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 0-10260
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)
September 30, 2000
Assets
Cash and cash equivalents $ 785
Receivables and deposits 184
Restricted escrows 730
Other assets 180
Investment properties:
Land $ 1,281
Buildings and related personal property 26,811
28,092
Less accumulated depreciation (16,878) 11,214
$ 13,093
Liabilities and Partners' (Deficit) Capital
Liabilities
Accounts payable $ 59
Tenant security deposit liabilities 120
Accrued property taxes 280
Other liabilities 506
Mortgage notes payable 7,738
Partners' (Deficit) Capital
General partners $ (89)
Limited partners (55,000 units issued and
outstanding) 4,479 4,390
$ 13,093
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 Nine Months Ended
September 30, September 30,
2000 1999 2000 1999
Revenues:
<S> <C> <C> <C> <C>
Rental income $1,306 $1,317 $3,982 $3,885
Other income 108 87 318 248
Total revenues 1,414 1,404 4,300 4,133
Expenses:
Operating 638 634 1,843 1,833
General and administrative 114 59 261 176
Depreciation 259 220 786 662
Interest 177 180 514 548
Property taxes 107 95 286 289
Total expenses 1,295 1,188 3,690 3,508
Net income $ 119 $ 216 $ 610 $ 625
Net income allocated
to general partners (1%) $ 1 $ 2 $ 6 $ 6
Net income allocated
to limited partners (99%) 118 214 604 619
$ 119 $ 216 $ 610 $ 625
Net income per limited
partnership unit $ 2.14 $ 3.89 $10.98 $11.25
Distributions per limited
partnership unit $ -- $ 3.60 $10.44 $ 3.60
See Accompanying Notes to Consolidated Financial Statements
</TABLE>
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 nine months
ended September 30, 2000 -- 6 604 610
Partners' (deficit) capital at
September 30, 2000 55,000 $ (89) $ 4,479 $ 4,390
See Accompanying Notes to Consolidated Financial Statements
</TABLE>
d)
SHELTER PROPERTIES III
CONSOLIDATED 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 $ 610 $ 625
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation 786 662
Amortization of discounts and loan costs 78 74
Change in accounts:
Receivables and deposits 253 22
Other assets (29) (50)
Accounts payable (55) 79
Tenant security deposit liabilities 14 (4)
Accrued property taxes 123 25
Other liabilities 50 12
Net cash provided by operating activities 1,830 1,445
Cash flows from investing activities:
Property improvements and replacements (755) (554)
Net (deposits to) withdrawals from restricted escrows (160) 384
Net cash used in investing activities (915) (170)
Cash flows from financing activities:
Payments on mortgage notes payable (205) (190)
Partners' distributions (580) (200)
Net cash used in financing activities (785) (390)
Net increase in cash and cash equivalents 130 885
Cash and cash equivalents at beginning of period 655 630
Cash and cash equivalents at end of period $ 785 $ 1,515
Supplemental disclosure of cash flow information:
Cash paid for interest $ 460 $ 475
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 nine month periods ended September 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.
<TABLE>
<CAPTION>
For the Nine Months Ended
September 30,
2000 1999
(in thousands)
<S> <C> <C>
Net cash provided by operating activities $ 1,830 $ 1,445
Payments on mortgage notes payable (205) (190)
Property improvements and replacements (755) (554)
Change in restricted escrows, net (160) 384
Changes in reserves for net operating
liabilities (356) (84)
Additional reserves (132) (1,001)
Net cash provided by operations $ 222 $ --
</TABLE>
The Corporate General Partner reserved approximately $132,000 and $1,001,000 at
September 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 nine months
ended September 30, 2000 and 1999.
2000 1999
(in thousands)
Property management fees (included in
operating expenses) $216 $211
Reimbursement for services of affiliates
(included in operating and general and
administrative expenses and investment properties) 145 92
Due to general partners 185 185
Due from general partners 11 11
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 for providing property management services. The
Registrant paid to such affiliates approximately $216,000 and $211,000 for the
nine months ended September 30, 2000 and 1999, respectively.
An affiliate of the Corporate General Partner received reimbursement of
accountable administrative expenses amounting to approximately $145,000 and
$92,000 for the nine months ended September 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 September 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.
In addition to its indirect ownership of the general partner interest in the
Partnership, AIMCO and its affiliates currently own 32,314 limited partnership
units in the Partnership representing 58.75% 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 General Partner. As a result of
its ownership of 58.75% 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, 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. During the nine
months ended September 30, 1999, a cash distribution of approximately $200,000
($198,000 to the limited partners, $3.60 per limited partnership unit) was paid
from operations.
Subsequent to September 30, 2000, an operating distribution of approximately
$222,000 was declared and paid ($220,000 of which was paid to the limited
partners, $4.00 per limited partnership unit).
