FORM 10-QSB--QUARTERLY REPORT UNDER SECTION 13 or 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
Quarterly or Transitional Report
(As last amended by 34-32231, eff. 6/3/93.)
U. S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-QSB
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended July 31, 1995
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period.........to.........
Commission file number 0-10884
SHELTER PROPERTIES IV LIMITED PARTNERSHIP
(Exact name of small business issuer as specified in its charter)
South Carolina 57-0721760
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
One Insignia Financial Plaza, P.O. Box 1089
Greenville, South Carolina 29602
(Address of principal executive offices) (Zip Code)
Issuer's telephone number (803) 239-1000
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 IV LIMITED PARTNERSHIP
CONSOLIDATED BALANCE SHEET
(Unaudited)
July 31, 1995
<TABLE>
<CAPTION>
<S> <C> <C>
Assets
Cash:
Unrestricted $ 1,385,718
Restricted--tenant security deposits 241,725
Investments 1,311,381
Accounts receivable 26,690
Escrow for taxes 511,906
Restricted escrows 1,637,259
Other assets 650,114
Investment properties:
Land $ 3,442,097
Buildings and related personal property 54,359,430
57,801,527
Less accumulated depreciation (28,120,712) 29,680,815
$35,445,608
Liabilities and Partners' Capital (Deficit)
Liabilities
Accounts payable $ 281,726
Tenant security deposits 245,012
Accrued taxes 393,777
Other liabilities 334,193
Mortgage notes payable 25,182,574
Partners' Capital
General partners $ 5,720
Limited partners (50,000 units
issued and outstanding) 9,002,606 9,008,326
$35,445,608
</TABLE>
See Accompanying Notes to Financial Statements
1
<PAGE>
b) SHELTER PROPERTIES IV LIMITED PARTNERSHIP
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
July 31, July 31,
<S> <C> <C> <C> <C>
1995 1994 1995 1994
Revenues:
Rental income $2,492,118 $2,357,615 $7,323,895 $7,028,716
Other income 163,242 175,239 439,655 376,530
Total revenues 2,655,360 2,532,854 7,763,550 7,405,246
Expenses:
Operating 754,716 757,649 2,164,701 2,141,091
General and administrative 177,795 50,109 331,628 184,759
Property management fees 130,318 121,223 381,121 362,751
Maintenance 454,630 352,984 1,737,225 1,119,202
Depreciation 441,731 390,291 1,303,432 1,229,166
Interest 574,394 583,666 1,730,314 1,757,356
Property taxes 164,819 183,647 506,144 513,877
Total expenses 2,698,403 2,439,569 8,154,565 7,308,202
Loss on disposal of property -- (814) -- (814)
Net (loss) income $ (43,043) $ 92,471 $ (391,015) $ 96,230
Net (loss) income allocated
to general partners (1%) $ (430) $ 925 $ (3,910) $ 962
Net (loss) income allocated
to limited partners (99%) (42,613) 91,546 (387,105) 95,268
$ (43,043) $ 92,471 $ (391,015) $ 96,230
Net (loss) income per limited
partnership unit $ (.85) $ 1.83 $ (7.74) $ 1.91
</TABLE>
See Accompanying Notes to Financial Statements
2
<PAGE>
c) SHELTER PROPERTIES IV LIMITED PARTNERSHIP
CONSOLIDATED STATEMENT OF CHANGES IN PARTNERS' CAPITAL (DEFICIT)
(Unaudited)
<TABLE>
<CAPTION>
Limited
Partnership General Limited
Units Partners Partners Total
<S> <C> <C> <C> <C>
Original capital
contributions 50,000 $ 2,000 $50,000,000 $50,002,000
Partners' capital at
October 31, 1994 50,000 $ 9,630 $ 9,389,711 $ 9,399,341
Net loss for the nine months
ended July 31, 1995 -- (3,910) (387,105) (391,015)
Partners' capital at
July 31, 1995 50,000 $ 5,720 $ 9,002,606 $ 9,008,326
</TABLE>
See Accompanying Notes to Financial Statements
3
<PAGE>
d) SHELTER PROPERTIES IV LIMITED PARTNERSHIP
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<Captiion>
Nine Months Ended
July 31,
1995 1994
<S> <C> <C>
Cash flows from operating activities:
Net (loss) income $(391,015) $ 96,230
Adjustments to reconcile net (loss) income to
net cash provided by operating activities:
Depreciation 1,303,432 1,229,166
Amortization of discounts and loan costs 193,566 187,559
Loss on disposition of property -- 814
Change in accounts:
Restricted cash (13,768) (7,425)
Accounts receivable (4,721) 1,267
Escrows for taxes 143,956 300,131
Other assets 77,585 (30,695)
Accounts payable 107,438 (366,117)
Tenant security deposit liabilities 17,055 9,123
Accrued taxes (52,768) (226,039)
Other liabilities (70,379) 55,076
Net cash provided by operating activities 1,310,381 1,249,090
Cash flows from investing activities:
Property improvements and replacements (453,590) (316,282)
