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)
[ ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended ___________
[X] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from November 1, 1999 to December 31, 1999
Commission file number 0-10884
SHELTER PROPERTIES IV
(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.)
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 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
CONSOLIDATED BALANCE SHEET
(Unaudited)
(in thousands, except per unit data)
December 31, 1999
<TABLE>
<CAPTION>
Assets
<S> <C> <C>
Cash and cash equivalents $ 3,630
Receivables and deposits 726
Restricted escrows 901
Other assets 510
Investment properties:
Land $ 3,442
Buildings and related personal property 59,421
-------
62,863
Less accumulated depreciation (36,714) 26,149
------- -------
$ 31,916
Liabilities and Partners' (Deficit) Capital
Liabilities
Accounts payable $ 204
Tenant security deposit liabilities 232
Accrued property taxes 341
Other liabilities 287
Distributions payable 1,000
Mortgage notes payable 22,749
Partners' (Deficit) Capital
General partners $ (14)
Limited partners (49,995 units issued and
outstanding) 7,117 7,103
------- -------
$ 31,916
</TABLE>
See Accompanying Notes to Consolidated Financial Statements
<PAGE>
b)
SHELTER PROPERTIES IV
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(in thousands, except unit data)
Two Months Ended
December 31,
1999 1998
---- ----
(restated)
Revenues:
Rental income $1,840 $1,876
Other income 90 107
----- -----
Total revenues 1,930 1,983
----- -----
Expenses:
Operating 865 773
General and administrative 48 46
Depreciation 398 366
Interest 345 356
Property taxes 137 114
----- -----
Total expenses 1,793 1,655
----- -----
Income before cumulative effect of a change in
accounting principle 137 328
Cumulative effect on prior years of a change in
accounting for the cost of exterior painting
and major landscaping (Note A) -- 403
----- -----
Net income $ 137 $ 731
===== ====
Net income allocated to general partners (1%) $ 1 $ 7
Net income allocated to limited partners (99%) 136 724
----- ----
$ 137 $ 731
===== ====
Net income per limited partnership unit:
Income before cumulative effect of a change
in accounting principle 2.72 6.50
Cumulative effect on prior years of a change
in accounting for the cost of exterior
painting and major landscaping -- 7.98
----- -----
$ 2.72 $14.48
===== =====
Distributions per limited partnership unit $19.80 $47.52
===== =====
See Accompanying Notes to Consolidated Financial Statements
<PAGE>
c)
SHELTER PROPERTIES IV
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 50,000 $ 2 $50,000 $50,002
====== ====== ====== ======
Partners' (deficit) capital at
October 31, 1999 49,995 $ (5) $ 7,971 $ 7,966
Net income for the two months
ended December 31, 1999 -- 1 136 137
Partners' distributions -- (10) (990) (1,000)
------ ------ ------ ------
Partners' (deficit) capital at
December 31, 1999 49,995 $ (14) $ 7,117 $ 7,103
====== ====== ====== ======
</TABLE>
See Accompanying Notes to Consolidated Financial Statements
<PAGE>
d)
SHELTER PROPERTIES IV
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
<TABLE>
<CAPTION>
Two Months Ended
December 31,
1999 1998
(restated)
Cash flows from operating activities:
<S> <C> <C>
Net income $ 137 $ 731
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation 398 366
Amortization of discounts and loan costs 47 46
Cumulative effect on prior year of a change in
accounting principle -- (403)
Change in accounts:
Receivables and deposits 425 465
Other assets 32 4
Accounts payable (255) (3)
Tenant security deposit liabilities (14) (5)
Accrued property taxes (335) (371)
Other liabilities (32) (34)
------ ------
Net cash provided by operating activities 403 796
------ ------
Cash flows from investing activities:
Property improvements and replacements (230) (259)
Net (deposits to) withdrawals from restricted escrows (13) 89
------ ------
Net cash used in investing activities (243) (170)
------ ------
Cash flows from financing activities:
Partners' distributions -- (2,400)
Payments on mortgage notes payable (144) (134)
------ ------
Net cash used in financing activities (144) (2,534)
------ ------
Net increase (decrease) in cash and cash equivalents 16 (1,908)
Cash and cash equivalents at beginning of period 3,614 3,181
------ ------
Cash and cash equivalents at end of period $ 3,630 $ 1,273
====== ======
Supplemental disclosure of cash flow information:
Cash paid for interest $ 298 $ 309
====== ======
</TABLE>
Supplemental disclosure of non-cash activity:
At December 31, 1999 distributions payable and partners equity was
adjusted by $1,000,000 for unpaid distributions. Also, investment
properties, accumulated depreciation and other liabilities were adjusted
by $23,000, $11,000 and $12,000, respectively due to write-off of assets
as a result of a casualty.
