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 June 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 0-10260
SHELTER PROPERTIES III
(Exact name of small business issuer as specified in its charter)
South Carolina 57-0718508
(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 Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes X No____
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
a)
SHELTER PROPERTIES III
CONSOLIDATED BALANCE SHEET
(Unaudited)
(in thousands, except per unit data)
June 30, 2000
Assets
Cash and cash equivalents $ 605
Receivables and deposits 161
Restricted escrows 827
Other assets 194
Investment properties:
Land $ 1,281
Buildings and related personal property 26,503
27,784
Less accumulated depreciation (16,619) 11,165
$ 12,952
Liabilities and Partners' (Deficit) Capital
Liabilities
Accounts payable $ 172
Tenant security deposit liabilities 112
Accrued property taxes 173
Other liabilities 432
Mortgage notes payable 7,792
Partners' (Deficit) Capital
General partners $ (90)
Limited partners (55,000 units issued and
outstanding) 4,361 4,271
$ 12,952
See Accompanying Notes to Consolidated Financial Statements
b)
SHELTER PROPERTIES III
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(in thousands, except unit data)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
2000 1999 2000 1999
Revenues:
<S> <C> <C> <C> <C>
Rental income $1,359 $1,289 $2,676 $2,568
Other income 106 76 210 161
Total revenues 1,465 1,365 2,886 2,729
Expenses:
Operating 599 638 1,205 1,199
General and administrative 87 62 147 117
Depreciation 267 212 527 442
Interest 181 183 337 368
Property taxes 96 99 179 194
Total expenses 1,230 1,194 2,395 2,320
Net income $ 235 $ 171 $ 491 $ 409
Net income allocated
to general partners (1%) $ 2 $ 2 $ 5 $ 4
Net income allocated
to limited partners (99%) 233 169 486 405
$ 235 $ 171 $ 491 $ 409
Net income per limited
partnership unit $ 4.24 $ 3.07 $ 8.84 $ 7.36
Distributions per limited
partnership unit $10.44 $ -- $10.44 $ --
See Accompanying Notes to Consolidated Financial Statements
</TABLE>
<PAGE>
c)
SHELTER PROPERTIES III
CONSOLIDATED 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 55,000 $ 2 $27,500 $27,502
Partners' (deficit) capital at
December 31, 1999 55,000 $ (89) $ 4,449 $ 4,360
Distributions to partners (6) (574) (580)
Net income for the six months
ended June 30, 2000 -- 5 486 491
Partners' (deficit) capital at
June 30, 2000 55,000 $ (90) $ 4,361 $ 4,271
See Accompanying Notes to Consolidated Financial Statements
</TABLE>
d)
SHELTER PROPERTIES III
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
<TABLE>
<CAPTION>
Six Months Ended
June 30,
2000 1999
Cash flows from operating activities:
<S> <C> <C>
Net income $ 491 $ 409
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation 527 442
Amortization of discounts and loan costs 53 49
Change in accounts:
Receivables and deposits 276 66
Other assets (33) (59)
Accounts payable 58 45
Tenant security deposit liabilities 6 (12)
Accrued property taxes 16 (70)
Other liabilities (24) 1
Net cash provided by operating activities 1,370 871
Cash flows from investing activities:
Property improvements and replacements (447) (199)
Net (deposits to) withdrawals from restricted escrows (257) 331
Net cash (used in) provided by investing
activities (704) 132
Cash flows from financing activities:
Payments on mortgage notes payable (136) (125)
Partners' distributions (580) --
Net cash used in financing activities (716) (125)
Net (decrease) increase in cash and cash equivalents (50) 878
Cash and cash equivalents at beginning of period 655 630
Cash and cash equivalents at end of period $ 605 $ 1,508
Supplemental disclosure of cash flow information:
Cash paid for interest $ 307 $ 318
See Accompanying Notes to Consolidated Financial Statements
</TABLE>
e)
SHELTER PROPERTIES III
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note A - Basis of Presentation
The accompanying unaudited consolidated financial statements of Shelter
Properties III (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 III Corporation (the
"Corporate General Partner"), all adjustments (consisting of normal recurring
accruals) considered necessary for a fair presentation have been included.
