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 0-11574
SHELTER PROPERTIES V
(Exact name of small business issuer as specified in its charter)
South Carolina 57-0721855
(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)
Issuer's telephone number (864) 239-1000
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 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 V
CONSOLIDATED BALANCE SHEET
(Unaudited)
(in thousands, except unit data)
June 30, 2000
<TABLE>
<CAPTION>
Assets
<S> <C> <C>
Cash and cash equivalents $ 2,559
Receivables and deposits 723
Restricted escrows 653
Other assets 641
Investment properties:
Land $ 4,242
Buildings and related personal property 73,382
77,624
Less accumulated depreciation (45,671) 31,953
$ 36,529
Liabilities and Partners' Deficit
Liabilities
Accounts payable $ 376
Tenant security deposit liabilities 302
Accrued property taxes 391
Other liabilities 574
Mortgage notes payable 36,885
Partners' Deficit
General partners $ (345)
Limited partners (52,538 units
issued and outstanding) (1,654) (1,999)
$ 36,529
See Accompanying Notes to Consolidated Financial Statements
</TABLE>
b)
SHELTER PROPERTIES V
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 $ 3,410 $ 3,416 $ 6,820 $ 6,844
Other income 333 225 568 427
Total revenues 3,743 3,641 7,388 7,271
Expenses:
Operating 1,354 1,372 2,755 2,757
General and administrative 105 100 220 193
Depreciation 668 720 1,354 1,432
Interest 762 681 1,524 1,357
Property taxes 215 216 387 435
Total expenses 3,104 3,089 6,240 6,174
Net income $ 639 $ 552 $ 1,148 $ 1,097
Net income allocated to
general partners (1%) $ 6 $ 6 $ 11 $ 11
Net income allocated to
limited partners (99%) 633 546 1,137 1,086
$ 639 $ 552 $ 1,148 $ 1,097
Net income per limited
partnership unit $ 12.05 $ 10.39 $ 21.64 $ 20.67
Distributions per limited
partnership unit $144.18 $ -- $144.18 $ 35.80
See Accompanying Notes to Consolidated Financial Statements
</TABLE>
c)
SHELTER PROPERTIES V
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 52,538 $ 2 $52,538 $52,540
Partners' (deficit) capital at
December 31, 1999 52,538 (339) 4,784 4,445
Net income for the six months
ended June 30, 2000 -- 11 1,137 1,148
Distributions to partners -- (17) (7,575) (7,592)
Partners' deficit at June 30, 2000 52,538 $ (345) $(1,654) $(1,999)
See Accompanying Notes to Consolidated Financial Statements
</TABLE>
d)
SHELTER PROPERTIES V
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 $ 1,148 $ 1,097
Adjustments to reconcile net income
to net cash provided by operating activities:
Depreciation 1,354 1,432
Amortization of discounts and loan costs 99 91
Change in accounts:
Receivables and deposits (734) (102)
Other assets (56) (120)
Accounts payable (459) (2)
Tenant security deposit liabilities 28 3
Accrued property taxes (20) 35
Other liabilities (390) (30)
Net cash provided by operating activities 970 2,404
Cash flows from investing activities:
Property improvements and replacements (1,891) (585)
Net (deposit to) withdrawals from restricted escrows (2) 176
Insurance proceeds received, net 2,644 --
Net cash provided by (used in) investing
activities 751 (409)
Cash flows from financing activities:
Payments on mortgage notes payable (339) (253)
Loan costs paid (83) (10)
Partners' distributions (7,592) (1,905)
Net cash used in financing activities (8,014) (2,168)
Net decrease in cash and cash equivalents (6,293) (173)
Cash and cash equivalents at beginning of period 8,852 2,892
Cash and cash equivalents at end of period $ 2,559 $ 2,719
Supplemental disclosure of cash flow information:
Cash paid for interest $ 1,425 $ 1,267
At December 31, 1999 approximately $548,000 of property improvements and
replacements were included in accounts payable.
See Accompanying Notes to Consolidated Financial Statements
</TABLE>
e)
SHELTER PROPERTIES V
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note A - Basis of Presentation
The accompanying unaudited consolidated financial statements of Shelter
Properties V (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 V 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 November 30, 1999.
Change in Fiscal Year End:
On January 3, 2000, the Partnership elected to change its fiscal year end from
November 30 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 six months ended June 30, 2000.
Principles of Consolidation:
The financial statements include all the accounts of the Partnership and its two
99.99% owned partnerships. The Corporate General Partner of the consolidated
partnerships is Shelter Realty V Corporation. Shelter Realty V Corporation may
be removed as the general partner of the consolidated partnership by the
Registrant; therefore, the consolidated partnerships are 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 from operations", as defined in the Partnership
Agreement. However, "net cash from 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.
