<PAGE>
FORM 10-QSB--QUARTERLY REPORT UNDER SECTION 13 or 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
Quarterly or Transitional Report
(As last amended by 34-32231, eff. 6/3/93.)
U. S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-QSB
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended July 31, 1995
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period.........to.........
Commission file number 0-13261
SHELTER PROPERTIES VI LIMITED PARTNERSHIP
(Exact name of small business issuer as specified in its charter)
South Carolina 57-0755618
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
One Insignia Financial Plaza, P.O. Box 1089
Greenville, South Carolina 29602
(Address of principal executive offices) (Zip Code)
Issuer's telephone number (803) 239-1000
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 VI LIMITED PARTNERSHIP
BALANCE SHEET
(Unaudited)
July 31, 1995
<TABLE>
<CAPTION>
<S> <C> <C>
Assets
Cash:
Unrestricted $ 893,793
Restricted--tenant security deposits 228,972
Investments 395,379
Accounts receivable 8,206
Escrow for taxes 571,606
Restricted escrows 1,714,346
Other assets 777,085
Investment properties:
Land $ 5,635,471
Buildings and related personal property 52,279,994
57,915,465
Less accumulated depreciation (24,222,755) 33,692,710
$38,282,097
Liabilities and Partners' Capital (Deficit)
Liabilities
Accounts payable $ 198,582
Tenant security deposits 225,191
Accrued taxes 712,302
Other liabilities 405,028
Mortgage notes payable 31,197,562
Partners' Capital (Deficit)
General partners $ (312,679)
Limited partners (42,324 units
issued and outstanding) 5,856,111 5,543,432
$38,282,097
</TABLE>
See Accompanying Notes to Financial Statements
1
<PAGE>
b) SHELTER PROPERTIES VI LIMITED PARTNERSHIP
STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
July 31, July 31,
<S> <C> <C> <C> <C>
1995 1994 1995 1994
Revenues:
Rental income $2,598,756 $2,537,873 $7,703,174 $7,384,433
Other income 139,596 120,805 468,166 351,279
Total revenues 2,738,352 2,658,678 8,171,340 7,735,712
Expenses:
Operating 740,170 752,943 2,059,544 2,083,170
General and administrative 179,674 57,779 320,124 190,433
Property management fees 138,809 131,144 405,758 382,905
Maintenance 396,185 468,969 1,062,734 1,229,400
Depreciation 553,227 521,410 1,633,249 1,551,460
Interest 710,549 723,227 2,142,533 2,177,451
Property taxes 239,141 230,710 705,812 670,569
Total expenses 2,957,755 2,886,182 8,329,754 8,285,388
Loss on disposal of property (2,155) (23,601) (13,457) (39,216)
Net loss $ (221,558) $ (251,105) $ (171,871) $ (588,892)
Net loss allocated
to general partners (1%) $ (2,216) $ (2,511) $ (1,719) $ (5,889)
Net loss allocated
to limited partners (99%) (219,342) (248,594) (170,152) (583,003)
$ (221,558) $ (251,105) $ (171,871) $ (588,892)
Net loss per limited
partnership unit $ (5.18) $ (5.87) $ (4.02) $ (13.77)
</TABLE>
See Accompanying Notes to Financial Statements
2
<PAGE>
c) SHELTER PROPERTIES VI LIMITED PARTNERSHIP
STATEMENT OF CHANGES IN PARTNERS' CAPITAL (DEFICIT)
(Unaudited)
<TABLE>
<CAPTION>
Limited
Partnership General Limited
Units Partners Partners Total
<S> <C> <C> <C> <C>
Original capital
contributions 42,324 $ 2,000 $42,324,000 $42,326,000
Partners' capital at
October 31, 1994 42,324 $(310,960) $ 6,026,263 $ 5,715,303
Net loss for the nine months
ended July 31, 1995 -- (1,719) (170,152) (171,871)
Partners' capital at
July 31, 1995 42,324 $(312,679) $ 5,856,111 $ 5,543,432
</TABLE>
See Accompanying Notes to Financial Statements
3
<PAGE>
d) SHELTER PROPERTIES VI LIMITED PARTNERSHIP
STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
July 31,
<S> <C> <C>
1995 1994
Cash flows from operating activities:
Net loss $ (171,871) $ (588,892)
Adjustments to reconcile net loss to net
cash provided by operating activities:
Depreciation 1,633,249 1,551,460
Amortization of discounts and loan costs 239,750 232,307
Loss on disposal of property 13,457 39,216
Change in accounts:
Restricted cash (11,863) (12,926)
Accounts receivable 5,418 18,748
Escrows for taxes (159,710) (268,431)