See Accompanying Notes to Consolidated Financial Statements
<PAGE>
e)
SHELTER PROPERTIES IV
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note A - Basis of Presentation
The accompanying unaudited consolidated financial statements of Shelter
Properties IV (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 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 two month period ended December 31, 1999, 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 October 31, 1999.
Principles of Consolidation: The financial statements include all the accounts
of the Partnership and its 99.99% owned partnership. The general partner of the
consolidated partnership is the Corporate General Partner. The Corporate General
Partner 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.
Change in Accounting Principle: During the two months ended December 31, 1998,
the Partnership changed its method of accounting to capitalize the cost of
exterior painting and major landscaping. The Partnership believes that this
accounting principle change is preferable because it provides a better matching
of expenses with the related benefit of the expenditures and it is consistent
with industry practice and the policies of the Corporate General Partner. The
effect of the change for the two months ended December 31, 1998 was to decrease
income before the change by approximately $24,000 ($.48 per limited partnership
unit). The cumulative effect adjustment of approximately $403,000 is the result
of applying the aforementioned change in accounting principle retroactively and
is included in net income for the two months ended December 31, 1998. The
accounting principle change will not have an effect on cashflow, funds available
for distributions or fees payable to the general partners or affiliates.
Change in Fiscal Year End: The Partnership elected to change its fiscal year
from October 31, to December 31, effective for the period ending December 31,
1999.
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.
<PAGE>
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 of the Partnership (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 Two Months Ended
December 31,
1999 1998
---- ----
(in thousands)
Net cash provided by operating activities $ 403 $ 796
Payments on mortgage notes payable (144) (134)
Property improvements and replacements (230) (259)
Change in restricted escrows, net (13) 89
Changes in reserves for net operating
liabilities 179 (56)
Additional reserves (195) (436)
----- -----
Net cash from operations $----- $-----
===== =====
The Corporate General Partner believed it to be in the best interest of the
Partnership to reserve net cash from operations of approximately $195,000 and
$436,000 at December 31, 1999 and 1998, respectively, to fund continuing capital
improvements and repairs at the Partnership's three investment properties.
Note D - Distributions
A cash distribution from operations of approximately $1,000,000 was declared
during the two months ended December 31, 1999, of which approximately $990,000
was payable to limited partners ($19.80 per limited partnership unit). This
distribution was paid during January 2000. A cash distribution of approximately
$2,400,000 was made from operations during the two months ended December 31,
1998, of which approximately $2,376,000 was paid to limited partners ($47.52 per
limited partnership unit).
<PAGE>
Note E - 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) certain
payments to affiliates for services and (ii) reimbursement of certain expenses
incurred by affiliates on behalf of the Partnership. The following payments were
made to the Corporate General Partner and its affiliates during the two months
ended December 31, 1999 and 1998:
1999 1998
---- ----
(in thousands)
Property management fees (included in
operating expenses) $ 97 $ 98
Reimbursement for services of affiliates
(included in operating, general and
administrative expenses, and investment
properties) 33 30
During the two months ended December 31, 1999 and 1998, affiliates of the
Corporate General Partner were entitled to receive 5% of gross receipts from all
of the Registrant's properties as compensation for providing property management
services. The Registrant paid to such affiliates approximately $97,000 and
$98,000 for the two months ended December 31, 1999 and 1998, respectively.
Affiliates of the Corporate General Partner received reimbursement of
accountable administrative expenses amounting to approximately $33,000 and
$30,000 for the two months ended December 31, 1999 and 1998, respectively.
Several tender offers were made by various parties, including affiliates of the
general partners, during the two months ended December 31, 1999 and the fiscal
years ended October 31, 1999 and 1998. As a result of these tender offers, AIMCO
and its affiliates currently own 28,913 units of limited partnership units in
the Partnership representing 57.83% of the outstanding units. 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. Consequently, AIMCO is
in a position to significantly influence all voting decisions with respect to
the Registrant. Under the Partnership Agreement, unitholders holding a majority
of the Units are entitled to take action with respect to a variety of matters.
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.