Cash invested in short-term investments (3,144,537) (3,077,733)
Cash received from matured investments 2,839,902 3,043,903
Deposits to restricted escrows (51,840) (90,311)
Receipts from restricted escrows 93,258 90,636
Insurance proceeds from property damage -- 121,915
Net cash used in investing activities (716,807) (227,872)
Cash flows from financing activities:
Payments on mortgage notes payable $ (455,480) $ (422,247)
Distributions paid -- (105,513)
Net cash used in financing activities (455,480) (527,760)
Net increase in cash 138,094 493,458
Cash at beginning of period 1,247,624 610,730
Cash at end of period $1,385,718 $ 1,104,188
Supplemental disclosure of cash flow information:
Cash paid for interest $1,536,748 $ 1,569,980
</TABLE>
See Accompanying Notes to Financial Statements
4
<PAGE>
e) SHELTER PROPERTIES IV LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
Note A - Basis of Presentation
The accompanying unaudited financial statements 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 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 July 31, 1995, are not necessarily indicative of the results that
may be expected for the fiscal year ending October 31, 1995. 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 October 31, 1994.
Certain reclassifications have been made to the 1994 information to
conform to the 1995 presentation.
Note B - 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.
<TABLE>
<CAPTION>
For the Nine Months Ended
July 31,
1995 1994
<S> <C> <C>
Net cash provided by operating activities $1,310,381 $1,249,090
Payments on mortgage notes payable (455,480) (422,247)
Property improvements and replacements (453,590) (316,282)
Change in restricted escrows, net 41,418 325
Changes in reserves for net operating
liabilities (204,398) 264,679
Insurance proceeds from property damage -- 121,915
Additional reserves (250,000) (905,000)
Net cash provided by (used in)
operations $ (11,669) $ (7,520)
</TABLE>
In 1995 and 1994 the Corporate General Partner believed it to be in the
best interest of the Partnership to reserve an additional $250,000 and
$905,000, respectively, to fund continuing capital improvements at the
three properties.
5
<PAGE>
SHELTER PROPERTIES IV LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS - continued
(unaudited)
Note C Transactions with Affiliated Parties
The Partnership has no employees and is dependent on the Corporate
General Partner and its affiliates for the management and administration
of all partnership activities. The Partnership Agreement provides for
payments to affiliates for services and as reimbursement of certain
expenses incurred by affiliates on behalf of the Partnership. The
following transactions with Insignia Financial Group, Inc. and
affiliates were charged to expense in 1995 and 1994:
<TABLE>
<CAPTION>
For the Nine Months Ended
July 31,
1995 1994
<S> <C> <C>
Property management fees $381,121 $362,751
Data processing services 37,852 35,082
Marketing services 909 1,637
Reimbursement for services of affiliates 94,322 76,585
</TABLE>
The Partnership insures its properties under a master policy through
an agency and insurer unaffiliated with the Corporate General Partner.
An affiliate of the Corporate General Partner acquired, in the
acquisition of a business, certain financial obligations from an
insurance agency which was later acquired by the agent who placed the
current year's master policy. The current agent assumed the financial
obligations to the affiliate of the Corporate General Partner, who
receives payments on these obligations from the agent. The amount of
the Partnership's insurance premiums accruing to the benefit of the
affiliate of the Corporate General Partner by virtue of the agent's
obligations is not significant.
6
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
The Partnership's investment properties consist of three
apartment complexes. The following table sets forth the average
occupancy of the properties for the nine months ended July 31, 1995 and
1994:
<TABLE>
<CAPTION>
Average
Occupancy
<S> <C> <C>
Property 1995 1994
Baymeadows Apartments
Jacksonville, Florida 96% 96%
Quail Run Apartments
Columbia, South Carolina 95% 89%
Countrywood Village Apartments
Raleigh, North Carolina 95% 96%
</TABLE>
The Corporate General Partner attributes the increase in occupancy at
Quail Run to the increase in military personnel being transferred into
the local base.
The Partnership's net loss for the nine months ended July 31, 1995,
was $391,015, with the third quarter having a loss of $43,043. The
Partnership reported net income of $96,230 and $92,471 for the
respective corresponding periods of 1994. The decrease in net income is
primarily attributable to an increase in maintenance expense due to
additional renovations in 1995 which included painting and exterior
renovations of both Baymeadows and Countrywood. In addition, general
and administrative expenses increased as a result of increased legal
costs for an outstanding lawsuit as disclosed in Legal Proceedings
below, as well as increased professional expenses in connection with the
tender offers. Partially offsetting these items is an increase in
rental income due to an increase in occupancy and periodic rental rate
increases. In addition, other income increased due to additional tenant
charges and increased revenue at Baymeadows' ancillary operations.
Other income also increased due to additional cash being available for
investments and higher interest rates. Offsetting these increases in
other income was a decrease in other income at Quail Run due to a tax
refund received in 1994 with no similar refund in 1995.
As part of the ongoing business plan of the Partnership, the
Corporate General Partner monitors the rental market environment of each
of its investment properties to assess the feasibility of increasing
rents, maintaining or increasing occupancy levels and protecting the
Partnership from increases in expense. As part of this plan the
Corporate General Partner attempts to protect the Partnership from the
burden of inflation-related increases in expenses by increasing rents
and maintaining a high overall occupancy level. However, due to
changing market conditions, which can result in the use of rental
concessions and rental reductions to offset softening market conditions,
there is no guarantee that the Corporate General Partner will be able to
sustain such a plan.
At July 31, 1995, the Partnership reported unrestricted cash of
$1,385,718 versus $1,104,188 for the same period in 1994. Net cash
provided from operations increased primarily due to the change in
accounts payable resulting from the payment of
7
<PAGE>
property improvements in 1994 for services rendered during fiscal
1993. Also contributing to this increase is the change in other
assets resulting from the refund of taxes from the Internal
Revenue Service that had to be prepaid in May 1994. Offsetting
this change is the reporting of a net loss for the nine months
ended July 31, 1995, versus net income for the same period in 1994
as previously discussed. Net cash used in investing activities
increased primarily due to additional purchases of short-term
investments and the receipt in 1994 of insurance proceeds for
damages incurred in 1993 with no such receipt in 1995. Also
contributing to this change is an increase in property
improvements in the first nine months of 1995 over the same period
in 1994. These property improvements are mainly due to major
renovation projects at Baymeadows and Countrywood. Finally, the
statement of cash flows includes a decrease in cash used in
financing activities resulting from a distribution to the partners
paid in the second quarter of 1994. This distribution was for
withholding taxes due on behalf of the partners resulting from the
income associated with the foreclosure of one of the Partnership's
properties.
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 property to adequately maintain the
physical assets and other operating needs of the Partnership. Such
assets are currently thought to be sufficient for any near-term needs of
the Partnership. The mortgage indebtedness of $25,182,574, net of
discount, is amortized over 257 months with a balloon payment of
$20,669,395 due on November 15, 2002, at which time the properties will
either be refinanced or sold. Future cash distributions will depend on
the levels of net cash generated from operations, property sales, and
the availability of cash reserves. As previously discussed, the
Partnership paid the withholding taxes in 1994 for the partners in
connection with the gain reported on the foreclosure of one of the
partnership's properties in 1993. No cash distributions were recorded
during the first nine months of fiscal 1995. The Corporate General
Partner presently anticipates that the Partnership will make a cash
distribution to Unit holders in 1995. Although the timing and amount
of such anticipated distribution has not been determined, the
Partnership does not intend to make a cash distribution until later
in 1995.
8
<PAGE>
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The general partner responsible for management of the
Partnership's business is Shelter Realty IV Corporation, a South
Carolina corporation (the "Corporate General Partner"). The only other
general partner of the Partnership, N. Barton Tuck, Jr. is effectively
prohibited by the Partnership's partnership agreement (the "Partnership
Agreement") from participating in the management of the Partnership.
The Corporate General Partner is an indirect subsidiary of Insignia
Financial Group, Inc. ("Insignia"). The directors and officers of the
Corporate General Partner also serve as executive officers of Insignia.
The Corporate General Partner owns 100 Limited Partnership Units
("Units"). On May 27, 1995, an affiliate of the Corporate General
Partner (the "Affiliated Purchaser") acquired 11,050 Units at a price of
$250.00 per Unit pursuant to a tender offer (the "Affiliate Offer")
described below. The Corporate General Partner and the Affiliated
Purchaser are, therefore, entitled to participate in cash distributions
made by the Partnership to its Unit holders. The Partnership has not
made cash distributions to Unit holders since 1985. In addition, the
Partnership made withholding tax payments in 1994 to taxing authorities
on behalf of the partners which was recorded as a distribution.
The Corporate General Partner presently anticipates that the
Partnership will make a cash distribution to Unit holders in 1995.
Although the timing and amount of such anticipated distribution
has not been determined, the Partnership does not intend to make
a cash distribution until later in 1995 after the High River Offer
is scheduled to expire. As a result, High River (as defined below) will
receive the full cash distribution made during 1995 for those Units that
it purchases in the High River Offer. The Partnership presently expects
that any distribution made during 1995 would be in the range of $17.50
to $20.00 per Unit. In addition, the Corporate General Partner is
entitled to certain cash distributions in respect of its general partner
interest. The Corporate General Partner has not received a cash
distribution in respect of its general partner interest since 1985.
As a result of the Affiliated Purchaser's acquisition of 22.1% of
the outstanding Units, the Affiliated Purchaser, an affiliate of the
Corporate General Partner and Insignia, may be in a position to
significantly influence any vote of the Unit holders. The Partnership
has paid Insignia Management Group, L.P. ("IMG"), an affiliate of the
Corporate General Partner, property management fees equal to 5% of the
Partnership's apartment revenues for property management services in
each of the three years in the period ended October 31, 1994, pursuant
to property management agreements. Property management fees paid to IMG
amounted to $492,733, $477,484, and $486,071, respectively, for the
three years ended October 31, 1992, 1993, and 1994. Additionally, the
Partnership paid IMG property management fees equal to $381,121 during
the first three quarters of fiscal 1995. Insignia and its affiliates do
not receive any fees from the Partnership for the asset management or
partnership administration services they provide, although Insignia and
its affiliates are reimbursed by the Partnership for the expenses they
incur in connection with providing those services. The Partnership
Agreement also provides for reimbursement to the Corporate General
Partner and its affiliates for costs incurred in connection with
administration of the Partnership's activities. Pursuant to these
provisions and in addition to the property management fees referred to
above, the Partnership paid the Corporate General Partner and its
affiliates (including the reimbursements to Insignia and its affiliates
in connection with asset management and partnership administration
services) an aggregate of $172,088, $189,970, and $194,478,
respectively, for the three years ended October 31, 1992, 1993, and 1994
and $133,083 during the first three quarters
9
<PAGE>
of fiscal 1995. In 1992, an affiliate of Insignia assisted an
unaffiliated third party engaged by the Partnership in connection
with refinancings of the Partnership's properties, and received
$244,500 from the third party for providing such assistance. In
addition, at various times during the past three fiscal years an
affiliate of Insignia has held a promissory note or preferred
stock issued by an unaffiliated company that provides insurance
brokerage services to the Partnership.
The terms of the Affiliated Purchaser's financing of the Affiliate
Offer may result in future potential conflicts of interest. The
Affiliated Purchaser paid for the Units it purchased pursuant to the
Affiliate Offer with funds provided by Insignia, and Insignia, in turn,
obtained these funds from its working capital. It is possible, however,
that in connection with its future financing activities, Insignia may
cause or request the Affiliated Purchaser to pledge its Units as
collateral for loans, or otherwise agree to terms which provide Insignia
and the Affiliated Purchaser with incentives to generate substantial
near-term cash flow from the Affiliated Purchaser's investment in the
Units. In such a situation, the Corporate General Partner may
experience a conflict of interest in seeking to reconcile the best
interests of the Partnership with the need of its affiliates for cash
flow from the Partnership's activities.
