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)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended September 30, 2000
[ ] 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
(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)
September 30, 2000
<TABLE>
<CAPTION>
Assets
<S> <C> <C>
Cash and cash equivalents $ 2,702
Receivables and deposits 302
Restricted escrows 704
Other assets 292
Investment properties:
Land $ 2,759
Buildings and related personal property 49,014
51,773
Less accumulated depreciation (29,116) 22,657
$ 26,657
Liabilities and Partners' Capital
Liabilities
Accounts payable $ 697
Tenant security deposit liabilities 199
Accrued property taxes 550
Other liabilities 862
Mortgage notes payable 18,167
Partners' Capital
General partners $ 94
Limited partners (49,995 units issued and
outstanding) 6,088 6,182
$ 26,657
See Accompanying Notes to Consolidated Financial Statements
</TABLE>
<PAGE>
b)
SHELTER PROPERTIES IV
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(in thousands, except unit data)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
2000 1999 2000 1999
Revenues:
<S> <C> <C> <C> <C>
Rental income $ 2,401 $ 2,823 $ 8,064 $ 8,378
Other income 165 110 518 344
Gain on sale of investment
property (Note H) 12,350 -- 12,350 --
Total revenues 14,916 2,933 20,932 8,722
Expenses:
Operating 1,199 1,317 3,782 3,554
General and administrative 209 97 382 273
Depreciation 604 474 1,618 1,423
Interest 451 523 1,478 1,581
Property taxes 195 199 604 602
Total expenses 2,658 2,610 7,864 7,433
Income before extraordinary item 12,258 323 13,068 1,289
Extraordinary loss on early
extinguishment of debt (Note H) (246) -- (246) --
Net income $12,012 $ 323 $12,822 $ 1,289
Net income allocated
to general partners (1%) $ 120 $ 3 $ 128 $ 13
Net income allocated
to limited partners (99%) 11,892 320 12,694 1,276
$12,012 $ 323 $12,822 $ 1,289
Net income per limited
partnership unit $237.86 $ 6.40 $253.90 $ 25.52
Distributions per limited
partnership unit $234.89 $ -- $274.49 $ --
See Accompanying Notes to Consolidated Financial Statements
</TABLE>
<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
December 31, 1999 49,995 $ (14) $ 7,117 $ 7,103
Distributions to partners (20) (13,723) (13,743)
Net income for the nine months
ended September 30, 2000 -- 128 12,694 12,822
Partners' capital at
September 30, 2000 49,995 $ 94 $ 6,088 $ 6,182
See Accompanying Notes to Consolidated Financial Statements
</TABLE>
<PAGE>
d)
SHELTER PROPERTIES IV
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
2000 1999
Cash flows from operating activities:
<S> <C> <C>
Net income $12,822 $ 1,289
Adjustments to reconcile net income to net
cash provided by operating activities:
Gain on sale of investment property (12,350) --
Loss on early extinguishment of debt 246 --
Depreciation 1,618 1,423
Amortization of discounts and loan costs 199 210
Change in accounts:
Receivables and deposits 424 (279)
Other assets 119 (302)
Accounts payable (128) 106
Tenant security deposit liabilities (33) 10
Accrued property taxes 209 321
Other liabilities 575 (3)
Net cash provided by operating activities 3,701 2,775
Cash flows from investing activities:
Property improvements and replacements (2,540) (921)
Net withdrawals from restricted escrows 197 853
Proceeds from the sale of investment property 17,385 --
Net cash provided by (used in) investing
activities 15,042 (68)
Cash flows from financing activities:
Partners' distributions (14,743) --
Payments on mortgage notes payable (640) (622)
Repayment of mortgage note payable (4,172) --
Debt extinguishment costs (116) --
Net cash used in financing activities (19,671) (622)
Net (decrease) increase in cash and cash equivalents (928) 2,085
Cash and cash equivalents at beginning of period 3,630 1,273
Cash and cash equivalents at end of period $ 2,702 $ 3,358
Supplemental disclosure of cash flow information:
Cash paid for interest $ 1,298 $ 1,370
Supplemental disclosure of non-cash flow information:
Property improvements and replacements included in
accounts payable $ 443 $ --
Distributions of approximately $1,000,000 were accrued at December 31, 1999 and
paid in January 2000.
