overnight delivery service, delivery prepaid or delivered by hand with written receipt acknowledged. For purposes of giving notice hereunder the addresses of the respective parties are: United Dominion: United Dominion Realty Trust, Inc. 10 South Sixth Street, Suite 203 Richmond, Virginia 23219-3802 ATTN: William Brand Inlow with a copy to: United Dominion Realty Trust, Inc. 10 South Sixth Street, Suite 203 Richmond, Virginia 23219-3802 ATTN: Sarah S. Schimmels, Esquire Seller: Shelter Properties VI Limited Partnership c/o Jack Snedigar Insignia Financial Group One Insignia Financial Plaza Greenville, South Carolina 29601 with a copy to: Steve Bartlett Insignia Mortgage and Investment Company The Woodmont Centre II, 102 Woodmont Blvd. Suite 400 Nashville, Tennessee 37205 and Douglas G. Brown, Esq. P.O. Box 1089 One Insignia Financial Plaza Greenville, South Carolina 29602 11. Contract Period. Prior to Settlement, Seller and Dominion agree: (a) Seller shall not cause any new liens or encumbrances to be created by Seller against the Property, nor will Seller enter into contracts with respect to the Property other than in the ordinary course of business; (b) Seller shall continue to lease and renew leases on the Property using lease agreements now being used and rental rates now being quoted to new or renewal tenants, and leases shall be written for terms not greater than one year; (c) Seller shall continue to comply with all of the landlord's duties and obligations as set forth in the tenant leases; (d) Seller shall continue to operate, repair, and maintain the Property in the same manner as it has prior to the date of this Agreement. 12. Remedies. If United Dominion terminates this Agreement as a consequence or a misrepresentation or breach of warranty or covenant by the Seller, or failure by the Seller to perform its obligations hereunder, United Dominion shall retain as its sole remedy the right to specific performance of this Agreement and the recovery of the cost of enforcing this remedy. If, prior to Settlement, United Dominion defaults in performing any of its obligations under his Agreement, including its obligation to purchase the Property, (unless United Dominion's termination is the result of Seller's actions noted above in this paragraph), the Seller's sole remedy for such default shall be to terminate this Agreement and be paid Fifty Thousand Dollars ($50,000.00). Seller and United Dominion agree that, in the event of such a default, the damages that the Seller would sustain as a result thereof would be difficult if not impossible to ascertain. Therefore, Seller and United Dominion agree that, Seller shall be paid Fifty Thousand Dollars ($50,000.00) as full and complete liquidated damages, and not as a penalty or forfeiture, as the Seller's sole remedy. All limitations of this paragraph apply only to claims brought by either party prior to Settlement. 13. Successors and Assigns. All rights and obligations of Seller and United Dominion under this Agreement shall inure to and be binding on their respective successors and assigns. 14. Severability. If any provision of this Agreement shall be in violation of any applicable law or unenforceable for any reason, the invalidity or unenforcebility of any provision shall not invalidate or render unenforceable any other provision hereof, which other provisions shall remain in full force and effect. 15. Entire Agreement. This Agreement constitutes the entire agreement between the parties hereto with respect to the transactions contemplated hereby and supersedes all prior discussions, understandings, agreements and negotiations between the parties hereto. This Agreement may be modified only by a written instrument duly executed by the parties hereto. 16. Incorporation by Reference. All of the exhibits attached hereto are by this reference incorporated herein and made a part hereof. 17. Survival. All warranties, representations and agreements made in Paragraph 8 herein shall survive Settlement for a period of nine (9) months. Claims brought by either party after Settlement are not subject to the limitations of paragraph 12 above. 18. Real Estate Commission. United Dominion warrants that in connection with this transaction it has dealt with no real estate agents or brokers. Seller warrants that in connection with this transaction it has dealt with no real estate agents or brokers other than Insignia Mortgage & Investment Company (the "Broker"). Seller shall be responsible for any payment due to the Broker and shall hold United Dominion harmless from claims for such payments. The parties further warrant and represent to each other respectively that they will pay any and all brokerage fees for which they are responsible as a result of the purchase and sale of the Property pursuant to this Agreement, and agree to indemnify and hold the other harmless against, and with respect to, any such obligation or liability, or claim of liability. 19. Time is of the Essence. Time is of the essence with respect to every provision of this Agreement. 20. Expiration. If this Agreement is not executed by all parties and two (2) fully executed originals are not received by the offices of United Dominion on or before 5:00 P.M., June 2, 1995, then this Agreement shall expire and become null and void. 21. Applicable Law. This Agreement including the determination of the statute of limitations for bringing any claims, shall be construed, performed and enforced in accordance with the laws of the Commonwealth of Virginia. 22. Like-Kind Exchange. United Dominion reserves the right to assign its rights under this Agreement (but without release of its obligations herein) to a third party who may purchase and thereafter exchange the Property with United Dominion in accordance with the provisions of Section 1031 of the Internal Revenue Code. Such exchange shall be accomplished at no additional expense or delay to Seller and United Dominion agrees to indemnify Seller against any claims or liabilities resulting solely from structuring the transaction as an exchange, rather than a direct purchase. 23. Assignment. This Agreement may be assigned by United Dominion to an affiliate or subsidiary of United Dominion without the consent of the Seller. IN WITNESS WHEREOF, this Agreement has been executed by the duly authorized representatives of the parties hereto as of the date designated below. Seller: SHELTER PROPERTIES VI LIMITED PARTNERSHIP, a South Carolina limited partnership By: SHELTER REALTY VI CORPORATION, a South Carolina Corporation By: William H. Jarrard, Jr. Its: President Date: 6/2/95 United Dominion: UNITED REALTY TRUST, INC., a Virginia corporation By: Richard Chess Its: Vice President Date: May 31, 1995 Acknowledgment of Good Faith Deposit: Chicago Title Insurance Co. acknowledges receipt of a good faith deposit in the amount of Fifty Thousand Dollars ($50,000.00) from United Dominion on 6/8/95 for the purchase of the Marble Hill Apartments. ESCROW AGENT: By: Sally French Its: National Accounts Mgr/NBU -----END PRIVACY-ENHANCED MESSAGE-----