FORM 10-QSB--QUARTERLY OR TRANSITIONAL REPORT UNDER SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
Quarterly or Transitional Report
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-QSB
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended September 30, 2000
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from _________to _________
Commission file number 0-10256
SHELTER PROPERTIES II
(Exact name of small business issuer as specified in its charter)
South Carolina 57-0709233
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
55 Beattie Place, P.O. Box 1089
Greenville, South Carolina 29602
(Address of principal executive offices)
(864) 239-1000
(Issuer's telephone number)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12
months (or for such shorter period that the registrant was required to file such
reports), and (2) has been subject to such filing requirements for the past 90
days. Yes X No___
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
a)
SHELTER PROPERTIES II
BALANCE SHEET
(Unaudited)
(in thousands, except unit data)
September 30, 2000
<TABLE>
<CAPTION>
Assets
<S> <C>
Cash and cash equivalents $ 849
Receivables and deposits 180
Restricted escrows 896
Other assets 166
Investment properties:
Land $ 1,814
Buildings and related personal property 25,481
27,295
Less accumulated depreciation (18,664) 8,631
$ 10,722
Liabilities and Partners' (Deficit) Capital
Liabilities
Accounts payable $ 67
Tenant security deposit liabilities 138
Accrued property taxes 337
Other liabilities 256
Mortgage notes payable 7,918
Partners' (Deficit) Capital
General partners $ (128)
Limited partners (27,500 units issued and
outstanding) 2,134 2,006
$ 10,722
</TABLE>
See Accompanying Notes to Financial Statements
<PAGE>
b)
SHELTER PROPERTIES II
STATEMENTS OF OPERATIONS
(Unaudited)
(in thousands, except unit data)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
2000 1999 2000 1999
Revenues:
<S> <C> <C> <C> <C>
Rental income $ 1,559 $ 1,465 $ 4,567 $ 4,299
Other income 93 64 248 201
Total revenues 1,652 1,529 4,815 4,500
Expenses:
Operating 706 810 1,984 1,973
General and administrative 106 64 226 158
Depreciation 222 201 780 700
Interest 181 187 533 567
Property taxes 113 108 334 324
Total expenses 1,328 1,370 3,857 3,722
Net income $ 324 $ 159 $ 958 $ 778
Net income allocated to
general partners (1%) $ 3 $ 2 $ 10 $ 8
Net income allocated to
limited partners (99%) 321 157 948 770
$ 324 $ 159 $ 958 $ 778
Net income per limited
partnership unit $ 11.67 $ 5.71 $ 34.47 $ 28.00
Distributions per limited
partnership unit $ -- $ 10.80 $ 40.87 $ 10.80
</TABLE>
See Accompanying Notes to Financial Statements
<PAGE>
c)
SHELTER PROPERTIES II
STATEMENT OF CHANGES IN PARTNERS' (DEFICIT) CAPITAL
(Unaudited)
(in thousands, except unit data)
<TABLE>
<CAPTION>
Limited
Partnership General Limited
Units Partners Partners Total
<S> <C> <C> <C> <C>
Original capital contributions 27,500 $ 2 $27,500 $27,502
Partners' (deficit) capital at
December 31, 1999 27,500 $ (127) $ 2,310 $ 2,183
Distributions to partners -- (11) (1,124) (1,135)
Net income for the nine months
ended September 30, 2000 -- 10 948 958
Partners' (deficit) capital at
September 30, 2000 27,500 $ (128) $ 2,134 $ 2,006
</TABLE>
See Accompanying Notes to Financial Statements
<PAGE>
d)
SHELTER PROPERTIES II
STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
2000 1999
Cash flows from operating activities:
<S> <C> <C>
Net income $ 958 $ 778
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation 780 700
Amortization of discounts and loan costs 88 79
Loss on disposal of property -- 11
Change in accounts:
Receivables and deposits 189 (102)
Other assets (28) (62)
Accounts payable (71) (32)
Tenant security deposit liabilities (57) 19
Accrued property taxes 187 90
Other liabilities (186) 5
Net cash provided by operating activities 1,860 1,486
Cash flows from investing activities:
Property improvements and replacements (454) (1,127)
Net (deposits to) withdrawals from restricted escrows (511) 604
Net cash used in investing activities (965) (523)
Cash flows from financing activities:
Distributions to partners (1,135) (300)
Payments on mortgage notes payable (238) (222)
Net cash used in financing activity (1,373) (522)
Net (decrease) increase in cash and cash equivalents (478) 441