See Accompanying Notes to Consolidated Financial Statements
</TABLE>
<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 three and nine month periods ended September 30, 2000,
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 fiscal year ended October 31, 1999.
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, as announced in its Form 8-K filed on January 3, 2000. This Quarterly
Report on Form 10-QSB presents the unaudited results of the Partnership's
operations for the three and nine months ended September 30, 2000 and 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.
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.
<TABLE>
<CAPTION>
For the Nine Months Ended
September 30,
2000 1999
(in thousands)
<S> <C> <C>
Net cash provided by operating activities $ 3,701 $ 2,775
Payments on mortgage notes payable (640) (622)
Property improvements and replacements (2,540) (921)
Change in restricted escrows, net 197 853
Changes in reserves for net operating
liabilities (1,166) 147
Additional reserves -- (2,232)
Net cash used in operations $ (448) $ --
</TABLE>
The Corporate General Partner believed it to be in the best interest of the
Partnership to reserve net cash from operations of approximately $2,232,000 at
September 30, 1999, to fund continuing capital improvements and repairs at the
Partnership's three investment properties.
Note D - Distributions
During the nine months ended September 30, 2000, the Partnership declared and
paid a distribution from operations of approximately $2,000,000 ($1,980,000 paid
to limited partners or $39.60 per limited partnership unit) and paid a
distribution of approximately $11,743,000 from sale proceeds ($11,743,000 paid
to limited partners or $234.89 per limited partnership unit). In addition, a
distribution from operations of approximately $1,000,000 ($990,000 to limited
partners or $19.80 per limited partnership unit) was paid during the nine months
ended September 30, 2000 relating to a distribution payable as of December 31,
1999. There were no distributions paid during the nine months ended September
30, 1999.
<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 amounts were
paid or accrued to the Corporate General Partner and its affiliates during the
nine months ended September 30, 2000 and 1999:
2000 1999
(in thousands)
Property management fees (included in
operating expenses) $431 $437
Reimbursement for services of affiliates
(included in operating, general and
administrative expenses, and investment
properties) 276 158
Due to affiliates (included in other
liabilities) 90 --
Due to general partners (included in other
liabilities) 178 --
During the nine months ended September 30, 2000 and 1999, 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 $431,000 and
$437,000 for the nine months ended September 30, 2000 and 1999, respectively.
Affiliates of the Corporate General Partner received reimbursement of
accountable administrative expenses amounting to approximately $276,000 and
$158,000 for the nine months ended September 30, 2000 and 1999, respectively. Of
this amount approximately $90,000 was accrued at September 30, 2000.
In connection with the sale of Countrywood Village, the Corporate General
Partner is allowed to receive a commission of up to 1% for its assistance in the
sale. Payment of such commission is subordinate to the limited partners
receiving a cumulative 7% return on their investment. This return has not yet
been met and accordingly, the $178,000 owed to the Corporate General Partner was
accrued and is included in 'Other Liabilities' at September 30, 2000.
In addition to its indirect ownership of the general partner interest in the
Partnership, AIMCO and its affiliates currently own 30,448 limited partnership
units in the Partnership representing 60.902% of the outstanding units. A number
of these units were acquired pursuant to tender offers made by AIMCO or its
affiliates. 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. Under the Partnership Agreement, unitholders holding a majority of the
Units are entitled to take action with respect to a variety of matters, which
would include without limitation, voting on certain amendments to the
Partnership Agreement and voting to remove the Corporate General Partner. As a
result of its ownership of 60.902% of the outstanding units, AIMCO is in a
position to influence all voting decisions with respect to the Registrant. 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.
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 two apartment complexes, one each located in Florida and South Carolina. On
August 1, 2000, the Partnership sold its third apartment complex located in
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 segment profit (loss) before
depreciation. 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 fiscal 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 three and nine month periods ended September 30,
2000 and 1999 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.
