March 21, 2000
United States
Securities and Exchange Commission
Washington, D.C. 20549
RE: Shelter Properties I
Form 10-KSB
File No. 0-10255
To Whom it May Concern:
The accompanying Form 10-KSB for the year ended December 31, 1999 describes a
change in the method of accounting to capitalize exterior painting and major
landscaping, which would have been expensed under the old policy. The
Partnership believes that this accounting principle change is preferable because
it provides a better matching of expenses with the related benefit of the
expenditures and it is consistent with industry practice and the policies of the
Corporate General Partner.
Please do not hesitate to contact the undersigned with any questions or comments
that you might have.
Very truly yours,
Stephen Waters
Real Estate Controller
<PAGE>
FORM 10-KSB--ANNUAL OR TRANSITIONAL REPORT UNDER
SECTION 13 OR 15(d)
Form 10-KSB
(Mark One)
[X] ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934 [No Fee Required]
For the fiscal year ended December 31, 1999
[ ] 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 0-10255
SHELTER PROPERTIES I
(Name of small business issuer in its charter)
South Carolina 57-0707398
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
55 Beattie Place, PO Box 1089
Greenville, South Carolina 29602
(Address of principal executive offices)
(864) 239-1000
Issuer's telephone number
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 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 the Partnership'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.
State issuer's revenues for its most recent fiscal year. $5,491,000
State the aggregate market value of the voting partnership interests held 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 December 31, 1999. No market exists for the limited partnership
interests of the Registrant, and, therefore, no aggregate market value can be
determined.
DOCUMENTS INCORPORATED BY REFERENCE
NONE
<PAGE>
PART I
Item 1. Description of Business
Shelter Properties I (the "Partnership" or "Registrant") was organized as a
limited partnership under the laws of the State of South Carolina on April 7,
1980. The general partner responsible for management of the Partnership's
business is Shelter Realty I Corporation, a South Carolina corporation (the
"Corporate General Partner"). The only other general partner of the Partnership
was N. Barton Tuck, Jr. Mr. Tuck was not an affiliate of the Corporate General
Partner and was effectively prohibited by the Partnership's partnership
agreement (the "Partnership Agreement") from participating in the management of
the Partnership. In June 1999, Mr. Tuck's general partnership interest in the
Registrant was purchased by AIMCO Properties, L.P., an affiliate of the
Corporate General Partner. The Corporate General Partner is a subsidiary of
Apartment Investment and Management Company ("AIMCO"). The Partnership Agreement
provides that the Partnership is to terminate on December 31, 2019 unless
terminated prior to such date.
The Registrant is engaged in the business of operating and holding real estate
properties for investment. In 1980, during its acquisition phase, the Registrant
acquired seven existing apartment properties. The Registrant continues to own
and operate four of these properties (see "Item 2. Description of Properties").
Commencing July 3, 1980, the Registrant offered pursuant to a Registration
Statement filed with the Securities and Exchange Commission up to 14,900 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). An additional 100 Units were
purchased by the Corporate General Partner.
The offering terminated on September 10, 1980. Upon termination of the offering,
the Registrant had accepted subscriptions for 15,000 Units, including 100 Units
purchased by the Corporate General partner, for an aggregate of $15,000,000. The
Registrant invested approximately $11,000,000 of such proceeds in seven existing
apartment properties and thereby completed its acquisition program in December
1980. Since its initial offering, the Registrant has not received, nor are
limited partners required to make, additional capital contributions.
The Registrant has no employees. Management and administrative services are
performed by the Corporate General Partner and by agents retained by the
Corporate General Partner. These services were provided by an affiliate of the
Corporate General Partner for the years ended December 31, 1999 and 1998.
The Partnership receives income from its properties and is responsible for
operating expenses, capital improvements and debt service payments under
mortgage obligations secured by the properties. The Partnership financed its
properties primarily through non-recourse debt. Therefore, in the event of
default, the lender can generally look only to the subject property for recovery
of amounts due.
Both the income and expenses of operating the properties owned by the
Partnership are subject to factors outside of the Partnership's control, such as
changes in the supply and demand for similar properties resulting from various
market conditions, increases/decreases in unemployment or population shifts,
changes in the availability of permanent mortgage financing, changes in zoning
laws, or changes in patterns or needs of users. In addition, there are risks
inherent in owning and operating residential properties because such properties
are susceptible to the impact of economic and other conditions outside of the
control of the Partnership.
There have been, and it is possible there may be other, Federal, state and local
legislation and regulations enacted relating to the protection of the
environment. The Partnership is unable to predict the extent, if any, to which
such new legislation or regulations might occur and the degree to which such
existing or new legislation or regulations might adversely affect the properties
owned by the Partnership.
The Partnership monitors its properties for evidence of pollutants, toxins and
other dangerous substances, including the presence of asbestos. In certain cases
environmental testing has been performed which resulted in no material adverse
conditions or liabilities. In no case has the Partnership received notice that
it is a potentially responsible party with respect to an environmental clean up
site.
The real estate business in which the Partnership is engaged is highly
competitive. There are other residential properties within the market area of
the Registrant's properties. The number and quality of competitive properties,
including those which may be managed by an affiliate of the Corporate General
Partner, in such market area could have a material effect on the rental market
for the apartments at the Registrant's properties and the rents that may be
charged for such apartments. While the Corporate General Partner and its
affiliates own and/or control a significant number of apartment units in the
United States such units represent an insignificant percentage of total
apartment units in the United States, and competition for the apartments is
local.
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.
Transfer of Control
Pursuant to a series of transactions which closed on October 1, 1998 and
February 26, 1999, Insignia Financial Group, Inc. and Insignia Properties Trust
merged into AIMCO, a publicly traded real estate investment trust, with AIMCO
being the surviving corporation (the "Insignia Merger"). As a result, AIMCO
acquired 100% ownership interest in the Corporate General Partner. The Corporate
General Partner does not believe that this transaction has had or will have a
material effect on the affairs and operations of the Partnership.
<PAGE>
Item 2. Description of Properties
The following table sets forth the Registrant's investments in properties:
<TABLE>
<CAPTION>
Date of
Properties Purchase Type of Ownership Use
<S> <C> <C> <C>
Quail Hollow Apartments 09/01/80 Fee ownership, subject to Apartment
West Columbia, South Carolina first mortgage 215 units
Windsor Hills Apartments 09/01/80 Fee ownership, subject to Apartment
Blacksburg, Virginia first mortgage and second 300 units
mortgage (1)
Heritage Pointe Apartments 09/15/80 Fee ownership, subject to Apartment
(formerly Rome Georgian first mortgage 149 units
Apartments)
Rome, Georgia
Stone Mountain West Apartments 12/31/80 Fee ownership, subject to Apartment
Stone Mountain, Georgia first mortgage 142 units
</TABLE>
(1) Property is held by a Limited Partnership which the Registrant owns a
99.99% interest in.
Schedule of Properties
Set forth below for each of the Registrant's properties is the gross carrying
value, accumulated depreciation, depreciable life, method of depreciation, and
Federal tax basis.
<TABLE>
<CAPTION>
Gross
Carrying Accumulated Federal
Properties Value Depreciation Rate Method Tax Basis
(in thousands) (in thousands)
<S> <C> <C> <C> <C> <C>
Quail Hollow Apartments $ 5,672 $ 3,970 5-34 S/L $ 2,069
Windsor Hills Apartments 7,017 4,801 5-30 S/L 2,452
Heritage Pointe Apartments 3,694 2,613 5-35 S/L 1,291
Stone Mountain West Apartments 4,914 3,535 5-37 S/L 1,855
Totals $21,297 $14,919 $ 7,667
</TABLE>
See "Note A" to the financial statements included in "Item 7" for a description
of the Partnership's depreciation policy and "Note J - Change in Accounting
Principle."
<PAGE>
Schedule of Property Indebtedness
The following table sets forth certain information relating to the loans
encumbering the Registrant's properties.
<TABLE>
<CAPTION>
Principal Principal
Balance At Stated Balance
December 31, Interest Period Maturity Due At
Properties 1999 Rate Amortized Date Maturity (2)
(in thousands) (in thousands)
<S> <C> <C> <C> <C> <C>
Quail Hollow $ 2,850 7.33% none 11/01/03 $ 2,850
Windsor Hills
1st mortgage 3,975 7.60% (1) 11/15/02 3,489
2nd mortgage 149 7.60% none 11/15/02 149
Heritage Pointe 1,400 7.33% none 11/01/03 1,400
Stone Mountain West 3,000 7.33% none 11/01/03 3,000
11,374 $10,888
Less unamortized
present value
discounts (117)
Totals $11,257
</TABLE>
(1) The principal and discount are being amortized over 257 months with
a balloon payment due November 15, 2002.
