0000950168-95-000794.txt : 19950915 0000950168-95-000794.hdr.sgml : 19950915 ACCESSION NUMBER: 0000950168-95-000794 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19950731 FILED AS OF DATE: 19950914 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: 95573792 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 INSIGNIA SPVI 82502 10QSB 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 July 31, 1995 or [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period.........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 (803) 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) July 31, 1995
Assets Cash: Unrestricted $ 893,793 Restricted--tenant security deposits 228,972 Investments 395,379 Accounts receivable 8,206 Escrow for taxes 571,606 Restricted escrows 1,714,346 Other assets 777,085 Investment properties: Land $ 5,635,471 Buildings and related personal property 52,279,994 57,915,465 Less accumulated depreciation (24,222,755) 33,692,710 $38,282,097 Liabilities and Partners' Capital (Deficit) Liabilities Accounts payable $ 198,582 Tenant security deposits 225,191 Accrued taxes 712,302 Other liabilities 405,028 Mortgage notes payable 31,197,562 Partners' Capital (Deficit) General partners $ (312,679) Limited partners (42,324 units issued and outstanding) 5,856,111 5,543,432 $38,282,097
See Accompanying Notes to Financial Statements 1 b) SHELTER PROPERTIES VI LIMITED PARTNERSHIP STATEMENTS OF OPERATIONS (Unaudited)
Three Months Ended Nine Months Ended July 31, July 31, 1995 1994 1995 1994 Revenues: Rental income $2,598,756 $2,537,873 $7,703,174 $7,384,433 Other income 139,596 120,805 468,166 351,279 Total revenues 2,738,352 2,658,678 8,171,340 7,735,712 Expenses: Operating 740,170 752,943 2,059,544 2,083,170 General and administrative 179,674 57,779 320,124 190,433 Property management fees 138,809 131,144 405,758 382,905 Maintenance 396,185 468,969 1,062,734 1,229,400 Depreciation 553,227 521,410 1,633,249 1,551,460 Interest 710,549 723,227 2,142,533 2,177,451 Property taxes 239,141 230,710 705,812 670,569 Total expenses 2,957,755 2,886,182 8,329,754 8,285,388 Loss on disposal of property (2,155) (23,601) (13,457) (39,216) Net loss $ (221,558) $ (251,105) $ (171,871) $ (588,892) Net loss allocated to general partners (1%) $ (2,216) $ (2,511) $ (1,719) $ (5,889) Net loss allocated to limited partners (99%) (219,342) (248,594) (170,152) (583,003) $ (221,558) $ (251,105) $ (171,871) $ (588,892) Net loss per limited partnership unit $ (5.18) $ (5.87) $ (4.02) $ (13.77)
See Accompanying Notes to Financial Statements 2 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 at October 31, 1994 42,324 $(310,960) $ 6,026,263 $ 5,715,303 Net loss for the nine months ended July 31, 1995 -- (1,719) (170,152) (171,871) Partners' capital at July 31, 1995 42,324 $(312,679) $ 5,856,111 $ 5,543,432
See Accompanying Notes to Financial Statements 3 d) SHELTER PROPERTIES VI LIMITED PARTNERSHIP STATEMENTS OF CASH FLOWS (Unaudited)
Nine Months Ended July 31, 1995 1994 Cash flows from operating activities: Net loss $ (171,871) $ (588,892) Adjustments to reconcile net loss to net cash provided by operating activities: Depreciation 1,633,249 1,551,460 Amortization of discounts and loan costs 239,750 232,307 Loss on disposal of property 13,457 39,216 Change in accounts: Restricted cash (11,863) (12,926) Accounts receivable 5,418 18,748 Escrows for taxes (159,710) (268,431) Other assets 28,106 28,759 Accounts payable (109,273) (195,777) Tenant security deposit liabilities 8,082 12,926 Accrued taxes 129,162 164,949 Other liabilities 25,145 (3,951) Net cash provided by operating activities 1,629,652 978,388 Cash flows from investing activities: Property improvements and replacements (642,980) (490,348) Cash invested in short-term investments (521,379) (720,333) Cash received from matured investments 703,527 912,416 Deposits to restricted escrows (226,672) (224,653) Receipts from restricted escrows 58,156 309,380 Net cash used in investing activities (629,348) (213,538) Cash flows from financing activities: Payments on mortgage notes payable (564,289) (523,118) Net cash used in financing activities (564,289) (523,118) Net increase in cash 436,015 241,732 Cash at beginning of period 457,778 370,797 Cash at end of period $ 893,793 $ 612,529 Supplemental disclosure of cash flow information: Cash paid for interest $1,903,808 $1,944,979
See Accompanying Notes to Financial Statements 4 e) SHELTER PROPERTIES VI LIMITED PARTNERSHIP NOTES TO FINANCIAL STATEMENTS (Unaudited) Note A - Basis of Presentation The accompanying unaudited financial statements 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 three and nine month periods ended July 31, 1995, are not necessarily indicative of the results that may be expected for the fiscal year ending October 31, 1995. 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, 1994. Certain reclassifications have been made to the 1994 information to conform to the 1995 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.
