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 April 30, 1996
or
[ ] 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 0-10884
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 (864) 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 .
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
a) SHELTER PROPERTIES IV LIMITED PARTNERSHIP
CONSOLIDATED BALANCE SHEET
(Unaudited)
April 30, 1996
Assets
Cash and cash equivalents:
Unrestricted $ 1,836,980
Restricted--tenant security deposits 263,604
Accounts receivable 25,380
Escrow for taxes 408,458
Restricted escrows 1,663,621
Other assets 593,830
Investment properties:
Land $ 3,442,097
Buildings and related personal property 55,148,670
58,590,767
Less accumulated depreciation (29,441,085) 29,149,682
$33,941,555
Liabilities and Partners' Capital (Deficit)
Liabilities
Accounts payable $ 212,824
Tenant security deposits 265,029
Accrued taxes 250,594
Other liabilities 281,316
Mortgage notes payable 24,834,810
Partners' Capital (Deficit)
General partners $ (3,394)
Limited partners (50,000 units
issued and outstanding) 8,100,376 8,096,982
$33,941,555
See Accompanying Notes to Consolidated Financial Statements
b) SHELTER PROPERTIES IV LIMITED PARTNERSHIP
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
April 30, April 30,
1996 1995 1996 1995
<S> <C> <C> <C> <C>
Revenues:
Rental income $2,573,926 $2,443,129 $5,105,123 $4,831,777
Other income 156,226 149,118 303,903 276,413
Total revenues 2,730,152 2,592,247 5,409,026 5,108,190
Expenses:
Operating 833,370 841,350 1,660,336 1,660,788
General and administrative 91,032 84,129 180,748 153,833
Maintenance 441,636 564,615 887,810 1,282,595
Depreciation 458,112 435,548 903,877 861,701
Interest 564,482 576,789 1,133,926 1,155,920
Property taxes 187,822 171,742 370,926 341,325
Total expenses 2,576,454 2,674,173 5,137,623 5,456,162
Net income (loss) $ 153,698 $ (81,926) $ 271,403 $ (347,972)
Net income (loss) allocated
to general partners (1%) $ 1,537 $ (819) $ 2,714 $ (3,480)
Net income (loss) allocated
to limited partners (99%) 152,161 (81,107) 268,689 (344,492)
$ 153,698 $ (81,926) $ 271,403 $ (347,972)
Net income (loss) per limited
partnership unit $ 3.04 $ (1.62) $ 5.37 $ (6.89)
<FN>
See Accompanying Notes to Consolidated Financial Statements
</TABLE>
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 (deficit)
at October 31, 1995 50,000 $ 3,892 $ 8,821,687 $ 8,825,579
Net income for the six months
ended April 30, 1996 2,714 268,689 271,403
Distributions (10,000) (990,000) (1,000,000)
Partners' capital (deficit)
at April 30, 1996 50,000 $ (3,394) $ 8,100,376 $ 8,096,982
<FN>
See Accompanying Notes to Consolidated Financial Statements
</TABLE>
d) SHELTER PROPERTIES IV LIMITED PARTNERSHIP
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended April 30,
1996 1995
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 271,403 $ (347,972)
Adjustments to reconcile net income (loss) to net
cash provided by operating activities:
Depreciation 903,877 861,701
Amortization of discounts and loan costs 132,621 128,537
Change in accounts:
Restricted cash (26,154) (10,013)
Accounts receivable (2,510) 6,834
Escrows for taxes 308,675 348,498
Other assets (7,424) 20,746
Accounts payable (255,156) 77,335
Tenant security deposit liabilities 27,131 14,920
Accrued taxes (350,379) (217,587)
Other liabilities (36,104) (76,990)
Net cash provided by operating activities 965,980 806,009
Cash flows from investing activities:
Property improvements and replacements (539,965) (314,480)
Deposits to restricted escrows (36,389) (37,011)
Receipts from restricted escrows 7,000 47,385
Net cash used in investing activities (569,354) (304,106)
Cash flows from financing activities:
Payments on mortgage notes payable (324,441) (300,769)
Partners' distributions (1,000,000) --
Net cash used in financing activities (1,324,441) (300,769)
Net (decrease) increase in cash and cash equivalents (927,815) 201,134
Cash and cash equivalents at beginning of period 2,764,795 2,254,370
Cash and cash equivalents at end of period $ 1,836,980 $ 2,455,504
Supplemental disclosure of cash flow information:
Cash paid for interest $ 1,003,711 $ 1,027,383
<FN>
See Accompanying Notes to Consolidated Financial Statements
</TABLE>
e) SHELTER PROPERTIES IV LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note A - Basis of Presentation
The accompanying unaudited consolidated financial statements of Shelter
Properties IV Limited Partnership (the "Partnership") 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 six
month periods ended April 30, 1996, are not necessarily indicative of the
results that may be expected for the fiscal year ending October 31, 1996. 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 October 31, 1995.
Cash and Cash Equivalents:
Unrestricted - Unrestricted cash includes cash on hand and in banks, money
market funds and Certificates of Deposit with original maturities less than 90
days. At certain times, the amount of cash deposited at a bank may exceed the
limit on insured deposits.