Cash and cash equivalents at beginning of period 1,327 576
Cash and cash equivalents at end of period $ 849 $ 1,017
Supplemental disclosure of cash flow information:
Cash paid for interest $ 470 $ 488
</TABLE>
See Accompanying Notes to Financial Statements
<PAGE>
e)
SHELTER PROPERTIES II
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
Note A - Basis of Presentation
The accompanying unaudited financial statements of Shelter Properties II (the
"Partnership" or "Registrant") have been prepared in accordance with generally
accepted accounting principles for interim financial information and with the
instructions to Form 10-QSB and Item 310 (b) of Regulation S-B. Accordingly,
they do not include all of the information and footnotes required by generally
accepted accounting principles for complete financial statements. In the opinion
of Shelter Realty II Corporation (the "Corporate General Partner"), all
adjustments (consisting of normal recurring accruals) considered necessary for a
fair presentation have been included. Operating results for the three and nine
months ended September 30, 2000, are not necessarily indicative of the results
that may be expected for the fiscal year ending December 31, 2000. For further
information, refer to the financial statements and footnotes thereto included in
the Partnership's Annual Report on Form 10-KSB for the year ended December 31,
1999.
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 Apartment Investment and Management Company ("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 - Reconciliation of Cash Flows
The following is a reconciliation of the subtotal on the accompanying statements
of cash flows captioned "Net cash provided by operating activities" to "Net cash
used in operations", as defined in the partnership agreement. However, "Net cash
used in operations" should not be considered an alternative to net income as an
indicator of the Partnership's operating performance or to cash flows as a
measure of liquidity.
Nine Months Ended
September 30,
2000 1999
(in thousands)
Net cash provided by operating activities $ 1,860 $ 1,486
Payments on mortgage notes payable (238) (222)
Property improvements and replacements (454) (1,127)
Change in restricted escrows, net (511) 604
Changes in reserves for net operating
liabilities (34) 82
Additional operating reserves (307) (823)
Net cash from operations $ 316 $ --
For the nine months ended September 30, 2000 and 1999, the Corporate General
Partner believed it to be in the best interest of the Partnership to reserve an
additional $307,000 and $823,000, respectively, to fund continuing capital
improvement needs in order for the properties to remain competitive.
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 (i) certain
payments to affiliates for services and (ii) reimbursement of certain expenses
incurred by affiliates on behalf of the Partnership. Balances and other
transactions with affiliates of the Corporate General Partner for the nine
months ended September 30, 2000 and 1999 are as follows:
2000 1999
(in thousands)
Property management fees (included in
operating expenses) $238 $226
Reimbursement for services of affiliates
(included in investment properties,
general and administrative expense and
operating expense) 145 129
Due to general partners (included in other liabilities) 58 58
During the nine months ended September 30, 2000 and 1999, affiliates of the
Corporate General Partner were entitled to receive 5% of gross receipts from all
of the Registrant's properties as compensation for providing property management
services. The Registrant paid to such affiliates approximately $238,000 and
$226,000 for the nine months ended September 30, 2000 and 1999, respectively.
Affiliates of the Corporate General Partner received reimbursement of
accountable administrative expenses amounting to approximately $145,000 and
$129,000 for the nine months ended September 30, 2000 and 1999, respectively.
During 1983, a liability of approximately $58,000 was incurred to the general
partners for sales commissions earned. Pursuant to the Partnership Agreement,
this liability cannot be paid until certain levels of return are received by the
limited partners. As of September 30, 2000, the level of return to the limited
partners has not been met.
