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 June 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__
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
a)
SHELTER PROPERTIES IV
CONSOLIDATED BALANCE SHEET
(Unaudited)
(in thousands, except per unit data)
June 30, 2000
<TABLE>
<CAPTION>
Assets
<S> <C> <C>
Cash and cash equivalents $ 1,238
Receivables and deposits 365
Restricted escrows 1,429
Other assets 360
Investment properties:
Land $ 3,442
Buildings and related personal property 60,817
64,259
Less accumulated depreciation (37,728) 26,531
$ 29,923
Liabilities and Partners' (Deficit) Capital
Liabilities
Accounts payable $ 571
Tenant security deposit liabilities 274
Accrued property taxes 446
Other liabilities 314
Mortgage notes payable 22,405
Partners' (Deficit) Capital
General partners $ (26)
Limited partners (49,995 units issued and
outstanding) 5,939 5,913
$ 29,923
See Accompanying Notes to Consolidated Financial Statements
</TABLE>
b)
SHELTER PROPERTIES IV
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(in thousands, except unit data)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
2000 1999 2000 1999
Revenues:
<S> <C> <C> <C> <C>
Rental income $2,823 $2,766 $5,663 $5,555
Other income 201 133 353 234
Total revenues 3,024 2,899 6,016 5,789
Expenses:
Operating 1,315 1,089 2,583 2,237
General and administrative 87 103 173 176
Depreciation 509 452 1,014 949
Interest 512 529 1,027 1,058
Property taxes 202 205 409 403
Total expenses 2,625 2,378 5,206 4,823
Net income $ 399 $ 521 $ 810 $ 966
Net income allocated
to general partners (1%) $ 4 $ 6 $ 8 $ 10
Net income allocated
to limited partners (99%) 395 515 802 956
$ 453 $ 521 $ 810 $ 966
Net income per limited
partnership unit $ 7.90 $10.30 $16.04 $19.12
Distributions per limited
partnership unit $39.60 $ -- $39.60 $ --
See Accompanying Notes to Consolidated Financial Statements
</TABLE>
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) (1,980) (2,000)
Net income for the six months
ended June 30, 2000 -- 8 802 810
Partners' (deficit) capital at
June 30, 2000 49,995 $ (26) $ 5,939 $ 5,913
See Accompanying Notes to Consolidated Financial Statements
</TABLE>
d)
SHELTER PROPERTIES IV
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
<TABLE>
<CAPTION>
Six Months Ended
June 30,
2000 1999
Cash flows from operating activities:
<S> <C> <C>
Net income $ 810 $ 966
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation 1,014 949
Amortization of discounts and loan costs 141 139
Change in accounts:
Receivables and deposits 361 (23)
Other assets 108 (307)
Accounts payable 367 (72)
Tenant security deposit liabilities 42 --
Accrued property taxes 105 121
Other liabilities 27 (1)
Net cash provided by operating activities 2,975 1,772
Cash flows from investing activities:
Property improvements and replacements (1,396) (581)
Net (deposits to) withdrawals from restricted escrows (528) 859
Net cash (used in) provided by investing
activities (1,924) 278
Cash flows from financing activities:
Partners' distributions (3,000) --
Payments on mortgage notes payable (443) (410)
Net cash used in financing activities (3,443) (410)
Net (decrease) increase in cash and cash equivalents (2,392) 1,640
Cash and cash equivalents at beginning of period 3,630 1,273
Cash and cash equivalents at end of period $ 1,238 $ 2,913
Supplemental disclosure of cash flow information:
Cash paid for interest $ 885 $ 918
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>
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 six month periods ended June 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 June 30, 2000,
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 six months ended June 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.