<PAGE>
Note F - Segment Reporting
Description of the types of products and services from which the reportable
segment derives its revenues:
The Partnership has one reportable segment: residential properties consisting of
three apartment complexes located in Florida, South Carolina, and North
Carolina. 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 net income. The accounting
policies of the reportable segment are the same as those described in the
summary of significant accounting policies in the Partnership's Annual Report on
Form 10-KSB for the year ended October 31, 1999.
Factors management used to identify the Partnership's reportable segment:
The Partnership's reportable segment consists of investment properties that
offer similar products and services. Although each of the investment properties
are managed separately, they have been aggregated into one segment as they
provide services with similar types of products and customers.
Segment information for the two month periods ended December 31, 1999 and 1998
is shown in the tables below (in thousands). The "Other" column includes
partnership administration related items and income and expense not allocated to
the reportable segment.
1999 Residential Other Totals
---- ----------- ----- ------
Rental income $ 1,840 $ -- $ 1,840
Other income 88 2 90
Interest expense 345 -- 345
Depreciation 398 -- 398
General and administrative expense -- 48 48
Segment profit (loss) 183 (46) 137
Total assets 30,534 1,382 31,916
Capital expenditures for investment
properties 230 -- 230
<PAGE>
1998 Residential Other Totals
---- ----------- ----- ------
Rental income $ 1,876 $ -- $ 1,876
Other income 88 19 107
Interest expense 356 -- 356
Depreciation 366 -- 366
General and administrative expense -- 46 46
Cumulative effect on prior years of
a change in accounting principle 403 -- 403
Segment profit (loss) 758 (27) 731
Total assets 30,308 465 30,773
Capital expenditures for investment
properties 259 -- 259
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, the 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 by Insignia Financial Group, Inc.
("Insignia") and entities which were, at one time, affiliates of Insignia
("Insignia Affiliates") of interests in certain general partner entities, past
tender offers by Insignia Affiliates to acquire limited partnership units, the
management of partnerships by Insignia Affiliates and the Insignia Merger (see
"Note B - Transfer of Control"). 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 own units as
of November 3, 1999. Preliminary approval of the settlement was obtained on
November 3, 1999 from the Superior Court of the State of California, County of
San Mateo, 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 class plaintiffs' counsel
to enter the settlement. On December 14, 1999, the Corporate General Partner and
its affiliates terminated the proposed settlement. Certain plaintiffs have filed
a motion to disqualify some of the plaintiffs' counsel in the action. 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.
<PAGE>
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
discussion 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
operations. 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 three apartment complexes.
The following table sets forth the average occupancy of the properties for each
of the two months ended December 31, 1999 and 1998:
Average
Occupancy
Property 1999 1998
-------- ---- ----
Baymeadows Apartments
Jacksonville, Florida 93% 95%
Quail Run Apartments
Columbia, South Carolina 93% 92%
Countrywood Village Apartments
Raleigh, North Carolina 90% 92%
Results of Operations
The Partnership's net income before cumulative effect of a change in accounting
principle for the two months ended December 31, 1999 was approximately $137,000
compared to approximately $328,000 for the corresponding period in 1998. The
decrease in income before cumulative effect of a change in accounting principle
for the comparable two months periods is due to a decrease in total revenues and
an increase in total expenses. The decrease in total revenues is primarily due
to a decrease in rental income. Rental income decreased due to a decrease in
occupancy at both Baymeadows and Countrywood Village which more than offset an
increase in average rental rates at all three investment properties.
Total expenses increased for the two months ended December 31, 1999 as compared
to the two months ended December 31, 1998, due to increases in operating and
property tax expenses at Baymeadows and depreciation at all three of the
properties. Operating expense increased at Baymeadows due to increases in
salaries, commissions and other related benefits as well as increases in sewer
repair, floor covering repairs and interior painting at Baymeadows. The general
partners are currently in the process of evaluating an increase in expenditures
to upgrade Baymeadows so that it may improve its position in the Jacksonville
market. As of this report, approximately $1,350,000 has been approved to be
spent on upgrading the property. Depreciation expense increased at all three
properties due to the increase in capital improvements and replacements made
over the past twelve months.
Included in general and administrative expense for the two month period ended
December 31, 1999 are reimbursements to the Corporate General Partner allowed
under the Partnership Agreement. In addition, costs associated with the
quarterly and annual communications with investors and regulatory agencies and
the annual audit and appraisals required by the Partnership Agreement are also
included.