On April 27, 1995, the Affiliated Purchaser commenced the
Affiliate Offer for up to 30% of the Units at a price of $250.00 per
Unit. The Affiliate Offer expired on May 26, 1995. On May 27, 1995, an
affiliate of the Corporate General Partner, the Affiliated Purchaser,
acquired 11,050 Units at a price of $250.00 per Unit pursuant to the
Affiliate Offer. During the Affiliate Offer, Carl C. Icahn and certain
of his associates contacted Insignia about pursuing a variety of
possible transactions on a joint venture basis. During those
discussions, representatives of Insignia advised Mr. Icahn and his
representatives that Insignia did not wish to discourage or prevent any
transaction which would produce additional value for Unit holders.
During those conversations, Mr. Icahn and his representatives expressed
a desire to make an equity investment in the Affiliated Purchaser with a
view to sharing in the economic benefits, if any, to be derived by the
Affiliated Purchaser from the Affiliate Offer. The representatives of
Insignia declined to agree to such an arrangement.
Following those discussions, at approximately 6:45 p.m. on Monday,
May 22, 1995, the Corporate General Partner received a letter from High
River Limited Partnership ("High River") which stated that High River
was commencing, by public announcement, a cash tender offer for up to
approximately 30% of the outstanding Units at a price of $287.50 per
Unit (the "High River Offer"). High River sent similar letters to the
Insignia affiliated corporate general partners of five other limited
partnerships. On May 23, 1995, Insignia issued a press release which
announced receipt of the letters.
From 12:00 noon on Tuesday, May 23 through late in the evening of
Wednesday, May 24, the Affiliated Purchaser, Insignia, and High River
and their respective counsel had a series of meetings and telephone
conversations to explore a possible joint venture relationship with
respect to various real estate related investment opportunities,
including the Affiliate Offer. Representatives of High River terminated
the discussions. No agreement was reached with respect to the
Affiliated Offer or any other matter.
On the afternoon of Thursday, May 25, 1995, the Corporate General
Partner received a second letter from High River stating that High River
had initiated a tender offer for up to 40% of the outstanding Units at a
price of $363.00 per Unit.
10
<PAGE>
High River also issued a press release announcing the High River
Offer and that High River was commencing similar tender offers for
units of limited partnership interest in five other partnerships
in which other Insignia affiliates are the corporate general
partners. Upon receiving the letter from High River, Insignia
issued its own press release announcing the terms of the six High
River offers.
Also on May 25, 1995, the Corporate General Partner received a
copy of a Complaint (the "High River Complaint") seeking, among other
things, an order from the United States District Court for the District
of Delaware enjoining the closing of the Affiliate Offer. The High
River Complaint related to the Affiliate Offer and to five other tender
offers made by affiliates of Insignia for units of limited partnership
interests in other limited partnerships in which other affiliates of
Insignia are general partners. The High River Complaint named as
defendants the Affiliated Purchaser and each of the Insignia affiliates
making the five other tender offers; the Corporate General Partner and
the five other Insignia-affiliated general partners; and Insignia. The
High River Complaint contained allegations that, among other things, the
Affiliated Purchaser sought to acquire Units at highly inadequate
prices, and that the Affiliate Offer contained numerous false and
misleading statements and omissions of material facts. The alleged
misstatements and omissions concerned, among other things, the true
value of the units; the true financial conditions of the Partnership;
the factors affecting the likelihood that properties owned by the
Partnership will be sold or liquidated in the near future; the liquidity
and value of the Units; the limited secondary market for Units; and the
true nature of the market for underlying assets. The High River
Complaint also alleged that the Affiliated Purchaser failed to comply
with the requirements of Rule 13e-4 under the Securities Exchange Act of
1934.
On Friday, May 26, 1995, the United States District Court for the
District of Delaware denied High River's motion for a temporary
restraining order to postpone the closing of the Affiliate Offer. On
May 26, 1995, Insignia issued a press release announcing the Court's
decision. High River subsequently voluntarily withdrew the High River
Complaint without prejudice.
On May 26, 1995, High River filed a Schedule 14D-1 relating to the
High River Offer and containing an Offer to Purchase and a related
Assignment of Partnership Interest. The Affiliate Offer expired as
scheduled at midnight on May 26, 1995. As filed on May 26, 1995, the
High River Offer was conditioned upon the Affiliate Offer being extended
by at least 10 business days. High River issued a press release, dated
May 26, 1995, announcing that the extension of the Affiliate Offer for
10 business days would be eliminated as a condition to the High River
Offer. Also on May 26, the Chairman and Chief Executive Officer of
Insignia received a letter from Mr. Icahn. In the letter, Mr. Icahn
accused Insignia of disregarding its "fiduciary responsibilities."
On Friday June 2, the High River Offer to Purchase and the related
Assignment of Partnership Interests were mailed to Unit holders. On
Monday, June 5, the Corporate General Partner delivered a letter to High
River which requested that High River cure certain alleged critical
omissions, misstatements, and deficiencies in the High River Offer by
June 7, 1995. On June 7, the Corporate General Partner received a
letter from Mr. Icahn stating that High River does not agree with the
positions taken in the Corporate General Partner's June 5 letter.
11
<PAGE>
On June 8, 1995, the Corporate General Partner commenced an action
against High River and Carl C. Icahn in the United States District Court
for the District of South Carolina. The complaint alleged that the High
River Offer misled Unit holders and violated federal securities laws.
The Partnership sought relief from High River's and Mr. Icahn's actions
in the form of an injunction against the High River Offer, a judgment
declaring that the untrue statements in and omissions from the High
River Offer constitute violations of the federal securities laws, and an
order requiring High River to make appropriate disclosures to correct
all of the false and misleading statements in and omissions from the
High River Offer.
The Partnership and the Corporate General Partner recommended that
the Unit holders reject the High River Offer and not tender their Units
pursuant to the High River Offer. The Partnership and the Corporate
General Partner stated that they may reconsider their recommendation if
High River makes additional disclosures to the Unit holders as the
Corporate General Partner requested. For further information, see the
Partnership's Solicitation/Recommendation Statement on Schedule 14D-9
which was filed with the Securities and Exchange Commission on June 9,
1995.
On June 12, 1995, High River filed an amendment to its Schedule
14D-1 containing a Supplement to its Offer to Purchase. The Supplement
amended the High River Offer to increase the number of Units being
sought to all of the outstanding Units and amended certain disclosures
in the Offer to Purchase.
Persons claiming to own Units filed a purported class action and
derivative suit in the United States District Court for the District of
South Carolina seeking, among other things, an order enjoining the
Affiliate Offer. On Thursday, May 18, 1995, the Court denied
plaintiffs' motion for a temporary restraining order postponing the
closing of the Affiliate Offer, which expired as scheduled on May 26,
1995. Counsel for the parties are engaged in settlement discussions and
may continue such discussions.
The Complaint applies to the Affiliate Offer and to five other
tender offers being made by affiliates of Insignia for units of limited
partnership interests in other limited partnerships in which other
affiliates of Insignia serve as general partners. The Complaint names
as defendants the Affiliated Purchaser and each of the Insignia
affiliates, including the five other tender offerors; the Corporate
General Partner and five other Insignia-affiliated general partners; and
four individuals who are officers and/or directors of Insignia, the
Corporate General Partner and/or the Affiliated Purchaser. The
Complaint contains allegations that, among other things, the defendants
have intentionally mismanaged the Partnership and the five other
Partnerships (collectively the "Partnerships") and acted contrary to the
limited partners' best interests in order to prolong the lives of the
Partnerships and thus continue the revenues derived by Insignia from the
Partnerships while at the same time reducing the demand for the
Partnerships' units in the limited resale market for the units by
artificially depressing the trading prices for the units, in order to
create a favorable environment for the Affiliate Offer and the five
other tender offers. In the Complaint the plaintiffs also allege that
in the Affiliate Offer and the five other tender offers, the Affiliated
Purchaser will acquire effective voting control over the Partnerships at
highly inadequate prices, and that the offers to purchase and related
tender offer documents contain numerous false and misleading statements
and omissions of material facts. The alleged misstatements and
omissions concern, among other things, the advantages to Unit holders of
tendering Units pursuant to the Affiliate Offer; the true value of the
Units; the true financial condition of the Partnerships; the
12
<PAGE>
factors affecting the likelihood that properties owned by the
Partnerships will be sold or liquidated in the near future; the
liquidity and value of the Units; the limited secondary market for
Units; and the true nature of the market for underlying assets.