Operating results for the three and six month periods ended June 30, 2000 are
not necessarily indicative of the results that may be expected for the year
ending December 31, 2000. For further information, refer to the consolidated
financial statements and footnotes thereto included in the Partnership's Annual
Report on Form 10-KSB for the year ended December 31, 1999.
Principles of Consolidation
The financial statements include all of the accounts of the Partnership and its
99.99% owned partnership. The Corporate General Partner of the consolidated
partnership is Shelter Realty III Corporation. Shelter Realty III Corporation
may be removed as the general partner of the consolidated partnership by the
Registrant; therefore, the consolidated partnership is controlled and
consolidated by the Registrant. All significant interpartnership balances have
been eliminated.
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
consolidated statements of cash flows captioned "net cash provided by operating
activities" to "net cash used in operations", as defined in the Partnership
Agreement. However, "net cash used in operations" should not be considered an
alternative to net income as an indicator of the Partnership's operating
performance or to cash flows as a measure of liquidity.
For the Six Months Ended
June 30,
2000 1999
(in thousands)
Net cash provided by operating activities $ 1,370 $ 871
Payments on mortgage notes payable (136) (125)
Property improvements and replacements (447) (199)
Change in restricted escrows, net (257) 331
Changes in reserves for net operating
liabilities (299) 29
Additional reserves (231) (707)
Net cash provided by operations $ -- $ 200
The Corporate General Partner reserved approximately $231,000 and $707,000 at
June 30, 2000 and 1999, respectively, to fund capital improvements and repairs
at the Partnership's four investment properties.
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) payments to
affiliates for services and (ii) reimbursement of certain expenses incurred by
affiliates on behalf of the Partnership. The following amounts were paid or
accrued to the Corporate General Partner and affiliates during the six months
ended June 30, 2000 and 1999.
2000 1999
(in thousands)
Property management fees (included in
operating expenses) $146 $140
Reimbursement for services of affiliates
(included in operating and general and
administrative expenses and investment properties) 63 58
Due to general partners 185 185
Due from general partners 11 11
During the six months ended June 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 for providing property management services. The
Registrant paid to such affiliates approximately $146,000 and $140,000 for the
six months ended June 30, 2000 and 1999, respectively.
An affiliate of the Corporate General Partner received reimbursement of
accountable administrative expenses amounting to approximately $63,000 and
$58,000 for the six months ended June 30, 2000 and 1999, respectively.
During 1986 a liability of approximately $185,000 was incurred to the general
partners for sales commissions earned. Pursuant to the Partnership Agreement,
this liability cannot be paid until certain levels of returns are received by
the limited partners. As of June 30, 2000, the level of return to the limited
partners has not been met.
On September 26, 1997, an affiliate of the 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 Essex
Park Apartments, Colony House Apartments, and Willowick Apartments owned by the
Partnership.
AIMCO and its affiliates currently own 30,424 limited partnership units in the
Partnership representing 55.32% 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. As a result of its
ownership of 55.32% 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 - Segment Reporting
Description of the types of products and services from which the reportable
segment derives its revenue:
The Partnership has one reportable segment: residential properties. The
Partnership's residential property segment consists of four apartment complexes
located in Georgia, South Carolina (2), and Tennessee. The Partnership rents
apartment units to tenants for terms that are typically twelve months or less.
Measurement of segment profit or loss:
The Partnership evaluates performance based on segment profit (loss) before
depreciation. The accounting policies of the reportable segment are the same as
those described in the 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 six months ended June 30, 2000 and 1999 is
shown in the tables below. The "Other" column includes partnership
administration related items and income and expense not allocated to the
reportable segment.