During the two months ended December 31, 1998, the Partnership changed its
method of accounting to capitalize the cost of exterior painting and major
landscaping. The Partnership believes that this accounting principle change is
preferable because it provides a better matching of expenses with the related
benefit of the expenditures and it is consistent with industry practice and the
policies of the Corporate General Partner. The effect of the change for the two
months ended December 31, 1998 was to decrease income before the change by
approximately $24,000 ($.48 per limited partnership unit). The cumulative effect
adjustment of approximately $403,000 is the result of applying the
aforementioned change in accounting principle retroactively and is included in
net income for the two months ended December 31, 1998. The accounting principle
change will not have an effect on cashflow, funds available for distributions or
fees payable to the general partners or affiliates.
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
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 December 31, 1999, the Partnership had cash and cash equivalents of
approximately $3,630,000 as compared to approximately $1,273,000 at December 31,
1998. Cash and cash equivalents increased approximately $16,000 for the two
months ended December 31, 1999 from the Registrant's prior fiscal year end of
October 31, 1999. The increase was due to approximately $403,000 of net cash
provided by operating activities which was partially offset by approximately
$243,000 of cash used in investing activities and approximately $144,000 of cash
used in financing activities. Cash used in financing activities consisted of
payments of principal made on the mortgages encumbering the Registrant's
properties. Cash used in investing activities consisted of property improvements
and replacements, and to a lesser extent, net deposits to restricted escrows
maintained by the mortgage lender. 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 Partnership and to comply with
Federal, state, local, legal, and regulatory requirements. Capital improvements
planned for each of the Registrant's properties are detailed below.
Baymeadows Apartments: The Partnership completed approximately $97,000 in
capital expenditures at Baymeadows Apartments as of December 31, 1999,
consisting primarily of flooring, appliance and drapery replacements, and
plumbing work. These improvements were funded primarily from replacement
reserves. The general partners are currently in the process of evaluating an
increase in expenditures to upgrade Baymeadows so that it may improve its
position in the Jacksonville market. As of this report, approximately $1,350,000
has been approved to be spent on upgrading the property.
Quail Run Apartments: The Partnership completed approximately $48,000 in capital
expenditures at Quail Run Apartments as of December 31, 1999, consisting
primarily of electrical improvements, plumbing work and a roofing project. These
improvements were funded primarily from replacement reserves. The Partnership is
currently evaluating the capital improvement needs of the property for the
upcoming year. The minimum amount to be budgeted is expected to be $300 per unit
or approximately $100,000. Additional improvements may be considered and will
depend on the physical condition of the property as well as replacement reserves
and anticipated cash flow generated by the property.
Countrywood Village Apartments: The Partnership completed approximately $85,000
in capital expenditures at Countrywood Apartments as of December 31, 1999,
consisting primarily of parking area improvements, interior decoration and pool
improvements. These improvements were funded primarily from replacement
reserves. The Partnership is currently evaluating the capital improvement needs
of the property for the upcoming year. The minimum amount to be budgeted is
expected to be $300 per unit or approximately $115,000. Additional improvements
may be considered and will depend on the physical condition of the property as
well as replacement reserves and anticipated cash flow generated by the
property.
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 $22,749,000, net of discount, is amortized over
257 months with a balloon payment of approximately $20,669,000 due on November
15, 2002. The Corporate General Partner will attempt to refinance such
indebtedness and/or sell the properties prior to such maturity date. If the
properties cannot be refinanced or sold for a sufficient amount, the Registrant
will risk losing such properties through foreclosure.
A cash distribution from operations of approximately $1,000,000 was declared
during the two months ended December 31, 1999, of which approximately $990,000
was payable to limited partners ($19.80 per limited partnership unit). This
distribution was paid during January 2000. A cash distribution of approximately
$2,400,000 was made from operations during the two months ended December 31,
1998, of which approximately $2,376,000 was paid to limited partners ($47.52 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 required capital expenditures, to permit any additional
distributions to its partners in the year 2000 or subsequent periods.
Tender Offer
Several tender offers were made by various parties, including affiliates of the
general partners, during the two months ended December 31, 1999 and the fiscal
years ended October 31, 1999 and 1998. As a result of these tender offers, AIMCO
and its affiliates currently own 28,913 units of limited partnership units in
the Partnership representing 57.83% of the outstanding units. 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. Consequently, AIMCO is
in a position to significantly influence all voting decisions with respect to
the Registrant. Under the Partnership Agreement, unitholders holding a majority
of the Units are entitled to take action with respect to a variety of matters.
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.
