FORM 10-QSB--QUARTERLY 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
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended April 30, 1997
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 (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)
(in thousands)
April 30, 1997
Assets
Cash and cash equivalents:
Unrestricted $ 1,719
Restricted--tenant security deposits 273
Accounts receivable 44
Escrow for taxes 462
Restricted escrows 1,714
Other assets 502
Investment properties:
Land $ 3,442
Buildings and related personal property 56,071
59,513
Less accumulated depreciation (31,283) 28,230
$32,944
Liabilities and Partners' Capital (Deficit)
Liabilities
Accounts payable $ 188
Tenant security deposits 273
Accrued taxes 269
Other liabilities 256
Mortgage notes payable 24,335
Partners' Capital
General partners $ (8)
Limited partners (49,995 units
issued and outstanding) 7,631 7,623
$32,944
See Accompanying Notes to Consolidated Financial Statements
b) SHELTER PROPERTIES IV LIMITED PARTNERSHIP
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(in thousands, except per unit data)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
April 30, April 30,
1997 1996 1997 1996
<S> <C> <C> <C> <C>
Revenues:
Rental income $2,616 $2,574 $5,216 $5,105
Interest income 39 38 79 83
Other income 115 119 239 221
Total revenues 2,770 2,731 5,534 5,409
Expenses:
Operating 860 834 1,704 1,660
General and administrative 98 91 162 181
Maintenance 680 442 1,150 888
Depreciation 477 458 945 904
Interest 558 565 1,117 1,134
Property taxes 200 188 400 371
Total expenses 2,873 2,578 5,478 5,138
Net (loss) income $ (103) $ 153 $ 56 $ 271
Net (loss) income allocated
to general partners (1%) $ (1) $ 2 $ 1 $ 3
Net (loss) income allocated
to limited partners (99%) (102) 151 55 268
$ (103) $ 153 $ 56 $ 271
Net (loss) income per limited
partnership unit $(2.03) $ 3.04 $ 1.13 $ 5.37
<FN>
See Accompanying Notes to Consolidated Financial Statements
</TABLE>
c) SHELTER PROPERTIES IV LIMITED PARTNERSHIP
CONSOLIDATED STATEMENT OF CHANGES IN PARTNERS' CAPITAL (DEFICIT)
(Unaudited)
(in thousands, except unit data)
<TABLE>
<CAPTION>
Limited
Partnership General Limited
Units Partners Partners Total
<S> <C> <C> <C> <C>
Original capital contributions 50,000 $ 2 $50,000 $50,002
Partners' (deficit) capital at
October 31, 1996 49,995 $ (4) $ 8,076 $ 8,072
Net income for the six
months ended April 30, 1997 1 55 56
Partners' distributions (5) (500) (505)
Partners' (deficit) capital at
at April 30, 1997 49,995 $ (8) $ 7,631 $ 7,623
<FN>
See Accompanying Notes to Consolidated Financial Statements
</TABLE>
d) SHELTER PROPERTIES IV LIMITED PARTNERSHIP
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
<TABLE>
<CAPTION>
Six Months Ended April 30,
1997 1996
<S> <C> <C>
Cash flows from operating activities:
Net income $ 56 $ 271
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation 945 904
Amortization of discounts and loan costs 137 133
Change in accounts:
Restricted cash -- (26)
Accounts receivable 3 (3)
Escrows for taxes 360 309
Other assets 58 (8)
Accounts payable (86) (255)
Tenant security deposit liabilities (2) 27
Accrued taxes (373) (350)
Other liabilities (241) (36)
Net cash provided by operating activities 857 966
Cash flows from investing activities:
Property improvements and replacements (540) (540)
Deposits to restricted escrows (35) (36)
Receipts from restricted escrows -- 7
Net cash used in investing activities (575) (569)
Cash flows from financing activities:
Partners' distributions (505) (1,000)
Payments on mortgage notes payable (349) (325)
Net cash used in financing activities (854) (1,325)
Net decrease in cash (572) (928)
Cash at beginning of period 2,291 2,765
Cash at end of period $1,719 $ 1,837
Supplemental disclosure of cash flow information:
Cash paid for interest $ 979 $ 1,004
<FN>
See Accompanying Notes to Consolidated Financial Statements
</TABLE>
e) SHELTER PROPERTIES IV LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
NOTE A - BASIS OF PRESENTATION
The accompanying unaudited financial statements of Shelter Properties IV Limited
Partnership ("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 Shelter Realty IV Corporation ("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, 1997, are not necessarily indicative of the
results that may be expected for the fiscal year ending October 31, 1997. 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, 1996.
Certain reclassifications have been made to the 1996 information to conform to
the 1997 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.
For the Six Months Ended
April 30,
1997 1996
(in thousands)
Net cash provided by operating activities $ 857 $ 966
Payments on mortgage notes payable (349) (325)
Property improvements and replacements (540) (540)
Change in restricted escrows, net (35) (29)
Changes in reserves for net operating
liabilities 281 342
Additional reserves (214) (414)
Net cash used in operations $ -- $ --
The Corporate General Partner reserved approximately $214,000 and $414,000 on
April 30, 1997 and 1996, respectively, to fund capital improvements and repairs
at its properties.
