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 January 31, 1998
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)
(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 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, except per unit data)
January 31, 1998
Assets
Cash and cash equivalents $ 2,472
Receivables and deposits 691
Restricted escrows 1,769
Other assets 487
Investment properties:
Land $ 3,442
Buildings and related personal property 56,670
60,112
Less accumulated depreciation (32,741) 27,371
$32,790
Liabilities and Partners' Capital (Deficit)
Liabilities
Accounts payable $ 164
Tenant security deposit liabilities 269
Accrued property taxes 67
Distribution payable 812
Other liabilities 225
Mortgage notes payable 23,928
Partners' Capital
General partners' $ (11)
Limited partners' (49,995 units
issued and outstanding) 7,336 7,325
$32,790
See Accompanying Notes to Consolidated Financial Statements
b) SHELTER PROPERTIES IV LIMITED PARTNERSHIP
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(in thousands, except per unit data)
Three Months Ended January 31,
1998 1997
Revenues:
Rental income $2,750 $2,597
Other income 112 164
Total revenues 2,862 2,761
Expenses:
Operating 1,209 1,272
General and administrative 76 64
Depreciation 472 468
Interest 546 559
Property taxes 201 200
Loss on disposal of property -- 39
Total expenses 2,504 2,602
Net income $ 358 $ 159
Net income allocated to general partners (1%) $ 4 $ 2
Net income allocated to limited partners (99%) 354 157
$ 358 $ 159
Net income per limited partnership unit $ 7.08 $ 3.16
See Accompanying Notes to Consolidated Financial Statements
c) SHELTER PROPERTIES IV LIMITED PARTNERSHIP
CONSOLIDATED STATEMENT OF CHANGES IN PARTNERS' CAPITAL (DEFICIT)
(Unaudited)
(in thousands, except unit data)
Limited
Partnership General Limited
Units Partners Partners Total
Original capital contributions 50,000 $ 2 $50,000 $50,002
Partners' capital (deficit) at
October 31, 1997 49,995 $ (7) $ 7,786 $ 7,779
Net income for the three
months ended January 31, 1998 -- 4 354 358
Distribution declared -- (8) (804) (812)
Partners' capital (deficit)
at January 31, 1998 49,995 $(11) $ 7,336 $ 7,325
See Accompanying Notes to Consolidated Financial Statements
d) SHELTER PROPERTIES IV LIMITED PARTNERSHIP
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
<TABLE>
<CAPTION>
Three Months Ended January 31,
1998 1997
<S> <C> <C>
Cash flows from operating activities:
Net income $ 358 $ 159
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation 472 468
Amortization of discounts and loan costs 69 68
Loss on disposal of property -- 39
Change in accounts:
Receivables and deposits 538 572
Other assets 24 10
Accounts payable 60 (82)
Tenant security deposit liabilities (8) (5)
Accrued property taxes (563) (574)
Other liabilities (3) (255)
Net cash provided by operating activities 947 400
Cash flows from investing activities:
Property improvements and replacements (116) (261)
Deposits to restricted escrows (19) (18)
Net cash used in investing activities (135) (279)
Cash flows from financing activities:
Payments on mortgage notes payable (187) (173)
Partners' distributions -- (505)
Net cash used in financing activities (187) (678)
Net increase (decrease) in cash and cash equivalents 625 (557)
Cash and cash equivalents at beginning of period 1,847 2,291
Cash and cash equivalents at end of period $2,472 $ 1,734
Supplemental disclosure of cash flow information:
Cash paid for interest $ 477 $ 491
Supplemental disclosure of non-cash activity:
Distribution payable $ 812 $ --
<FN>
See Accompanying Notes to Consolidated Financial Statements
</FN>
</TABLE>
e) SHELTER PROPERTIES IV LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
January 31, 1998
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 Shelter Realty IV 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 month period ended January 31, 1998, are not
necessarily indicative of the results that may be expected for the fiscal year
ending October 31, 1998. 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, 1997.
Certain reclassifications have been made to the 1997 information to conform to
the 1998 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 Three Months Ended
January 31,
1998 1997
(in thousands)
Net cash provided by operating activities $ 947 $ 400
Payments on mortgage notes payable (187) (173)
Property improvements and replacements (116) (261)
Change in restricted escrows, net (19) (18)
Changes in reserves for net operating
liabilities (48) 334
Additional reserves (577) (282)
Net cash used in operations $ -- $ --
The Corporate General Partner reserved approximately $577,000 and $282,000 on
January 31, 1998, and 1997, respectively, to fund capital improvements and
repairs at its 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 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
1998 and 1997 (in thousands):
<TABLE>
<CAPTION>
For the Three Months Ended
January 31,
1998 1997
<S> <C> <C>
Property management fees (included in operating expenses) $143 $138
Reimbursement for services of affiliates (included in
operating, general and administrative expenses, and
investment properties) (1) 58 54
</FN>
(1) Included in "reimbursements for services of affiliates" for the three months
ended January 31, 1998 and 1997, is approximately $2,000 and $9,000,
respectively, in reimbursements for construction oversight costs.