Other assets 28,106 28,759
Accounts payable (109,273) (195,777)
Tenant security deposit liabilities 8,082 12,926
Accrued taxes 129,162 164,949
Other liabilities 25,145 (3,951)
Net cash provided by operating activities 1,629,652 978,388
Cash flows from investing activities:
Property improvements and replacements (642,980) (490,348)
Cash invested in short-term investments (521,379) (720,333)
Cash received from matured investments 703,527 912,416
Deposits to restricted escrows (226,672) (224,653)
Receipts from restricted escrows 58,156 309,380
Net cash used in investing activities (629,348) (213,538)
Cash flows from financing activities:
Payments on mortgage notes payable (564,289) (523,118)
Net cash used in financing activities (564,289) (523,118)
Net increase in cash 436,015 241,732
Cash at beginning of period 457,778 370,797
Cash at end of period $ 893,793 $ 612,529
Supplemental disclosure of cash flow information:
Cash paid for interest $1,903,808 $1,944,979
</TABLE>
See Accompanying Notes to Financial Statements
4
<PAGE>
e) SHELTER PROPERTIES VI LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
Note A - Basis of Presentation
The accompanying unaudited financial statements 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 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 July 31, 1995, are not necessarily indicative of the results that
may be expected for the fiscal year ending October 31, 1995. For
further information, refer to the financial statements and footnotes
thereto included in the Partnership's annual report on Form 10-KSB for
the year ended October 31, 1994.
Certain reclassifications have been made to the 1994 information to
conform to the 1995 presentation.
Note B - Reconciliation of Cash Flows
The following is a reconciliation of the subtotal on the accompanying
statements of cash flows captioned "net cash provided by operating
activities" to "net cash used in operations", as defined in the
partnership agreement. However, "net cash used in operations" should
not be considered an alternative to net income as an indicator of the
Partnership's operating performance or to cash flows as a measure of
liquidity.
<TABLE>
<CAPTION>
For the Nine Months Ended
July 31,
1995 1994
<S> <C> <C>
Net cash provided by operating activities $1,629,652 $ 978,388
Payments on mortgage notes payable (564,289) (523,118)
Property improvements and replacements (642,980) (490,348)
Changes in reserves for net operating
liabilities 84,933 255,703
Change in restricted escrows, net (168,516) 84,727
Additional reserves (340,000) (306,000)
Net cash used in operations $ (1,200) $ (648)
</TABLE>
5
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SHELTER PROPERTIES VI LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS - continued
(unaudited)
Note B - Reconciliation of Cash Flows - continued
The Corporate General Partner has reserved an additional $340,000 and
$306,000 for capital expenditures and to the fund the Reserve Escrow, as
defined in the mortgage notes. These Reserve Escrows require the
partnership to deposit $1,000 per apartment unit for each respective
property, or $1,710,000. The current balance is $1,642,890.
Note C Transactions with Affiliated Parties
The Partnership has no employees and is dependent on the Corporate
General Partner and its affiliates for the management and administration
of all partnership activities. The Partnership Agreement provides for
payments to affiliates for services and as reimbursement of certain
expenses incurred by affiliates on behalf of the Partnership. The
following transactions with Insignia Financial Group, Inc. and
affiliates were charged to expense in 1995 and 1994:
<TABLE>
<CAPTION>
For the Nine Months Ended
July 31,
1995 1994
<S> <C> <C>
Property management fees $405,758 $382,905
Data processing services 28,079 26,024
Marketing services 5,596 11,010
Reimbursement for services of affiliates 92,117 74,796
</TABLE>
The Partnership insures its properties under a master policy through
an agency and insurer unaffiliated with the Corporate General Partner.
An affiliate of the Corporate General Partner acquired, in the
acquisition of a business, certain financial obligations from an
insurance agency which was later acquired by the agent who placed the
current year's master policy. The current agent assumed the financial
obligations to the affiliate of the Corporate General Partner, who
receives payments on these obligations from the agent. The amount of
the Partnership's insurance premiums accruing to the benefit of the
affiliate of the Corporate General Partner by virtue of the agent's
obligations is not significant.
6
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
The Partnership's investment properties consist of seven
apartment complexes. The following table sets forth the average
occupancy of the properties for the nine months ended July 31, 1995 and
1994:
<TABLE>
<CAPTION>
Average
Occupancy
<S> <C> <C>
Property 1995 1994
Marble Hills
Richmond, Virginia 96% 94%
Rocky Creek
Augusta, Georgia 90% 89%
Carriage House
Gastonia, North Carolina 98% 98%
Nottingham Square
Des Moines, Iowa 94% 96%
Foxfire/Barcelona
Durham, North Carolina 98% 93%
River Reach
Jacksonville, Florida 99% 98%
Village Gardens
Fort Collins, Colorado 94% 97%
</TABLE>
The Corporate General Partner attributes the increase in occupancy at
Foxfire to a reduction in the number of tenants purchasing homes as well
as a strong market created by the property's proximity to the
universities and hospitals in the Durham area. In addition, the Durham
area experienced little growth in new apartment complexes over the last
several years. During this time, Foxfire's overall reputation improved
resulting in decreased turnover. The Corporate General Partner
attributes the decrease in occupancy at Village Gardens to competition
from several new apartment complexes in the area.
The Partnership's net loss for the nine months ended July 31, 1995,
was $171,871 with the third quarter having a loss of $221,558. The
Partnership reported net losses of $588,892 and $251,105 for the
corresponding periods of 1994. The decrease in net loss is primarily
due to an increase in rental income due to an increase in occupancy at
four of the properties and rental rate increases at all properties. In
addition, maintenance expense decreased due to the high level of repair
and maintenance activity in 1994, including exterior painting projects
at Carriage House and Nottingham Square, parking lot and tennis court
surface renovations at Rocky Creek, exterior wood replacement and
painting at Foxfire and asbestos removal at Village Gardens. In
addition, other income increased due to an increase in various tenant
charges, such as lease cancellation and application fees, and the
increase in laundry income at Marble Hills. Interest income increased
due to an increase in the restricted escrow balances earning interest at
higher interest rates in 1995.
7
<PAGE>
The loss from the retirement of property decreased due to fewer
roof replacements in 1995 as compared to 1994. Offsetting the
decrease in net loss is an increase in general and administrative
expenses due to increased legal fees associated with the lawsuits
disclosed in the Legal Proceedings section below, as well as
increased professional expenses in connection with the tender
offers.
As part of the ongoing business plan of the Partnership, the
Corporate General Partner monitors the rental market environment of each
of its investment properties to assess the feasibility of increasing
rents, maintaining or increasing occupancy levels and protecting the
Partnership from increases in expense. As part of this plan, the
Corporate General Partner attempts to protect the Partnership from the
burden of inflation-related increases in expenses by increasing rents
and maintaining a high overall occupancy level. However, due to
changing market conditions, which can result in the use of rental
concessions and rental reductions to offset softening market conditions,
there is no guarantee that the Corporate General Partner will be able to
sustain such a plan.
At July 31, 1995, the Partnership reported unrestricted cash of
$893,793 versus $612,529 for the same period of 1994. Net cash provided
by operations increased primarily due to the decrease in net loss as
discussed above. In addition, the change in escrow for taxes reflects
an increase in cash due to the timing of the transfers from the tax
escrow to unrestricted cash in order to cover tax payments. The
decrease in accrued taxes, reflecting the payment of the taxes, offsets
this change. Also contributing to the change was a decrease in cash
used in accounts payable due to the timing of payments. In addition,
other liabilities caused an increase in cash provided by operating
activities due to an increase in tenant rental prepayments, particularly
at Nottingham Square and River Reach. Net cash used in investing
activities increased primarily due to an increase in property
improvements and replacements. These improvements include gutter and
cabinet replacements at Nottingham Square and parking lot resurfacing at
River Reach. In addition, receipts from restricted escrows decreased
due to the majority of the renovations required by the refinancing in
1992 having been completed in the prior two years. The 1995
improvements were primarily funded from property operations. Net cash
used in financing activities increased due to an increase in principal
payments on the mortgage notes payable.
The sufficiency of existing liquid assets to meet future liquidity
and capital expenditure requirements is directly related to the level of
capital expenditures required at the property to adequately maintain the
physical assets and other operating needs of the Partnership. Such
assets are currently thought to be sufficient for any near-term needs of
the Partnership. The mortgage indebtedness of $31,197,562, net of
discount, is amortized over 257 months with a balloon payment of
$25,606,184 due on November 15, 2002, at which time the properties will
either be refinanced or sold. Future cash distributions will depend on
the levels of net cash generated from operations, property sales, and
the availability of cash reserves. Distributions may also be restricted
by the requirement to deposit net operating income (as defined in the
mortgage note) into the Reserve Account until the $1,000 per apartment
unit is funded for each respective property. No cash distributions were
recorded in 1994 or during the first nine months of 1995. At this time,
the Corporate General partner does not anticipate making a cash
distribution from property operations during 1995. On June 2, 1995, the
Partnership entered into an Agreement of Purchase and Sale ("Agreement")
between Shelter Properties VI Limited Partnership and an unaffiliated
third party in connection with Marble Hills Apartments. The Agreement
is contingent upon the satisfaction of numerous closing conditions.
Therefore, the Corporate General Partner cannot guarantee that this sale
will close. If the sale is consummated, the Corporate General Partner
believes that the Partnership may make a cash distribution.
8
<PAGE>
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The general partner responsible for management of the
Partnership's business is Shelter Realty VI Corporation, a South
Carolina corporation (the "Corporate General Partner"). The only other
general partner of the Partnership, N. Barton Tuck, Jr. is effectively
prohibited by the Partnership's partnership agreement (the "Partnership
Agreement") from participating in the management of the Partnership.
The Corporate General Partner is an indirect subsidiary of Insignia
Financial Group, Inc. ("Insignia"). The directors and officers of the
Corporate General Partner also serve as executive officers of Insignia.
The Corporate General Partner owns 100 Limited Partnership Units
("Units"). On May 27, 1995, an affiliate of the Corporate General
Partner (the "Affiliated Purchaser") acquired 7,995 Units at a price of
$200.00 per Unit pursuant to a tender offer (the "Affiliate Offer")
described below. The Corporate General Partner and the Affiliated
Purchaser are, therefore, entitled to participate in cash distributions
made by the Partnership to its Unit holders. The Partnership has not
made cash distributions to Unit holders since 1986. On June 2, 1995,
the partnership entered into an agreement of purchase and sale to sell
one of its properties. If the sale is consummated, the Corporate
General Partner believes that the Partnership may make a cash
distribution of up to $1,000,000 ($23.63 per unit) to Unit holders.
There can be no assurance that such sale will be consummated. If the
sale is not consummated, the Corporate General Partner does not expect
that the Partnership will be in a position to make a distribution of
cash from operations in the near term. In addition, the Corporate
General Partner is entitled to certain cash distributions in respect of
its general partner interest. The Corporate General Partner has not
received a cash distribution in respect of its general partner interest
since 1986.
As a result of the Affiliated Purchaser's acquisition of 18.9% of
the outstanding Units, the Affiliated Purchaser, an affiliate of the
Corporate General Partner and Insignia, may be in a position to
significantly influence any vote of the Unit holders. The Partnership
has paid Insignia Management Group, L.P. ("IMG"), an affiliate of the
Corporate General Partner, property management fees equal to 5% of the
Partnership's apartment revenues for property management services in
each of the three years in the period ended October 31, 1994, pursuant
to property management agreements. Property management fees paid to IMG
amounted to $472,626, $491,112, and $517,482, respectively, for the
three years ended October 31, 1992, 1993, and 1994. Additionally, the
Partnership paid IMG property management fees equal to $405,758 during
the first three quarters of fiscal 1995. Insignia and its affiliates do
not receive any fees from the Partnership for the asset management or
partnership administration services they provide, although Insignia and
its affiliates are reimbursed by the Partnership for the expenses they
incur in connection with providing those services. The Partnership
Agreement also provides for reimbursement to the Corporate General
Partner and its affiliates for costs incurred in connection with
administration of the Partnership's activities. Pursuant to these
provisions and in addition to the property management fees referred to
above, the Partnership paid the Corporate General Partner and its
affiliates (including the reimbursements to Insignia and its affiliates
in connection with asset management and partnership administration
services) an aggregate of $160,342, $179,813, and $191,686,
respectively, for the three years ended October 31, 1992, 1993, and 1994
and $125,792 during the first three quarters of fiscal 1995. In 1992,
an affiliate of Insignia assisted an unaffiliated third party engaged by
the Partnership in connection with refinancings of the
9
<PAGE>
Partnership's properties, and received $319,995 from the third
party for providing such assistance. In addition, at various
times during the past three fiscal years an affiliate of Insignia
has held a promissory note or preferred stock issued by an
unaffiliated company that provides insurance brokerage services to
the Partnership.
The terms of the Affiliated Purchaser's financing of the Affiliate
Offer may result in future potential conflicts of interest. The
Affiliated Purchaser paid for the Units it purchased pursuant to the
Affiliate Offer with funds provided by Insignia, and Insignia, in turn,
obtained these funds from its working capital. It is possible, however,
that in connection with its future financing activities, Insignia may
cause or request the Affiliated Purchaser to pledge its Units as
collateral for loans, or otherwise agree to terms which provide Insignia
and the Affiliated Purchaser with incentives to generate substantial
near-term cash flow from the Affiliated Purchaser's investment in the
Units. In such a situation, the Corporate General Partner may
experience a conflict of interest in seeking to reconcile the best
interests of the Partnership with the need of its affiliates for cash
flow from the Partnership's activities.
On April 27, 1995, the Affiliated Purchaser commenced the
Affiliate Offer for up to 30% of the Units at a price of $200.00 per
Unit. The Affiliate Offer expired on May 26, 1995. On May 27, 1995, an
affiliate of the Corporate General Partner, the Affiliated Purchaser,
acquired 7,995 Units at a price of $200.00 per Unit pursuant to the
Affiliate Offer. During the Affiliate Offer, Carl C. Icahn and certain
of his associates contacted Insignia about pursuing a variety of
possible transactions on a joint venture basis. During those
discussions, representatives of Insignia advised Mr. Icahn and his
representatives that Insignia did not wish to discourage or prevent any
transaction which would produce additional value for Unit holders.
During those conversations, Mr. Icahn and his representatives expressed
a desire to make an equity investment in the Affiliated Purchaser with a
view to sharing in the economic benefits, if any, to be derived by the
Affiliated Purchaser from the Affiliate Offer. The representatives of
Insignia declined to agree to such an arrangement.
Following those discussions, at approximately 6:45 p.m. on Monday,
May 22, 1995, the Corporate General Partner received a letter from High
River Limited Partnership ("High River") which stated that High River
was commencing, by public announcement, a cash tender offer for up to
approximately 30% of the outstanding Units at a price of $230.00 per
Unit (the "High River Offer"). High River sent similar letters to the
Insignia affiliated corporate general partners of five other limited
partnerships. On May 23, 1995, Insignia issued a press release which
announced receipt of the letters.
From 12:00 noon on Tuesday, May 23 through late in the evening of
Wednesday, May 24, the Affiliated Purchaser, Insignia, and High River
and their respective counsel had a series of meetings and telephone
conversations to explore a possible joint venture relationship with
respect to various real estate related investment opportunities,
including the Affiliate Offer. Representatives of High River terminated
the discussions. No agreement was reached with respect to the
Affiliated Offer or any other matter.
On the afternoon of Thursday, May 25, 1995, the Corporate General
Partner received a second letter from High River stating that High River
had initiated a tender offer for up to 40% of the outstanding Units at a
price of $290.40 per Unit. High River also issued a press release
announcing the High River Offer and that High River was commencing
similar tender offers for units of limited partnership interest in five
other partnerships in which other Insignia affiliates are the corporate
10
<PAGE>
general partners. Upon receiving the letter from High River, Insignia
issued its own press release announcing the terms of the six High River
offers.
Also on May 25, 1995, the Corporate General Partner received a
copy of a Complaint (the "High River Complaint") seeking, among other
things, an order from the United States District Court for the District
of Delaware enjoining the closing of the Affiliate Offer. The High
River Complaint related to the Affiliate Offer and to five other tender
offers made by affiliates of Insignia for units of limited partnership
interests in other limited partnerships in which other affiliates of
Insignia are general partners. The High River Complaint named as
defendants the Affiliated Purchaser and each of the Insignia affiliates
making the five other tender offers; the Corporate General Partner and
the five other Insignia-affiliated general partners; and Insignia. The
High River Complaint contained allegations that, among other things, the
Affiliated Purchaser sought to acquire Units at highly inadequate
prices, and that the Affiliate Offer contained numerous false and
misleading statements and omissions of material facts. The alleged
misstatements and omissions concerned, among other things, the true
value of the units; the true financial conditions of the Partnership;
the factors affecting the likelihood that properties owned by the
Partnership will be sold or liquidated in the near future; the liquidity
and value of the Units; the limited secondary market for Units; and the
true nature of the market for underlying assets. The High River
Complaint also alleged that the Affiliated Purchaser failed to comply
with the requirements of Rule 13e-4 under the Securities Exchange Act of
1934.
On Friday, May 26, 1995, the United States District Court for the
District of Delaware denied High River's motion for a temporary
restraining order to postpone the closing of the Affiliate Offer. On
May 26, 1995, Insignia issued a press release announcing the Court's
decision. High River subsequently voluntarily withdrew the High River
Complaint without prejudice.
On May 26, 1995, High River filed a Schedule 14D-1 relating to the
High River Offer and containing an Offer to Purchase and a related
Assignment of Partnership Interest. The Affiliate Offer expired as
scheduled at midnight on May 26, 1995. As filed on May 26, 1995, the
High River Offer was conditioned upon the Affiliate Offer being extended
by at least 10 business days. High River issued a press release, dated
May 26, 1995, announcing that the extension of the Affiliate Offer for
10 business days would be eliminated as a condition to the High River
Offer. Also on May 26, the Chairman and Chief Executive Officer of
Insignia received a letter from Mr. Icahn. In the letter, Mr. Icahn
accused Insignia of disregarding its "fiduciary responsibilities."
On Friday June 2, the High River Offer to Purchase and the related
Assignment of Partnership Interests were mailed to Unit holders. On
Monday, June 5, the Corporate General Partner delivered a letter to High
River which requested that High River cure certain alleged critical
omissions, misstatements, and deficiencies in the High River Offer by
June 7, 1995. On June 7, the Corporate General Partner received a
letter from Mr. Icahn stating that High River does not agree with the
positions taken in the Corporate General Partner's June 5 letter.