On September 26, 1997, an affiliate of the Corporate General Partner purchased
Lehman Brothers' Class "D" subordinated bonds of SASCO 1992-M1. These bonds are
secured by 55 multi-family apartment mortgage loan pairs held in Trust,
including Parktown Townhouses, Raintree Apartments, and Signal Pointe Apartments
owned by the Partnership.
In addition to its indirect ownership of the general partner interest in the
Partnership, AIMCO and its affiliates currently own 17,637 limited partnership
units in the Partnership representing 64.135% of the outstanding units. A number
of these units were acquired pursuant to tender offers made by AIMCO or its
affiliates. 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. Under the Partnership Agreement, unitholders holding a majority of the
Units are entitled to take action with respect to a variety of matters, which
would include without limitation, voting on certain amendments to the
Partnership Agreement and voting to remove the Corporate General Partner. As a
result of its ownership of 64.135% of the outstanding units, AIMCO is in a
position to influence all voting decisions with respect to the Registrant. 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 E - Distributions
During the nine months ended September 30, 2000, the Partnership paid cash
distributions from operations of approximately $1,135,000 (approximately
$1,124,000 to the limited partners or $40.87 per limited partnership unit).
Subsequent to September 30, 2000, the Partnership declared and paid a cash
distribution from operations of approximately $316,000 (approximately $313,000
to the limited partners or $11.38 per limited partnership unit). During the nine
months ended September 30, 1999, the Partnership paid cash distributions from
operations of approximately $300,000 (approximately $297,000 to the limited
partners or $10.80 per limited partnership unit).
Note F - 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, consisting of three apartment complexes one located in
each of Texas, South Carolina, and Florida. The Partnership rents apartment
units to tenants for terms that are typically twelve months or less.
Measurement of segment profit and 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 Partnership's
Annual Report on Form 10-KSB for the year ended December 31, 1999.
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 three and nine month periods ended September 30,
2000 and 1999 is shown in the tables below (in thousands). The "Other" column
includes Partnership administration related items and income and expense not
allocated to the reportable segment.
Three Months Ended September 30, 2000 Residential Other Totals
Rental income $ 1,559 $ -- $ 1,559
Other income 92 1 93
Interest expense 181 -- 181
Depreciation 222 -- 222
General and administrative expense -- 106 106
Segment profit (loss) 429 (105) 324
Nine Months Ended September 30, 2000 Residential Other Totals
Rental income $ 4,567 $ -- $ 4,567
Other income 244 4 248
Interest expense 533 -- 533
Depreciation 780 -- 780
General and administrative expense -- 226 226
Segment profit (loss) 1,180 (222) 958
Total assets 10,565 157 10,722
Capital expenditures for investment
properties 454 -- 454
Three Months Ended September 30, 1999 Residential Other Totals
Rental income $ 1,465 $ -- $ 1,465
Other income 63 1 64
Interest expense 187 -- 187
Depreciation 201 -- 201
General and administrative expense -- 64 64
Segment profit (loss) 222 (63) 159
Nine Months Ended September 30, 1999 Residential Other Totals
Rental income $ 4,299 $ -- $ 4,299
Other income 195 6 201
Interest expense 567 -- 567
Depreciation 700 -- 700
General and administrative expense -- 158 158
Segment profit (loss) 930 (152) 778
Total assets 10,602 162 10,764
Capital expenditures for investment
properties 1,127 -- 1,127
Note G - 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, its 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 of interests in certain general partner
entities by Insignia Financial Group, Inc. ("Insignia") and entities which were,
at one time, affiliates of Insignia; past tender offers by the Insignia
affiliates to acquire limited partnership units; the management of partnerships
by the Insignia affiliates; and the Insignia Merger. 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 owned units as of November 3, 1999. Preliminary
approval of the settlement was obtained on November 3, 1999 from the Court, 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 prior lead counsel to enter the settlement. On
December 14, 1999, the Corporate General Partner and its affiliates terminated
the proposed settlement. In February 2000, counsel for some of the named
plaintiffs filed a motion to disqualify plaintiff's lead and liaison counsel who
negotiated the settlement. On June 27, 2000, the Court entered an order
disqualifying them from the case. The Court is considering applications for lead
counsel and has currently scheduled a hearing on the matter for November 20,
2000. 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.