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 Six Months Ended
June 30,
2000 1999
(in thousands)
<S> <C> <C>
Net cash provided by operating activities $ 2,975 $ 1,772
Payments on mortgage notes payable (443) (410)
Property improvements and replacements (1,396) (581)
Change in restricted escrows, net (528) 859
Changes in reserves for net operating
liabilities (1,010) 282
Additional reserves -- (1,922)
Net cash (used in) from operations $ (402) $ --
</TABLE>
The Corporate General Partner believed it to be in the best interest of the
Partnership to reserve net cash from operations of approximately $1,922,000 at
June 30, 1999, to fund continuing capital improvements and repairs at the
Partnership's three investment properties.
Note D - Distributions
During the six months ended June 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). 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 six months
ended June 30, 2000 relating to a distribution payable as of December 31, 1999.
There were no distributions paid during the six months ended June 30, 1999.
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 six months
ended June 30, 2000 and 1999:
2000 1999
(in thousands)
Property management fees (included in
operating expenses) $304 $293
Reimbursement for services of affiliates
(included in operating, general and
administrative expenses, and investment
properties) 119 99
During the six months ended June 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 $304,000 and
$293,000 for the six months ended June 30, 2000 and 1999, respectively.
Affiliates of the Corporate General Partner received reimbursement of
accountable administrative expenses amounting to approximately $119,000 and
$99,000 for the six months ended June 30, 2000 and 1999, respectively.
AIMCO and its affiliates currently own 29,140 limited partnership units in the
Partnership representing 58.286% 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. In this
regard, on July 24, 2000 an affiliate of AIMCO commenced a tender offer to
purchase any and all of the remaining partnership interests for a purchase price
of $574.10, which is currently scheduled to expire on August 21, 2000. Under the
Partnership Agreement, unitholders holding a majority of the Units are entitled
to take action with respect to a variety of matters. As a result of its
ownership of 58.286% 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 three apartment complexes, one each 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 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 six month periods ended June 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 June 30, 2000
Residential Other Totals
Rental income $ 2,823 $ -- $ 2,823
Other income 200 1 201
Interest expense 512 -- 512
Depreciation 509 -- 509
General and administrative expense -- 87 87
Segment profit (loss) 485 (86) 399
Six Months Ended June 30, 2000
Residential Other Totals
Rental income $ 5,663 $ -- $ 5,663
Other income 345 8 353
Interest expense 1,027 -- 1,027
Depreciation 1,014 -- 1,014
General and administrative expense -- 173 173
Segment profit (loss) 975 (165) 810
Total assets 29,797 126 29,923
Capital expenditures 1,396 -- 1,396
Three Months Ended June 30, 1999
Residential Other Totals
Rental income $ 2,766 $ -- $ 2,766
Other income 125 8 133
Interest expense 529 -- 529
Depreciation 452 -- 452
General and administrative expense -- 103 103
Segment profit (loss) 616 (95) 521
Six Months Ended June 30, 1999
Residential Other Totals
Rental income $ 5,555 $ -- $ 5,555
Other income 218 16 234
Interest expense 1,058 -- 1,058
Depreciation 949 -- 949
General and administrative expense -- 176 176
Segment profit (loss) 1,126 (160) 966
Total assets 30,602 872 31,474
Capital expenditures 581 -- 581
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. 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 will entertain applications for lead
counsel which must be filed by August 4, 2000. The Court has scheduled a hearing
on August 21, 2000 to address the issue of appointing lead counsel. 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 - Subsequent Event
On August 1, 2000, the Partnership sold Countrywood Village Apartments to DCF,
Sr., LLC, an unrelated third party, for net proceeds of approximately
$17,208,000 after payment of closing costs. The Partnership recognized a gain of
approximately $12,376,000 on the sale during the third quarter of 2000. In
addition, the Partnership is waiting on the calculation of a prepayment premium
by the mortgage lender. As a result, the Partnership has the potential to incur
further costs related to this sale.
The sales transaction is summarized as follows (amounts in thousands):
Sales price, net of selling costs $ 17,208
Real estate (1) (4,832)
Gain on sale of real estate $ 12,376
(1) Net of accumulated depreciation of approximately $9,167,000.