Year 2000 Compliance
General Description
The Year 2000 issue is the result of computer programs being written using two
digits rather than four digits to define the applicable year. The Partnership is
dependent upon the Corporate General Partner and its affiliates for management
and administrative services ("Managing Agent"). Any of the Managing Agent's
computer programs or hardware that had date-sensitive software or embedded chips
might have recognized a date using "00" as the year 1900 rather than the year
2000. This could have resulted in a system failure or miscalculations causing
disruptions of operations, including, among other things, a temporary inability
to process transactions, send invoices, or engage in similar normal business
activities.
Computer Hardware, Software and Operating Equipment
In 1999, the Managing Agent completed all phases of its Year 2000 program by
completing the replacement and repair of any hardware or software system or
operating equipment that was not yet Year 2000 compliant. The Managing Agent's
hardware and software systems and its operating equipment are now Year 2000
compliant. As of February 11, 2000, no material failure or erroneous results
have occurred in the Managing Agent's computer applications related to the
failure to reference the Year 2000.
Third Parties
To date, the Managing Agent is not aware of any significant supplier or
subcontractor (external agent) or financial institution of the Partnership that
has a Year 2000 issue that would have a material impact on the Partnership's
results of operations, liquidity or capital resources. However, the Managing
Agent has no means of ensuring or determining the Year 2000 compliance of
external agents. At this time, the Managing Agent does not believe that a Year
2000 issue of any non-compliant external agent will have a material impact on
the Partnership's financial position or results of operations.
Costs
The total cost of the Managing Agent's Year 2000 project was approximately $3.2
million and was funded from operating cash flows.
Risks Associated with the Year 2000
The Managing Agent completed all necessary phases of its Year 2000 program in
1999, and did not experience system or equipment malfunctions related to a
failure to reference the Year 2000. The Managing Agent or Partnership have not
been materially adversely effected by disruptions in the economy generally
resulting from the Year 2000 issue.
At this time, the Managing Agent does not believe that the Partnership's
businesses, results of operations or financial condition will be materially
adversely effected by the Year 2000 issue.
Contingency Plans Associated with the Year 2000
The Managing Agent has not had to implement contingency plans such as manual
workarounds or selecting new relationships for its banking or elevator operation
activities in order to avoid the Year 2000 issue.
<PAGE>
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEDINGS
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, the 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 by Insignia Financial Group, Inc.
("Insignia") and entities which were, at one time, affiliates of Insignia
("Insignia Affiliates") of interests in certain general partner entities, past
tender offers by Insignia Affiliates to acquire limited partnership units, the
management of partnerships by Insignia Affiliates and the Insignia Merger (see
"Note B - Transfer of Control"). 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 own units as
of November 3, 1999. Preliminary approval of the settlement was obtained on
November 3, 1999 from the Superior Court of the State of California, County of
San Mateo, 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 class plaintiffs' counsel
to enter the settlement. On December 14, 1999, the Corporate General Partner and
its affiliates terminated the proposed settlement. Certain plaintiffs have filed
a motion to disqualify some of the plaintiffs' counsel in the action. 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 two months ended December
31, 1999:
None.
<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
By: Shelter Realty IV Corporation
Corporate General Partner
By: /s/Patrick J. Foye
Patrick J. Foye
Executive Vice President and Director
By: /s/Martha L. Long
Martha L. Long
Senior Vice President and
Controller
Date: February 14, 2000
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from Shelter
Properties IV 1999 Transitional Report on 10-QSB and is qualified in its
entirety by reference to such 10-QSB filing.
</LEGEND>
<CIK> 0000702174
<NAME> Shelter Properties IV
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 2-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> NOV-1-1999
<PERIOD-END> DEC-31-1999
<CASH> 3,630
<SECURITIES> 0
<RECEIVABLES> 726
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0 <F1>
<PP&E> 62,863
<DEPRECIATION> 36,714
<TOTAL-ASSETS> 31,916
<CURRENT-LIABILITIES> 0 <F1>
<BONDS> 22,749
0
0
<COMMON> 0
<OTHER-SE> 7,103
<TOTAL-LIABILITY-AND-EQUITY> 31,916
<SALES> 0
<TOTAL-REVENUES> 1,930
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 1,793
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 345
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 137
<EPS-BASIC> 2.72 <F2>
<EPS-DILUTED> 0
<FN>
<F1> Registrant has an unclassified balance sheet. <F2> Multiplier is 1.
</FN>
</TABLE>