For the Nine Months Ended July 31, 1995 1994 Net cash provided by operating activities $1,629,652 $ 978,388 Payments on mortgage notes payable (564,289) (523,118) Property improvements and replacements (642,980) (490,348) Changes in reserves for net operating liabilities 84,933 255,703 Change in restricted escrows, net (168,516) 84,727 Additional reserves (340,000) (306,000) Net cash used in operations $ (1,200) $ (648)
5 SHELTER PROPERTIES VI LIMITED PARTNERSHIP NOTES TO FINANCIAL STATEMENTS - continued (unaudited) Note B - Reconciliation of Cash Flows - continued The Corporate General Partner has reserved an additional $340,000 and $306,000 for capital expenditures and to the fund the Reserve Escrow, as defined in the mortgage notes. These Reserve Escrows require the partnership to deposit $1,000 per apartment unit for each respective property, or $1,710,000. The current balance is $1,642,890. 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 Partnership Agreement provides for payments to affiliates for services and as reimbursement of certain expenses incurred by affiliates on behalf of the Partnership. The following transactions with Insignia Financial Group, Inc. and affiliates were charged to expense in 1995 and 1994:
For the Nine Months Ended July 31, 1995 1994 Property management fees $405,758 $382,905 Data processing services 28,079 26,024 Marketing services 5,596 11,010 Reimbursement for services of affiliates 92,117 74,796
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. 6 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION The Partnership's investment properties consist of seven apartment complexes. The following table sets forth the average occupancy of the properties for the nine months ended July 31, 1995 and 1994:
Average Occupancy Property 1995 1994 Marble Hills Richmond, Virginia 96% 94% Rocky Creek Augusta, Georgia 90% 89% Carriage House Gastonia, North Carolina 98% 98% Nottingham Square Des Moines, Iowa 94% 96% Foxfire/Barcelona Durham, North Carolina 98% 93% River Reach Jacksonville, Florida 99% 98% Village Gardens Fort Collins, Colorado 94% 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. The Corporate General Partner attributes the decrease in occupancy at Village Gardens to competition from several new apartment complexes in the area. The Partnership's net loss for the nine months ended July 31, 1995, was $171,871 with the third quarter having a loss of $221,558. The Partnership reported net losses of $588,892 and $251,105 for the corresponding periods of 1994. The decrease in net loss is primarily due to an increase in rental income due to an increase in occupancy at four of the properties and rental rate increases at all properties. In addition, maintenance expense decreased due to the high level of repair and maintenance activity in 1994, including exterior painting projects at Carriage House and Nottingham Square, parking lot and tennis court surface renovations at Rocky Creek, exterior wood replacement and painting at Foxfire and asbestos removal at Village Gardens. In addition, other income increased due to an increase in various tenant charges, such as lease cancellation and application fees, and the increase in laundry income at Marble Hills. Interest income increased due to an increase in the restricted escrow balances earning interest at higher interest rates in 1995. 7 The loss from the retirement of property decreased due to fewer roof replacements in 1995 as compared to 1994. Offsetting the decrease in net loss is an increase in general and administrative expenses due to increased legal fees associated with the lawsuits disclosed in the Legal Proceedings section below, 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. At July 31, 1995, the Partnership reported unrestricted cash of $893,793 versus $612,529 for the same period of 1994. Net cash provided by operations increased primarily due to the decrease in net loss as discussed above. 