Three Months Ended June 30, 2000 Residential Other Totals
(in thousands)
Rental income $ 1,359 $ -- $ 1,359
Other income 104 2 106
Interest expense 181 -- 181
Depreciation 267 -- 267
General and administrative expense -- 87 87
Segment profit (loss) 320 (85) 235
Six Months Ended June 30, 2000 Residential Other Totals
(in thousands)
Rental income $ 2,676 $ -- $ 2,676
Other income 206 4 210
Interest expense 337 -- 337
Depreciation 527 -- 527
General and administrative expense -- 147 147
Segment profit (loss) 634 (143) 491
Total assets 12,688 264 12,952
Capital expenditures for investment
properties 447 -- 447
Three Months Ended June 30, 1999 Residential Other Totals
(in thousands)
Rental income $ 1,289 $ -- $ 1,289
Other income 70 6 76
Interest expense 183 -- 183
Depreciation 212 -- 212
General and administrative expense -- 62 62
Segment profit (loss) 227 (56) 171
Six Months Ended June 30, 1999 Residential Other Totals
(in thousands)
Rental income $ 2,568 $ -- $ 2,568
Other income 151 10 161
Interest expense 368 -- 368
Depreciation 442 -- 442
General and administrative expense -- 117 117
Segment profit (loss) 516 (107) 409
Total assets 13,069 473 13,542
Capital expenditures for investment
properties 199 -- 199
Note F - 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. 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 will entertain applications for lead
counsel which must be filed by August 4, 2000. The Court has scheduled a hearing
on August 21, 2000 to address the issue of appointing lead counsel. The
Corporate General Partner does not anticipate that costs associated with this
case will be material to the Partnership's overall operations.
The Partnership is unaware of any other pending or outstanding litigation that
is not of a routine nature arising in the ordinary course of business.
Item 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
discussions of the Registrant's business and results of operations, including
forward-looking statements pertaining to such matters, does not take into
account the effects of any changes to the Registrant's business and results of
operation. Accordingly, actual results could differ materially from those
projected in the forward-looking statements as a result of a number of factors,
including those identified herein.
The Partnership's investment properties consist of four apartment complexes. The
following table sets forth the average occupancy of the properties for each of
the six months ended June 30, 2000 and 1999:
Average
Occupancy
Property 2000 1999
Essex Park Apartments
Columbia, South Carolina 92% 92%
Colony House Apartments
Mufreesboro, Tennessee 93% 88%
North River Village Apartments
Atlanta, Georgia 94% 96%
Willowick Apartments
Greenville, South Carolina 96% 95%
The Corporate General Partner attributes the increase in occupancy at Colony
House Apartments to management's intensified marketing and promotion efforts.
Results of Operations
The Registrant's net income for the three and six months ended June 30, 2000 was
approximately $235,000 and $491,000, respectively, as compared to approximately
$171,000 and $409,000 for the three and six months ended June 30, 1999. The
increase in net income for both periods is due to an increase in total revenues,
which was partially offset by an increase in total expenses. Total revenues
increased primarily due to an increase in rental income and, to a lesser extent,
an increase in other income. Rental income increased due to an increase in the
average rental rates at all four of the Registrant's investment properties and
to an increase in occupancy at Colony House Apartments and Willowick Apartments.
The increase in rental income was partially offset by a decrease in occupancy at
North River Village Apartments. Other income increased primarily due to an
increase in miscellaneous income at North River Village Apartments, and, to a
lesser extent, an increase in interest income.
The increase in total revenues for the three and six months ended June 30, 2000
was partially offset by an increase in total expenses. Total expenses increased
due to an increase in depreciation and general and administrative expenses,
which were partially offset by decreases in interest and property tax expenses.
Depreciation expense increased due to increased property improvements and
replacements at all four investment properties. Interest expense decreased
primarily due to the reduction of principal balances on the properties'
mortgages. Property tax expense decreased due to the timing of the receipt of
property tax billings. Operating expense remained relatively constant for the
six months ended June 30, 2000. Operating expense decreased for the three months
ended June 30, 2000 due to a decrease in advertising expense and a decrease in
maintenance materials and supplies.
General and administrative expense increased for three and six month periods
ended June 30, 2000 as a result of an increase in costs associated with
communications with investors and the annual audit. Included in general and
administrative expenses for the six months ended June 30, 2000 and 1999 are
management reimbursements to the Corporate General Partner allowed under the
Partnership Agreement. Also included in general and administrative expenses were
costs associated with the quarterly and annual communications with investors and
regulatory agencies and the annual audit and appraisals required by the
Partnership Agreement.