(2) See "Item 7. Financial Statements - Note C" for information with respect
to the Registrant's ability to repay these loans and other specific
details about the loans.
Rental Rates and Occupancy
Average annual rental rates and occupancy for 1999 and 1998 for each property
are as follows:
Average Annual Average Annual
Rental Rates Occupancy
(per unit)
Properties 1999 1998 1999 1998
Quail Hollow $6,790 $6,588 94% 95%
Windsor Hills 6,497 6,102 95% 96%
Heritage Pointe 5,561 5,395 93% 89%
Stone Mountain West 9,575 9,191 95% 96%
The Corporate General Partner attributes the increase in occupancy at Heritage
Pointe Apartments to management's intensified marketing efforts and improvements
made to the property which has enhanced its curb appeal.
<PAGE>
As noted under "Item 1. Description of Business", the real estate industry is
highly competitive. The Partnership's properties are subject to competition from
other residential apartment complexes in the area. The Corporate General Partner
believes that the properties are adequately insured. Each property is an
apartment complex which leases units for lease terms of one year or less. As of
December 31, 1999 no tenant leases 10% or more of the available rental space.
All of the properties are in good physical condition, subject to normal
depreciation and deterioration as is typical for assets of this type and age.
Real Estate Taxes and Rates:
Real estate taxes and rates in 1999 for each property were as follows:
1999 1999
Billing Rate
(in thousands)
Quail Hollow (i) $ 74 28.13%
Windsor Hills 86 .83%
Heritage Pointe 40 3.56%
Stone Mountain West 63 3.52%
(i) Property tax rate is currently under appeal with the taxing authorities.
Above amounts are at full value actually paid at 80% pending outcome of
appeal.
Capital Improvements:
Quail Hollow Apartments: The Partnership completed approximately $189,000 in
capital expenditures at Quail Hollow Apartments as of December 31, 1999,
consisting primarily of floor covering, appliance and roof replacements,
exterior painting, interior building improvements, parking lot improvements and
major landscaping. These improvements were funded primarily from Partnership
reserves and operations. The Partnership is currently evaluating the capital
improvement needs of the property for the upcoming year. The minimum amount to
be budgeted is expected to be $300 per unit or $64,500. Additional improvements
may be considered and will depend on the physical condition of the property as
well as replacement reserves and anticipated cash flow generated by the
property.
Windsor Hills Apartments: The Partnership completed approximately $444,000 in
capital expenditures at Windsor Hills Apartments as of December 31, 1999,
consisting primarily of air conditioning and swimming pool upgrades, floor
covering and appliance replacements, parking lot upgrades, structural building
improvements, exterior painting, and major landscaping. These improvements were
funded primarily from Partnership reserves and operations. The Partnership is
currently evaluating the capital improvement needs of the property for the
upcoming year. The minimum amount to be budgeted is expected to be $300 per unit
or $90,000. Additional improvements may be considered and will depend on the
physical condition of the property as well as replacement reserves and
anticipated cash flow generated by the property.
Heritage Pointe Apartments: The Partnership completed approximately $235,000 in
capital expenditures at Heritage Pointe Apartments as of December 31, 1999,
consisting primarily of floor covering and appliance replacements and electrical
and structural building improvements. These improvements were funded primarily
from Partnership reserves and operations. The Partnership is currently
evaluating the capital improvement needs of the property for the upcoming year.
The minimum amount to be budgeted is expected to be $300 per unit or $44,700.
Additional improvements may be considered and will depend on the physical
condition of the property as well as replacement reserves and anticipated cash
flow generated by the property.
Stone Mountain West Apartments: The Partnership completed approximately $64,000
in capital expenditures at Stone Mountain West Apartments as of December 31,
1999, consisting primarily of floor covering and appliance replacements and
electrical improvements. These improvements were funded primarily from
Partnership reserves and operations. The Partnership is currently evaluating the
capital improvement needs of the property for the upcoming year. The minimum
amount to be budgeted is expected to be $300 per unit or approximately $42,600.
Additional improvements may be considered and will depend on the physical
condition of the property as well as replacement reserves and anticipated cash
flow generated by the property.
The capital improvements planned for 2000 at the Partnership properties will be
made only to the extent of cash available from operations and Partnership
reserves. To the extent that such budgeted capital improvements are completed,
the Registrant's distributable cash flow, if any, may be adversely affected at
least in the short term.
Item 3. 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 Corporate General Partner and several of their affiliated
partnerships and corporate entities. The action 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 Financial Group, Inc.
("Insignia") and entities which were, at one time, affiliates of Insignia
("Insignia 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 and the Insignia Merger (see
"Item 7. Financial Statements Note B - Transfer of Control"). The plaintiffs
seek monetary damages and equitable relief, including judicial dissolution of
the Partnership. On June 25, 1998, the Corporate General Partner filed a motion
seeking dismissal of the action. In lieu of responding to the motion, the
plaintiffs have filed an amended complaint. The Corporate General Partner filed
demurrers to the amended complaint which were heard February 1999. Pending the
ruling on such demurrers, settlement negotiations commenced. On November 2,
1999, the parties executed and filed a Stipulation of Settlement settling
claims, subject to final court approval, on behalf of the Partnership and all
limited partners who own units as of November 3, 1999. Preliminary approval of
the settlement was obtained on November 3, 1999 from the Superior Court of the
State of California, County of San Mateo, at which time the Court set a final
approval hearing for December 10, 1999. Prior to the December 10, 1999 hearing
the Court received various objections to the settlement, including a challenge
to the Court's preliminary approval based upon the alleged lack of authority of
class plaintiffs' counsel to enter the settlement. On December 14, 1999, the
Corporate General Partner and its affiliates terminated the proposed settlement.
Certain plaintiffs have filed a motion to disqualify some of the plaintiffs'
counsel in the action. The Corporate General Partner does not anticipate that
costs associated with this case will be material to the Partnership's overall
operations.
The Partnership is unaware of any other pending or outstanding litigation that
is not of a routine nature arising in the ordinary course of business.
Item 4. Submission of Matters to a Vote of Security Holders
During the quarter ended December 31, 1999, no matter was submitted to a vote of
unit holders through the solicitation of proxies or otherwise.
<PAGE>
PART II
Item 5. Market for the Partnership Equity and Related Partner Matters
The Partnership, a publicly-held limited partnership, offered and sold 15,000
limited partnership units aggregating $15,000,000 including 100 units which were
purchased by the Corporate General Partner. The Partnership currently has 399
holders of record owning an aggregate of 15,000 Units. Affiliates of the
Corporate General Partner own 10,098 units or approximately 67.32% at December
31, 1999. No public trading market has developed for the Units, and it is not
anticipated that such a market will develop in the future.
The following table sets forth the distributions made by the Partnership for the
years ended December 31, 1998 and 1999, as well as for the subsequent period.
(See Item 6. Management's Discussion and Analysis or Plan of Operation for
further details).
Distributions
Per Limited
Aggregate Partnership Unit
01/01/98 - 12/31/98 $1,600,000 (1) $105.67
01/01/99 - 12/31/99 $1,300,000 (1) $ 85.80
01/01/00 - 03/15/00 $ 500,000 (1) $ 33.00
(1) Distributions were made from cash from operations.
Future cash distributions will depend on the levels of net cash generated from
operations, the availability of cash reserves, and the timing of debt
maturities, refinancings, and/or property sales. There can be no assurance,
however, that the Partnership will generate sufficient funds from operations,
after required capital expenditures, to permit any additional distributions to
its partners in 2000 or subsequent periods. See "Item 2. Description of
Properties - Capital Improvements" for information relating to anticipated
capital expenditures at the properties. Distributions may 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 in an amount equal
to $300 to $325 per apartment unit for Quail Hollow, Stone Mountain West, and
Heritage Pointe for a total of $151,800 to $164,500. The mortgage agreement
stipulates a minimum reserve of $400 per apartment unit at Windsor Hills for a
total of $120,000. As of December 31, 1999, the Partnership has deposits of
approximately $305,000 in its reserve accounts.
Several tender offers were made by various parties, including affiliates of the
general partners, during the years ended December 31, 1999 and 1998. As a result
of these tender offers, AIMCO and its affiliates currently own 10,098 limited
partnership interest in the Partnership representing approximately 67.32% of the
outstanding units. It is possible that AIMCO or its affiliates will make one or
more additional offers to acquire additional limited partnership interests in
the Partnership for cash or in exchange for units in the operating partnership
of AIMCO. Consequently, AIMCO is in a position to influence all voting decisions
with respect to the Registrant. Under the Partnership Agreement, unitholders
holding a majority of the Units are entitled to take action with respect to a
variety of matters. When voting on matters, AIMCO would in all likelihood vote
the Units it acquired in a manner favorable to the interest of the Corporate
General Partner because of their affiliation with the Corporate General Partner.