</FN>
</TABLE>
For the period November 1, 1996 to August 31, 1997, the Partnership insured its
properties under a master policy through an agency affiliated with the Corporate
General Partner with an 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 master policy. The agent assumed the
financial obligations to the affiliate of the Corporate General Partner which
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 - DISPOSAL OF PROPERTY
The Partnership incurred a loss on disposal of property of approximately $39,000
due to a roof replacement project at Quail Run during the three months ended
January 31, 1997.
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 each
of the three months ended January 31, 1998 and 1997:
Average
Occupancy
Property 1998 1997
Baymeadows Apartments
Jacksonville, Florida 93% 94%
Quail Run Apartments
Columbia, South Carolina 96% 92%
Countrywood Village Apartments
Raleigh, North Carolina 95% 95%
The Corporate General Partner attributes the increase in average occupancy at
Quail Run to an exterior painting project which was completed at the property
during 1997 in an effort to enhance the curb appeal of the property.
Results of Operations
The Partnership's net income for the three months ended January 31, 1998, was
approximately $358,000 compared to approximately $159,000 for the three months
ended January 31, 1997. The increase in net income is primarily attributable to
an increase in rental income as well as a decrease in operating expenses. The
increase in rental income is attributable to the increase in average occupancy
at Quail Run and an increase in average rental rates at Baymeadows which more
than offset the property's slight decrease in average occupancy. The decrease
in operating expenses is attributable to the completion of the exterior painting
projects at Quail Run and Baymeadows during 1997. The decrease in operating
expense was partially offset by an increase in major landscaping at Countrywood
Village and Baymeadows during the three months ended January 31, 1998. These
costs were incurred to attract new tenants and increase occupancy at the
properties. Additionally, the Partnership incurred a loss on disposal of
property due to a roof replacement project at Quail Run during the period ended
January 31, 1997. Offsetting the increase in net income for the three months
ended January 31, 1998 compared to the corresponding period of 1997 is a
decrease in other income. Other income decreased primarily due to a decrease in
recreational income at Baymeadows as a result of closing the racquet club at the
property. This facility had been losing money and it was determined to be in
the best interest of the Partnership to close it to outside users at the end of
1997. The facility continues to be maintained and is available for the
residents' use and enjoyment. Included in operating expense for the three
months ended January 31, 1998 is approximately $93,000 of major repairs and
maintenance comprised primarily of major landscaping and window coverings.
Included in operating expense for the three months ended January 31, 1997 is
approximately $181,000 of major repairs and maintenance comprised primarily of
exterior painting and major landscaping projects.
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 January 31, 1998 the Partnership had cash and cash equivalents of
approximately $2,472,000 as compared to approximately $1,734,000 at January 31,
1997. The net increase in cash and cash equivalents for the three months ended
January 31, 1998 was $625,000. The net decrease in cash and cash equivalents
for the three months ended January 31, 1997 was $557,000. Net cash provided by
operating activities increased primarily due to the increase in net income as
discussed above. The increase is also attributable to the increase in other
liabilities due to the timing of payments to creditors. Net cash used in
investing activities decreased due to the decrease in purchases of property
improvements and replacements. Net cash used in financing activities decreased
due to the timing of payments of distributions to partners during the three
months ended January 31, 1998.
The Partnership has budgeted approximately $1,500,000 for capital improvements
and major repairs and maintenance at the three properties in 1998. Budgeted
capital improvements at Baymeadows include major carpet replacement, major
landscaping, exterior painting, and gutter repairs. Budgeted capital
improvements at Quail Run include roof replacement and major carpet replacement.
Countrywood has budgeted major carpet replacement and landscaping in 1998. Of
this work the major landscaping at Countrywood was completed during the first
quarter. The additional capital expenditures will be incurred only if cash is
available from operations or from partnership reserves mentioned previously.
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 approximately $23,928,000 net of discount, is amortized over 257
months with a balloon payment of approximately $20,669,000 due on November 15,
2002, at which time the properties will either be refinanced or sold. A cash
distribution of approximately $812,000 was declared during the three months
ended January 31, 1998 and paid in February 1998. Cash distributions of
approximately $505,000 were made in the first quarter of 1997. 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 January 31, 1998:
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 and Treasurer
Date: March 16, 1998
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from Shelter
Properties IV Limited Partnership 1998 First 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> 3-MOS
<FISCAL-YEAR-END> OCT-31-1998
<PERIOD-END> JAN-31-1998
<CASH> 2,472
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0<F1>
<PP&E> 60,112
<DEPRECIATION> (32,741)
<TOTAL-ASSETS> 32,790
<CURRENT-LIABILITIES> 0<F1>
<BONDS> 23,928
0
0
<COMMON> 0
<OTHER-SE> 7,325
<TOTAL-LIABILITY-AND-EQUITY> 32,790
<SALES> 0
<TOTAL-REVENUES> 2,862
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 2,504
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 546
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 358
<EPS-PRIMARY> 7.08<F2>
<EPS-DILUTED> 0
<FN>
<F1>Registrant has an unclassified balance sheet.
<F2>Multiplier is 1.
</FN>
</TABLE>