As part of the ongoing business plan of the Registrant, the Corporate General
Partner monitors the rental market environments 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 June 30, 2000, the Partnership had cash and cash equivalents of approximately
$605,000 compared to approximately $1,508,000 at June 30, 1999. The decrease in
cash and cash equivalents of approximately $50,000 for the six months ended June
30, 2000, from the Partnership's calendar year end, is due to approximately
$716,000 of cash used in financing activities and approximately $704,000 of cash
used in investing activities, which was partially offset by approximately
$1,370,000 of cash provided by operating activities. Cash used in investing
activities consisted of property improvements and replacements and, to a lesser
extent, net deposits to escrow accounts maintained by the mortgage lender. Cash
used in financing activities consisted of partner distributions and, to a lesser
extent, payments of principal made on the mortgages encumbering the Registrant's
properties. The Registrant 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 investment properties to adequately maintain the
physical assets and other operating needs of the Registrant and to comply with
Federal, state, local, legal, and regulatory requirements. Capital improvements
completed at each of the Registrant's properties are detailed below.
Essex Park Apartments
The Partnership has budgeted approximately $223,000 for capital improvements
during 2000 at Essex Park Apartments, consisting primarily of appliances, floor
coverings, plumbing improvements, and other building improvements. The
Partnership has completed approximately $62,000 in capital expenditures as of
June 30, 2000, consisting primarily of fencing improvements and floor covering
and appliance replacements. These improvements were funded primarily from
operations.
Colony House Apartments
The Partnership has budgeted approximately $117,000 for capital improvements
during 2000 at Colony House Apartments consisting primarily of appliances, floor
coverings, swimming pool improvements, and air conditioning improvements. The
Partnership has completed approximately $228,000 in capital expenditures as of
June 30, 2000, consisting primarily of floor covering and appliance
replacements, air conditioning improvements, and swimming pool improvements.
These improvements were funded primarily from operations.
North River Village Apartments
The Partnership has budgeted approximately $164,000 for capital improvements
during 2000 at North River Village Apartments, consisting primarily of
appliances, floor coverings and plumbing improvements. The Partnership has
completed approximately $107,000 in capital expenditures as of June 30, 2000,
consisting primarily of floor covering and HVAC replacements, plumbing
improvements, parking lot improvements, and other building improvements. These
improvements were funded primarily from operations.
Willowick Apartments
The Partnership has budgeted approximately $70,000 for capital improvements
during 2000 at Willowick Apartments, consisting primarily of appliances, floor
coverings, major landscaping and clubhouse renovations. The Partnership has
completed approximately $50,000 in capital expenditures as of June 30, 2000,
consisting primarily of floor covering, lighting and appliance replacements and
other building improvements. These improvements were funded primarily from
operations.
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 $7,792,000, net of discount, is amortized over
varying periods with balloon payments due from November 15, 2002 to October 15,
2003. The Corporate General Partner will attempt to refinance such indebtedness
and/or sell the properties prior to such maturity dates. If the properties
cannot be refinanced or sold for a sufficient amount, the Registrant will risk
losing such properties through foreclosure.
During the six months ended June 30, 2000, cash distributions of approximately
$580,000 ($574,000 of which was paid to the limited partners, $10.44 per limited
partnership unit) were paid from operations. Included in this amount was
approximately $15,000 which consisted of withholding taxes paid to the state of
South Carolina on behalf of the limited partners. There were no cash
distributions made for the six months ended June 30, 1999. 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 Partnership's distribution policy is
reviewed on a semi-annual basis. There can be no assurance, however, that the
Partnership will generate sufficient funds from operations, after planned
capital improvement expenditures, to permit any additional distributions to its
partners in 2000 or subsequent periods. In addition, the Partnership may be
restricted from making distributions if the amount in the reserve account for
each property maintained by the mortgage lender is less than $400 per apartment
unit at Colony House Apartments, Essex Park Apartments, and Willowick Apartments
and $200 per apartment unit at North River Village Apartments. As of June 30,
2000 the reserve account was fully funded with approximately $750,000 on deposit
with the mortgage lender.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
In March 1998, several putative unit holders of limited partnership units of the
Partnership commenced an action entitled Rosalie Nuanes, et al. v. Insignia
Financial Group, Inc., et al. in the Superior Court of the State of California
for the County of San Mateo. The plaintiffs named as defendants, among others,
the Partnership, 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. 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 will entertain applications for lead
counsel which must be filed by August 4, 2000. The Court has scheduled a hearing
on August 21, 2000 to address the issue of appointing lead counsel. 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 June 30, 2000:
None.
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 III
By: Shelter Realty III 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: August 2, 2000