<PAGE>
Item 6. Management's Discussion and Analysis or Plan of Operation
The matters discussed in this Form 10-KSB contain certain forward-looking
statements and involve risks and uncertainties (including changing market
conditions, competitive and regulatory matters, etc.) detailed in the disclosure
contained in this Form 10-KSB and the other filings with the Securities and
Exchange Commission made by the Registrant from time to time. The discussion of
the Registrant's business and results of operations, including forward-looking
statements pertaining to such matters, does not take into account the effects of
any changes to the Registrant's business and results of operation. Accordingly,
actual results could differ materially from those projected in the
forward-looking statements as a result of a number of factors, including those
identified herein.
This item should be read in conjunction with the consolidated financial
statements and other items contained elsewhere in this report.
Results of Operations
The Registrant's net income for the year ended December 31, 1999, was
approximately $1,254,000 as compared to $1,065,000 for the year ended December
31, 1998. (See "Note D" of the consolidated financial statements for a
reconciliation of these amounts to the Registrant's federal taxable income). The
increase in net income was due to an increase in total revenues which was
partially offset by a slight increase in total expenses. The increase in total
revenues is primarily due to an increase in rental income which was partially
offset by a slight decrease in other income. The increase in rental income is
the result of an increase in average rental rates at all four of the
Registrant's investment properties and to the increase in occupancy at Heritage
Pointe Apartments. The Corporate General Partner attributes the increase in
occupancy at Heritage Pointe Apartments to management's intensified marketing
efforts and improvements to the property which have enhanced its curb appeal.
Other income decreased primarily due to lower interest income as a result of a
decrease in interest bearing cash balances as a result of distributions paid to
partners.
Total expenses increased due to slight increases in operating expense,
depreciation and interest expense. Operating expense increased as a result of
increases in advertising, property and maintenance expenses. Advertising expense
increased as the result of an effort to increase occupancy at Heritage Pointe
Apartments as discussed above. Property expense increased as a result of an
increase in salaries and related employee benefits. Maintenance expense
increased due to interior and exterior building improvements which were
completed during 1999.
The increase in total expenses was partially offset by a decrease in property
tax expense and general and administrative expense. Property tax expense
decreased due to decreases in the assessment values by the taxing authorities
for Stone Mountain West Apartments. Quail Hollow Apartments current year
property taxes were paid at a reduced amount while the property is appealing the
actual billed amount. This decrease was partially offset by an increase in the
assessment value at Windsor Hills Apartments. The decrease in general and
administrative expense is primarily attributable to a decrease in management
reimbursements to the Corporate General Partner allowed under the Partnership
Agreement. General and administrative expense also decreased due to a decrease
in appraisal fees which were incurred during 1998. Also included in general and
administrative expenses at both December 31, 1999 and 1998 were costs associated
with the quarterly and annual communications with investors and regulatory
agencies and the annual audit required by the Partnership Agreement.
Effective January 1, 1999, the Partnership changed its method of accounting to
capitalize the cost of exterior painting and major landscaping on a prospective
basis. The Partnership believes that this accounting principle change is
preferable because it provides a better matching of expenses with the related
benefit of the expenditures and it is consistent with industry practice and the
policies of the Corporate General Partner. The effect of the change in 1999 was
to increase net income by approximately $67,700 ($4.47 per limited partnership
unit). The cumulative effect, had this change been applied to prior periods, is
not material. The accounting principle change will not have an effect on cash
flow, funds available for distribution or fees payable to the Corporate General
Partner and affiliates.
As part of the ongoing business plan of the Registrant, 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
expenses. 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 December 31, 1999, the Partnership had cash and cash equivalents of
approximately $1,748,000 compared to approximately $1,682,000 at December 31,
1998. The increase in cash and cash equivalents is due to approximately
$2,053,000 of cash provided by operating activities which was partially offset
by approximately $539,000 of cash used in investing activities and approximately
$1,448,000 of cash used in financing activities. Cash used in investing
activities consisted of capital improvements and replacements, which was
partially offset by withdrawals from escrow accounts maintained by the mortgage
lender. Cash used in financing activities consisted primarily of partner
distributions and to a lesser extent payments of principal made on the mortgages
encumbering the Registrant's properties. The Partnership invests its working
capital reserves in money market accounts.
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 various properties to adequately maintain the
physical assets and other operating needs of the Registrant and to comply with
Federal, state, and local legal and regulatory requirements. The Partnership is
currently evaluating the capital improvement needs of the property for the
upcoming year. The minimum to be budgeted is expected to be $300 per unit or
$241,800. Additional capital improvements will be incurred only if cash is
available from operations and partnership reserves. To the extent that such
budgeted capital improvements are completed, the Partnership's distributable
cash flow, if any, may be adversely affected at least in the short term.
The Registrant's current assets are thought to be sufficient for any near-term
needs (exclusive of capital improvements) of the Partnership. The mortgage
indebtedness of approximately $11,257,000, net of discount, is amortized over
varying periods with required balloon payments ranging from November 15, 2002 to
November 1, 2003. The Corporate General Partner will attempt to refinance such
remaining indebtedness and/or sell the properties prior to such maturity dates.
If the properties cannot be refinanced or sold for a sufficient amount, the
Registrant may risk losing such properties through foreclosure.
Cash distributions from operations of approximately $1,300,000 ($1,287,000 of
which was paid to the limited partners, $85.80 per limited partnership unit),
were made to the partners during the year ended December 31, 1999. Cash
distributions from operations of approximately $1,600,000 ($1,585,000 of which
was paid to the limited partners, $105.67 per limited partnership unit), were
made to the partners during the year ended December 31, 1998. A cash
distribution from operations of approximately $500,000 ($495,000 of which were
paid to the limited partners, $33.00 per limited partnership unit), was made
during February, 2000. The Registrant's distribution policy is reviewed on a
semi-annual basis. There can be no assurance, however, that the Registrant will
generate sufficient funds from operations to permit further distributions to its
partners in 2000 or subsequent periods. Distributions may 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 in an amount equal
to $300 to $325 per apartment unit for Quail Hollow, Stone Mountain West, and
Heritage Pointe for a total of $151,800 to $164,500. The mortgage agreement
stipulates a minimum reserve of $400 per apartment unit Windsor Hills for a
total of $120,000. As of December 31, 1999, the Partnership has deposits of
approximately $305,000 in its reserve accounts.
Tender Offer
Several tender offers were made by various parties, including affiliates of the
general partners, during the years ended December 31, 1999 and 1998. As a result
of these tender offers, AIMCO and its affiliates currently own 10,098 units of
limited partnership interest in the Partnership representing approximately
67.32% of the outstanding units. It is possible that AIMCO or its affiliates
will make one or more additional offers to acquire additional limited
partnership interests in the Partnership for cash or in exchange for units in
the operating partnership of AIMCO. Consequently, AIMCO is in a position to
influence all voting decisions with respect to the Registrant. Under the
Partnership Agreement, unitholders holding a majority of the Units are entitled
to take action with respect to a variety of matters. When voting on matters,
AIMCO would in all likelihood vote the Units it acquired in a manner favorable
to the interest of the Corporate General Partner because of their affiliation
with the Corporate General Partner.
Year 2000 Compliance
General Description
The Year 2000 issue is the result of computer programs being written using two
digits rather than four digits to define the applicable year. The Partnership is
dependent upon the Corporate General Partner and its affiliates for management
and administrative services ("Managing Agent"). Any of the Managing Agent's
computer programs or hardware that had date-sensitive software or embedded chips
might have recognized a date using "00" as the year 1900 rather than the year
2000. This could have resulted in a system failure or miscalculations causing
disruptions of operations, including, among other things, a temporary inability
to process transactions, send invoices, or engage in similar normal business
activities.
<PAGE>
Computer Hardware, Software and Operating Equipment
In 1999, the Managing Agent completed all phases of its Year 2000 program by
completing the replacement and repair of any hardware or software system or
operating equipment that was not yet Year 2000 compliant. The Managing Agent's
hardware and software systems and its operating equipment are now Year 2000
compliant. No material failure or erroneous results have occurred in the
Managing Agent's computer applications related to the failure to reference the
Year 2000 to date.
Third Parties
To date, the Managing Agent is not aware of any significant supplier or
subcontractor (external agent) or financial institution of the Partnership that
has a Year 2000 issue that would have a material impact on the Partnership's
results of operations, liquidity or capital resources. However, the Managing
Agent has no means of ensuring or determining the Year 2000 compliance of
external agents. At this time, the Managing Agent does not believe that a Year
2000 issue of any non-compliant external agent will have a material impact on
the Partnership's financial position or results of operations.
Costs
The total cost of the Managing Agent's Year 2000 project was approximately $3.2
million and was funded from operating cash flows.
Risks Associated with the Year 2000
The Managing Agent completed all necessary phases of its Year 2000 program in
1999, and did not experience system or equipment malfunctions related to a
failure to reference the Year 2000. The Managing Agent or Partnership have not
been materially adversely effected by disruptions in the economy generally
resulting from the Year 2000 issue.
At this time, the Managing Agent does not believe that the Partnership's
businesses, results of operations or financial condition will be materially
adversely effected by the Year 2000 issue.
Contingency Plans Associated with the Year 2000
The Managing Agent has not had to implement contingency plans such as manual
workarounds or selecting new relationships for its banking or elevator operation
activities in order to avoid the Year 2000 issue.
<PAGE>
Item 7. Financial Statements
SHELTER PROPERTIES I
LIST OF FINANCIAL STATEMENTS
Report of Ernst & Young LLP, Independent Auditors
Consolidated Balance Sheet - December 31, 1999
Consolidated Statements of Operations - Years ended December 31, 1999 and
1998
Consolidated Statements of Changes in Partners' Deficit - Years ended
December 31, 1999 and 1998
Consolidated Statements of Cash Flows - Years ended December 31, 1999 and
1998
Notes to Consolidated Financial Statements
<PAGE>
Report of Ernst & Young LLP, Independent Auditors
The Partners
Shelter Properties I
We have audited the accompanying consolidated balance sheet of Shelter
Properties I as of December 31, 1999, and the related consolidated statements of
operations, changes in partners' deficit and cash flows for each of the two
years in the period ended December 31, 1999. 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 auditing standards generally accepted
in the United States. 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 consolidated financial position of Shelter Properties
I at December 31, 1999, and the consolidated results of its operations and its
cash flows for each of the two years in the period ended December 31, 1999, in
conformity with accounting principles generally accepted in the United States.
As discussed in Note J to the financial statements, the Partnership changed its
method of accounting to capitalize the cost of exterior painting and major
landscaping effective January 1, 1999.
/s/ ERNST & YOUNG LLP
Greenville, South Carolina
February 24, 2000
<PAGE>
SHELTER PROPERTIES I
CONSOLIDATED BALANCE SHEET
(in thousands, except unit data)
December 31, 1999
<TABLE>
<CAPTION>
Assets
<S> <C> <C>
Cash and cash equivalents $ 1,748
Receivables and deposits 298
Restricted escrows 501
Other assets 249
Investment properties (Notes C & F):
Land $ 1,428
Buildings and related personal property 19,869
21,297
Less accumulated depreciation (14,919) 6,378
$ 9,174
Liabilities and Partners' Deficit
Liabilities
Accounts payable $ 142
Tenant security deposit liabilities 147
Accrued property taxes 48
Other liabilities 321
Mortgage notes payable (Notes C) 11,257
Partners' Deficit
General partners $ (52)
Limited partners (15,000 units issued and
outstanding) (2,689) (2,741)
$ 9,174
</TABLE>
See Accompanying Notes to Consolidated Financial Statements
<PAGE>
SHELTER PROPERTIES I
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except unit data)
<TABLE>
<CAPTION>
Years Ended December 31,
1999 1998
<S> <C> <C>
Revenues:
Rental income $ 5,205 $ 4,998
Other income 286 291
Total revenues 5,491 5,289
Expenses:
Operating 2,156 2,146
General and administrative 186 217
Depreciation 689 640
Interest 956 950
Property taxes 250 271
Total expenses 4,237 4,224
Net income (Note D) $ 1,254 $ 1,065
Net income allocated to general partners (1%) $ 13 $ 11
Net income allocated to limited partners (99%) 1,241 1,054
$ 1,254 $ 1,065
Net income per limited partnership unit $ 82.73 $ 70.27
Distributions per limited partnership unit $ 85.80 $105.67
</TABLE>
See Accompanying Notes to Consolidated Financial Statements
<PAGE>
SHELTER PROPERTIES I
CONSOLIDATED STATEMENTS OF CHANGES IN PARTNERS' DEFICIT
(in thousands, except unit data)
<TABLE>
<CAPTION>
Limited
Partnership General Limited
Units Partners Partners Total
<S> <C> <C> <C> <C>
Original capital contributions 15,000 $ 2 $15,000 $15,002
Partners' deficit at
December 31, 1997 15,000 $ (48) $(2,112) $(2,160)
Distributions to partners -- (15) (1,585) (1,600)
Net income for the year ended
December 31, 1998 -- 11 1,054 1,065
Partners' deficit at
December 31, 1998 15,000 (52) (2,643) (2,695)
Distributions to partners -- (13) (1,287) (1,300)
Net income for the year ended
December 31, 1999 -- 13 1,241 1,254
Partners' deficit at
December 31, 1999 15,000 $ (52) $(2,689) $(2,741)
</TABLE>
See Accompanying Notes to Consolidated Financial Statements
<PAGE>
SHELTER PROPERTIES I
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
<TABLE>
<CAPTION>
Years Ended December 31,
1999 1998
Cash flows from operating activities:
<S> <C> <C>
Net income $ 1,254 $ 1,065
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation 689 640
Amortization of discounts and loan costs 93 88
Change in accounts:
Receivables and deposits (30) (75)
Other assets (45) 17
Accounts payable 57 (130)
Tenant security deposit or liabilities 13 5
Accrued property taxes (26) 68
Other liabilities 48 (3)
Net cash provided by operating activities 2,053 1,675
Cash flows from investing activities:
Property improvements and replacements (932) (438)
Net withdrawals from restricted escrows 393 154
Net cash used in investing activities (539) (284)
Cash flows from financing activities:
Payments on mortgage notes payable (148) (137)
Partners distributions (1,300) (1,600)
Net cash used in financing activities (1,448) (1,737)
Net increase (decrease) in cash and cash equivalents 66 (346)
Cash and cash equivalents at beginning of year 1,682 2,028
Cash and cash equivalents at end of year $ 1,748 $ 1,682
Supplemental disclosure of cash flow information:
Cash paid for interest $ 851 $ 862
</TABLE>
See Accompanying Notes to Consolidated Financial Statements
<PAGE>
SHELTER PROPERTIES I
Notes to Consolidated Financial Statements
December 31, 1999
Note A - Organization and Significant Accounting Policies
Organization
Shelter Properties I (the "Partnership" or "Registrant") was organized as a
limited partnership under the laws of the State of South Carolina on April 7,
1980. The general partner responsible for management of the Partnership's
business is Shelter Realty I Corporation, a South Carolina corporation (the
"Corporate General Partner"). The only other general partner of the Partnership
was N. Barton Tuck, Jr. Mr. Tuck was not an affiliate of the Corporate General
Partner and was effectively prohibited by the Partnership's partnership
agreement (the "Partnership Agreement") from participating in the management of
the Partnership. In June 1999, Mr. Tuck's general partnership interest in the
Registrant was purchased by AIMCO Properties, L.P., an affiliate of the
Corporate General Partner. The Corporate General Partner is a subsidiary of
Apartment Investment and Management Company ("AIMCO") (see "Note B - Transfer of
Control"). The directors and officers of the Corporate General Partner also
serve as executive directors of AIMCO. The Partnership commenced operations on
July 3, 1980 and completed its acquisition of apartment properties during
December 1980. The Partnership owns four properties located in South Carolina,
Virginia, and Georgia (2). The Partnership Agreement provides that the
Partnership is to terminate on December 31, 2019 unless terminated prior to such
date.
Principles of Consolidation
The Registrant's financial statements include all of the accounts of the
Partnership and its 99.99% owned partnership. The General Partner of the
consolidated partnership is Shelter Realty I Corporation. Shelter Realty I
Corporation may be removed by the Registrant; therefore, the consolidated
partnership is controlled and consolidated by the Registrant. All significant
interpartnership transactions have been eliminated.
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 including reserve amounts deemed necessary by the Corporate General
Partner. In the following notes to consolidated financial statements, whenever
net cash provided by operations is used, it has the aforementioned meaning. The
following is a reconciliation of this subtotal in the accompanying consolidated
statements of cash flows captioned "net cash provided by operating activities"
to "net cash from operations", as defined in the Partnership Agreement. However,
"net cash from 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.
Years Ended December 31,
1999 1998
---- ----
(in thousands)
Net cash provided by operating activities $2,053 $1,675
Property improvements and replacements (932) (438)
Payments on mortgage notes payable (148) (137)
Changes in reserves for net operating liabilities (17) 118
Changes in restricted escrows, net 393 154
Additional operating reserves (849) (372)
Net cash from operations $ 500 $1,000
The Corporate General Partner reserved approximately $849,000 and $372,000 at
December 31, 1999 and 1998, respectively, to fund capital improvements and
repairs at its properties.
Distributions made from reserves no longer considered necessary by the Corporate
General Partner are considered to be additional net cash from operations for
allocation purposes. The following table sets forth the distributions made by
the Partnership for the years ended December 31, 1999 and 1998, as well as for
the subsequent period.
Distributions
Per Limited
Aggregate Partnership Unit
01/01/98 - 12/31/98 $1,600,000 (1) $105.67
01/01/99 - 12/31/99 $1,300,000 (1) $ 85.80
01/01/00 - 03/15/00 $ 500,000 (1) $ 33.00
(1) Distributions were made from cash from operations.
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
Reserve Account is funded in an amount equal to $300 to $325 per apartment unit
for Quail Hollow, Stone Mountain West, and Heritage Pointe for a total of
$151,800 to $164,500. The mortgage agreement stipulates a minimum reserve of
$400 per apartment unit at Windsor Hills for a total of $120,000. As of December
31, 1999, the Partnership has deposits of approximately $305,000 in its reserve
accounts.
Undistributed Net Proceeds from Property Sales
At December 31, 1999, undistributed proceeds from property sales amounted to
approximately $101,000 which is payable to the General Partners for related
sales commissions when certain levels of return are received by the limited
partners.
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.
Profits, not including gain from property dispositions, are allocated as if they
were distributions of net cash from operations.
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 as shown in the statements of operations and changes in
partners' deficit for 1999 and 1998 were allocated 99% to the limited partners
and 1% to the general partners. Net income per limited partnership unit for each
such year was computed as 99% of net income divided by 15,000 average units
outstanding.
Fair Value of Financial Instruments
Statement of Financial Accounting Standards ("SFAS") No. 107, "Disclosures about
Fair Value of Financial Instruments", as amended by SFAS No. 119, "Disclosures
about Derivative Financial Instruments and Fair Value of Financial Instruments",
requires disclosure of fair value information about financial instruments,
whether or not recognized in the balance sheet, for which it is practicable to
estimate fair value. Fair value is defined in the SFAS as the amount at which
the instruments could be exchanged in a current transaction between willing
parties, other than in a forced or liquidation sale. The Partnership believes
that the carrying amount of its financial instruments (except for long term
debt) approximates their fair value due to the short term maturity of these
instruments. The fair value of the Partnership's long term debt, after
discounting the scheduled loan payments to maturity, approximates its carrying
balance.
Other Reserves
The Corporate General Partner may designate a portion of cash generated from
operations as "other reserves" in determining net cash used in operations. The
general partners designated as other reserves an amount equal to the net
liabilities related to the operations of apartment properties during the current
year that are expected to require the use of cash during the next year. The
changes in the other reserves during 1999 and 1998 were a decrease of
approximately $17,000 and an increase of approximately $118,000, respectively.
These amounts were determined by considering changes in the balance of
receivables and deposits, other assets, accounts payable, tenant security
deposits liabilities, accrued property taxes and other liabilities. At this
time, the Corporate General Partner expects to continue to adjust other reserves
based on the net change in the aforementioned account balances.
Cash and Cash Equivalents
Cash and cash equivalents include cash on hand, cash in banks, and money market
accounts. At certain times, the amount of cash deposited at a bank may exceed
the limit on insured deposits.
Restricted Escrows
Capital Replacement Reserves - In connection with the refinancing of Quail
Hollow, Heritage Pointe, and Stone Mountain West Apartments in 1996,
approximately $606,000 of the proceeds were designated as a Repair Escrow
for the funding of required capital improvements and repairs as noted in
the loan documents. At December 31, 1999, approximately $191,000 remained
in the account.
Replacement Reserves - In connection with the 1996 refinancings of Quail
Hollow, Heritage Pointe and Stone Mountain West Apartments, each property
is to deposit between $300 and $325 per unit per year with the mortgage
company to establish and maintain a Replacement Reserve designated for
repairs and replacements at the properties. At December 31, 1999 this
reserve totaled approximately $129,000.
Reserve Account - A general Reserve Account was established in 1992 with
the refinancing proceeds for Windsor Hills. This fund was 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 Windsor Hills to its Reserve Account
until it equals a minimum of $400 per apartment unit or $120,000. The
balance at December 31, 1999, is approximately $176,000, which includes
interest earned on these funds.
Escrows for Taxes and Insurance
All tax escrow funds are designated for the payment of real estate taxes and are
held by the Partnership. These funds totaled approximately $164,800 and are
included in receivables and deposits.
Depreciation
Depreciation is calculated 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 additions prior to March 16, 1984, 18 years for additions
after March 15, 1984 and 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 5 years.
Effective January 1, 1999, the Partnership changed its method of accounting to
capitalize the cost of exterior painting and major landscaping (Note J).
Loan Costs
Loan costs of approximately $426,000, less accumulated amortization of
approximately $232,000, are included in other assets and are being amortized on
a straight-line basis over the life of the loans.
Tenant Security Deposits
The Partnership requires security deposits from lessees for the duration of the
lease and such deposits are included in receivables and deposits. Deposits are
refunded when the tenant vacates, provided the tenant has not damaged its space
and is current on rental payments.
Leases
The Partnership generally leases apartment units for twelve-month terms or less.
The Partnership recognizes income as earned on leases. The Corporate General
Partner finds it necessary 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 income as incurred.
Investment Properties
Investment properties consist of four apartment complexes and are stated at
cost. Acquisition fees are capitalized as a cost of real estate. In accordance
with Financial Accounting Standards Board Statement No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of,"
the Partnership records impairment losses on long-lived assets used in
operations when events and circumstances indicate that the assets might be
impaired and the undiscounted cash flows estimated to be generated by those
assets are less than the carrying amounts of those assets. Costs of apartment
properties that have been permanently impaired have been written down to
appraised value. No adjustments for impairment of value were recorded in the
years ended December 31, 1999 and 1998.
Advertising
The Partnership expenses the costs of advertising as incurred. Advertising costs
of approximately $50,000 and $46,000 for the years ended December 31, 1999 and
1998, respectively, were charged to operating expense as incurred.
Segment Reporting
Statement of Financial Accounting Standards ("SFAS") No. 131, "Disclosure about
Segments of an Enterprise and Related Information" ("Statement 131"),
established standards for the way that public business enterprises report
information about operating segments in annual financial statements and requires
that those enterprises report selected information about operating segments in
interim financial reports. It also establishes standards for related disclosures
about products and services, geographic areas, and major customers. (See "Note
H" for segment disclosure.)
Note B - Transfer of Control
Pursuant to a series of transactions which closed on October 1, 1998 and
February 26, 1999, Insignia Financial Group, Inc. and Insignia Properties Trust
merged into AIMCO, a publicly traded real estate investment trust, with AIMCO
being the surviving corporation (the "Insignia Merger"). As a result, AIMCO
acquired 100% ownership interest in the Corporate General Partner. The Corporate
General Partner does not believe that this transaction has had or will have a
material effect on the affairs and operations of the Partnership.
Note C - Mortgage Notes Payable
The principal terms of mortgage notes payable are as follows:
<TABLE>
<CAPTION>
Principal Monthly Principal
Balance At Payment Stated Balance
December 31, Including Interest Maturity Due At
1999 Interest Rate Date Maturity
(in thousands) (in thousands)
Properties
<S> <C> <C> <C> <C> <C>
Quail Hollow Apartments $ 2,850 $ 17 7.33% 11/01/03 $ 2,850
Windsor Hills Apartments
1st mortgage 3,975 38 7.60% 11/15/02 3,489
2nd mortgage 149 1 7.60% 11/15/02 149
Heritage Pointe Apartments 1,400 9 7.33% 11/01/03 1,400
Stone Mountain West
Apartments 3,000 18 7.33% 11/01/03 3,000
11,374 $ 83 $10,888
Less unamortized
Discounts (117)
Totals $11,257
</TABLE>
The Partnership exercised an interest rate buy-down option for the refinanced
mortgage notes payable of Windsor Hills, reducing the stated rate from 8.76% to
7.6%. The fee for the interest rate reduction amounted to approximately $346,000
and is being amortized as a loan discount on the interest method over the life
of the loan. The 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. Prepayment penalties are required if repaid prior to
maturity. Further, the properties may not be sold subject to existing
indebtedness.
Scheduled principal payments of the mortgage notes payable subsequent to
December 31, 1999 are as follows (in thousands):
2000 $ 160
2001 172
2002 3,791
2003 7,251
Thereafter --
$11,374
Note D - Income Taxes
The Partnership has received a ruling from the Internal Revenue Service that it
will be classified as a partnership for Federal income tax purposes.
Accordingly, no provision for income taxes is made in the financial statements
of the Partnership. Taxable income or loss of the Partnership is reported in the
income tax returns of its partners.
The following is a reconciliation of reported net income and Federal taxable
income (in thousands, except per unit data):
1999 1998
Net income as reported $1,254 $1,065
Add (deduct):
Amortization of present value discounts -- 1
Depreciation differences 13 40
Change in prepaid rental (17) (60)
Other 68 28
Federal taxable income $1,318 $1,074
Federal taxable income per limited
partnership unit $87.01 $70.88
The following is a reconciliation between the Partnership's reported amounts and
Federal tax basis of net assets and liabilities (in thousands):
Net deficit as reported $ (2,741)
Land and buildings 1,891
Accumulated depreciation (602)
Syndication fees 1,895
Other 235
Net assets - tax basis $ 678
Note E - Transactions with Affiliated Parties
The Partnership has no employees and is dependent on the Corporate General
Partner and its affiliates for the management and administration of all
partnership activities. The Partnership Agreement provides for (i) certain
payments to affiliates for services and (ii) reimbursement of certain expenses
incurred by affiliates on behalf of the Partnership. The following payments were
paid or accrued to the Corporate General Partner and affiliates during the years
ended December 31, 1999 and 1998:
1999 1998
(in thousands)
Property management fees (included in operating
expenses) $ 273 $ 262
Reimbursement for services of affiliates,
(included in operating, general and
administrative expenses, and investment
properties) 98 138
Due to general partners 101 101
During the years ended December 31, 1999 and 1998, affiliates of the Corporate
General Partner were entitled to receive 5% of gross receipts from all of the
Partnership's properties for providing property management services. The
Partnership paid to such affiliates approximately $273,000 and $262,000 for the
years ended December 31, 1999 and 1998, respectively.
An affiliate of the Corporate General Partner received reimbursement of
accountable administrative expenses amounting to approximately $98,000 and
$138,000 for the years ended December 31, 1999 and 1998, respectively.
Several tender offers were made by various parties, including affiliates of the
general partners, during the years ended December 31, 1999 and 1998. As a result
of these tender offers, AIMCO and its affiliates currently own 10,098 units of
limited partnership interest in the Partnership representing approximately
67.32% of the outstanding units. It is possible that AIMCO or its affiliates
will make one or more additional offers to acquire additional limited
partnership interests in the Partnership for cash or in exchange for units in
the operating partnership of AIMCO. Consequently, AIMCO is in a position to
influence all voting decisions with respect to the Registrant. Under the
Partnership Agreement, unitholders holding a majority of the Units are entitled
to take action with respect to a variety of matters. When voting on matters,
AIMCO would in all likelihood vote the Units it acquired in a manner favorable
to the interest of the Corporate General Partner because of their affiliation
with the Corporate General Partner.
Note F - Real Estate and Accumulated Depreciation
<TABLE>
<CAPTION>
Initial Cost
To Partnership
(in thousands)
Buildings Cost
and Related Capitalized
Personal Subsequent to
Description Encumbrances Land Property Acquisition
(in thousands) (in thousands)
<S> <C> <C> <C> <C>
Quail Hollow Apartments $ 2,850 $ 459 $ 3,754 $ 1,459
West Columbia, South Carolina
Windsor Hills Apartments 4,124 520 4,575 1,922
Blacksburg, Virginia
Heritage Pointe Apartments 1,400 239 2,410 1,045
Rome, Georgia
Stone Mountain West Apartments 3,000 210 3,408 1,296
Stone Mountain, Georgia
Total $11,374 $ 1,428 $14,147 $ 5,722
</TABLE>
Gross Amount At Which Carried
At December 31, 1999
(in thousands)
<TABLE>
<CAPTION>
Buildings
And
Related
Personal Accumulated Date of Date Depreciable
Description Land Properties Total Depreciation Construction Acquired Life-Years
<S> <C> <C> <C> <C> <C> <C> <C>
Quail Hollow $ 459 $ 5,213 $ 5,672 $ 3,970 1973 09/01/80 5-34
West Columbia,
South Carolina
Windsor Hill 520 6,497 7,017 4,801 1973 09/01/80 5-30
Blacksburg,
Virginia
Heritage Pointe 239 3,455 3,694 2,613 1967-1970 09/15/80 5-35
Rome, Georgia
Stone Mountain West 210 4,704 4,914 3,535 1972 12/31/80 5-37
Stone Mountain,
Georgia
Totals $1,428 $19,869 $21,297 $14,919
</TABLE>
Reconciliation of "Real Estate and Accumulated Depreciation":
December 31,
1999 1998
(in thousands)
Real Estate
Balance at beginning of year $20,365 $19,927
Property improvements 932 438
Balance at end of year $21,297 $20,365
Accumulated Depreciation
Balance at beginning of year $14,230 $13,590
Additions charged to expense 689 640
Balance at end of year $14,919 $14,230
The aggregate cost of the real estate for Federal income tax purposes at
December 31, 1999 and 1998, is approximately $23,188,000 and $22,256,000,
respectively. The accumulated depreciation taken for Federal income tax purposes
at December 31, 1999 and 1998, is approximately $15,521,000 and $14,844,000,
respectively.
<PAGE>
Note G - Distributions
The following table sets forth the distributions made by the Partnership for the
years ended December 31, 1999 and 1998 as well as for the subsequent period.
Distributions
Per Limited
Aggregate Partnership Unit
01/01/98 - 12/31/98 $1,600,000 (1) $105.67
01/01/99 - 12/31/99 $1,300,000 (1) $ 85.50
01/01/00 - 03/15/00 $ 500,000 (1) $ 33.00
(1) Distribution was made from cash from operations.
Note H - Segment Reporting
Description of the types of products and services from which the reportable
segment derives its revenues
The Partnership has one reportable segment: residential properties. The
Partnership's residential properties segment consists of four apartment
complexes located in Georgia (2), South Carolina, and Virginia. The Partnership
rents apartment units to people for terms that are typically twelve months or
less.
Measurement of segment profit or loss
The Partnership evaluates performance based on segment profit (loss) before
depreciation. The accounting policies of the reportable segment are the same as
those described in the summary of significant accounting policies.
Factors management used to identify the enterprise's reportable segment
The Partnership's reportable segment consists of investment properties that
offer similar products and services. Although each of the investment properties
is managed separately, they have been aggregated into one segment as they
provide services with similar types of products and customers.
Segment information for the years ended December 31, 1999 and 1998 is shown in
the tables below. The "Other" column includes partnership administration related
items and income and expense not allocated to the reportable segment.
1999 Residential Other Totals
(in thousands)
Rental income $ 5,205 $ -- $ 5,205
Other income 267 19 286
Interest expense 956 -- 956
Depreciation 689 -- 689
General and administrative expense -- 186 186
Segment profit (loss) 1,421 (167) 1,254
Total assets 9,001 173 9,174
Capital expenditures for investment
properties 932 -- 932
1998 Residential Other Totals
(in thousands)
Rental income $ 4,998 $ -- $ 4,998
Other income 266 25 291
Interest expense 950 -- 950
Depreciation 640 -- 640
General and administrative expense -- 217 217
Segment profit (loss) 1,257 (192) 1,065
Total assets 8,415 824 9,239
Capital expenditures for investment
properties 438 -- 438
Note I - 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 Corporate General Partner and several of their affiliated
partnerships and corporate entities. The action 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 Financial Group, Inc.
("Insignia") and entities which were, at one time, affiliates of Insignia
("Insignia 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 and the Insignia Merger (see
"Note B - Transfer of Control"). The plaintiffs seek monetary damages and
equitable relief, including judicial dissolution of the Partnership. On June 25,
1998, the Corporate General Partner filed a motion seeking dismissal of the
action. In lieu of responding to the motion, the plaintiffs have filed an
amended complaint. The Corporate General Partner filed demurrers to the amended
complaint which were heard February 1999. Pending the ruling on such demurrers,
settlement negotiations commenced. On November 2, 1999, the parties executed and
filed a Stipulation of Settlement settling claims, subject to final court
approval, on behalf of the Partnership and all limited partners who own units as
of November 3, 1999. Preliminary approval of the settlement was obtained on
November 3, 1999 from the Superior Court of the State of California, County of
San Mateo, at which time the Court set a final approval hearing for December 10,
1999. Prior to the December 10, 1999 hearing the Court received various
objections to the settlement, including a challenge to the Court's preliminary
approval based upon the alleged lack of authority of class plaintiffs' counsel
to enter the settlement. On December 14, 1999, the Corporate General Partner and
its affiliates terminated the proposed settlement. Certain plaintiffs have filed
a motion to disqualify some of the plaintiffs' counsel in the action. The
Corporate General Partner does not anticipate that costs associated with this
case will be material to the Partnership's overall operations.
The Partnership is unaware of any other pending or outstanding litigation that
is not of a routine nature arising in the ordinary course of business.
Note J - Change in Accounting Principle
Effective January 1, 1999, the Partnership changed its method of accounting to
capitalize the cost of exterior painting and major landscaping on a prospective
basis. The Partnership believes that this accounting principle change is
preferable because it provides a better matching of expenses with the related
benefit of the expenditures and it is consistent with industry practice and the
policies of the Corporate General Partner. The effect of the change in 1999 was
to increase net income by approximately $67,700 ($4.47 per limited partnership
unit). The cumulative effect, had this change been applied to prior periods, is
not material. The accounting principle change will not have an effect on cash
flow, funds available for distribution or fees payable to the Corporate General
Partner and affiliates.
<PAGE>
Item 8. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
None.
<PAGE>
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 Corporate General Partner is
Shelter Realty I Corporation. The names and ages of, as well as the positions
and offices held by, the present executive officers and directors of the
Corporate General Partner are set forth below. There are no family relationships
between or among any officers or directors.
Name Age Position
Patrick J. Foye 42 Executive Vice President and Director
Martha L. Long 40 Senior Vice President and Controller
Patrick J. Foye has been Executive Vice President and Director of the Corporate
General Partner since October 1, 1998. Mr. Foye has served as Executive Vice
President of AIMCO since May 1998. Prior to joining AIMCO, Mr. Foye was a
partner in the law firm of Skadden, Arps, Slate, Meagher & Flom LLP from 1989 to
1998 and was Managing Partner of the firm's Brussels, Budapest and Moscow
offices from 1992 through 1994. Mr. Foye is also Deputy Chairman of the Long
Island Power Authority and serves as a member of the New York State
Privatization Council. He received a B.A. from Fordham College and a J.D. from
Fordham University Law School.
Martha L. Long has been Senior Vice President and Controller of the Corporate
General Partner and AIMCO since October 1998, as a result of the acquisition of
Insignia Financial Group, Inc. From June 1994 until January 1997, she was the
Controller for Insignia, and was promoted to Senior Vice President - Finance and
Controller in January 1997, retaining that title until October 1998. From 1988
to June 1994, Ms. Long was Senior Vice President and Controller for The First
Savings Bank, FSB in Greenville, South Carolina.
Based solely upon a review of Forms 3 and 4 and amendments thereto furnished to
the Registrant under Rule 16a-3(e) during the Registrant's most recent fiscal
year and Forms 5 and amendments thereto furnished to the Registrant with respect
to its most recent fiscal year, the Registrant is not aware of any director,
officer, beneficial owner of more than ten percent of the units of limited
partnership interest in the Registrant that failed to file on a timely basis, as
disclosed in the above Forms, reports required by section 16(a) of the Exchange
Act during the most recent fiscal year or prior fiscal years except as follows:
AIMCO Properties, L.P. and its joint filers failed to timely file a Form 3 with
respect to its acquisition of Units and AIMCO and its joint filers failed to
timely file a Form 4 with respect to its acquisition of Units.
Item 10. Executive Compensation
None 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, as of December 31, 1999, no person or entity was known to
own of record or beneficially more than 5% of the Limited Partnership Units of
the Registrant.
Number of Units Percentage
Cooper River Properties, LLC 1,145 7.64%
(an affiliate of AIMCO)
Insignia Properties, LP 5,864 39.09%
(an affiliate of AIMCO)
AIMCO Properties, LP 3,089 20.59%
(an affiliate of AIMCO)
Cooper River Properties, LLC and Insignia Properties LP are indirectly
ultimately owned by AIMCO. Their business address is 55 Beattie Place,
Greenville, SC 29602.
AIMCO Properties, LP is indirectly ultimately owned by AIMCO. Its business
address is 2000 South Colorado Blvd., Denver, Colorado 80222.
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 governing the Partnership. AIMCO Properties LP, the other
general partner acquired 3,089 units during the current year.
Item 12. Certain Relationships and Related Transactions
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 (i) certain
payments to affiliates for services and (ii) reimbursement of certain expenses
incurred by affiliates on behalf of the Partnership. The following payments were
paid or accrued to the Corporate General Partner and affiliates during the years
ended December 31, 1999 and 1998:
1999 1998
(in thousands)
Property management fees (included in operating
expenses) $ 273 $ 262
Reimbursement for services of affiliates,
(included in operating, general and
administrative expenses, and investment
properties) 98 138
Due to general partners 101 101
During the years ended December 31, 1999 and 1998, affiliates of the Corporate
General Partner were entitled to receive 5% of gross receipts from all of the
Partnership's properties for providing property management services. The
Partnership paid to such affiliates approximately $273,000 and $262,000 for the
years ended December 31, 1999 and 1998, respectively.
An affiliate of the Corporate General Partner received reimbursement of
accountable administrative expenses amounting to approximately $98,000 and
$138,000 for the years ended December 31, 1999 and 1998, respectively.
Several tender offers were made by various parties, including affiliates of the
general partners, during the years ended December 31, 1999 and 1998. As a result
of these tender offers, AIMCO and its affiliates currently own 10,098 units of
limited partnership interest in the Partnership representing 67.32% of the
outstanding units. It is possible that AIMCO or its affiliates will make one or
more additional offers to acquire additional limited partnership interests in
the Partnership for cash or in exchange for units in the operating partnership
of AIMCO. Consequently, AIMCO is in a position to influence all voting decisions
with respect to the Registrant. Under the Partnership Agreement, unitholders
holding a majority of the Units are entitled to take action with respect to a
variety of matters. When voting on matters, AIMCO would in all likelihood vote
the Units it acquired in a manner favorable to the interest of the Corporate
General Partner because of their affiliation with the Corporate General Partner.
<PAGE>
Item 13. Exhibits and Reports on Form 8-K
(a) Exhibits:
Exhibit 18, Independent Accountants' Preferability Letter for Change
in Accounting Principle, is filed as an exhibit to this report.
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 1999:
None.
<PAGE>
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the Registrant has
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
SHELTER PROPERTIES I
By: Shelter Realty I Corporation
Corporate General Partner
By: /s/Patrick J. Foye
Patrick J. Foye
Executive Vice President
By: /s/Martha L. Long
Martha L. Long
Senior Vice President and
Controller
Date:
In accordance with the Exchange Act, this report has been signed below by the
following persons on behalf of the Partnership and in the capacities and on the
dates indicated.
/s/Patrick J. Foye Executive Vice President Date:
Patrick J. Foye and Director
/s/Martha L.Long Senior Vice President Date:
Martha L. Long and Controller
<PAGE>
EXHIBIT INDEX
Exhibit
2.1 Agreement and Plan of Merger, dated as of October 1, 1998, by and
between AIMCO and IPT (incorporated by reference to Exhibit 2.1 of
IPT's Current Report on Form 8-K, File No. 1-14179, dated October 1,
1998).
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 July 3, 1980 contained in Amendment No. 1 to Registration
Statement No. 2-67384 of Registrant filed July 3, 1980 (the
"Prospectus") and incorporated herein by reference).
(b) Subscription Agreements and Signature Pages (Filed with Amendment
No. 1 of Registration Statement No. 2-67384 of Registrant filed
July 3, 1980 and incorporated herein by reference).
(c) Wrap Around Mortgage Note and South Carolina Mortgage of Real
Estate between Quail Hollow Company and Shelter Properties I to
acquire Quail Hollow Apartments.*
(d) Promissory Note and Deed of Trust and Security Agreement between
Pacific Mutual Life Insurance Company and Shelter Properties I to
refinance the debt of Windsor Hills Apartments.*
(e) Multifamily Note and Multifamily Deed to secure Debt between
Germania Federal Savings and Loan Association and Shelter
Properties I to refinance the debt of Rome Georgian Apartments.*
(f) Promissory Note and Deed to Secure Debt and Security Agreement
between Citizens and Southern Financial Corporation and Stone
Property Associates, Ltd. to acquire Stone Mountain Apartments.*
*Filed as Exhibit 4(c), 4(d), 4(e), and 4(f), respectively, to
Form 10-K of Registrant for year ended December 31, 1987 and
incorporated herein by reference.
10(i) Contract related to acquisition or disposition of properties.
(a) Purchase Agreement dated December 5, 1979, between Quail Hollow
Associates Limited Partnership and U.S. Shelter Corporation to
purchase Quail Hollow Apartments.**
(b) Purchase Agreement dated December 5, 1979, between Windsor
Associates and U.S. Shelter Corporation to purchase Windsor Hills
Apartments.**
**Filed as Exhibits 12(c) and 12(d), respectively, to
Registration Statement No. 2-67384 of Registrant filed April
16, 1980 and incorporated herein by reference.
(c) Purchase Agreement dated June 4, 1980 between Paul Lipman,
Trustee and U.S. Shelter Corporation to purchase Rome Georgian
Apartments.***
***Filed as Exhibit 12(d), to Amendment No. 1 to Registration
Statement, No. 2-67384, of Registrant filed July 3, 1980 and
incorporated herein by reference.
(d) Purchase Agreement dated December 17, 1980 between Stone Property
Associates, Ltd. and Shelter Properties I to purchase Stone
Mountain West Apartments. (Filed with Form 8-K of Registrant
dated December 18, 1980 and incorporated herein by reference).
(e) Agreement of Sale dated September 30, 1983 between Shelter
Properties I and Case/Edwards Associates to sell Yorktown
Apartments. (Filed with Form 10-K of Registrant for year ended
December 31, 1983 and incorporated herein by reference).
(f) Contract of Sale dated September 30, 1983 between Shelter
Properties I and Volco, Inc. to sell Lamplighter Apartments.
(Filed with Form 10-K of Registrant for year ended December 31,
1984 and incorporated herein by reference).
(g) Agreement of Sale dated May 31, 1984 between Shelter Properties I
and BWIT Fifty-Fifth Street, Inc. to sell Middle Plantation
Apartments. (Filed with Form 10-K of Registrant for year ended
December 31, 1984 and incorporated herein by reference).
10(ii) Form of Management Agreement with U.S. Shelter Corporation subsequently
assigned to Shelter Management Group, L.P. (now known as Insignia
Management, L.P.) (Filed with Amendment No. 1 of Registration Statement,
No. 2-67384 of Registrant filed July 3, 1980 and incorporated herein by
reference).
10(iii) Contracts related to refinancing the debt:
(a) Restated and Modified of First Deed of Trust and Security
Agreement dated October 28, 1992 between Windsor Hills I, L.P.
and Dewey B. Morris and Richard G. Joynt (Trustee) and First
Commonwealth Realty Credit Corporation, a Virginia Corporation,
securing the Windsor Hill property.****
(b) Second Deed of Trust and Security Agreement dated October 28,
1992 between Windsor Hills I, L.P. and Dewey B. Morris and
Richard G. Joynt (Trustee) and First Commonwealth Realty Credit
Corporation, a Virginia Corporation, securing the Windsor Hill
property.****
(c) First Assignment of Leases and Rents dated October 28, 1992
between Windsor Hills I, L.P. and First Commonwealth Realty
Credit Corporation, a Virginia Corporation, securing the Windsor
Hills property.****
(d) Second Assignment of Leases and Rents dated October 28, 1992
between Windsor Hills I, L.P. and Dewey B. Morris and Richard G.
Joynt (Trustee) and First Commonwealth Realty Credit Corporation,
a Virginia Corporation, securing the Windsor Hills property.****
(e) Restated and Modified Deed of Trust Note dated October 28, 1992
between Windsor Hills I, L.P. and First Commonwealth Realty
Credit Corporation relating to the Windsor Hills property.****
(f) Second Deed of Trust Note dated October 28, 1992 between Windsor
Hills I, L.P. and First Commonwealth Realty Credit Corporation, a
Virginia Corporation relating to the Windsor Hills property.****
****Filed as Exhibit 10(iii) (a) through (f), respectively, to
Form 10-KSB of Registrant for year ended December 31, 1992 and
incorporated herein by reference.
(g) Multifamily Note dated May 11, 1994 between Shelter Properties I
and Financial Federal Savings Bank relating to Rome Georgian
Apartments.*****
(h) Multifamily Deed to secure debt, assignments of rents and
security agreement, dated May 11, 1994 between Shelter Properties
I and Financial Federal Savings Bank securing Rome Georgian
Apartments.*****
(i) Multifamily Note secured by a Mortgage or Deed of Trust dated
November 1, 1996, between Shelter Properties I and Lehman
Brothers Holdings, Inc., d/b/a Lehman Capital, a Division of
Lehman Brothers Holdings, Inc., relating to Quail Hollow
Apartments.
(j) Multifamily Note secured by a Mortgage or Deed of Trust dated
November 1, 1996, between Shelter Properties I and Lehman
Brothers Holdings, Inc., d/b/a Lehman Capital, a Division of
Lehman Brothers Holdings, Inc., relating to Rome Georgian
Apartments.
(k) Multifamily Note secured by a Mortgage or Deed of Trust dated
November 1, 1996, between Shelter Properties I and Lehman
Brothers Holdings, Inc., d/b/a Lehman Capital, a Division of
Lehman Brothers Holdings, Inc., relating to Stone Mountain West
Apartments.
*****Filed as Exhibit 10(iii) (a) and (b), respectively, to
Form 10QSB of Registrant for the quarter ended June 30, 1994
and incorporated herein by reference.
18 Independent Accountants' Preferability Letter for Change in
Accounting Principle.
22 Subsidiaries of the Registrant.
27 Financial Data Schedule.
99 (a) Prospectus of Registrant dated July 3, 1980, (included in
Registration Statement No. 2-67384, of Registrant) and
incorporated herein by reference.
(b) Agreement of Limited Partnership for Windsor Hills I, L.P.
between Shelter I GP Limited Partnership and Shelter I Limited
Partnership dated October 13, 1992. (Filed as Exhibit 28(b) to
Form 10-KSB of Registrant for year ended December 31, 1992 and
incorporated herein by reference).
<PAGE>
EXHIBIT 22
SHELTER PROPERTIES I
Subsidiary List
State of Incorporation/
Name of Subsidiary Formation Date
Windsor I Limited Partnership Delaware 1992
Shelter I GP Limited Partnership 1992
<PAGE>
Exhibit 18
February 7, 2000
Mr. Patrick J. Foye
Executive Vice President
Shelter Realty I Corporation
Corporate General Partner of Shelter Properties I
55 Beattie Place
P.O. Box 1089
Greenville, South Carolina 29602
Dear Mr. Foye:
Note J of Notes to the Financial Statements of Shelter Properties I included in
its Form 10-KSB for the year ended December 31, 1999 describes a change in the
method of accounting to capitalize exterior painting and major landscaping,
which would have been expensed under the old policy. You have advised us that
you believe that the change is to a preferable method in your circumstances
because it provides a better matching of expenses with the related benefit of
the expenditures and is consistent with policies currently being used by your
industry and conforms to the policies of the Corporate General Partner.
There are no authoritative criteria for determining a preferable method based on
the particular circumstances; however, we conclude that the change in the method
of accounting for exterior painting and major landscaping is to an acceptable
alternative method which, based on your business judgment to make this change
for the reasons cited above, is preferable in your circumstances.
Very truly yours,
/s/ Ernst & Young LLP
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from Shelter
Properties I 1999 Fourth Quarter 10-KSB and is qualified in its entirety by
reference to such 10-KSB filing.
</LEGEND>
<CIK> 0000316220
<NAME> Shelter Properties I
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
<CASH> 1748
<SECURITIES> 0
<RECEIVABLES> 298
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0 <F1>
<PP&E> 21,297
<DEPRECIATION> 14,919
<TOTAL-ASSETS> 9,174
<CURRENT-LIABILITIES> 0 <F1>
<BONDS> 11,257
0
0
<COMMON> 0
<OTHER-SE> (2,741)
<TOTAL-LIABILITY-AND-EQUITY> 9,174
<SALES> 0
<TOTAL-REVENUES> 5,491
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 4,237
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 956
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,254
<EPS-BASIC> 82.73 <F2>
<EPS-DILUTED> 0
<FN>
<F1> Registrant has an unclassified balance sheet. <F2> Multiplier is 1.
</FN>
</TABLE>