Six Months Ended
June 30,
(in thousands)
2000 1999
Net cash provided by operating
activities $ 970 $ 2,404
Payments on mortgage notes
payable (339) (253)
Property improvements and
replacements (1,891) (585)
Change in restricted escrows, net (2) 176
Changes in reserves for net
operating liabilities 2,179 216
Additional operating reserves (917) (958)
Net cash provided by operations $ -- $ 1,000
The Corporate General Partner reserved an additional $917,000 and $958,000 at
June 30, 2000 and 1999, respectively, to fund capital improvements and repairs
at the Partnership's seven investment properties.
Note D - 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 affiliates during the six months ended
June 30, 2000 and 1999 (in thousands):
June 30,
2000 1999
Property management fees (included in
operating expense) $ 358 $ 368
Reimbursement for services of affiliates
(included in operating, general and
administrative expenses and investment 155 109
properties)
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 for providing property management services. The
Registrant paid to such affiliates approximately $358,000 and $368,000 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 $155,000 and
$109,000 for the six months ended June 30, 2000 and 1999, respectively. Included
in these expenses for the six months ended June 30, 2000 and 1999 is
approximately $23,000 and $2,000, respectively, in reimbursements for
construction oversight costs.
AIMCO and its affiliates currently own 33,627 limited partnership units in the
Partnership representing 64.01% 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. As a result of its
ownership of 64.01% 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 E - 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. The
Partnership's residential property segment consists of seven apartment complexes
located in Florida (2), South Carolina (1), Virginia (1), Georgia(1), and North
Carolina (2). 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 of the Partnership as described in the Partnership's Annual Report on Form
10-KSB for the year ended November 30, 1999.
Factors management used to identify the enterprise's reportable segment:
The Partnership's reportable segment consists of investment properties that
offer similar products and services. Although each of the investment properties
is 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. 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
(in thousands)
Rental income $ 3,410 $ -- $ 3,410
Other income 261 72 333
Interest expense 762 -- 762
Depreciation 668 -- 668
General and administrative expense -- 105 105
Segment profit (loss) 672 (33) 639
Six Months Ended June 30, 2000 Residential Other Totals
(in thousands)
Rental income $ 6,820 $ -- $ 6,820
Other income 425 143 568
Interest expense 1,524 -- 1,524
Depreciation 1,354 -- 1,354
General and administrative expense -- 220 220
Segment profit (loss) 1,225 (77) 1,148
Total assets 36,337 192 36,529
Capital expenditures for
investment properties 1,343 -- 1,343
Three Months Ended March 31, 1999 Residential Other Totals
(in thousands)
Rental income $ 3,416 $ -- $ 3,416
Other income 219 6 225
Interest expense 681 -- 681
Depreciation 720 -- 720
General and administrative expense -- 100 100
Segment profit (loss) 646 (94) 552
Six Months Ended June 30, 1999 Residential Other Totals
(in thousands)
Rental income $ 6,844 $ -- $ 6,844
Other income 410 17 427
Interest expense 1,357 -- 1,357
Depreciation 1,432 -- 1,432
General and administrative expense -- 193 193
Segment profit (loss) 1,273 (176) 1,097
Total assets 36,385 594 36,979
Capital expenditures for
investment properties 585 -- 585
Note F - Casualty Event
In September 1999, Tar River Estates Apartments, was damaged by severe flooding
which affected certain areas of North Carolina. It is estimated that the
property has incurred approximately $6,323,000 in damages as a result of this
flooding. As of June 30, 2000, insurance proceeds of approximately $3,242,000
have been received to cover lost rents and damage to the property. It is
anticipated that the costs incurred to restore the property will be fully
covered by insurance.
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.
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
discussions 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
operation. 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 seven apartment complexes.
The following table sets forth the average occupancy of the properties for the
six months ended June 30, 2000 and 1999:
June 30,
Property 2000 1999
Foxfire Apartments
Atlanta, Georgia 95% 94%
Old Salem Apartments
Charlottesville, Virginia 97% 95%
Woodland Village Apartments
Columbia, South Carolina 92% 94%
Lake Johnson Mews Apartments
Raleigh, North Carolina 93% 95%
The Lexington Green Apartments
Sarasota, Florida 97% 98%
Millhopper Village Apartments
Gainesville, Florida 94% 95%
Tar River Estates Apartments
Greenville, North Carolina (1) 35% 95%
(1) During September 1999, Tar River Estates was damaged by severe flooding
which affected certain areas of North Carolina. The property has incurred
extensive damage as a result of the flooding causing portions of the
property to be unavailable for occupancy since September 1999. It is
anticipated that the costs incurred to restore the property will be fully
covered by insurance. The occupancy for the units not damaged at the
property was 93% at June 30, 2000. The Corporate General Partner is
currently in discussions concerning the redevelopment of the property.