Three Months Ended September 30, 2000
Residential Other Totals
Rental income $ 2,401 $ -- $ 2,401
Other income 152 13 165
Interest expense 451 -- 451
Depreciation 604 -- 604
General and administrative expense -- 209 209
Gain on sale of investment property 12,350 -- 12,350
Extraordinary loss on early (246) -- (246)
extinguishment of debt
Segment profit (loss) 12,208 (196) 12,012
<PAGE>
Nine Months Ended September 30, 2000
Residential Other Totals
Rental income $ 8,064 $ -- $ 8,064
Other income 497 21 518
Interest expense 1,478 -- 1,478
Depreciation 1,618 -- 1,618
General and administrative expense -- 382 382
Gain on sale of investment property 12,350 -- 12,350
Extraordinary loss on early
extinguishment of debt (246) -- (246)
Segment profit (loss) 13,183 (361) 12,822
Total assets 25,849 808 26,657
Capital expenditures 2,983 -- 2,983
Three Months Ended September 30, 1999
Residential Other Totals
Rental income $ 2,823 $ -- $ 2,823
Other income 105 5 110
Interest expense 523 -- 523
Depreciation 474 -- 474
General and administrative expense -- 97 97
Segment profit (loss) 415 (92) 323
Nine Months Ended September 30, 1999
Residential Other Totals
Rental income $ 8,378 $ -- $ 8,378
Other income 323 21 344
Interest expense 1,581 -- 1,581
Depreciation 1,423 -- 1,423
General and administrative expense -- 273 273
Segment profit (loss) 1,541 (252) 1,289
Total assets 31,193 827 32,020
Capital expenditures 921 -- 921
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, its 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 of interests in certain general partner
entities by Insignia Financial Group, Inc. ("Insignia") and entities which were,
at one time, affiliates of Insignia; past tender offers by the Insignia
affiliates to acquire limited partnership units; the management of partnerships
by the Insignia affiliates; and the Insignia Merger. 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 owned units as of November 3, 1999. Preliminary
approval of the settlement was obtained on November 3, 1999 from the Court, 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 prior lead counsel to enter the settlement. On
December 14, 1999, the Corporate General Partner and its affiliates terminated
the proposed settlement. In February 2000, counsel for some of the named
plaintiffs filed a motion to disqualify plaintiff's lead and liaison counsel who
negotiated the settlement. On June 27, 2000, the Court entered an order
disqualifying them from the case. The Court is considering applications for lead
counsel and has currently scheduled a hearing on the matter for November 20,
2000. 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.
Note H - Sale of Property
On August 1, 2000, the Partnership sold Countrywood Village to DCF, Sr., LLC, an
unrelated third party, for net proceeds of approximately $17,385,000 after
payment of closing costs. The Partnership realized a gain of approximately
$12,350,000 as a result of the sale. In addition, the Partnership recorded an
extraordinary loss on early extinguishment of debt of approximately $246,000 as
a result of unamortized debt discount being written off and the payment of a
prepayment penalty of approximately $116,000 relating to the prepayment of the
mortgage encumbering the property. In connection with the sale, the Corporate
General Partner is allowed to receive a commission of up to 1% for its
assistance in the sale. Payment of such commission is subordinate to the limited
partners receiving a cumulative 7% return on their investment. This return has
not yet been met and accordingly, the $178,000 owed to the Corporate General
Partner was accrued and is included in 'Other Liabilities' at September 30,
2000. In August 2000, the Partnership made a distribution of approximately
$11,743,000 representing proceeds from the sale of Countrywood Village. Revenues
included in the accompanying consolidated statements of operations related to
this property were approximately $1,586,000 and $2,031,000 for the nine months
ended September 30, 2000 and 1999, respectively.
<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 two apartment complexes. The
following table sets forth the average occupancy of the properties for each of
the nine months ended September 30, 2000 and 1999:
Average
Occupancy
Property 2000 1999
Baymeadows Apartments
Jacksonville, Florida 93% 93%
Quail Run Apartments
Columbia, South Carolina 90% 93%
The Corporate General Partner attributes the decrease in average occupancy at
Quail Run to increased competition in the local market as a result of the
addition of five new apartment complexes in the local area.