<PAGE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
The matters discussed in this Form 10-QSB contain certain forward-looking
statements and involve risks and uncertainties (including changing market
conditions, competitive and regulatory matters, etc.) detailed in the
disclosures contained in this Form 10-QSB 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
operations. 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.
The Partnership's investment properties consist of three apartment complexes.
The following table sets forth the average occupancy of the properties for each
of the nine months ended September 30, 2000 and 1999:
Average
Occupancy
Property 2000 1999
Parktown Townhouses
Deer Park, Texas 95% 94%
Raintree Apartments
Anderson, South Carolina 95% 95%
Signal Pointe Apartments
Winter Park, Florida 95% 95%
Results of Operations
The Partnership realized net income for the nine months ended September 30, 2000
of approximately $958,000 compared to approximately $778,000 for the
corresponding period in 1999. For the three month periods ended September 30,
2000 and 1999, the Partnership realized net income of approximately $324,000 and
$159,000, respectively. The increase in net income for the nine months ended
September 30, 2000 is due to an increase in total revenues partially offset by
an increase in total expenses. The increase in net income for the three months
ended September 30, 1999, is due to an increase in total revenues and, to a
lesser extent, a decrease in total expenses. Total revenues for the three and
nine months ended September 30, 2000 increased primarily due to an increase in
rental and, to a lesser extent, other income. The increase in rental income is
primarily due to an increase in the average rental rates at the three investment
properties. The increase in other income is primarily due to an increase in
interest income as a result of larger average cash balances held in interest
bearing accounts.
Total expenses for the nine months ended September 30, 2000 increased primarily
due to an increase in depreciation and general and administrative expenses
partially offset by a decrease in interest expense. Total expenses for the three
months ended September 30, 2000 decreased primarily due to a decrease in
operating expense largely offset by an increase in depreciation and general and
administrative expenses. Depreciation expense for the nine months ended
September 30, 2000 increased due to property improvements and replacements
completed during the past twelve months. Interest expense decreased for the nine
months ended September 30, 2000 due to a decrease in the average outstanding
debt balances. The decrease in operating expense during the three months ended
September 30, 2000, is primarily due to the fact that no expenses were incurred
during the third quarter of 2000 for repairs as was incurred for repairs during
the third quarter of 1999 for fire damage to four units at Parktown Townhouses.
General and administrative expense increased due to an increase in the costs of
services included in the management reimbursements to the Corporate General
Partner as allowed under the Partnership Agreement. In addition, costs
associated with the quarterly and annual communications with investors and
regulatory agencies and the annual audit required by the Partnership Agreement
are also included.
As part of the ongoing business plan of the Registrant, 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
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 September 30, 2000, the Partnership had cash and cash equivalents of
approximately $849,000 compared to approximately $1,017,000 at September 30,
1999. Cash and cash equivalents decreased approximately $478,000 from the
Partnership's previous year ended December 31, 1999. The decrease is due to
approximately $965,000 of cash used in investing activities and approximately
$1,373,000 of cash used in financing activities which was partially offset by
approximately $1,860,000 of cash provided by operating activities. Cash used in
investing activities consisted of net deposits to escrow accounts maintained by
the mortgage lender and property improvements and replacements. Cash used in
financing activities consisted of distributions to the partners 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 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. Capital improvements planned
for each of the Registrant's properties are detailed below.
Parktown Townhouses
For 2000, the Partnership has budgeted approximately $113,000 for capital
improvements at Parktown Townhouses, consisting primarily of structural
improvements, floor covering replacements, appliance replacements and HVAC unit
replacements. During the nine months ended September 30, 2000, the Partnership
completed approximately $165,000 of budgeted and unbudgeted capital
improvements, consisting primarily of floor covering replacements, air
conditioning improvements, exterior painting, parking lot enhancements, and
appliance replacements. These improvements were funded from operating cash flow.