Results of Operations
The Registrant's net income for the three and six months ended June 30, 2000 was
approximately $639,000 and $1,148,000, respectively, as compared to
approximately $552,000 and $1,097,000 for the three and six months ended June
30, 1999. The increase in net income for the three and six month periods is due
to an increase in total revenues, which was partially offset by an increase in
total expenses. Total revenues increased due to an increase in other income.
Other income increased primarily due to an increase in interest income, as a
result of higher cash balances maintained in interest bearing accounts. The
increase in other income was partially offset by a slight decrease in rental
income as a result of a decrease in occupancy at five of the Partnership's
investment properties which more than offset the increase in average rental
rates at all of the properties.
Total expenses increased primarily due to an increase in interest expense and,
to a lesser extent, an increase in general and administrative expense. The
increase in interest expense is primarily the result of the refinancing of the
debt encumbering Old Salem Apartments and Foxfire Apartments (as discussed
below). General and administrative expenses increased primarily due to increases
in audit fees and management reimbursements to the Corporate General Partner.
The increase in total expenses was partially offset by decreases in depreciation
and property tax expenses. The decrease in depreciation expense is due primarily
to the write-off of a building and the related accumulated depreciation at Tar
River Estates Apartments due to damage sustained as a result of flooding in
1999. The decrease in property tax expense is due to the timing of the receipt
of tax bills, which affected the tax accruals recorded for the respective
periods. Operating expenses remained relatively constant for the comparable
periods.
In addition, included in general and administrative expenses at both June 30,
2000 and 1999 are costs associated with the quarterly and annual communications
with investors and regulatory agencies and appraisals required by the
Partnership Agreement are also included.
As part of the ongoing business plan of the Registrant, the Corporate General
Partner monitors the rental market environment of each of its investment
properties to assess the feasibility of increasing rents, maintaining or
increasing occupancy levels and protecting the Partnership from increases in
expense. As part of this plan, the Corporate General Partner attempts to protect
the Partnership from the burden of inflation-related increases in expenses by
increasing rents and maintaining a high overall occupancy level. However, due to
changing market conditions, which can result in the use of rental concessions
and rental reductions to offset softening market conditions, there is no
guarantee that the Corporate General Partner will be able to sustain such a
plan.
Liquidity and Capital Resources
At June 30, 2000, the Registrant had cash and cash equivalents of approximately
$2,559,000 as compared to approximately $2,719,000 at June 30, 1999. The
decrease in cash and cash equivalents of approximately $6,293,000 for the six
months ended June 30, 2000, from the Partnership's year ended December 31, 1999,
is due to approximately $8,014,000 of cash used in financing activities, which
was partially offset by approximately $751,000 of cash provided by investing
activities and approximately $970,000 of cash provided by operating activities.
Cash provided by investing activities consisted of the receipt of insurance
proceeds, which was partially offset by property improvements and replacements
and net deposits to escrow accounts maintained by the mortgage lender. Cash used
in financing activities consisted primarily of partner distributions and, to a
lesser extent, payments of principal made on the mortgages encumbering the
Registrant's properties and loan costs related to the refinancing of the
mortgages encumbering Old Salem Apartments and Foxfire Apartments. The
Partnership 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 Registrant and to comply with
Federal, state, local, legal and regulatory requirements. Capital improvements
planned for each of the Registrant's properties are detailed below.
Millhopper Village Apartments: For 2000, the Partnership has budgeted
approximately $44,000 for capital improvements, consisting primarily of
appliance and floor covering replacements and HVAC unit replacements. The
Partnership completed approximately $87,000 in budgeted and non budgeted capital
expenditures for the six months ended June 30, 2000. The capital expenditures
incurred consisted primarily of balcony replacements, major landscaping
improvements, and floor covering replacements. These improvements were funded
primarily from Partnership reserves and operations.
Foxfire Apartments: For 2000, the Partnership has budgeted approximately $34,000
for capital improvements, consisting primarily of parking area and swimming pool
improvements, floor covering and appliance replacements and other interior
building improvements. The Partnership completed approximately $122,000 in
capital expenditures for the six months ended June 30, 2000. The capital
expenditures incurred consisted primarily of exterior painting, structural
upgrades, HVAC, floor covering and appliance replacements. These improvements
were funded primarily from operations.