Note F - 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 nine months ended September 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 September 30, 2000 Residential Other Totals
(in thousands)
Rental income $ 1,306 $ -- $ 1,306
Other income 106 2 108
Interest expense 177 -- 177
Depreciation 259 -- 259
General and administrative expense -- 114 114
Segment profit (loss) 231 (112) 119
Nine Months Ended September 30, 2000 Residential Other Totals
(in thousands)
Rental income $ 3,982 $ -- $ 3,982
Other income 312 6 318
Interest expense 514 -- 514
Depreciation 786 -- 786
General and administrative expense -- 261 261
Segment profit (loss) 865 (255) 610
Total assets 12,878 215 13,093
Capital expenditures for investment
properties 755 -- 755
Three Months Ended September 30, 1999 Residential Other Totals
(in thousands)
Rental income $ 1,317 $ -- $ 1,317
Other income 85 2 87
Interest expense 180 -- 180
Depreciation 220 -- 220
General and administrative expense -- 59 59
Segment profit (loss) 273 (57) 216
Nine months Ended September 30, 1999 Residential Other Totals
(in thousands)
Rental income $ 3,885 $ -- $ 3,885
Other income 236 12 248
Interest expense 548 -- 548
Depreciation 662 -- 662
General and administrative expense -- 176 176
Segment profit (loss) 789 (164) 625
Total assets 13,440 215 13,655
Capital expenditures for investment
properties 554 -- 554
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. 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.
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 nine months ended September 30, 2000 and 1999:
Average
Occupancy
Property 2000 1999
Essex Park Apartments
Columbia, South Carolina 91% 92%
Colony House Apartments
Mufreesboro, Tennessee 91% 92%
North River Village Apartments
Atlanta, Georgia 95% 95%
Willowick Apartments
Greenville, South Carolina 96% 94%
Results of Operations
The Registrant's net income for the three and nine months ended September 30,
2000 was approximately $119,000 and $610,000, respectively, as compared to
approximately $216,000 and $625,000 for the three and nine months ended
September 30, 1999. The decrease in net income for both periods is due to an
increase in total expenses partially offset by an increase in total revenues.
Total revenues increased due to an increase in rental income for the nine months
ended September 30, 2000 and an increase in other income for the three and nine
months ended September 30, 2000. Rental income increased due to an increase in
the average rental rates at all four of the Registrant's properties. Other
income increased primarily due to an increase in miscellaneous income at North
Village Apartments, and to a lesser extent, an increase in interest income.
Total expenses increased for the three and nine months ended September 30, 2000
due to an increase in depreciation and general and administrative expenses,
which were partially offset by a decrease in interest expense. Depreciation
expense increased due to increased property improvements and replacements at all
four of the investment properties which are now being depreciated. Interest
expense decreased slightly for the three month period and more significantly for
the nine month period primarily due to the reduction of principal balances on
the properties' mortgages. Operating and property tax expense remained
relatively constant for the three and nine months ended September 30, 2000.
General and administrative expense increased for the three and nine month
periods ended September 30, 2000 as a result of an increase in costs associated
with the annual audit and management reimbursements to the Corporate General
Partner allowed under the Partnership Agreement. Included in general and
administrative expenses for the nine months ended September 30, 2000 and 1999
were costs associated with the quarterly and annual communications with
investors and regulatory agencies and the annual 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 September 30, 2000, the Partnership had cash and cash equivalents of
approximately $785,000 compared to approximately $1,515,000 at September 30,
1999. The increase in cash and cash equivalents of approximately $130,000 for
the nine months ended September 30, 2000, from the Partnership's calendar year
end, is due to approximately $1,830,000 of cash provided by operating activities
which was partially offset by approximately $785,000 of cash used in financing
activities and approximately $915,000 of cash used in investing 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 $139,000 in capital expenditures as of
September 30, 2000, consisting primarily of fencing improvements, floor covering
and appliance replacements and other building improvements. These improvements
were funded 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, air conditioning improvements and other
building improvements. The Partnership has completed approximately $334,000 in
capital expenditures as of September 30, 2000, consisting primarily of floor
covering and appliance replacements, air conditioning improvements, swimming
pool improvements. These improvements were funded from operations.
North River Village Apartments
The Partnership has budgeted approximately $214,000 for capital improvements
during 2000 at North River Village Apartments, consisting primarily of
appliances, floor coverings and plumbing improvements. The Partnership has
completed approximately $203,000 in capital expenditures as of September 30,
2000, consisting primarily of floor covering and HVAC replacements, plumbing
improvements, parking lot improvements, swimming pool improvements, and other
building improvements. These improvements were funded from operations.
Willowick Apartments
The Partnership has budgeted approximately $107,000 for capital improvements
during 2000 at Willowick Apartments, consisting primarily of appliances, floor
coverings, major landscaping and clubhouse renovations. The Partnership has
completed approximately $79,000 in capital expenditures as of September 30,
2000, consisting primarily of floor covering, lighting and appliance
replacements and other building improvements. These improvements were funded
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 $7,738,000, 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 nine months ended September 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. During the nine
months ended September 30, 1999, a cash distribution of approximately $200,000
($198,000 to the limited partners, $3.60 per limited partnership unit) was paid
from operations. Subsequent to September 30, 2000, an operating distribution of
approximately $222,000 was declared and paid ($220,000 of which was paid to the
limited partners, $4.00 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 Partnership's distribution policy is reviewed on a
quarterly 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 September 30, 2000 the
reserve account was fully funded with approximately $652,000 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 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.
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: November 8, 2000