Raintree Apartments
For 2000, the Partnership has budgeted approximately $73,000 for capital
improvements at Raintree Apartments, consisting primarily of major landscaping,
floor covering replacements and roof replacements. During the nine months ended
September 30, 2000, the Partnership completed approximately $80,000 of budgeted
and unbudgeted capital improvements, consisting primarily of roof replacement,
floor covering replacements, appliance replacements, and major landscaping.
These improvements were funded from operating cash flow.
Signal Pointe Apartments
For 2000, the Partnership has budgeted approximately $181,000 for capital
improvements at Signal Pointe Apartments, consisting primarily of structural
improvements, floor covering replacements, appliance replacements and HVAC unit
replacements. During the nine months ended September 30, 2000, the Partnership
completed approximately $209,000 of budgeted and unbudgeted capital
improvements, consisting primarily of floor covering and air conditioning
replacements, and structural and other improvements. These improvements were
funded from operating cash flow.
The additional capital expenditures will be incurred only if cash is 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.
The Registrant's current assets are thought to be sufficient for any near term
needs (exclusive of capital improvements) of the Registrant. The mortgage
indebtedness of approximately $7,918,000, net of discount, is amortized over 257
months with required balloon payments of approximately $7,370,000 due on
November 15, 2002. The Corporate General Partner will attempt to refinance such
indebtedness and/or sell the properties prior to such maturity date. If the
properties cannot be refinanced or sold for a sufficient amount, the Registrant
may risk losing such properties through foreclosure.
During the nine months ended September 30, 2000, the Partnership paid cash
distributions from operations of approximately $1,135,000 (approximately
$1,124,000 to the limited partners or $40.87 per limited partnership unit).
Subsequent to September 30, 2000, the Partnership declared and paid a cash
distribution from operations of approximately $316,000 (approximately $313,000
to the limited partners or $11.38 per limited partnership unit). During the nine
months ended September 30, 1999, the Partnership paid cash distributions from
operations of approximately $300,000 (approximately $297,000 to the limited
partners or $10.80 per limited partnership unit). 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. The Registrant's distribution policy is reviewed on a quarterly basis.
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 a minimum of $400 and a maximum
of $1,000 per apartment unit for each respective property for a total of
approximately $341,000 to $853,000. The reserve account balance at September 30,
2000 was approximately $872,000. There can be no assurance, however, that the
Partnership will generate sufficient funds from operations after required
capital expenditures to permit additional distributions to its partners during
the remainder of 2000 or subsequent periods.
<PAGE>
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEDINGS
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, its 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 of interests in certain general partner
entities by Insignia Financial Group, Inc. ("Insignia") and entities which were,
at one time, affiliates of Insignia; past tender offers by the Insignia
affiliates to acquire limited partnership units; the management of partnerships
by the Insignia affiliates; and the Insignia Merger. 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 owned units as of November 3, 1999. Preliminary
approval of the settlement was obtained on November 3, 1999 from the Court, 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 prior lead counsel to enter the settlement. On
December 14, 1999, the Corporate General Partner and its affiliates terminated
the proposed settlement. In February 2000, counsel for some of the named
plaintiffs filed a motion to disqualify plaintiff's lead and liaison counsel who
negotiated the settlement. On June 27, 2000, the Court entered an order
disqualifying them from the case. The Court is considering applications for lead
counsel and has currently scheduled a hearing on the matter for November 20,
2000. The Corporate General Partner does not anticipate that costs associated
with this case will be material to the Partnership's overall operations.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a) Exhibits:
Exhibit 27, Financial Data Schedule, is filed as an exhibit to
this report.
b) Reports on Form 8-K filed during the quarter ended September
30, 2000:
None.
<PAGE>
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
SHELTER PROPERTIES II
By: Shelter Realty II 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:
