FORM 10-KSB--ANNUAL OR TRANSITIONAL REPORT UNDER
SECTION 13 OR 15(D)
FORM 10-KSB
[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, 1996
or
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934 [No Fee Required]
For the transition period.........to.........
Commission file number 0-10256
SHELTER PROPERTIES II LIMITED PARTNERSHIP
(Name of small business issuer in its charter)
South Carolina 57-0709233
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
One Insignia Financial Plaza, P.O. Box 1089
Greenville, South Carolina 29602
(Address of principal executive offices) (Zip Code)
Issuer's telephone number (864) 239-1000
Securities registered under Section 12(b) of the Exchange Act:
None
Securities registered under Section 12(g) of the Exchange Act:
Units of Limited Partnership Interest
(Title of class)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act of 1934 during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days. Yes X No
Check if there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B contained in this form, and no disclosure will be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-KSB or any
amendment to this Form 10-KSB. [ ]
State issuer's revenues for its most recent fiscal year. $5,509,000
State the aggregate market value of the voting partnership interests by non-
affiliates computed by reference to the price at which the partnership interests
were sold, or the average bid and asked prices of such partnership interests, as
of December 31, 1996: Market value information for the Registrant's partnership
interests is not available. Should a trading market develop for these
interests, it is the Corporate General Partner's belief that such trading would
not exceed $25,000,000.
DOCUMENTS INCORPORATED BY REFERENCE
1.Portions of the Prospectus of Registrant dated February 2, 1981 (included in
Registration Statement, No.2-69507, of Registrant) are incorporated by reference
into Parts I and III.
PART I
ITEM 1. DESCRIPTION OF BUSINESS
Shelter Properties II Limited Partnership (the "Registrant" or the
"Partnership") is engaged in the business of acquiring, operating and holding
real properties for investment. The Registrant acquired five existing apartment
properties during 1981. The Registrant sold one property in 1983, and in 1988
another property was foreclosed upon by the lender.
Commencing February 2, 1981, the Registrant offered through E. F. Hutton &
Company Inc. ("Hutton") up to 27,400 Units of Limited Partnership Interest (the
"Units") at $1,000 per Unit with a minimum purchase of 5 Units ($5,000), or 1.5
Units ($1,500) for an Individual Retirement Account. An additional 100 Units
were purchased by Shelter Realty II Corporation (the "Corporate General
Partner"). Limited partners are not required to make any additional capital
contributions.
The Units were registered under the Securities Act of 1933 via Registration
Statement No. 2-69507 (the "Registration Statement"). Reference is made to the
Prospectus of Registrant dated February 2, 1981 (the "Prospectus") contained in
said Registration Statement, which is incorporated herein by reference thereto.
The offering terminated on April 30, 1981. Upon termination of the offering,
the Registrant had accepted subscriptions for 27,500 Units, including 100 Units
purchased by the Corporate General Partner, for an aggregate of $27,500,000. By
June 30, 1981, the Registrant had invested or committed for investment
approximately $21,000,000 of such proceeds in five existing apartment
properties, thereby completing its acquisition program at the approximate
expenditure level estimated in the Prospectus.
During December of 1983, the Partnership sold Cambridge Station Apartments in
Columbia, South Carolina. During September of 1988, after unsuccessful
negotiations to restructure the mortgage note on The Village Apartments in
Winston-Salem, North Carolina, the general partner, on behalf of the
Partnership, put the note in default and allowed the lender to foreclose on the
property.
A further description of the Partnership's business is included in Management's
Discussion and Analysis or Plan of Operation included in "Item 6" of this Form
10-KSB.
The Registrant has no employees. Management and administrative services are
performed by the Corporate General Partner and by Insignia Residential Group,
L.P., an affiliate of Insignia Financial Group, Inc. ("Insignia"), the ultimate
parent company of the Corporate General Partner. Pursuant to a management
agreement between them, Insignia Residential Group, L.P. provides property
management services to the Registrant.
The real estate business in which the Partnership is engaged is highly
competitive, and the Partnership is not a significant factor in this industry.
The Registrant's property is subject to competition from similar properties in
the vicinity in which the property is located. In addition, various limited
partnerships have been formed by the General Partners and/or their affiliates to
engage in business which may be competitive with the Registrant.
ITEM 2. DESCRIPTION OF PROPERTIES:
The following table sets forth the Registrant's investments in properties:
Date of
Property Purchase Type of Ownership Use
Parktown Townhouses 03/01/81 Fee ownership, subject Apartment
Deer Park, Texas to first and second 309 units
mortgages.
Raintree Apartments 04/30/81 Fee ownership, subject Apartment
Anderson, South Carolina to first and second 176 units
mortgages.
Signal Pointe Apartments 06/30/81 Fee ownership, subject Apartment
Winter Park, Florida to first and second 368 units
mortgages.
SCHEDULE OF PROPERTIES:
(dollar amounts in thousands)
Gross
Carrying Accumulated Federal
Property Value Depreciation Rate Method Tax Basis
Parktown Townhouses $ 9,396 $ 5,725 5-35 S/L $2,826
Raintree Apartments 3,988 2,486 5-38 S/L 515
Signal Pointe Apartments 11,112 6,832 5-37 S/L 1,800
Totals $24,496 $15,043 $5,141
See "Note A" to the financial statements in "Item 7" for a description of the
Partnership's depreciation policy.
SCHEDULE OF MORTGAGES:
(dollar amounts in thousands)
<TABLE>
<CAPTION>
Principal Principal
Balance at Stated Balance
December 31, Interest Period Maturity Due At
Property 1996 Rate Amortized Date Maturity
<S> <C> <C> <C> <C> <C>
Parktown Townhouses
1st mortgage $ 3,209 7.60% (1) 11/15/02 $2,552
2nd mortgage 109 7.60 (1) 11/15/02 109
Raintree Apartments
1st mortgage 1,424 7.60 (1) 11/15/02 1,133
2nd mortgage 48 7.60 (1) 11/15/02 48
Signal Pointe Apartments
1st mortgage 4,254 7.60 (1) 11/15/02 3,383
2nd mortgage 145 7.60 (1) 11/15/02 145
$ 9,189
Less unamortized
present value discounts (451)
Total $ 8,738
<FN>
(1) The principal balance is being amortized over 257 months with a balloon
payment due November 15, 2002.
</TABLE>
The Partnership exercised interest rate buy-down options for the three
properties when the debt was refinanced in 1992, reducing the stated rate from
8.76% to 7.60%. The fee for the interest rate reduction amounted to
approximately $700,000 and is being amortized as a loan discount using the
interest method over the life of the loans. The discount 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. Certain of the notes require prepayment penalties if
repaid prior to maturity.
Average annual rental rate per unit and occupancy for 1996 and 1995 for each
property were:
Average Annual Average
Rental Rates Occupancy
Property 1996 1995 1996 1995
Parktown Townhouses $7,361 $7,063 95% 95%
Raintree Apartments 5,602 5,329 94% 96%
Signal Pointe Apartments 5,958 5,826 95% 95%
As noted under "Item 1. Description of Business," the real estate industry is
highly competitive. All of the properties of the Partnership are subject to
competition from other residential apartment complexes in the area. The
Corporate General Partner believes that all of the properties are adequately
insured. The multi-family residential properties' lease terms are for one year
or less. No residential tenant leases 10% or more of the available rental
space.
Real estate taxes and rates in 1996 for each property were:
(dollar amounts in thousands)
1996 1996
Billing Rate
Parktown Townhouses $ 176 2.97%
Raintree Apartments 73 3.76%
Signal Pointe Apartments 145 1.82%
ITEM 3. LEGAL PROCEEDINGS
The general partner responsible for management of the Partnership's business is
Shelter Realty II 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 affiliate 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
or about April 26 and 27, 1995, six entities ("Affiliated Purchaser") affiliated
with the Partnership commenced tender offers for limited partner interests in
six limited partnerships, including the Partnership (collectively, the "Shelter
Properties Partnerships"). On May 27, 1995, the Affiliated Purchaser acquired
6,026 units of the Partnership pursuant to the tender offer. On or about May
12, 1995, in the United States District Court for the District of South
Carolina, certain limited partners of the Shelter Properties Partnerships
commenced a lawsuit, on behalf of themselves, on behalf of a putative class of
plaintiffs, and derivatively on behalf of the partnerships, challenging the
actions taken by defendants (including Insignia, the acquiring entities and
certain officers of Insignia) in the management of the Shelter Properties
Partnerships and in connection with the tender offers and certain other matters.
The plaintiffs alleged that, among other things: (i) the defendants
intentionally mismanaged the partnerships and acted contrary to the limited
partners' best interests by prolonging the existence of the partnerships in
order to perpetuate the revenues derived by Insignia (an affiliate of the
Corporate General Partner) and its affiliates from the partnerships, (ii) the
defendants' actions reduced the demand for the partnerships' limited partner
interests in the limited resale market by artificially depressing the trading
prices for limited partner interests in order to create a favorable environment
for the tender offers; (iii) through the tender offers, the acquiring entities
sought to acquire effective voting control over the partnerships while paying
highly inadequate prices; and (iv) the documents disseminated to the class in
connection with the tender offers contained false and misleading statements and
omissions of material facts concerning such issues as the advantages to limited
partners of tendering pursuant to the tender offers, the true value of the
interest, the true financial condition of the partnerships, the factors
affecting the likelihood that properties owned by the partnerships will be sold
or liquidated in the near future, the liquidity and true value of the limited
partner interests, the reasons for the limited secondary market for limited
partner interests, and the true nature of the market for the underlying real
estate assets owned by the Shelter Properties Partnerships, all in violation of
the federal securities laws.
On September 27, 1995, the parties entered into a stipulation to settle the
matter. The principal terms of the stipulation require supplemental payments to
tendering limited partners aggregating approximately $6 million to be paid by
Affiliated Purchaser, of which approximately $640,000 is the Partnership's
portion; waiver by the Shelter Properties Partnerships' general partners of any
right to certain proceeds from a sale or refinancing of the Shelter Properties
Partnerships' properties; some restrictions on Insignia's ability to vote the
limited partner interests it acquired; payment of $1.25 million (which amount is
divided among the various partnerships and acquiring entities) for plaintiffs'
attorney fees and expenses in the litigation; and general releases of all the
defendants.
On June 24, 1996, after notice to the class and a hearing on the fairness and
adequacy of notice and the terms of settlement, the court orally approved the
settlement. The court signed the formal order on July 30, 1996. No appeal was
filed within thirty days after the court entered the formal order and the
settlement became effective on August 30, 1996. The Affiliated Purchaser made
the payments to investors in accordance with the settlement in early September
1996.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
During the fiscal year ended December 31, 1996, no matter was submitted to a
vote of Unit holders through the solicitation of proxies or otherwise.
PART II
ITEM 5. MARKET FOR PARTNERSHIP EQUITY AND RELATED PARTNER MATTERS
As of December 31, 1996, there was minimal trading of the Units in the
secondary market. As of December 31, 1996, there were 1,799 holders of record
owning an aggregate of 27,500 Units. As disclosed in "Item 3. Legal
Proceedings," an affiliate of the Corporate General Partner purchased 6,026
units at $235 per unit. In addition, High River Limited Partnership purchased
2,857 units at $341.20 per Unit. No public trading market has developed for the
Units, and it is not anticipated that such a market will develop in the future.
Cash distributions to the limited partners of $500,000, attributable to prior
years debt refinancing proceeds, were declared and paid during the year ended
December 31, 1996. Future cash distributions will depend on the levels of cash
generated from operations, refinancings, property sales and cash reserves. As
of December 31, 1996, the Reserve Account was fully funded, however if it
becomes necessary to draw upon these reserves, distributions may also be
restricted by the requirement to deposit net operating income (as defined in the
mortgage note) into the Reserve Account as disclosed in "Note A" of the
financial statements.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
This item should be read in conjunction with the consolidated financial
statements and other items contained elsewhere in this report.
Results of Operations
The Partnership realized net income of $258,000 for the year ended December 31,
1996, compared to a net loss of $93,000 for the year ended December 31, 1995
(see "Note C" of the financial statements for a reconciliation of these amounts
to the Partnership's federal taxable losses). The increase in net income was
primarily attributable to a decrease in general and administrative expenses.
General and administrative expenses decreased primarily due to the reduction of
legal fees which were unusually high during 1995 due to the lawsuit disclosed in
"Item 3. Legal Proceedings," as well as a decrease in professional fees in
connection with the partnership's required responses to certain tender offers
made during 1995.
The Partnership recorded a casualty loss in 1995 resulting from a fire at
Parktown Apartments which affected a building roof and the interiors of four
units. The damage resulted in a loss of $15,000 arising from proceeds from the
Partnership's insurance carrier of approximately $38,000 which did not cover the
cost of the property and expenses to replace the roof and interiors damaged.
Included in maintenance expense is approximately $255,000 of major repairs and
maintenance comprised primarily of major landscaping expenses, gutter repairs,
exterior building repairs, parking lot repairs and exterior painting costs.
Investment properties consisting of three apartment complexes, are stated at
cost. Prior to the fourth quarter of 1995, costs of apartment properties that
were permanently impaired were written down to appraised value. The Corporate
General Partner relied on the annual appraisals performed by outside appraisers
for the estimated value of the Partnership's properties. There are three
recognized approaches or techniques available to the appraiser. When
applicable, these approaches are used to process the data considered significant
to each to arrive at separate value indications. In all instances, the
experience of the appraiser, coupled with his objective judgment, plays a
major role in arriving at the conclusions of the indicated value from which the
final estimate of value is made. The three approaches commonly used are the cost
approach, the sales comparison approach, and the income approach. The cost
approach is often not considered to be reliable due to the lack of land sales
and the significant amount of depreciation and, therefore, is often not
presented. Upon receipt of the appraisals, any property which was stated on the
books of the Partnership above the estimated value given in the appraisal was
written down to the estimated value given by the appraiser. The appraiser
assumed a stabilized occupancy at the time of the appraisal and, therefore, any
impairment of value was considered to be permanent by the Corporate General
Partner.
During the fourth quarter of 1995, the Partnership adopted "FASB Statement No.
121, Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed Of," which requires impairment losses to be recorded on
long-lived assets used in operations when indicators of impairment are present
and the undiscounted cash flows estimated to be generated by those assets are
less than the assets' carrying amount. The impairment loss is measured by
comparing the fair value of the asset to its carrying amount. The effect of
adoption was not material. For the year ended December 31, 1996, no adjustments
for value impairments were necessary.
As part of the ongoing business plan of the Partnership, the Corporate General
Partner monitors the rental market environment at 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 assurance that the Corporate General Partner will be able to sustain
this plan.
Liquidity and Capital Resources
At December 31, 1996, the Partnership held unrestricted cash of $2,223,000
compared to $2,280,000 at December 31, 1995. Net cash provided by operating
activities increased primarily as a result of increased rental income and
reduced administrative expenses. Net cash used in investing activities
increased primarily due to increased property improvements at Parktown
Apartments. Net cash used in financing activities decreased due to the
Partnership making lesser distributions in 1996 as compared to 1995.
The Partnership has no material capital programs scheduled to be performed in
1997, although certain routine capital expenditures and maintenance expenses
have been budgeted. The Corporate General Partner is currently evaluating the
necessity of the replacement or repair of water and sewer lines at Parktown due
to possible underground leaks. These capital expenditures and maintenance
expenses will be incurred only if cash is available.
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 properties to adequately maintain the physical
assets and other operating needs of the Partnership. Such assets are currently
thought to be sufficient for any near-term needs of the partnership. The
mortgage indebtedness of approximately $8,738,000, net of discount, is amortized
over 257 months as previously disclosed in "Item 2. Description of Properties."
In addition, the mortgage notes require balloon payments on November 15, 2002,
at which time the individual properties will either be sold or refinanced. Cash
distributions of $500,000 were paid during the year ended December 31, 1996.
During the year ended December 31, 1995, distributions totaling $600,000
were paid. Future cash distributions will depend on the levels of net cash
generated from operations, refinancings, property sales and cash reserves. As
of December 31, 1996, the Reserve Account was fully funded, however if it
becomes necessary to draw upon these reserves, distributions may also be
restricted by the requirement to deposit net operating income (as defined in the
mortgage note) into the Reserve Account as disclosed in "Note A" of the
financial statements.
ITEM 7. FINANCIAL STATEMENTS
SHELTER PROPERTIES II LIMITED PARTNERSHIP
LIST OF FINANCIAL STATEMENTS
Report of Independent Auditors
Balance Sheet--December 31, 1996
Statements of Operations--Years ended December 31, 1996 and 1995
Statements of Changes in Partners' Capital (Deficit)--Years ended
December 31, 1996 and 1995
Statements of Cash Flows--Years ended December 31, 1996 and 1995
Notes to Financial Statements
Report of Ernst & Young LLP, Independent Auditors
The Partners
Shelter Properties II Limited Partnership
We have audited the accompanying balance sheet of Shelter Properties II
Limited Partnership as of December 31, 1996, and the related statements of
operations, changes in partners' capital (deficit) and cash flows for each of
the two years in the period ended December 31, 1996. These financial
statements are the responsibility of the Partnership's management. Our
responsibility is to express an opinion on these financial statements based
on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by the Partnership's management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Shelter Properties II
Limited Partnership as of December 31, 1996, and the results of its
operations and its cash flows for each of the two years in the period ended
December 31, 1996, in conformity with generally accepted accounting
principles.
/s/ERNST & YOUNG LLP
Greenville, South Carolina
January 25, 1997
SHELTER PROPERTIES II LIMITED PARTNERSHIP
BALANCE SHEET
December 31, 1996
(in thousands, except unit data)
Assets
Cash and cash equivalents:
Unrestricted $ 2,223
Restricted--tenant security deposits 148
Accounts receivable 19
Escrow for taxes 234
Restricted escrows 903
Other assets 244
Investment properties: (Note B & E)
Land $ 1,814
Buildings and related personal property 22,682
24,496
Less accumulated depreciation (15,043) 9,453
$13,224
Liabilities and Partners' Capital (Deficit)
Liabilities
Accounts payable $ 157
Tenant security deposits 149
Accrued taxes 222
Other liabilities 190
Mortgage notes payable (Note B) 8,738
Partners' Capital (Deficit)
General partners $ (110)
Limited partners (27,500 units
issued and outstanding) 3,878 3,768
$13,224
See Accompanying Notes to Financial Statements
SHELTER PROPERTIES II LIMITED PARTNERSHIP
STATEMENTS OF OPERATIONS
(in thousands, except unit data)
Years Ended December 31,
1996 1995
Revenues:
Rental income $ 5,139 $ 5,000
Other income 370 365
Total revenues 5,509 5,365
Expenses:
Operating 1,920 1,894
General and administrative 176 337
Maintenance 863 933
Depreciation 1,087 1,090
Interest 813 826
Property taxes 392 363
Total expenses 5,251 5,443
Casualty loss (Note G) -- (15)
Net income (loss) (Note C) $ 258 $ (93)
Net income (loss) allocated to general
partners (1%) $ 3 $ (1)
Net income (loss) allocated to limited
partners (99%) 255 (92)
$ 258 $ (93)
Net income (loss) per limited partnership unit $ 9.27 $ (3.37)
See Accompanying Notes to Financial Statements
SHELTER PROPERTIES II LIMITED PARTNERSHIP
STATEMENTS OF CHANGES IN PARTNERS' CAPITAL (DEFICIT)
(in thousands, except unit data)
Limited
Partnership General Limited
Units Partners Partners Total
Original capital contributions 27,500 $ 2 $27,500 $27,502
Partners' capital (deficit) at
December 31, 1994 27,500 $ (106) $ 4,809 $ 4,703
Partners' distributions paid -- (6) (594) (600)
Net loss for the year ended
December 31, 1995 -- (1) (92) (93)
Partners' capital (deficit) at
December 31, 1995 27,500 (113) 4,123 4,010
Distributions to Partners -- -- (500) (500)
Net income for the year ended
December 31, 1996 -- 3 255 258
Partners' capital (deficit) at
December 31, 1996 27,500 $ (110) $ 3,878 $ 3,768
See Accompanying Notes to Financial Statements
SHELTER PROPERTIES II LIMITED PARTNERSHIP
STATEMENTS OF CASH FLOWS
(in thousands)
<TABLE>
<CAPTION>
Years Ended December 31,
1996 1995
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 258 $ (93)
Adjustments to reconcile net income (loss) to
net cash provided by operating activities:
Depreciation 1,087 1,090
Amortization of discounts and loan costs 105 102
Casualty loss -- 15
Change in accounts:
Restricted cash 4 (10)
Accounts receivable (2) (6)
Escrows for taxes (28) (102)
Other assets (2) (6)
Accounts payable (109) 140
Tenant security deposit liabilities (4) 8
Accrued taxes 60 77
Other liabilities (81) (32)
Net cash provided by operating activities 1,288 1,183
Cash flows from investing activities:
Property improvements and replacements (620) (463)
Deposits to restricted escrows (38) (57)
Receipts from restricted escrows 52 55
Insurance proceeds from property damage -- 8
Net cash used in investing activities (606) (457)
Cash flows from financing activities:
Payments on mortgage notes payable (239) (221)
Distributions to partners (500) (600)
Net cash used in financing activities (739) (821)
Net decrease in cash and cash equivalents (57) (95)
Cash and cash equivalents at beginning of period 2,280 2,375
Cash and cash equivalents at end of period $2,223 $2,280
Supplemental disclosure of cash flow information:
Cash paid for interest $ 710 $ 726
<FN>
See Accompanying Notes to Financial Statements
</TABLE>
NOTE A - ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
Organization: Shelter Properties II Limited Partnership (the "Partnership")
was organized as a limited partnership under the laws of the State of South
Carolina pursuant to a Certificate and Agreement of Limited Partnership filed
October 10, 1980. The general partner responsible for management of the
Partnership's business is Shelter Realty II 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 affiliate of Insignia Financial Group, Inc. ("Insignia"). The
directors and officers of the Corporate General Partner also serve as executive
officers of Insignia. The partnership agreement terminates December 31, 2020.
The Partnership commenced operations on March 1, 1981, and completed its
acquisition of apartment properties on June 30, 1981. The Partnership operates
three apartment properties located in the South and Southwest. At December 31,
1996, affiliates of Insignia own 6,211 units of the Partnership.
Use of Estimates: The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
Allocation of Cash Distributions: Cash distributions by the Partnership are
allocated between general and limited partners in accordance with the provisions
of the partnership agreement. The partnership agreement provides that net cash
from operations means revenue received less operating expenses paid, adjusted
for certain specified items which primarily include mortgage payments on
debt, property improvements and replacements not previously reserved, and the
effects of other adjustments to reserves. In the following notes to financial
statements, whenever "net cash from (used by) operations" is used, it has the
aforementioned meaning. The following is a reconciliation of the subtotal 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.
1996 1995
(in thousands)
Net cash provided by operating activities $1,288 $1,183
Property improvements and replacements (620) (463)
Payments on mortgage notes payable (239) (221)
Changes in reserves for net operating
liabilities 162 (69)
Change in restricted escrows, net 14 (2)
Insurance proceeds from property damage -- 8
Additional reserves (605) (450)
Net cash used in operations $ -- $ (14)
In 1996 and 1995, the Corporate General Partner believed it to be in the best
interest of the Partnership to reserve an additional $605,000 and $450,000,
respectively, to fund continuing capital improvement needs in order for the
properties to remain competitive.
Distributions made from reserves no longer considered necessary by the general
partners are considered to be additional net cash from operations for allocation
purposes. During the year ended December 31, 1996, the Corporate General
Partner made a distribution of $500,000 from cash attributable to prior years
debt refinancing proceeds.
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%.
Undistributed Net Proceeds from Refinancing: At December 31, 1996, net proceeds
from refinancings of approximately $248,000 remained undistributed. Also, at
December 31, 1996, undistributed sales proceeds from a prior year sale of an
apartment property amounted to approximately $166,000, of which $58,000 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.
For any fiscal year, to the extent that profits, not including gains from
property dispositions, do not exceed distributions of net cash from operations,
such profits are allocated in the same manner as such distributions. In any
fiscal year in which profits, not including gains from property disposition,
exceed distributions of net cash from operations, such excess is treated on a
cumulative basis as if it constituted an equivalent amount of distributable net
proceeds and is allocated together with, and in the same manner as, that portion
of gain described in the second sentence of the following paragraph.
Any gain from property dispositions attributable to the excess, if any, of the
indebtedness relating to a property immediately prior to the disposition of such
property over the Partnership's adjusted basis in the property shall be
allocated to each partner having a negative capital account balance, to the
extent of such negative balance. The balance of any gain shall be treated on a
cumulative basis as if it constituted an equivalent amount of distributable net
proceeds and shall be allocated to the general partners to the extent that
general partners would have received distributable net proceeds in connection
therewith; the balance shall be allocated to the limited partners. However, the
interest of the general partners will be equal to at least 1% of each gain at
all times during the existence of the Partnership.
All losses, including losses attributable to property dispositions, are
allocated 99% to the limited partners and 1% to the general partners.
Accordingly, net income (losses) as shown in the statements of operations and
changes in partners' capital (deficit) for 1996 and 1995 were allocated 99% to
the limited partners and 1% to the general partners. Net income (loss) per
limited partnership unit for 1996 and 1995 was computed as 99% of net income
(loss) divided by 27,500 weighted average units outstanding.
Other Reserves: The general partners may designate a portion of cash generated
from operations as "other reserves" in determining net cash from operations.
Per the partnership agreement, the general partners designated as other reserves
an amount equal to the net liabilities related to the operations of apartment
properties during the current fiscal year that are expected to require the use
of cash during the next fiscal year. The increase in other reserves during
1996 was $162,000 and the decrease in 1995 was $69,000, which amounts were
determined by considering changes in the balances of restricted cash, accounts
receivable, escrows for taxes, other assets, accounts payable, tenant security
deposit liabilities, accrued taxes and other liabilities. At this time, the
general partners expect to continue to adjust other reserves based on the net
change in the aforementioned account balances.
Reserve Account - In connection with the refinancing in 1992, a general Reserve
Account was established with the refinancing proceeds for each mortgaged
property. These funds were established to cover necessary repairs and
replacements of existing improvements, debt service, out of pocket expenses
incurred for ordinary and necessary administrative tasks, and payment of real
property taxes and insurance premiums. The Partnership is required to deposit
net operating income (as defined in the mortgage note) from each refinanced
property to the respective reserve account until the accounts equal $1,000 per
apartment unit or $853,000 in total. The balance at December 31, 1996, is
approximately $882,000, which includes interest earned on these funds.
Escrows for Taxes: These escrows are held by the Partnership and are designated
for the payment of real estate taxes.
Depreciation: Depreciation is provided by the straight-line method over the
estimated lives of the apartment properties and related personal property. For
Federal income tax purposes, the accelerated cost recovery method is used (1)
for real property over 15 years for 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 7 years.
Advertising: The Partnership expenses the costs of advertising as incurred.
Advertising expense, included in operating expenses, was approximately $51,000
and $59,000 for the years ended December 31, 1996 and 1995, respectively.
Loan Costs: Loan costs of approximately $393,000, less accumulated amortization
of approximately $160,000, are included in other assets and are being amortized
on a straight-line basis over the life of the loans.
Cash and cash equivalents: The Partnership considers only unrestricted cash to
be cash. Unrestricted cash includes cash on hand and in banks, and Certificates
of Deposit with original maturities of less than 90 days. At certain times, the
amount of cash deposited at a bank may exceed the limit on insured deposits.
Leases: The Partnership generally leases apartment units for twelve-month terms
or less. The Partnership recognizes income as earned on its leases. In
addition, the Corporate General Partner's policy is to offer rental concessions
during particularly slow months or in response to heavy competition from other
similar complexes in the area. Concessions are charged to expense as incurred.
Restricted Cash - Tenant Security Deposits: The Partnership requires security
deposits from lessees for the duration of the lease with such deposits being
considered restricted cash. Deposits are refunded when the tenant vacates,
provided the tenant has not damaged the unit and is current on rental payments.
Investment Properties: Investment properties consisting of three apartment
complexes, are stated at cost. Prior to the fourth quarter of 1995, costs of
apartment properties that were permanently impaired were written down to
appraised value. The Corporate General Partner relied on the annual appraisals
performed by outside appraisers for the estimated value of the Partnership's
properties. There are three recognized approaches or techniques available to
the appraiser. When applicable, these approaches are used to process the data
considered significant to each to arrive at separate value indications. In all
instances, the experience of the appraiser, coupled with his objective
judgement, plays a major role in arriving at the conclusions of the indicated
value from which the final estimate of value is made. The three approaches
commonly used are the cost approach, the sales comparison approach, and the
income approach. The cost approach is often not considered to be reliable due
to the lack of land sales and the significant amount of depreciation and,
therefore, is often not presented. Upon receipt of the appraisals, any property
which was stated on the books of the Partnership above the estimated value given
in the appraisal was written down to the estimated value given by the appraiser.
The appraiser assumed a stabilized occupancy at the time of the appraisal and,
therefore, any impairment of value was considered to be permanent by the
Corporate General Partner.
During the fourth quarter of 1995, the Partnership adopted "FASB Statement No.
121, Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed Of," which requires impairment losses to be
recorded on long-lived assets used in operations when indicators of impairment
are present and the undiscounted cash flows estimated to be generated by those
assets are less than the assets' carrying amount. The impairment loss is
measured by comparing the fair value of the asset to its carrying amount. The
effect of adoption was not material. For the year ended December 31, 1996, no
adjustments for value impairments were necessary.
Reclassifications: Certain reclassifications have been made to the 1995
information to conform to the 1996 presentation.
Fair Value: In 1995, the Partnership implemented "Statement of Financial
Accounting Standards No. 107, Disclosure about Fair Value of Financial
Instruments," which requires disclosure of fair value information about
financial instruments for which it is practicable to estimate that value. The
carrying amount of the Partnership's cash and cash equivalents approximates fair
value due to short-term maturities. The Partnership estimates the fair value of
its fixed rate mortgages by discounted cash flow analysis, based on estimated
borrowing rates currently available to the Partnership.
NOTE B - MORTGAGE NOTES PAYABLE
(dollar amounts in thousands)
The principal terms of mortgage notes payables are as follows:
Principal Monthly Principal
Balance At Payment Stated Balance
December 31, Including Interest Maturity Due At
Property 1996 Interest Rate Date Maturity
Parktown
1st mortgage $3,209 $ 28 7.60% 11/15/02 $2,552
2nd mortgage 109 1 7.60 11/15/02 109
Raintree
1st mortgage 1,424 12 7.60 11/15/02 1,133
2nd mortgage 48 --(a) 7.60 11/15/02 48
Signal Pointe
1st mortgage 4,254 37 7.60 11/15/02 3,383
2nd mortgage 145 1 7.60 11/15/02 145
9,189 79
Less unamortized
present value (451)
discounts
Total $8,738
(a) Monthly interest only payments are less than $1,000.
The estimated fair values of the Partnership's aggregate debt approximates its
carrying value. This estimation is not necessarily indicative of the amounts
the Partnership might pay in actual market transactions.
The Partnership exercised interest rate buy-down options for the three
properties when the debt was refinanced in 1992, reducing the stated rate from
8.76% to 7.60%. The fee for the interest rate reduction amounted to
approximately $700,000 and is being amortized as a loan discount using the
interest method over the life of the loans. The discount 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. Certain of the notes require prepayment penalties if
repaid prior to maturity.
Scheduled principal payments of mortgage notes payable subsequent to December
31, 1996 are as follows:
1997 258
1998 278
1999 300
2000 323
2001 349
Thereafter 7,681
$9,189
NOTE C - INCOME TAXES
(dollar amounts in thousands, except per unit data)
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 (loss) and Federal
taxable income (loss).
1996 1995
Net income (loss) as reported $ 258 $ (93)
Add (deduct)
Amortization of present
value discounts (5) (7)
Depreciation differences 78 (376)
Change in prepaid rental (37) (63)
Other (56) 1
Casualty loss -- 56
Federal taxable income (loss) $ 238 $ (482)
Federal taxable income (loss)
per limited partnership unit $ 8.57 $(17.37)
The following is a reconciliation between the Partnership's reported amounts and
Federal tax basis of net assets and liabilities as of December 31, 1996:
Net assets as reported $ 3,768
Buildings and land 2,672
Accumulated depreciation (6,984)
Syndication fees 3,111
Other 69
Net assets - tax basis $ 2,636
NOTE D - TRANSACTIONS WITH AFFILIATED PARTIES
The partnership has no employees and is dependent on the Corporate General
Partner and its affiliates for the management and administration of all
partnership activities. The partnership agreement provides for payments to
affiliates for services and as reimbursement of certain expenses incurred by
affiliates on behalf of the Partnership. Balances and other transactions with
Insignia Financial Group, Inc. ("Insignia") and certain of its affiliates in
1996 and 1995 are as follows:
1996 1995
(in thousands)
Property management fees $ 269 $ 263
Reimbursement for services of affiliates 123 98
Due to general partners 58 58
The Partnership insures its properties under a master policy through an agency
and insurer unaffiliated with the Corporate General Partner. An affiliate of
the Corporate General Partner acquired, in the acquisition of a business,
certain financial obligations from an insurance agency which was later acquired
by the agent who placed the current year's master policy. The current agent
assumed the financial obligations to the affiliate of the Corporate General
Partner who receives payments on these obligations from the agent. The amount
of the Partnership's insurance premiums accruing to the benefit of the affiliate
of the Corporate General Partner by virtue of the agent's obligations is not
significant.
NOTE E - REAL ESTATE AND ACCUMULATED DEPRECIATION
Apartment Properties
Initial Cost
To Partnership
Cost
Buildings Capitalized
and Related (Removed)
Personal Subsequent to
Description Encumbrances Land Property Acquisition
Parktown Townhouses
Deer Park, TX $ 3,318 $ 1,095 $ 5,329 $ 2,972
Raintree Apartments
Anderson, SC 1,472 184 3,184 620
Signal Pointe Apartments
Winter Park, FL 4,399 536 8,062 2,515
Totals $ 9,189 $ 1,815 $16,575 $ 6,107
<TABLE>
<CAPTION>
Gross Amount At Which Carried
At December 31, 1996
Buildings
And Related
Personal Accumulated Date of Date Depreciable
Description Land Property Total Depreciation Construction Acquired Life-Years
<S> <C> <C> <C> <C> <C> <C> <C>
Parktown Townhouses $ 1,095 $ 8,301 $ 9,396 $ 5,725 1969 03/01/81 5-35
Raintree Apartments 184 3,804 3,988 2,486 1972-1974 04/30/81 5-38
Signal Pointe 535 10,577 11,112 6,832 1970 06/30/81 5-37
Totals $ 1,814 $22,682 $24,496 $15,043
</TABLE>
Reconciliation of "Real Estate and Accumulated Depreciation":
Years Ended December 31,
1996 1995
Investment Properties
Balance at beginning of year $23,876 $23,494
Property improvements 620 463
Disposals of property -- (81)
Balance at End of Year $24,496 $23,876
Accumulated Depreciation
Balance at beginning of year $13,956 $12,924
Additions charged to expense 1,087 1,090
Disposals of property -- (58)
Balance at End of Year $15,043 $13,956
The aggregate cost of the real estate for Federal income tax purposes is
approximately $27,168,000 and $26,548,000 at December 31, 1996 and 1995,
respectively. The accumulated depreciation taken for Federal income
tax purposes is approximately $22,027,000 and $21,018,000 at December 31, 1996
and 1995, respectively.
NOTE F - CONTINGENCIES
Tender Offer Litigation: The Corporate General Partner previously owned 100
Limited Partnership Units ("Units"). On or about April 26 and 27, 1995, six
entities ("Affiliated Purchaser") affiliated with the Partnership commenced
tender offers for limited partner interests in six limited partnerships,
including the Partnership (collectively, the "Shelter Properties Partnerships").
On May 27, 1995, the Affiliated Purchaser acquired 6,026 units of the
Partnership pursuant to the tender offer. On or about May 12, 1995, in the
United States District Court for the District of South Carolina, certain limited
partners of the Shelter Properties Partnerships commenced a lawsuit, on behalf
of themselves, on behalf of a putative class of plaintiffs, and derivatively on
behalf of the partnerships, challenging the actions taken by defendants
(including Insignia, the acquiring entities and certain officers of Insignia) in
the management of the Shelter Properties Partnerships and in connection with the
tender offers and certain other matters.
The plaintiffs alleged that, among other things: (i) the defendants
intentionally mismanaged the partnerships and acted contrary to the limited
partners' best interests by prolonging the existence of the Shelter Properties
Partnerships in order to perpetuate the revenues derived by Insignia (an
affiliate of the Corporate General Partner) and its affiliates from the
partnerships, (ii) the defendants' actions reduced the demand for the Shelter
Properties Partnerships' limited partner interests in the limited resale market
by artificially depressing the trading prices for limited partners interests in
order to create a favorable environment for the tender offers; (iii) through the
tender offers, the acquiring entities sought to acquire effective voting control
over the Shelter Properties Partnerships while paying highly inadequate prices;
and (iv) the documents disseminated to the class in connection with the tender
offers contained false and misleading statements and omissions of material facts
concerning such issues as the advantages to limited partners of tendering
pursuant to the tender offers, the true value of the interest, the true
financial condition of the Shelter Properties Partnerships, the factors
affecting the likelihood that properties owned by the partnerships will be sold
or liquidated in the near future, the liquidity and true value of the limited
partner interests, the reasons for the limited secondary market for limited
partner interests, and the true nature of the market for the underlying real
estate assets owned by the partnerships all in violation of the federal
securities laws.
On September 27, 1995, the parties entered into a stipulation to settle the
matter. The principal terms of the stipulation require supplemental payments to
tendering limited partners aggregating approximately $6 million to be paid by
the Affiliated Purchaser of which approximately $640,000 is the Partnership's
portion; waiver by the Shelter Properties Partnerships' general partners of any
right to certain proceeds from a sale or refinancing of the Shelter
Properties Partnerships' properties; some restrictions on Insignia's ability to
vote the limited partner interests it acquired; payment of $1.25 million (which
amount is divided among the various partnerships and acquiring entities) for
plaintiffs' attorney fees and expenses in the litigation; and general releases
of all the defendants.
On June 24, 1996, after notice to the class and a hearing on the fairness and
adequacy of notice and the terms of settlement, the court orally approved the
settlement. The court signed the formal order on July 30, 1996. No appeal was
filed within thirty days after the court entered the formal order and the
settlement became effective on August 30, 1996. The Affiliated Purchaser made
the payments to investors in accordance with the settlement in early September
1996.
NOTE G - CASUALTY LOSS
The Partnership recorded a casualty loss in 1995 resulting from a fire at
Parktown Townhouses which damaged a building roof and interiors of four units.
The damage resulted in a loss of $15,000 arising from proceeds from the
Partnership's insurance carrier of $38,000 which did not cover the cost of
replacing the roof and interiors damaged.
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS, COMPLIANCE
WITH SECTION 16(A) OF THE EXCHANGE ACT
The Registrant has no officers or directors. The Individual and Corporate
General Partners are as follows:
Individual General Partner - N. Barton Tuck, Jr., age 58, is the Individual
General Partner of the Registrant. Mr. Tuck is Chairman of GolfSouth
Management, Inc. Until August 1990, he served as Chairman and Chief Executive
Officer of U.S. Shelter Corporation ("Shelter"), the former parent of AmReal
Corporation (parent of the Corporate General Partner of the Partnership). For
six years prior to 1966, Mr. Tuck was employed in Greenville, South Carolina by
the certified public accounting firm of S.D. Leidesdorf & Company. From 1966 to
1970, he was a registered representative with the investment banking firm of
Harris Upham & Co., Inc. in Greenville, South Carolina. Since 1970, Mr. Tuck
has been engaged in arranging equity investments for individuals and
partnerships. Mr. Tuck is a graduate of the University of North Carolina. Mr.
Tuck has delegated to the Corporate General Partner all of his authority, as a
general partner of the Partnership, to manage and control the Partnership and
its business and affairs.
Corporate General Partner - The names and ages of, as well as the positions and
offices held by, the executive officers and directors of Shelter Realty II
Corporation are set forth below. There are no family relationships between or
among any officers or directors.
Name Age Position
William H. Jarrard, Jr. 50 President and Director
Ronald Uretta 41 Vice President and Treasurer
John K. Lines 37 Vice President and Secretary
Kelley M. Buechler 39 Assistant Secretary
Mr. Jarrard, who had previously served as Vice President, became President in
August 1994. In August 1994, Mr. Lines became Vice President and Secretary.
William H. Jarrard, Jr. has been Managing Director - Partnership Administration
of Insignia since January 1994. Mr. Jarrard served as Managing Director -
Partnership Administration and Asset Management from July 1994 until January
1996.
Ronald Uretta has been Insignia's Treasurer since January 1992. Since August
1996, Mr. Uretta has also served as Chief Operating Officer. He also served as
Secretary from January 1992 to June 1994 and as Chief Financial Officer from
January 1992 to August 1996. Since September 1990, Mr. Uretta has also served
as Chief Financial Officer and Controller of MAG.
John K. Lines has been Vice President and Secretary of the Corporate General
Partner since August 1994, Insignia's General Counsel since June 1994, and
General Counsel and Secretary since July 1994. From May 1993 until June 1994,
Mr. Lines was the Assistant General Counsel and Vice President of Ocwen
Financial Corporation, West Palm Beach, Florida. From October 1991 until May
1993, Mr. Lines was a Senior Attorney with BANC ONE CORPORATION, Columbus, Ohio.
From May 1984 until October 1991, Mr. Lines was an attorney with Squire Sanders
& Dempsey, Columbus, Ohio.
Kelley M. Buechler is Assistant Secretary of the Corporate General Partner and
Assistant Secretary of Insignia since 1991. During the five years prior to
joining Insignia in 1991, she served in similar capacities with U.S. Shelter.
Insignia Commercial Group, Inc. ("ICG"), Insignia Financial Group, Inc. ("IFG")
and Shelter Properties II Acquisition LLC reported three, three and one
transactions, respectively, as of December 31, 1996, on a Form 5 filed in
January 1997, with respect to the entities purchases of Units of Limited
Partners Interest of the Partnership. Andrew L. Farkas also delinquently
reported the same transactions on a Form 5 by virtue of his status as an
affiliate of ICG and IFG, through which he may be deemed to be a beneficial
owner of the securities owned by such entities.
ITEM 10. EXECUTIVE COMPENSATION
Neither the Individual General Partner nor any of the directors and officers of
the Corporate General Partner received any remuneration from the Registrant.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Except as noted below, no person was known by the Registrant to be the
beneficial owner of more than 5% of the Limited Partnership Units of the
Registrant as of January 1, 1997.
Number
Group/Entity of Units Percentage
Insignia affiliates 6,211 22.59%
High River Limited Partnership 2,857 10.39%
The Insignia affiliates units above are held by Insignia Properties, L.P. who
hold 6,101 units (22.19% of outstanding units) and other affiliated entities who
hold nominal amounts of units.
No director or officer of the Corporate General Partner owns any Units. The
Corporate General Partner owns 100 Units as required by the terms of the
partnership agreement.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Individual General Partner and the Corporate General Partner received,
collectively, $6,000 as their pro-rata share of the distribution made during
1995. Distributions in the amount of approximately $1,800 relating to the 100
LP units required to be held by the General Partner were made to the Individual
and Corporate General Partners during the year ended December 31, 1996. For a
description of the share of cash distributions from operations, if any, to which
the general partners are entitled, reference is made to the material contained
in the Prospectus under the heading PROFITS AND LOSSES AND CASH DISTRIBUTIONS.
The Registrant has a property management agreement with Insignia Residential
Group, L.P. pursuant to which Insignia Residential Group, L.P. has assumed
direct responsibility for day-to-day management of the Partnership's
properties. This service includes the supervision of leasing, rent collection,
maintenance, budgeting, employment of personnel, payment of operating expenses,
etc. Insignia Residential Group, L.P. receives a property management fee equal
to 5% of apartment revenues. During the fiscal year ended December 31, 1996,
Insignia Residential Group, L.P. received approximately $269,000 in fees for
property management.
For a more detailed description of the management fee that Insignia Residential
Group, L.P. is entitled to receive, see the material contained in the Prospectus
under the heading "CONFLICTS OF INTEREST - Property Management Services".
For a further description of payments made by the Registrant to affiliates for
services and as reimbursement of certain expenses incurred by affiliates on
behalf of the Registrant, see Note D of the financial statements included as
part of this report.
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
Exhibit 27, Financial Data Schedule, is filed as an exhibit to this
report.
(b) Reports on Form 8-K filed in the fourth quarter of fiscal year 1996:
None.
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the Registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
SHELTER PROPERTIES II LIMITED PARTNERSHIP
By: Shelter Realty II Corporation
Corporate General Partner
By: /s/William H. Jarrard, Jr.
William H. Jarrard
President and Director
Date: March 26, 1997
In accordance with the Exchange Act, this report has been signed below by
the following persons on behalf of the Registrant and in the capacities and on
the date indicated.
/s/William H. Jarrard, Jr. Date: March 26, 1997
William H. Jarrard, Jr.
President and Director
/s/Ronald Uretta Date: March 26, 1997
Ronald Uretta
Vice President and Treasurer
Principal Financial
Officer and Principal
Accounting Officer
EXHIBIT INDEX
Exhibit
3 See Exhibit 4(a)
4 (a) Amended and Restated Certificate and Agreement of Limited Partnership
[included as Exhibit A to the Prospectus of Registrant dated February
2, 1981 contained in Amendment No. 1 to Registration Statement No. 2-
69507, of Registrant filed February 2, 1981 (the "Prospectus") and
incorporated herein by reference].
(b) Subscription Agreements and Signature Pages [Filed with Amendment No.
1 of Registration Statement No. 2-69507, of Registrant and
incorporated herein by reference].
(c) Promissory Note and Deed of Trust between Joe A. McDermott, Inc. and
the Mischer Corporation and New York Life Insurance Company. General
Warranty Deed between Parktown Realty, N.V and Shelter Properties II
to acquire Parktown Apartments.*
(d) Mortgage Note and Mortgage Deed between Mutual Benefit Life Insurance
Company and Foxcroft Investors, Limited. Purchase Money Note and
Purchase Money Mortgage and Security Agreement between Foxcroft
Investors, Limited and Shelter Properties II to acquire Squire One
Apartments.*
*Filed as Exhibit 4(c) and 4(e), respectively, to Form 10-K of
Registrant for year ended December 31, 1987 and incorporated herein by
reference.
(e) Mortgage Note between William C. Dailey and Fidelity Federal Savings
and Loan Association and Promissory Note between William C. Dailey and
The Prudential Insurance Company (filed as Exhibit 12(E) to Amendment
No. 1 to Registration Statement No. 2-69507 of Registrant filed
January, 1981 and incorporated herein by reference). Modification and
Assumption of Mortgage between American Federal Savings and Loan
Association and Shelter Properties II to acquire Raintree Apartments
(filed as Exhibit 4(e) to Form 10-K of Registrant for year ended
December 31, 1988 and incorporated herein by reference).
10(i) Contracts related to acquisition or disposition of properties.
(a) Purchase Agreement dated December 31, 1980, between Hubris, Inc. and
U.S. Shelter Corporation to purchase Parktown Townhouse.**
(b) Purchase Agreement dated January 5, 1981, between Twin City
Apartments, Inc. and U.S. Shelter Corporation to purchase The Village
Apartments.**
(c) Purchase Agreement dated January 2, 1981 between Carolina Housing
Partners and U.S. Shelter Corporation to purchase Raintree
Apartments.**
**Filed as Exhibits 12(b), 12(c) and 12(d), respectively, to Amendment
No. 1 of Registration Statement, No. 2-69507, of Registrant filed
February 2, 1981 and incorporated herein by reference.
(d) Purchase Agreement dated May 28, 1981 between Foxcroft Investors,
Limited and Shelter Properties II to purchase Squire One Apartments.
[Filed with Form 8-K of Registrant dated June 8, 1981 and incorporated
herein by reference.]
(e) Sales Agreement dated December 30, 1983 between Shelter Properties II
and Security Investors, Ltd.-II to sell Cambridge Station Apartments.
[Filed with Form 10-K of Registrant for year ended December 31, 1983
and incorporated herein by reference.]
(ii) Form of Management Agreement with U.S. Shelter Corporation subsequently
assigned to Shelter Management Group, L.P. (now known as Insignia
Management Group, L.P.) [filed with Amendment No. 1 to Registration
Statement, No. 2-69507, of Registrant] and incorporated herein by
reference.
(iii) Contracts related to refinancing of debt:
(a) First Mortgage and Security Agreements dated October 28, 1992 between
Shelter Properties II Limited Partnership and Joseph Philip Forte
(Trustee) and First Commonwealth Realty Credit Corporation, a Virginia
Corporation, securing the following properties: Raintree,
Parktown/Center Court, and Squire One. ***
(b) Second Mortgage and Security Agreements dated October 28, 1992 between
Shelter Properties II Limited Partnership and Joseph Philip Forte
(Trustee) and First Commonwealth Realty Credit Corporation, a Virginia
Corporation, securing the following properties: Raintree,
Parktown/Center Court, and Squire One. ***
(c) First Assignments of Leases and Rents dated October 28, 1992 between
Shelter Properties II Limited Partnership and Joseph Philip Forte
(Trustee) and First Commonwealth Realty Credit Corporation, a Virginia
Corporation, securing the following properties: Raintree,
Parktown/Center Court, and Squire One. ***
(d) Second Assignments of Leases and Rents dated October 28, 1992 between
Shelter Properties ii Limited Partnership and Joseph Philip Forte
(Trustee) and First Commonwealth Realty Credit Corporation, a Virginia
Corporation, securing the following properties: Raintree,
Parktown/Center Court, and Squire One. ***
(e) First Deeds of Trust Notes dated October 28, 1992 between Shelter
Properties II Limited Partnership and First Commonwealth Realty Credit
Corporation, relating to the following properties: Raintree,
Parktown/Center Court, and Squire One. ***
(f) Second Deeds of Trust Notes dated October 28, 1992 between Shelter
Properties II Limited Partnership and First Commonwealth Realty Credit
Corporation, relating to the following properties: Raintree,
Parktown/Center Court, and Squire One. ***
***Filed as Exhibits 10(iii) (a) through (f), respectively, of form
10KSB of Registrant for the year ended December 31, 1992 and
incorporated herein by reference.
27 Financial Data Schedule
99 Prospectus of Registrant dated February 2, 1981 [included in Registration
Statement No. 2-69507, of Registrant] and incorporated herein by reference.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from Shelter
Properties II Ltd. Partnership 1996 Year-End 10-KSB and is qualified in its
entirety by reference to such 10-KSB filing.
</LEGEND>
<CIK> 0000319723
<NAME> SHELTER PROPERTIES II LTD. PARTNERSHIP
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<CASH> 2,223
<SECURITIES> 0
<RECEIVABLES> 19
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0<F1>
<PP&E> 24,496
<DEPRECIATION> 15,043
<TOTAL-ASSETS> 13,224
<CURRENT-LIABILITIES> 0<F1>
<BONDS> 8,738
0
0
<COMMON> 0
<OTHER-SE> 3,768
<TOTAL-LIABILITY-AND-EQUITY> 13,224
<SALES> 0
<TOTAL-REVENUES> 5,509
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 5,251
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 813
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 258
<EPS-PRIMARY> 9.27<F2>
<EPS-DILUTED> 0
<FN>
<F1>Registrant has an unclassified balance sheet.
<F2>Multiplier is 1.
</FN>
</TABLE>