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. In addition, other liabilities caused an increase in cash provided by operating activities due to an increase in tenant rental prepayments, particularly at Nottingham Square and River Reach. Net cash used in investing activities increased primarily due to an increase in property improvements and replacements. These improvements include gutter and cabinet replacements at Nottingham Square and parking lot resurfacing at River Reach. In addition, receipts from restricted escrows decreased 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 $31,197,562, net of discount, is amortized over 257 months with a balloon payment of $25,606,184 due on November 15, 2002, at which time the properties will either be refinanced or sold. Future cash distributions will depend on the levels of net cash generated from operations, property sales, and the availability of 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. No cash distributions were recorded in 1994 or during the first nine months of 1995. At this time, the Corporate General partner does not anticipate making a cash distribution from property operations during 1995. On June 2, 1995, the Partnership entered into an Agreement of Purchase and Sale ("Agreement") between Shelter Properties VI Limited Partnership and an unaffiliated third party in connection with Marble Hills Apartments. The Agreement is contingent upon the satisfaction of numerous closing conditions. Therefore, the Corporate General Partner cannot guarantee that this sale will close. If the sale is consummated, the Corporate General Partner believes that the Partnership may make a cash distribution. 8 PART II - OTHER INFORMATION ITEM 1. 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 7,995 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 has not made cash distributions to Unit holders since 1986. On June 2, 1995, the partnership entered into an agreement of purchase and sale to sell one of its properties. If the sale is consummated, the Corporate General Partner believes that the Partnership may make a cash distribution of up to $1,000,000 ($23.63 per unit) to Unit holders. There can be no assurance that such sale will be consummated. If the sale is not consummated, the Corporate General Partner does not expect that the Partnership will be in a position to make a distribution of cash from operations in the near term. In addition, the Corporate General Partner is 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 three years in the period ended October 31, 1994, pursuant to property management agreements. Property management fees paid to IMG amounted to $472,626, $491,112, and $517,482, respectively, for the three years ended October 31, 1992, 1993, and 1994. Additionally, the Partnership paid IMG property management fees equal to $405,758 during the first three quarters of fiscal 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 $160,342, $179,813, and $191,686, respectively, for the three years ended October 31, 1992, 1993, and 1994 and $125,792 during the first three quarters of fiscal 1995. In 1992, an affiliate of Insignia assisted an unaffiliated third party engaged by the Partnership in connection with refinancings of the 9 Partnership's properties, and received $319,995 from the third party for providing such assistance. In addition, at various times during the past three 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 7,995 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 10 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 does 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 11 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 12 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 limit 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 13 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 notifies the limited partners that the Affiliated Purchaser has offered to increase the amount paid to such limited partners by an additional 45%. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K a) Exhibits: None b) Reports on Form 8-K filed in the third quarter ended July 31, 1995: Current report on Form 8-K dated July 20, 1995, as filed with the Securities and Exchange Commission on July 25, 1995. 14 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 Treasurer (Principal Financial Officer and Principal Accounting Officer) Date: September 14, 1995 15 EX-27 2 EXHIBIT 27
5 1,000 9-MOS OCT-31-1994 JUL-31-1995 893,793 395,379 8,206 0 0 2,097,956 57,915,465 24,222,755 38,282,097 1,541,103 31,197,562 0 0 0 5,543,432 38,282,097 0 8,171,340 0 0 8,329,754 0 2,142,533 (171,871) 0 (171,871) 0 0 0 (171,871) (4.02) 0