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 its affiliates were charged to expense in
1997 and 1996 (in thousands):
For the Six Months Ended
April 30,
1997 1996
Property management fees $275 $268
Reimbursement for services of affiliates (1) 125 98
(1) Included in "reimbursements for services of affiliates" for the six months
ended April 30, 1997, is approximately $22,000 in reimbursements for
construction oversight costs.
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.
PART II - OTHER INFORMATION
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, 1997 and 1996:
Average
Occupancy
Property 1997 1996
Baymeadows Apartments
Jacksonville, Florida 95% 97%
Quail Run Apartments
Columbia, South Carolina 90% 96%
Countrywood Village Apartments
Raleigh, North Carolina 95% 95%
The Corporate General Partner attributes the decrease in occupancy at Quail Run
to military transfers resulting from a large number of troops at Fort Jackson
being reassigned to other bases. Also, interest rates have made home ownership
more attractive, and the property has lost tenants to first time home buying.
In an effort to counteract these occupancy decreases, management is utilizing an
aggressive marketing plan, and the property has been undergoing exterior
renovations in order to attract quality residents.
The Partnership's net income for the six months ended April 30, 1997, was
approximately $56,000 compared to approximately $271,000 for the corresponding
period in 1996. The Partnership recorded a net loss of approximately $103,000
for the three months ended April 30, 1997, compared to net income of
approximately $153,000 for the corresponding period of 1996. The decrease in
net income for the three and six month periods ended April 30, 1997, compared to
the corresponding periods of 1996 is primarily attributable to increased
maintenance expenses at Quail Run and Baymeadows. Maintenance expense increased
as a result of exterior painting and repair projects and parking lot repairs,
which were incurred to improve the building exteriors in order to attract new
tenants and ultimately increase occupancy at these properties. Offsetting the
decrease in net income for the six month period ended April 30, 1997, compared
to the corresponding period of 1996, was a decrease in general and
administrative expenses due to a decrease in legal expenses related to a
discrimination case at Baymeadows, which was settled in November 1996. Included
in maintenance expense in 1997 is approximately $500,000 of major repair and
maintenance comprised primarily of the exterior painting and parking lot repairs
discussed above.
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 increase 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, 1997, the Partnership had unrestricted cash of approximately
$1,719,000 compared to approximately $1,837,000 at April 30, 1996. Net cash
provided by operating activities decreased primarily due to the decrease in net
income, as discussed above and an increase in cash paid for other liabilities,
which was partially offset by a decrease in cash paid for accounts payable.
Net cash used in investing activities remained stable. Finally, net cash used in
financing activities decreased due to a decrease in distributions paid to the
partners for the six months ended April 30, 1997, compared to the corresponding
period of 1996.
The Partnership has budgeted approximately $1.2 million in capital improvements
for it three investment properties in 1997. Of this amount, approximately
$540,000 in capital improvement projects were completed during the six months
ended April 30, 1997. Projects planned for the next quarter include a
continuation of roof replacements and major sewer replacements at Quail Run.
Other projects planned throughout 1997 include major carpet replacement at
Countrywood and Baymeadows. These capital expenditures and maintenance expenses
will be incurred only if cash is available from operations.
The sufficiency of existing liquid assets to meet future liquidity and capital
expenditure requirements is directly related to the level of capital
expenditures required at the properties to adequately maintain the physical
assets and other operating needs of the Partnership. Such assets are currently
thought to be sufficient for any near-term needs of the Partnership. The
mortgage indebtedness of approximately $24,335,000 net of discount, is amortized
over 257 months with balloon payments of approximately $20,669,000 due on
November 15, 2002, at which time the properties will either be refinanced or
sold. Cash distributions of approximately $505,000 were made during the six
months ended April 30, 1997. Cash distributions of approximately $1,000,000
were made during the six months ended April 30, 1996. These distributions were
made from property operations. 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 in the quarter ended April 30, 1997:
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
Vice President/Treasurer
Date: May 30, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from Shelter
Properties IV Limited Partnership 1997 Second Quarter 10-QSB and is qualified in
its entirety by reference to such 10-QSB filing.
</LEGEND>
<CIK> 0000702174
<NAME> SHELTER PROPERTIES IV LIMITED PARTNERSHIP
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> OCT-31-1997
<PERIOD-END> APR-30-1997
<CASH> 1,719
<SECURITIES> 0
<RECEIVABLES> 44
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0<F1>
<PP&E> 59,513
<DEPRECIATION> (31,283)
<TOTAL-ASSETS> 32,944
<CURRENT-LIABILITIES> 0<F1>
<BONDS> 24,335
0
0
<COMMON> 0
<OTHER-SE> 7,623
<TOTAL-LIABILITY-AND-EQUITY> 32,944
<SALES> 0
<TOTAL-REVENUES> 5,534
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 5,478
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,117
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 56
<EPS-PRIMARY> 1.13<F2>
<EPS-DILUTED> 0
<FN>
<F1>Registrant has an unclassified balance sheet.
<F2>Multiplier is 1.
</FN>
</TABLE>