Results of Operations
The Partnership recorded net income of approximately $12,012,000 for the three
months ended September 30, 2000 compared to net income of approximately $323,000
for the corresponding period in 1999. The Partnership's net income for the nine
months ended September 30, 2000 was approximately $12,822,000 compared to net
income of approximately $1,289,000 for the corresponding period in 1999. The
increase in net income for the three and nine month periods ended September 30,
2000 compared with the three and nine month periods ended September 30, 1999 is
primarily due to the gain on the sale of Countrywood Village partially offset by
the extraordinary loss on early extinguishment of debt recognized in connection
with the sale.
On August 1, 2000, the Partnership sold Countrywood Village to DCF, Sr., LLC, an
unrelated third party, for net proceeds of approximately $17,385,000 after
payment of closing costs. The Partnership realized a gain of approximately
$12,350,000 as a result of the sale. In addition, the Partnership recorded an
extraordinary loss on early extinguishment of debt of approximately $246,000 as
a result of unamortized debt discount being written off and the payment of a
prepayment penalty of approximately $116,000 relating to the prepayment of the
mortgage encumbering the property.
Excluding the impact of the sale of Countrywood Village, net income for the nine
months ended September 30, 2000 and 1999 was approximately $288,000 and $641,000
respectively. The net loss for the three months ended September 30, 2000 was
approximately $66,000 versus net income for the three months ended September 30,
1999 of approximately $98,000. The decrease in net income for the three and nine
month periods ended September 30, 2000 as compared to the three and nine month
periods ended September 30, 1999 was primarily due to an increase in total
expenses partially offset by an increase in total revenues. Total expenses
increased for the three and nine months ended September 30, 2000 as compared to
the three and nine months ended September 30, 1999, predominately due to an
increase in depreciation expense at both Baymeadows and Quail Run in addition to
an increase in general and administrative expenses. For the nine months ended
September 30, 2000 an increase in operating expense at Baymeadows also
contributed to the increase in total expenses. For the three months ended
September 30, 2000 operating expenses remained relatively constant. All other
expenses remained relatively constant for the comparable three and nine month
periods. The increase in depreciation expense is attributed to an increase in
capital improvements completed during the past year which are now being
depreciated. On an overall basis the operating expenses of Baymeadows have
increased during the last quarter of 1999 and into 2000 as a result of increases
in salaries, commissions and other related benefits as well as increases in
utilities, interior painting, floor covering repairs and sewer repairs. These
repairs were completed to upgrade Baymeadows so that it may improve its position
in the Jacksonville market.
General and administrative expenses increased for the three and nine month
periods ended September 30, 2000 as a result of an increase in the services and
the cost of such services provided by the Corporate General Partner and its
affiliates. Included in general and administrative expenses for the three and
nine month periods ended September 30, 2000 and 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.
The increase in total revenues is due to increases in both rental and other
income. Rental income increased due to increases in average rental rates at
Baymeadows and Quail Run, slightly offset by decreases in occupancy at Quail Run
Apartments in addition to an increase in concession costs at both properties.
Other income increased primarily due to increases in lease cancellation fees and
late charges at Baymeadows Apartments, local telephone income at all properties
and interest income. Interest income increased as a result of larger average
cash balances invested in interest bearing accounts.
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.
<PAGE>
Liquidity and Capital Resources
At September 30, 2000, the Partnership had cash and cash equivalents of
approximately $2,702,000 as compared to approximately $3,358,000 at September
30, 1999. Cash and cash equivalents decreased approximately $928,000 for the
nine months ended September 30, 2000 from the Registrant's year end of December
31, 1999. The decrease was due to approximately $19,671,000 of cash used in
financing activities, which was partially offset by approximately $15,042,000 of
cash provided by investing activities and approximately $3,701,000 of cash
provided by operating activities. Cash used in financing activities consisted
primarily of distributions to partners and, to lesser extent, payments of
principal made on the mortgages encumbering the Registrant's properties along
with payments associated with paying off the Countrywood Village mortgage. Cash
provided by investing activities consisted primarily of net proceeds from the
sale of Countrywood Village and net withdrawals from restricted escrows
maintained by the mortgage lender, partially offset by property improvements and
replacements. 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 and local legal and regulatory requirements. Capital improvements
planned for each of the Registrant's properties are detailed below.