On Friday, June 16, plaintiffs filed an amended complaint which
contained allegations that, among other things, the defendants engaged
in a plan by which they misappropriated the Partnerships' assets and
fraudulently induced limited partners to sell units to the defendants at
highly inadequate prices by causing the Partnerships to take actions
that artificially depressed the prices available for units and by
knowingly disseminating false and misleading statements and omissions of
material facts. The plaintiffs alleged that the defendants breached
fiduciary duties and violated federal securities law by closing the
Affiliate Offer and the five other tender offers made by affiliates of
Insignia for units in the other Partnerships with the knowledge that the
limited partners were not aware of the High River Offer. The plaintiffs
further alleged that the defendants, since the close of the Affiliate
Offer, had caused the Partnerships to enter into several wasteful
transactions that had no business purpose or benefit to the Partnerships
solely in order to entrench themselves in their positions of control
over the Partnerships, with the effect of impeding and possibly
preventing nonaffiliated entities from making tender offers that offer
higher value to unit holders than defendants paid.
Subsequent to the filing of the lawsuit by the Corporate General
Partner against High River and Carl C. Icahn, the Corporate General
Partner and High River began discussions in an attempt to settle the
lawsuit. On Friday, June 16, 1995, High River issued a press release
announcing that the expiration date of the High River Offer was extended
until 12:00 midnight, New York City time on Wednesday, June 28, 1995,
and that High River and the Corporate General Partner were engaged in
settlement discussions.
On Saturday, June 17, the Affiliated Purchaser and Insignia
entered into an agreement with Carl C. Icahn and High River (the
"Agreement") and the Corporate General Partner, among others, entered
into a letter agreement with High River (together with the Agreement,
the "Agreements"). The Agreements provide generally that Insignia would
not, and will not cause or permit its affiliates to, actively oppose the
High River Offer, but rather would take a neutral stance with respect to
the High River Offer, except in the case of a competing third party bid
made prior to the expiration of the High River Offer or the occurrence
of any event materially adversely affecting High River Offer. The High
River Offer would proceed in accordance with its terms, as amended, and
the Corporate General Partner would cooperate to facilitate the
admission of High River as a substitute limited partner with respect to
any Units High River purchases pursuant to the High River Offer in
accordance with the terms of the Partnership Agreement and applicable
law. The Agreements limit High River's ability to amend or extend the
High River Offer. Apart from purchases made by High River pursuant to
the High River Offer, neither High River nor Insignia nor any of their
respective affiliates would purchase any additional Units pursuant to a
tender offer and can only purchase additional Units from time to time
under certain conditions specified in the Agreements. High River would
vote on certain matters concerning the Partnership as directed by
Insignia. In addition, High River and its affiliates are prohibited
from soliciting proxies with respect to the Partnership or otherwise
making proposals concerning the Partnership directly to other Unit
holders. High River and Insignia have certain buy-sell rights with
respect to the other's Units which may be exercised 18 months after the
effective date of the Agreements and annually thereafter and at earlier
13
<PAGE>
or later dates under other circumstances specified in the Agreements,
including the proposal of certain transactions otherwise protected by
the Agreements. The party selling Units pursuant to the buy-sell
transaction must sell or cause to be sold to the other party all Units
beneficially owned by the first party and its affiliates.
Litigation initiated by the Corporate General Partner concerning
the High River Offer and litigation initiated by High River concerning
the Affiliate Offer was dismissed with prejudice and mutual releases
were exchanged. On June 20, High River issued a press release
announcing that the expiration date of the High River Offer was extended
until 12:00 midnight, New York City time on Monday, July 3, 1995.
On July 20, 1995, the Partnership mailed a letter to limited
partners of the Partnership who tendered limited partnership units to
the Affiliated Purchaser in the recent tender offer. The letter
notifies the limited partners that the Affiliated Purchaser has offered
to increase the amount paid to such limited partners by an additional
45%.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a) Exhibits: None
b) Reports on Form 8-K filed in the third quarter ended July
31, 1995:
Current report on Form 8-K dated July 20, 1995, as filed
with the Securities and Exchange Commission on July 25,
1995.
14
<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 IV LIMITED PARTNERSHIP
By: Shelter Realty IV Corporation
Corporate General Partner
By:/s/ William H. Jarrard, Jr.
William H. Jarrard, Jr.
President and Director
By:/s/ Ronald Uretta
Ronald Uretta
Treasurer
(Principal Financial Officer
and Principal Accounting Officer)
Date: September 14, 1995
15
<PAGE>
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<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> OCT-31-1994
<PERIOD-END> JUL-31-1995
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<COMMON> 0
0
0
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