-----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, NfLLvzwsjAME10ebgvIX7fKsVWOhsjiq5w5RmdqCDz3TnhZYEqJUlVbBQiTqBki1 dgM9RyYlr1CCh4T8tMJRfA== 0000730013-98-000003.txt : 19980611 0000730013-98-000003.hdr.sgml : 19980611 ACCESSION NUMBER: 0000730013-98-000003 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19980430 FILED AS OF DATE: 19980610 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: SEC FILE NUMBER: 000-13261 FILM NUMBER: 98645891 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 OR TRANSITIONAL REPORT UNDER SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 QUARTERLY OR TRANSITIONAL REPORT U. S. Securities And Exchange Commission Washington, D.C. 20549 FORM 10-QSB (Mark One) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended April 30, 1998 [ ] TRANSITION REPORT PURSUANT TO 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) (864) 239-1000 (Issuer's telephone number) Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15 (d) of the Exchange Act 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 PART I - FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS a) SHELTER PROPERTIES VI LIMITED PARTNERSHIP BALANCE SHEET (Unaudited) April 30, 1998 (in thousands, except unit data) Assets Cash and cash equivalents $ 2,904 Receivables and deposits 707 Restricted escrows 1,594 Other assets 523 Investment properties: Land $ 4,950 Buildings and related personal property 47,722 52,672 Less accumulated depreciation (25,739) 26,933 $ 32,661 Liabilities and Partners' Capital (Deficit) Liabilities Accounts payable $ 245 Tenant security deposits payable 190 Accrued property taxes 561 Other liabilities 240 Mortgage notes payable 26,477 Partners' Capital (Deficit) General partners' $ (309) Limited partners' (42,324 units issued and outstanding) 5,257 4,948 $ 32,661 See Accompanying Notes to Financial Statements b) SHELTER PROPERTIES VI LIMITED PARTNERSHIP STATEMENTS OF OPERATIONS (Unaudited) (in thousands, except unit data)
Three Months Ended Six Months Ended April 30 April 30 1998 1997 1998 1997 Revenues: Rental income $ 2,302 $ 2,358 $ 4,651 $ 4,729 Other income 179 166 343 333 Net casualty gain -- 268 -- 268 Total revenues 2,481 2,792 4,994 5,330 Expenses: Operating 1,036 1,042 2,039 2,002 General and administrative 92 79 173 142 Depreciation 495 493 988 980 Interest 604 619 1,212 1,241 Property taxes 246 236 472 457 Total expenses 2,473 2,469 4,884 4,822 Net income $ 8 $ 323 $ 110 $ 508 Net income allocated to general partners (1%) $ -- $ 3 $ 1 $ 5 Net income allocated to limited partners (99%) 8 320 109 503 $ 8 $ 323 $ 110 $ 508 Net income per limited partnership unit $ .19 $ 7.56 $ 2.58 $ 11.88 See Accompanying Notes to Financial Statements
c) SHELTER PROPERTIES VI LIMITED PARTNERSHIP STATEMENT OF CHANGES IN PARTNERS' CAPITAL (DEFICIT) (Unaudited) (in thousands, except unit data)
Limited Partnership General Limited Units Partners' Partners' Total Original capital contributions 42,324 $ 2 $42,324 $42,326 Partners' (deficit) capital at October 31, 1997 42,324 $ (310) $ 5,148 $ 4,838 Net income for the six months ended April 30, 1998 -- 1 109 110 Partners' (deficit) capital at April 30, 1998 42,324 $ (309) $ 5,257 $ 4,948 See Accompanying Notes to Financial Statements
d) SHELTER PROPERTIES VI LIMITED PARTNERSHIP STATEMENTS OF CASH FLOWS (Unaudited) (in thousands) Six Months Ended April 30, 1998 1997 Cash flows from operating activities: Net income $ 110 $ 508 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation 988 980 Amortization of discounts and loan costs 154 152 Casualty gain -- (268) Change in accounts: Receivables and deposits 20 51 Other assets 89 24 Accounts payable (271) 14 Tenant security deposits payable (3) 2 Accrued property taxes (55) (62) Other liabilities 11 (213) Net cash provided by operating activities 1,043 1,188 Cash flows from investing activities: Property improvements and replacements (463) (426) Net deposits to restricted escrows (36) (17) Insurance proceeds from casualty items 148 36 Net cash used in investing activities (351) (407) Cash flows from financing activities: Payments on mortgage notes payable (420) (390) Net cash used in financing activities (420) (390) Net increase in cash and cash equivalents 272 391 Cash and cash equivalents at beginning of period 2,632 3,104 Cash and cash equivalents at end of period $ 2,904 $ 3,495 Supplemental disclosure of cash flow information: Cash paid for interest $ 1,058 $ 1,089 At April 30, 1997, receivables and deposits and accounts payable were adjusted by approximately $308,000 and $132,000, respectively, for non-cash amounts in connection with the recording of the casualty items. See Accompanying Notes to Financial Statements 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 Shelter Realty VI Corporation (the "Corporate General Partner") all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three and six month periods ended April 30, 1998, are not necessarily indicative of the results that may be expected for the fiscal year ending October 31, 1998. For further information, refer to the financial statements and footnotes thereto included in the Partnership's annual report on Form 10-KSB for the fiscal year ended October 31, 1997. Certain reclassifications have been made to the 1997 information to conform to the 1998 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, (in thousands) 1998 1997 Net cash provided by operating activities $ 1,043 $ 1,188 Payments on mortgage notes payable (420) (390) Property improvements and replacements (463) (426) Change in restricted escrows, net (36) (17) Changes in reserves for net operating liabilities 209 184 Additional reserves (333) (540) Net cash used in operations $ -- $ (1) The Corporate General Partner believed it to be in the best interest of the Partnership to reserve net cash from operations of approximately $333,000 and $540,000 at April 30, 1998 and 1997, respectively, to fund continuing capital improvements at the Partnership's six investment properties. 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. The Corporate General Partner is wholly-owned by Insignia Properties Trust ("IPT"), an affiliate of Insignia Financial Group, Inc. ("Insignia"). The Partnership Agreement provides for payments to affiliates for services and the reimbursement of certain expenses incurred by affiliates on behalf of the Partnership. The following expenses were paid or accrued to affiliates of the Corporate General Partner during the six months ended April 30, 1998 and 1997 (in thousands): 1998 1997 Property management fees (included in operating expenses) $ 251 $ 251 Reimbursements for services of affiliates (included in investment properties, operating, and general and administrative expenses) 126 101 Included in reimbursements for services of affiliates for the six month periods ended April 30, 1998 and 1997, is approximately $19,000 and $7,000, respectively, of reimbursements for construction oversight costs. For the period of November 1, 1996 to August 31, 1997, the Partnership insured its properties under a master policy through an agency affiliated with the Corporate General Partner with an 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 master policy. The agent assumed the financial obligations to the affiliate of the Corporate General Partner which received payments on these obligations from the agent. The amount of the Partnership's insurance premiums that accrued to the benefit of the affiliate of the Corporate General Partner by virtue of the agent's obligations was not significant. On March 17, 1998, Insignia entered into an agreement to merge its national residential property management operations, and its controlling interest in IPT, with Apartment Investment and Management Company ("AIMCO"), a publicly-traded real estate investment trust. The closing, which is anticipated to happen in the third quarter of 1998, is subject to customary conditions, including government approvals and the approval of Insignia's shareholders. If the closing occurs, AIMCO will then control the Managing General Partner of the Partnership. NOTE D - CASUALTY LOSS During the six months ended April 30, 1998, the Partnership received approximately $148,000 in insurance proceeds, which were accrued at October 31, 1997. Approximately $35,000 of the proceeds was received in the first quarter of 1998, relating to tornado damage at River Reach Apartments in May 1997. The tornado caused uprooted trees, minor damage to the parking lot, and damage to roofs of two units. A casualty loss of approximately $19,000 resulted and was recorded during the year ended October 31, 1997. Approximately $113,000 of the insurance proceeds was received in the second quarter of 1998, relating to fire damage at Foxfire/Barcelona in April 1997. This fire destroyed an entire building consisting of eight units. A casualty gain of approximately $53,000 relating to the fire was recorded during the quarter ended April 30, 1997, resulting from the expected insurance proceeds exceeding the basis of the units destroyed plus the total estimated costs to replace the assets. An additional amount of approximately $77,000 in insurance proceeds is expected to be received subsequent to quarter end. The following additional casualty gains and losses were recorded during the second quarter of 1997. A casualty gain of approximately $232,000 resulted from the insurance proceeds from hail and wind storm damage at Nottingham Square that occurred in the second quarter of 1996. Approximately $27,000 of these proceeds was received during the second quarter of 1997 and the remaining $205,000 was received subsequent to quarter end. In November 1996, a fire occurred at Carriage House which damaged one unit and caused smoke damage to two additional units and the common area. The costs to repair the units exceeded the insurance proceeds received and thus resulted in a casualty loss of approximately $7,000. In March 1997, a fire occurred at Village Gardens which destroyed one unit and caused smoke and water damage to additional units. The costs to repair the units exceeded the insurance proceeds received and thus resulted in a casualty loss of approximately $10,000. The combination of these casualty events resulted in a casualty gain of approximately $268,000 for the six months ended April 30, 1997. 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, 1998 and 1997: Average Occupancy Property 1998 1997 Rocky Creek Apartments Augusta, Georgia 89% 87% Carriage House Apartments Gastonia, North Carolina (1) 82% 91% Nottingham Square Apartments Des Moines, Iowa (2) 85% 90% Foxfire/Barcelona Apartments Durham, North Carolina (3) 91% 96% River Reach Apartments Jacksonville, Florida 97% 98% Village Gardens Apartments Fort Collins, Colorado 96% 95% (1) The decrease in average occupancy at Carriage House Apartments is attributable to an increase in home purchases and transfers to stronger job markets in areas outside the Gastonia market. At April 30, 1998, occupancy had increased to 92% at the property. (2) Occupancy decreased at Nottingham Square Apartments due to competition from new construction in the Des Moines market. (3) The decrease in occupancy at Foxfire/Barcelona Apartments is primarily the result of competition due to new construction in the Durham market and rental rate increases. However, management anticipates the use of rental concessions will help increase occupancy. The Partnership realized net income of approximately $110,000 for the six months ended April 30, 1998, versus approximately $508,000 for the corresponding period in 1997. During the three months ended April 30, 1998 and 1997, the Partnership realized net income of approximately $8,000 and $323,000 respectively. The decrease in net income for the three and six month periods ended April 30, 1998, is primarily attributable to a decrease in total revenues resulting from the recognition of a $268,000 casualty gain in the second quarter of 1997. A decrease in rental income and an increase in operating and general and administrative expenses also contributed to the decrease in net income for the six months ended April 30, 1998. The decrease in rental income is due primarily to decreased occupancy as discussed above. Partially, offsetting the impact of decreased occupancy is an increase in rental rates at Foxfire/Barcelona, River Reach, and Village Gardens. General and administrative expenses increased due to increased expense reimbursements during the six month period ended April 30, 1998. Operating expenses increased primarily due to an increase in property expenses at River Reach Apartments, resulting from drainage repairs at the property. Included in operating expense is approximately $52,000 of major repairs and maintenance comprised primarily of landscaping, gutter repairs, and exterior building improvements for the six months ended April 30, 1998. For the six months ended April 30, 1997, approximately $98,000 comprised primarily of exterior building improvements and landscaping are included in operating expense. While operating expenses increased for the six month period ended April 30, 1998, they decreased slightly for the three month period ended April 30, 1998. All other revenues and expenses for the three months ended April 30, 1998, were consistent with the results during the six month period ended April 30, 1998. Major capital improvement projects budgeted for the Partnership's investment properties during 1998 include replacement of all the vinyl siding at Nottingham Square Apartments. This is anticipated to be a three year project with estimated costs of approximately $300,000 to be incurred during 1998. Additionally, approximately $200,000 is budgeted for parking lot repairs during 1998 at Nottingham Square and Foxfire/Barcelona Apartments. The following casualty gains and losses were recorded during the second quarter of 1997. At Foxfire/Barcelona in April 1997, a fire destroyed an entire building consisting of eight units. A casualty gain of approximately $53,000 relating to the fire was recorded during the quarter ended April 30, 1997, resulting from the expected insurance proceeds exceeding the basis of the units destroyed plus the total estimated costs to replace the assets. A casualty gain of approximately $232,000 resulted from the insurance proceeds from hail and wind storm damage at Nottingham Square that occurred in the second quarter of 1996. Approximately $27,000 of these proceeds was received during the second quarter of 1997 and the remaining $205,000 was received subsequent to quarter end. In November 1996, a fire occurred at Carriage House which damaged one unit and caused smoke damage to two additional units and the common area. The costs to repair the units exceeded the insurance proceeds received and thus resulted in a casualty loss of approximately $7,000. In March 1997, a fire occurred at Village Gardens which destroyed one unit and caused smoke and water damage to additional units. The costs to repair the units exceeded the insurance proceeds received and thus resulted in a casualty loss of approximately $10,000. The combination of these casualty events resulted in a casualty gain of approximately $268,000 for the six months ended April 30, 1997. 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, 1998, the Partnership held cash and cash equivalents of approximately $2,904,000 compared to approximately $3,495,000 at April 30, 1997. For the six months ended April 30, 1998, net cash increased approximately $272,000 compared to a net increase of approximately $391,000 for the six months ended April 30, 1997. Net cash provided by operating activities decreased primarily due to a decrease in rental income as discussed above and an increase in cash used for accounts payable due to the timing of payments to vendors. The decrease in net cash provided by operating activities was partially offset by a decrease in cash used for other liabilities. Net cash used in investing activities decreased primarily as a result of insurance proceeds received in 1998 for damages to several of the Partnership's properties in 1997. Net cash used in financing activities increased due to an increase in principal payments on mortgage notes. The sufficiency of existing liquid assets to meet future liquidity and capital expenditure requirements is directly related to the level of capital expenditures required at the investment properties to adequately maintain the physical assets and other operating needs of the Partnership. Such assets are currently thought to be sufficient for any near-term needs of the Partnership. The mortgage indebtedness of approximately $26,477,000, net of discounts, is being amortized over 257 months with balloon payments of approximately $23,008,000 due on November 15, 2002, at which time the properties are expected to either be refinanced or sold. No cash distributions were paid during the six months ended April 30, 1998 and 1997. Future cash distributions will depend on the levels of net cash generated from operations, refinancings, property sales and the availability of cash reserves. The Corporate General Partner is currently planning to make a distribution during the fourth quarter 1998. Year 2000 The Partnership is dependent upon the Corporate General Partner and Insignia for management and administrative services. Insignia has completed an assessment and will have to modify or replace portions of its software so that its computer systems will function properly with respect to dates in the year 2000 and thereafter (the "Year 2000 Issue"). The project is estimated to be completed not later than December 31, 1998, which is prior to any anticipated impact on its operating systems. The Corporate General Partner believes that with modifications to existing software and conversions to new software, the Year 2000 Issue will not pose significant operational problems for its computer systems. However, if such modifications and conversions are not made, or are not completed timely, the Year 2000 Issue could have a material impact on the operations of the Partnership. Other Certain items discussed in this quarterly report may constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 (the "Reform Act") and as such may involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of the Partnership to be materially different from any future results, performance or achievements expressed or implied by such forward- looking statements. Such forward-looking statements speak only as of the date of this quarterly report. The Partnership expressly disclaims any obligation or undertaking to release publicly any updates of revisions to any forward-looking statements contained herein to reflect any change in the Partnership's expectations with regard thereto or any change in events, conditions or circumstances on which any such statement is based. PART II - OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS In March 1998, several putative unit holders of limited partnership units of the Partnership commenced an action entitled Rosalie Nuanes, et al. v. Insignia Financial Group, Inc., et al. in the Superior Court of the State of California for the County of San Mateo. The plaintiffs named as defendants, among others, the Partnership, the Managing General Partner and several of their affiliated partnerships and corporate entities. The complaint purports to assert claims on behalf of a class of limited partners and derivatively on behalf of a number of limited partnerships (including the Partnership) which are named as nominal defendants, challenging the acquisition by Insignia and its affiliates of interests in certain general partner entities, past tender offers by Insignia affiliates to acquire limited partnership units, the management of partnerships by Insignia affiliates as well as a recently announced agreement between Insignia and AIMCO. The complaint seeks monetary damages and equitable relief, including judicial dissolution of the Partnership. The Managing General Partner was only recently served with the complaint, which it believes to be without merit, and intends to vigorously defend the action. The Partnership is unaware of any other pending or outstanding litigation that is not of a routine nature. The General Partner of the Partnership believes all such pending or outstanding litigation will be resolved without a material adverse effect upon the business, financial condition or operations of the Partnership. 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: None filed during the quarter ended April 30, 1998. 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 Its Corporate General Partner By: /s/ William H. Jarrard, Jr. William H. Jarrard, Jr. President and Director By: /s/ Ronald Uretta Ronald Uretta Vice President and Treasurer Date: June 10, 1998 EX-27 2
5 This schedule contains summary financial information extracted from Shelter Properties VI Limited Partnership 1998 Second Quarter 10-QSB and is qualified in its entirety by reference to such 10-QSB filing. 0000730013 SHELTER PROPERTIES VI LIMITED PARTNERSHIP 1,000 6-MOS OCT-31-1998 APR-30-1998 2,904 0 0 0 0 0 52,672 25,739 32,661 0 26,477 0 0 0 4,948 32,661 0 4,994 0 0 4,884 0 1,212 0 0 0 0 0 0 110 2.58 0 Registrant has an unclassified balance sheet. Multiplier is 1.
-----END PRIVACY-ENHANCED MESSAGE-----