Restricted cash - tenant security deposits - The Partnership requires security
deposits from lessees for the duration of the lease and such deposits are
considered restricted cash. Deposits are refunded when the tenant vacates,
provided the tenant has not damaged its space and is current on its rental
payments.
Certain reclassifications have been made to the 1995 information to conform to
the 1996 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.
Six Months Ended
April 30,
1996 1995
Net cash provided by operating activities $ 965,980 $ 806,009
Payments on mortgage notes payable (324,441) (300,769)
Property improvements and replacements (539,965) (314,480)
Change in restricted escrows, net (29,389) 10,374
Changes in reserves for net operating
liabilities 341,921 (163,743)
Additional reserves (415,000) (50,000)
Net cash used in operations $ (894) $ (12,609)
In 1996 and 1995 the Corporate General Partner believed it to be in the best
interest of the Partnership to reserve an additional $415,000 and $50,000,
respectively, to fund continuing maintenance and capital improvements at the
three properties.
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 the reimbursement of certain expenses incurred by
affiliates on behalf of the Partnership. Property management fees paid to
affiliates of Insignia Financial Group, Inc., during the six months ended April
30, 1996 and 1995, are included in operating expenses on the consolidated
statement of operations and are reflected in the following table. Reimbursement
for services of affiliates are included in general and administrative expense on
the consolidated statement of operations and are reflected in the following
table:
For the Six Months Ended
April 30,
1996 1995
Property management fees $267,594 $250,803
Reimbursement for services of affiliates 98,455 95,152
The Partnership insures its properties under a master policy through an agency
and insurer unaffiliated with the Corporate General Partner. An affiliate of
the Corporate General Partner acquired, in the acquisition of a business,
certain financial obligations from an insurance agency which was later acquired
by the agent who placed the current year's master policy. The current agent
assumed the financial obligations to the affiliate of the Corporate General
Partner who receives payments on these obligations from the agent. The amount
of the Partnership's insurance premiums accruing to the benefit of the affiliate
of the Corporate General Partner by virtue of the agent's obligations is not
significant.
Note D - Contingencies
The Secretary of Housing and Urban Development ("HUD") issued an administrative
Reasonable Cause Determination which found that a former tenant of Baymeadows
Apartments in Jacksonville, Florida, had been discriminated against on the basis
of race in violation of the Fair Housing Act. Specifically, HUD found that the
tenant was discriminated against because of her race when she did not get new
carpet, a new oven and new dishwasher and when her lease was not renewed. HUD's
administrative investigation and Reasonable Cause Determination names Insignia
Management Corporation and Shelter Realty IV Corporation, along with several
current and former employees of each, as respondents. The case proceeded to a
civil complaint filed by the Department of Justice in the United States District
Court for the Middle District of Florida. At this time, the outcome of this
case is uncertain. Management believes that this claim is not meritorious and
intends to defend this claim vigorously. There can be no assurance, however,
that this claim will not have a material adverse effect upon the business,
financial condition or operations of the Partnership.
The Corporate General Partner owns 100 Limited Partnership Units ("Units"). On
or about April 26 and 27, 1995, six entities ("Affiliated Purchaser") affiliated
with the Partnership commenced tender offers for limited partner interests in
six limited partnerships, including the Partnership (collectively, the "Shelter
Properties Partnerships"). On May 27, 1995, the Affiliated Purchaser acquired
11,050 units of the Partnership pursuant to the tender offer. On or about May
12, 1995, in the United States District Court for the District of South
Carolina, certain limited partners of the Shelter Properties Partnerships
commenced a lawsuit, on behalf of themselves, on behalf of a putative class of
plaintiffs, and derivatively on behalf of the partnerships, challenging the
actions taken by defendants (including Insignia, the acquiring entities and
certain officers of Insignia) in the management of the Shelter Properties
Partnerships and in connection with the tender offers and certain other matters.
The plaintiffs alleged that, among other things: (i) the defendants
intentionally mismanaged the partnerships and acted contrary to the limited
partners' best interests by prolonging the existence of the partnerships in
order to perpetuate the revenues derived by Insignia (an affiliate of the
Corporate General Partner) and its affiliates from the partnerships, (ii) the
defendants' actions reduced the demand for the partnerships' limited partner
interests in the limited resale market by artificially depressing the trading
prices for limited partners interests in order to create a favorable environment
for the tender offers; (iii) through the tender offers, the acquiring entities
sought to acquire effective voting control over the partnerships while paying
highly inadequate prices; and (iv) the documents disseminated to the class in
connection with the tender offers contained false and misleading statements and
omissions of material facts concerning such issues as the advantages to limited
partners of tendering pursuant to the tender offers; the true value of the
interest; the true financial condition of the partnerships; the factors
affecting the likelihood that properties owned by the partnerships will be sold
or liquidated in the near future; the liquidity and true value of the limited
partner interests; the reasons for the limited secondary market for limited
partner interests; and the true nature of the market for the underlying real
estate assets owned by the partnerships, all in violation of the federal
securities laws.