Lake Johnson Mews Apartments: For 2000, the Partnership has budgeted
approximately $105,000 for capital improvements, consisting primarily of
structural improvements, HVAC upgrades and floor covering and appliance
replacements. The Partnership completed approximately $62,000 in capital
expenditures for the six months ended June 30, 2000. The capital expenditures
incurred consisted primarily of appliance, cabinet, and floor covering
replacements. These improvements were funded primarily from Partnership reserves
and operations.
Woodland Village Apartments: For 2000, the Partnership has budgeted
approximately $47,000 for capital improvements, consisting primarily of exterior
painting, floor covering replacements and other interior and exterior building
improvements. The Partnership completed approximately $64,000 in capital
expenditures for the six months ended June 30, 2000. The capital expenditures
incurred consisted primarily of floor covering and appliance replacements and
structural improvements. These improvements were funded primarily from
operations. In addition approximately $331,000 has been spent during 2000 on
structural improvements required after a fire which occurred in July 1999. These
improvements were funded from insurance proceeds.
The Lexington Green Apartments: For 2000, the Partnership has budgeted
approximately $420,000 for capital improvements, consisting primarily of
plumbing improvements, swimming pool upgrades, floor covering and appliance
replacements and structural improvements. The Partnership completed
approximately $193,000 in capital expenditures for the six months ended June 30,
2000. The capital expenditures incurred consisted primarily of exterior
painting, plumbing upgrades and floor covering replacement. These improvements
were funded primarily from operations.
Tar River Estates Apartments: For 2000, the Partnership has budgeted
approximately $135,000 for capital improvements excluding costs associated with
repairing the damage incurred from flooding, consisting primarily of HVAC unit
upgrades and floor covering and appliance replacements and structural
improvements. The Partnership completed approximately $265,000 in capital
expenditures for the six months ended June 30, 2000. The capital expenditures
incurred consisted primarily of floor covering replacement and other exterior
and interior building improvements associated with the repairs required due to
the severe flood damage which occurred during September 1999. These improvements
were funded primarily from Partnership reserves and insurance proceeds.
Old Salem Apartments: For 2000, the Partnership has budgeted approximately
$438,000 for capital improvements, consisting primarily of parking lot
improvements, floor covering and appliance replacements, structural
improvements, and other interior and exterior improvements. The Partnership
completed approximately $219,000 in capital expenditures for the six months
ended June 30, 2000. The capital expenditures incurred consisted primarily of
structural improvements parking lot improvements, and floor covering and
appliance replacements. These improvements were funded primarily from
Partnership reserves and operations.
The additional capital expenditures will be incurred only if cash is available
from operations and from 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 $36,885,000 net of discount, is amortized over
varying periods with required balloon payments ranging from November 15, 2002 to
December 1, 2019. The Corporate General Partner will attempt to refinance such
indebtedness and/or sell the properties prior to such maturity dates. If the
properties cannot be refinanced or sold for a sufficient amount, the Registrant
will risk losing such properties through foreclosure.
During October and November 1999, the Partnership refinanced the mortgage notes
at Foxfire and Old Salem Apartments, respectively. Gross proceeds from the
refinancings were $7,200,000 and $10,157,000, respectively, of which
approximately $4,519,000 and $6,287,000 respectively was used to pay off the
existing mortgage notes. The new notes require monthly principal and interest
payments at fixed interest rates of 7.79% for Foxfire Apartments and 8.02% for
Old Salem Apartments. The old debt carried fixed interest rates of 7.50% and
10.375% with maturities beginning in May 1999.
During the six months ended June 30, 2000, cash distributions of approximately
$6,177,000 were paid to the limited partners ($117.57 per limited partnership
unit) from refinancing proceeds and approximately $1,398,000 ($26.61 per limited
partnership unit) was paid from operations. The general partners received
approximately $17,000 from operations during the six months ended June 30, 2000.
During the six months ended June 30, 1999, cash distributions of approximately
$1,905,000 ($1,881,000 of which was paid to the limited partners or $35.80 per
limited partnership unit) were paid from operations. 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 planned capital improvement
expenditures, to permit additional distributions to its partners during 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 maintained by the mortgage lender for The Lexington Green
Apartments and Tar River Estates Apartments is less than $400 per apartment unit
for each respective property for a total of $267,600. As of June 30, 2000, the
reserve accounts were fully funded with approximately $383,000 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:
None filed during the quarter ended June 30, 2000.
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 V
By: Shelter Realty V Corporation
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
