-----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, RO0t+CWQHJplXZuVaAdiWBWsqynVPhnj1jJtJj6soT2V4wFUVfR/lMIOPJT69Frd 79Zj4hF7th0UiE0+XqI++g== 0000730013-96-000003.txt : 19960604 0000730013-96-000003.hdr.sgml : 19960604 ACCESSION NUMBER: 0000730013-96-000003 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19960430 FILED AS OF DATE: 19960603 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: 10QSB SEC ACT: 1934 Act SEC FILE NUMBER: 000-13261 FILM NUMBER: 96576143 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 10QSB 1 FORM 10-QSB--QUARTERLY REPORT UNDER SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Quarterly or Transitional Report (As last amended by 34-32231, eff. 6/3/93.) U. S. SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Form 10-QSB [X] QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended April 30, 1996 or [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from.........to......... Commission file number 0-13261 SHELTER PROPERTIES VI LIMITED PARTNERSHIP (Exact name of small business issuer as specified in its charter) South Carolina 57-0755618 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 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 Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X . No . PART I - FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS a) SHELTER PROPERTIES VI LIMITED PARTNERSHIP BALANCE SHEET (Unaudited) April 30, 1996 Assets Cash: Unrestricted $ 2,867,916 Restricted--tenant security deposits 196,480 Accounts receivable 23,777 Escrow for taxes 381,981 Restricted escrows 1,503,159 Other assets 713,236 Investment properties: Land $ 4,949,503 Buildings and related personal property 45,742,895 50,692,398 Less accumulated depreciation (21,950,751) 28,741,647 $34,428,196 Liabilities and Partners' Capital (Deficit) Liabilities Accounts payable $ 129,481 Tenant security deposits 189,052 Accrued taxes 507,835 Other liabilities 358,094 Mortgage notes payable 27,644,624 Partners' Capital (Deficit) General partners $ (302,122) Limited partners (42,324 units issued and outstanding) 5,901,232 5,599,110 $34,428,196 See Accompanying Notes to Financial Statements b) SHELTER PROPERTIES VI LIMITED PARTNERSHIP STATEMENTS OF OPERATIONS (Unaudited)
Three Months Ended Six Months Ended April 30, April 30, 1996 1995 1996 1995 Revenues: Rental income $2,335,274 $2,586,562 $4,647,550 $5,104,418 Other income 172,165 187,487 327,790 328,570 Total revenues 2,507,439 2,774,049 4,975,340 5,432,988 Expenses: Operating 712,773 828,629 1,393,776 1,586,323 General and administrative 115,560 83,071 169,953 140,450 Maintenance 283,376 308,514 626,381 677,851 Depreciation 489,674 546,385 970,200 1,080,022 Interest 629,869 714,541 1,263,675 1,431,984 Property taxes 218,034 235,486 438,293 466,671 Total expenses 2,449,286 2,716,626 4,862,278 5,383,301 Casualty loss -- -- (1,047) -- Net income $ 58,153 $ 57,423 $ 112,015 $ 49,687 Net income allocated to general partners (1%) $ 582 $ 574 $ 1,120 $ 497 Net income allocated to limited partners (99%) 57,571 56,849 110,895 49,190 $ 58,153 $ 57,423 $ 112,015 $ 49,687 Net income per limited partnership unit $ 1.36 $ 1.34 $ 2.62 $ 1.16 See Accompanying Notes to Financial Statements
c) SHELTER PROPERTIES VI LIMITED PARTNERSHIP STATEMENT OF CHANGES IN PARTNERS' CAPITAL (DEFICIT) (Unaudited)
Limited Partnership General Limited Units Partners Partners Total Original capital contributions 42,324 $ 2,000 $42,324,000 $42,326,000 Partners' capital (deficit) at October 31, 1995 42,324 $(303,242) $ 5,790,337 $ 5,487,095 Net income for the six months ended April 30, 1996 -- 1,120 110,895 112,015 Partners' capital (deficit) at April 30, 1996 42,324 $(302,122) $ 5,901,232 $ 5,599,110 See Accompanying Notes to Financial Statements
d) SHELTER PROPERTIES VI LIMITED PARTNERSHIP STATEMENTS OF CASH FLOWS (Unaudited)
Six Months Ended April 30, 1996 1995 Cash flows from operating activities: Net income $ 112,015 $ 49,687 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation 970,200 1,080,022 Amortization of discounts and loan costs 147,496 159,206 Casualty loss 1,046 -- Change in accounts: Restricted cash (1,250) (9,172) Accounts receivable (7,209) (41,895) Escrows for taxes 18,158 18,985 Other assets (55,558) 28,106 Accounts payable (157,849) (173,434) Tenant security deposit liabilities 3,961 4,690 Accrued taxes (58,574) (56,571) Other liabilities (1,462) (189) Net cash provided by operating activities 970,974 1,059,435 Cash flows from investing activities: Property improvements and replacements (523,908) (465,307) Deposits to restricted escrows (30,782) (130,563) Receipts from restricted escrows 67,647 17,235 Net insurance proceeds from property damages 35,586 -- Net cash used in investing activities (451,457) (578,635) Cash flows from financing activities: Payments on mortgage notes payable (361,159) (372,620) Partners' distributions (1,000,000) -- Net cash used in financing activities (1,361,159) (372,620) Net (decrease) increase in cash (841,642) 108,180 Cash at beginning of period 3,709,558 1,035,305 Cash at end of period $2,867,916 $1,143,485 Supplemental disclosure of cash flow information: Cash paid for interest $1,117,271 $1,272,778 See Accompanying Notes to Financial Statements
e) SHELTER PROPERTIES VI LIMITED PARTNERSHIP NOTES TO FINANCIAL STATEMENTS (Unaudited) Note A - Basis of Presentation The accompanying unaudited financial statements of Shelter Properties VI Limited Partnership (the "Partnership") have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-QSB and Item 310(b) of Regulation S-B. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of the Corporate General Partner, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the six month period ended April 30, 1996, are not necessarily indicative of the results that may be expected for the fiscal year ending October 31, 1996. For further information, refer to the financial statements and footnotes thereto included in the Partnership's annual report on Form 10-KSB for the year ended October 31, 1995. Cash and Cash Equivalents: Unrestricted - Unrestricted cash includes cash on hand and in banks, money market funds and Certificates of Deposit with original maturities less than 90 days. At certain times, the amount of cash deposited at a bank may exceed the limit on insured deposits. Restricted cash - tenant security deposits - The Partnership requires security deposits from lessees for the duration of the lease and such deposits are considered restricted cash. Deposits are refunded when the tenant vacates, provided the tenant has not damaged its space and is current on its rental payments. Certain reclassifications have been made to the 1995 information to conform to the 1996 presentation. Note B - Reconciliation of Cash Flows The following is a reconciliation of the subtotal on the accompanying statements of cash flows captioned "net cash provided by operating activities" to "net cash used in operations", as defined in the partnership agreement. However, "net cash used in operations" should not be considered an alternative to net income as an indicator of the Partnership's operating performance or to cash flows as a measure of liquidity. Six Months Ended April 30, 1996 1995 Net cash provided by operating activities $ 970,974 $1,059,435 Payments on mortgage notes payable (361,159) (372,620) Property improvements and replacements (523,908) (465,307) Change in restricted escrows, net 36,865 (113,328) Changes in reserves for net operating liabilities 259,783 229,480 Additional reserves (385,000) (350,000) Net cash used in operations $ (2,445) $ (12,340) The Corporate General Partner reserved an additional $385,000 on April 30, 1996, to fund capital improvements and repairs at the properties. On April 30, 1995, the General Partner reserved $350,000 due to the funding requirements of the Reserve Escrow, as defined in the mortgage notes, having not been met. Note C - Transactions with Affiliated Parties The Partnership has no employees and is dependent on the Corporate General Partner and its affiliates for the management and administration of all partnership activities. These management fees are included in operating expenses on the statements of operations. The partnership agreement provides for payments to affiliates for services and the reimbursement of certain expenses incurred by affiliates on behalf of the Partnership. These reimbursements are included in general and administrative expenses on the statements of operations. Balances and other transactions with Insignia Financial Group, Inc. ("Insignia") and affiliates in 1996 and 1995 are as follows: For the Six Months Ended April 30, 1996 1995 Property management fees $246,495 $266,949 Reimbursement for services of affiliates 95,251 87,690 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 D - 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 (an affiliate of the Corporate General Partner) 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 the Affiliated Purchaser of which approximately $722,000 is Shelter Properties VI's portion; 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 (which amount is divided among the various partnerships and acquiring entities) for plaintiffs' attorney fees and expenses in the litigation; and general releases of all the defendants. On April 23, 1996, the Court gave preliminary approval of the establishment of the class for the purposes of the settlement and of the settlement terms, and ordered that notice of the settlement be sent to the class. Notice has been sent. A final hearing has been scheduled for June 24, 1996. If a certain number of class members opt out, the settlement may be cancelled. Class members also have the right to object to the settlement which could lead to alterations in the terms of settlement or even cancellation of the settlement. No assurance can be given that this matter will be settled on the terms set forth above or otherwise. Note E - 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 recognized during the fourth quarter of 1995. As of April 30, 1995, total assets of Marble Hills were $4,756,252, total liabilities were $7,981,519 and partners' deficit was $3,225,267. Revenues and expenses for the six months ended April 30, 1995, were $676,639 and $645,737, respectively, resulting in net income of $30,902. Note F - Casualty Loss During the first quarter of 1996, the Partnership recorded a casualty loss resulting from a fire which destroyed three units at Nottingham Square. Although, the damage was covered by insurance, the damage resulted in a loss of $1,047, arising from gross proceeds received of $43,141 which were less than the basis of the property plus expenses to replace the interiors damaged. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION The Partnership's investment properties consist of six apartment complexes. The following table sets forth the average occupancy of the properties for the six months ended April 30, 1996 and 1995: Average Occupancy Property 1996 1995 Rocky Creek Augusta, Georgia 80% 90% Carriage House Gastonia, North Carolina 97% 98% Nottingham Square Des Moines, Iowa 95% 93% Foxfire/Barcelona Durham, North Carolina 98% 98% River Reach Jacksonville, Florida 98% 99% Village Gardens Fort Collins, Colorado 93% 95% The Corporate General Partner attributes the decrease in occupancy at Rocky Creek to an increase in the number of tenants purchasing homes. Also contributing to the decrease was the downsizing of the employment base with lay- offs in the region. Occupancy also decreased at Village Gardens due to competition from several new apartment complexes in the area. Occupancy increased at Nottingham Square as a result of capital improvements completed in 1995 making the property more attractive while maintaining lower average rental rates as compared to the competition in the region. The Partnership's net income for the six months ended April 30, 1996, was $112,015 with the second quarter having income of $58,153. The Partnership reported net income of $49,687 and $57,423 for the corresponding periods of 1995. The increase in net income for the three and six months ended April 30, 1996, is primarily due to the reduction of operating, depreciation, property tax, and interest expenses as a result of the sale of Marble Hills in the fourth quarter of 1995. Offsetting the increase in net income is an increase in general and administrative expenses due to an increase in General Partnership cost reimbursements and an increase in insurance expense as a result of additional coverage. Repairs and maintenance expense increased for the six months ended April 30, 1996, at Foxfire due to gutter repairs and exterior painting and at Village Garden due to increased exterior and interior improvements needed to maintain market share. Overall repairs and maintenance decreased in the three months ended April 30, 1996, due to the sale of Marble Hills. Other income increased for the remaining six properties due to an increase in interest income resulting from increased cash reserves invested at higher interest rates compared to 1995. During the first quarter of 1996, the Partnership recorded a casualty loss resulting from a fire which destroyed three units at Nottingham Square. Although, the damage was covered by insurance, the damage resulted in a loss of $1,047, arising from gross proceeds received of $43,141 which were less than the basis of the property plus expenses to replace the interiors damaged. On September 29, 1995, the Partnership sold Marble Hills Apartments to an unaffiliated third 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 recognized during the fourth quarter of 1995. As of April 30, 1995, total assets of Marble Hills were $4,756,252, total liabilities were $7,981,519 and partners' deficit was $3,225,267. Revenues and expenses for the six months ended April 30, 1995, were $676,639 and $645,737, respectively, resulting in net income of $30,902. As part of the ongoing business plan of the Partnership, the Corporate General Partner monitors the rental market environment of each of its investment properties to assess the feasibility of increasing rents, maintaining or increasing occupancy levels and protecting the Partnership from increases in expense. As part of this plan, the Corporate General Partner attempts to protect the Partnership from the burden of inflation-related increases in expenses by increasing rents and maintaining a high overall occupancy level. However, due to changing market conditions, which can result in the use of rental concessions and rental reductions to offset softening market conditions, there is no guarantee that the Corporate General Partner will be able to sustain such a plan. At April 30, 1996, the Partnership reported unrestricted cash of $2,867,916 versus $1,143,485 for the same period of 1995. Net cash provided by operations decreased primarily due to an increase in other assets due to a Federal tax deposit required under Section 7519 of the Internal Revenue Code for future tax liabilities which may be incurred from the income of the Partnership's investment properties. Net cash used in investing activities decreased primarily due to insurance proceeds received as a result of the fire discussed above and an increase in net cash provided by restricted escrows. Offsetting the decrease in net cash used in investing activities was an increase in property improvements and replacements. Net cash used in financing activities increased due to a distribution made to partners during the six months ended April 30, 1996. The Partnership has no material capital programs scheduled to be performed in 1996, although certain routine capital expenditures and maintenance expenses have been budgeted. These capital expenditures and maintenance expenses will be incurred only if cash is available from operations or is received from the capital reserve account. 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 $27,644,624, net of discount, is amortized over 257 months with balloon payments of $23,007,741 due on November 15, 2002, at which time the properties will either be refinanced or sold. No cash distributions were paid in 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 in the first quarter of 1996. Future cash distributions will depend on the levels of net cash generated from operations, refinancing, property sales and cash reserves. 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. PART II - OTHER INFORMATION ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K a) Exhibits: Exhibit 27, Financial Data Schedule, is filed as an exhibit to this report. b) Reports on Form 8-K filed during the quarter ended April 30, 1996: None. SIGNATURES In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. SHELTER PROPERTIES VI LIMITED PARTNERSHIP By: Shelter Realty VI Corporation Corporate General Partner By:/s/ William H. Jarrard, Jr. William H. Jarrard, Jr. President and Director By:/s/ Ronald Uretta Ronald Uretta Principal Financial Officer and Principal Accounting Officer Date: June 3, 1996 EX-27 2
5 This schedule contains summary financial information extracted from Shelter Properties VI Limited Partnership 1996 Second Quarter 10-QSB and is qualified in its entirety by reference to such 10-QSB filing. 0000730013 SHELTER PROPERTIES VI LIMITED PARTNERSHIP 1 6-MOS OCT-31-1996 APR-30-1996 2,876,916 0 23,777 0 0 0 50,692,398 21,950,751 34,428,196 0 27,644,624 0 0 0 5,599,110 34,428,196 0 4,975,340 0 0 4,862,278 0 1,263,675 0 0 0 0 0 0 112,015 2.62 0 The Registrant has an unclassified balance sheet.
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