Baymeadows Apartments: The Partnership has budgeted, but is not limited to,
approximately $3,401,000 in capital improvements at Baymeadows Apartments for
2000 consisting primarily of pool upgrades, plumbing upgrades, roof
replacements, structural improvements, carpet and vinyl replacements, new
appliances, new cabinets, and air conditioning upgrades. As of September 30,
2000, the Partnership has spent approximately $2,652,000 in budgeted
improvements consisting primarily of plumbing upgrades, structural upgrades,
roof replacements, pool upgrades, appliances, and carpet and vinyl replacements.
These improvements were funded from operating cash flow.
Quail Run Apartments: The Partnership has budgeted, but is not limited to,
approximately $232,000 in capital improvements at Quail Run Apartments for 2000
consisting primarily of new appliances, carpet and vinyl replacements, and
fencing upgrades. As of September 30, 2000, the Partnership has spent
approximately $229,000 in budgeted improvements consisting primarily of carpet
and vinyl replacements, new appliances and lighting upgrades. These improvements
were funded from operating cash flow.
Countrywood Village Apartments: The Partnership had budgeted approximately
$125,000 in capital improvements at Countrywood apartments for 2000 consisting
primarily of carpet and vinyl replacements, cabinet replacements, new appliances
and air conditioning upgrades. Prior to the sale of the property on August 1,
2000, the Partnership had spent approximately $102,000 in budgeted improvements
consisting primarily of carpet and vinyl replacements and new appliances. These
improvements were funded from operating cash flow.
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 $18,167,000, net of discount, is amortized over
257 months with a balloon payment of approximately $16,907,000 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.
During the nine months ended September 30, 2000, the Partnership declared and
paid a distribution from operations of approximately $2,000,000 ($1,980,000 paid
to limited partners or $39.60 per limited partnership unit) and paid a
distribution of approximately $11,743,000 from sale proceeds ($11,743,000 paid
to limited partners or $234.89 per limited partnership unit). In addition a
distribution from operations of approximately $1,000,000 ($990,000 to limited
partners or $19.80 per limited partnership unit) was paid during the nine months
ended September 30, 2000 relating to a distribution payable as of December 31,
1999. There were no distributions paid during the nine months ended September
30, 1999. 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 for the remainder of 2000 or subsequent periods. In addition, the
Partnership may be restricted from making distributions if the amount in the
reserve account for each property is less than $400 per apartment unit at such
property or a total of approximately $494,000. As of September 30, 2000, the
reserve account was fully funded with approximately $691,000 on deposit with the
mortgage lender.
<PAGE>
PART II - OTHER INFORMATION
ITEM 1. 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, its 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 of interests in certain general partner
entities by Insignia Financial Group, Inc. ("Insignia") and entities which were,
at one time, affiliates of Insignia; past tender offers by the Insignia
affiliates to acquire limited partnership units; the management of partnerships
by the Insignia affiliates; and the Insignia Merger. 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 owned units as of November 3, 1999. Preliminary
approval of the settlement was obtained on November 3, 1999 from the Court, 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 prior lead counsel to enter the settlement. On
December 14, 1999, the Corporate General Partner and its affiliates terminated
the proposed settlement. In February 2000, counsel for some of the named
plaintiffs filed a motion to disqualify plaintiff's lead and liaison counsel who
negotiated the settlement. On June 27, 2000, the Court entered an order
disqualifying them from the case. The Court is considering applications for lead
counsel and has currently scheduled a hearing on the matter for November 20,
2000. The Corporate General Partner does not anticipate that costs associated
with this case will be material to the Partnership's overall operations.
<PAGE>
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 September
30, 2000:
Current report on Form 8-K filed August 14, 2000 disclosing
the sale of Countrywood Village Apartments.
<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
Its Corporate General Partner
By: /s/Patrick J. Foye
Patrick J. Foye
Executive Vice President
By: /s/Martha L. Long
Martha L. Long
Senior Vice President and
Controller
Date: November 13, 2000