On September 27, 1995, the parties entered into a stipulation to settle the
matter. The principal terms of the stipulation require supplemental payments to
tendering limited partners aggregating approximately $6 million to be paid by
the Affiliated Purchaser of which approximately $1,254,175 is Shelter Properties
IV's portion; waiver by the Shelter Properties Partnership's general partners of
any right to certain proceeds from a sale or refinancing of the partnerships'
properties; some restrictions on Insignia's ability to vote the limited partner
interests it acquired; payment of $1.25 million (which amount is divided among
the various partnerships and acquiring entities) for plaintiffs' attorney fees
and expenses in the litigation; and general releases of all the defendants. On
April 23, 1996, the court gave preliminary approval of the establishment of the
class for the purposes of the settlement and of the settlement terms, and
ordered that notice of the settlement be sent to the class. Notice has been
sent. A final hearing has been scheduled for June 24, 1996. If a certain
number of class members opt out, the settlement may be cancelled. Class members
also have the right to object to the settlement which could lead to alterations
in the terms of settlement or even cancellation of the settlement. No assurance
can be given that this matter will be settled on the terms set forth above or
otherwise.
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
six months ended April 30, 1996 and 1995:
Average
Occupancy
Property
1996 1995
Baymeadows Apartments
Jacksonville, Florida 97% 95%
Countrywood Village Apartments
Raleigh, North Carolina 95% 95%
Quail Run Apartments
Columbia, South Carolina 96% 95%
Results of Operations
The Partnership's net income for the six months ended April 30, 1996, was
$271,403 as compared to a net loss of $347,972 for the corresponding period in
1995. The Partnership recorded net income of $153,698 for the three months ended
April 30, 1996, as compared to a net loss of $81,926 for the corresponding
period in 1995. The increase in net income for the three and six month periods
ended April 30, 1996, is primarily attributable to an increase in rental income
which resulted from increased occupancy and an increase in rental rates. Also
contributing to the increase in net income is a decrease in maintenance expense
resulting from painting, exterior renovations, and interior building
improvements at Baymeadows and Countrywood Village which were performed
throughout 1995 and completed in the fourth quarter of 1995. Partially
offsetting these items is an increase in general and administrative expenses
which resulted from an increase in legal costs related to an outstanding
discrimination case as disclosed in "Note D."
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.
Liquidity and Capital Resources
At April 30, 1996, the Partnership had unrestricted cash of $1,836,980 as
compared to $2,455,504 at April 30, 1995. Net cash provided by operating
activities increased primarily due to the increase in net income described
above. Offsetting this increase was the decrease in accounts payable and
accrued taxes. The decrease in accounts payable resulted from the payment of
property improvements in 1996 for services rendered during the fiscal year 1995.
The decrease in accrued taxes resulted from the timing of payments to the taxing
authorities. Net cash used in investing activities increased primarily due to
an increase in property improvements and replacements during the six months
ended April 30, 1996, over the same period in 1995. Finally, the statement of
cash flows includes an increase in net cash used in financing activities
resulting primarily from a $1,000,000 distribution from net cash from operations
paid to the partners in the first quarter of 1996.
Capital improvement projects for the next quarter include exterior renovations
and painting at Baymeadows and Quail Run which will be funded from property
operations. The Partnership has no other material capital programs scheduled to
be performed in 1996, although certain routine capital expenditures and
maintenance expenses have been budgeted. These capital expenditures and
maintenance expenses will be incurred only if cash is available from operations
or from partnership reserves.
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
indebtness of $24,834,810, net of discount, is amortized over 257 months with
balloon payments of $20,669,395 due on November 15, 2002, at which time the
properties will either be refinanced or sold. Cash distributions of $1,000,000
were made during the six months ended April 30, 1996. These distributions were
made from net cash from operations. No distributions were made during the six
months ended April 30, 1995. Future cash distributions will depend on the
levels of net cash generated from operations, property sales, and the
availability of cash reserves.
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 April 30, 1996:
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 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
Principal Financial Officer
and Principal Accounting Officer
Date: June 3, 1996
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from Shelter
Properties IV Limited Partnerships 1996 2nd Quarter 10-QSB and is qualified in
its entirety by reference to such 10-QSB filing.
</LEGEND>
<CIK> 0000702174
<NAME> SHETLER PROPERTIES IV LIMITED PARTNERSHIP
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> OCT-31-1996
<PERIOD-END> APR-30-1996
<CASH> 1,836,980
<SECURITIES> 0
<RECEIVABLES> 25,380
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0<F1>
<PP&E> 58,590,767
<DEPRECIATION> (29,441,085)
<TOTAL-ASSETS> 33,941,555
<CURRENT-LIABILITIES> 0<F1>
<BONDS> 24,834,810
0
0
<COMMON> 0
<OTHER-SE> 8,096,982
<TOTAL-LIABILITY-AND-EQUITY> 33,941,555
<SALES> 0
<TOTAL-REVENUES> 5,409,026
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 5,137,623
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,133,926
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 271,403
<EPS-PRIMARY> 5.37
<EPS-DILUTED> 0
<FN>
<F1>The Registrant has an unclassified balance sheet.
</FN>
</TABLE>