The following unaudited pro forma information reflects the operations of the
Partnership for the six months ended June 30, 2000 and 1999, as if Countrywood
had been sold on January 1, 1999 (in thousands):
2000 1999
Revenues $ 4,650 $ 4,443
Expenses 4,296 3,901
Net income $ 354 $ 542
Net income per Limited Partnership Unit $ 7.01 $ 10.73
These pro forma adjustments are not necessarily reflective of the results that
actually would have occurred if the sale had been in effect as of the periods
presented or what may be achieved in the future.
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 six months ended June 30, 2000 and 1999:
Average
Occupancy
Property 2000 1999
Baymeadows Apartments
Jacksonville, Florida 94% 93%
Quail Run Apartments
Columbia, South Carolina 88% 92%
Countrywood Village Apartments
Raleigh, North Carolina 92% 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 $399,000 for the three
months ended June 30, 2000 compared to net income of approximately $521,000 for
the corresponding period in 1999. The Partnership's net income for the six
months ended June 30, 2000 was approximately $810,000 compared to net income of
approximately $966,000 for the corresponding period in 1999. The decrease in net
income for the three and six month periods ended June 30, 2000 compared with the
three and six month periods ended June 30, 1999 is primarily due to an increase
in total expenses partially offset by an increase in total revenues. Total
expenses increased for the three and six months ended June 30, 2000 as compared
to the three and six months ended June 30, 1999, predominately due to an
increase in operating expense at Baymeadows. Operating expense increased at
Baymeadows due to increases in salaries, commissions and other related benefits
as well as increases in utilities, sewer repair, floor covering repairs and
interior painting at Baymeadows. These repairs were completed to upgrade
Baymeadows so that it may improve its position in the Jacksonville market. All
other expenses remained relatively constant for the comparable three and six
month periods.
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 all
three properties, slightly offset by decreases in occupancy at Quail Run
Apartments in addition to an increase in concession costs at all three
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 cash balances invested in interest bearing accounts.
Included in general and administrative expense for the six month periods ended
June 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.
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 June 30, 2000, the Partnership had cash and cash equivalents of approximately
$1,238,000 as compared to approximately $2,913,000 at June 30, 1999. Cash and
cash equivalents decreased approximately $2,392,000 for the six months ended
June 30, 2000 from the Registrant's year end of December 31, 1999. The decrease
was due to approximately $3,443,000 of cash used in financing activities and
approximately $1,924,000 of cash used in investing activities, which was
partially offset by approximately $2,975,000 of cash provided by operating
activities. Cash used in financing activities consisted of distributions to
partners and, to lesser extent, payments of principal made on the mortgages
encumbering the Registrant's properties. Cash used in investing activities
consisted primarily 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 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 June 30, 2000,
the Partnership has spent approximately $1,178,000 in budgeted improvements
consisting primarily of plumbing upgrades, structural upgrades, roof
replacements, 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 June 30, 2000, the Partnership has spent approximately
$137,000 in budgeted improvements consisting primarily of carpet and vinyl
replacements, new appliances and lighting upgrades. These improvements were
funded from operating cash flow.
Countrywood Apartments: The Partnership has budgeted, but is not limited to,
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. As of June 30,
2000, the Partnership has spent approximately $81,000 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 $22,405,000, net of discount, is amortized over
257 months with a balloon payment of approximately $20,671,000 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 six months ended June 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). 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 six months
ended June 30, 2000 relating to a distribution payable as of December 31, 1999.
There were no distributions paid during the six months ended June 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 $648,000. As of June 30, 2000, the reserve account was fully
funded with approximately $1,429,000 on deposit with the mortgage lender.
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. 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 will entertain applications for lead
counsel which must be filed by August 4, 2000. The Court has scheduled a hearing
on August 21, 2000 to address the issue of appointing lead counsel. 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 quarter ended June 30, 2000:
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
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: August 14, 2000