On June 8, 1995, the Corporate General Partner commenced an action
against High River and Carl C. Icahn in the United States District Court
for the District of South Carolina. The complaint alleged that the High
River Offer misled Unit holders and violated federal securities laws.
The Partnership sought relief from High River's and Mr. Icahn's actions
in the form of an injunction against the High River Offer, a judgment
declaring that the untrue statements in and omissions from the
11
<PAGE>
High River Offer constitute violations of the federal securities
laws, and an order requiring High River to make appropriate
disclosures to correct all of the false and misleading statements
in and omissions from the High River Offer.
The Partnership and the Corporate General Partner recommended that
the Unit holders reject the High River Offer and not tender their Units
pursuant to the High River Offer. The Partnership and the Corporate
General Partner stated that they may reconsider their recommendation if
High River makes additional disclosures to the Unit holders as the
Corporate General Partner requested. For further information, see the
Partnership's Solicitation/Recommendation Statement on Schedule 14D-9
which was filed with the Securities and Exchange Commission on June 9,
1995.
On June 12, 1995, High River filed an amendment to its Schedule
14D-1 containing a Supplement to its Offer to Purchase. The Supplement
amended the High River Offer to increase the number of Units being
sought to all of the outstanding Units and amended certain disclosures
in the Offer to Purchase.
Persons claiming to own Units filed a purported class action and
derivative suit in the United States District Court for the District of
South Carolina seeking, among other things, an order enjoining the
Affiliate Offer. On Thursday, May 18, 1995, the Court denied
plaintiffs' motion for a temporary restraining order postponing the
closing of the Affiliate Offer, which expired as scheduled on May 26,
1995. Counsel for the parties are engaged in settlement discussions and
may continue such discussions.
The Complaint applies to the Affiliate Offer and to five other
tender offers being made by affiliates of Insignia for units of limited
partnership interests in other limited partnerships in which other
affiliates of Insignia serve as general partners. The Complaint names
as defendants the Affiliated Purchaser and each of the Insignia
affiliates, including the five other tender offerors; the Corporate
General Partner and five other Insignia-affiliated general partners; and
four individuals who are officers and/or directors of Insignia, the
Corporate General Partner and/or the Affiliated Purchaser. The
Complaint contains allegations that, among other things, the defendants
have intentionally mismanaged the Partnership and the five other
Partnerships (collectively the "Partnerships") and acted contrary to the
limited partners' best interests in order to prolong the lives of the
Partnerships and thus continue the revenues derived by Insignia from the
Partnerships while at the same time reducing the demand for the
Partnerships' units in the limited resale market for the units by
artificially depressing the trading prices for the units, in order to
create a favorable environment for the Affiliate Offer and the five
other tender offers. In the Complaint the plaintiffs also allege that
in the Affiliate Offer and the five other tender offers, the Affiliated
Purchaser will acquire effective voting control over the Partnerships at
highly inadequate prices, and that the offers to purchase and related
tender offer documents contain numerous false and misleading statements
and omissions of material facts. The alleged misstatements and
omissions concern, among other things, the advantages to Unit holders of
tendering Units pursuant to the Affiliate Offer; the true value of the
Units; the true financial condition of the Partnerships; the factors
affecting the likelihood that properties owned by the Partnerships will
be sold or liquidated in the near future; the liquidity and value of the
Units; the limited secondary market for Units; and the true nature of
the market for underlying assets.
On Friday, June 16, plaintiffs filed an amended complaint which
contained allegations that, among other things, the defendants engaged
in a plan by which they
12
<PAGE>
misappropriated the Partnerships' assets and fraudulently induced
limited partners to sell units to the defendants at highly
inadequate prices by causing the Partnerships to take actions that
artificially depressed the prices available for units and by
knowingly disseminating false and misleading statements and
omissions of material facts. The plaintiffs alleged that the
defendants breached fiduciary duties and violated federal
securities law by closing the Affiliate Offer and the five other
tender offers made by affiliates of Insignia for units in the
other Partnerships with the knowledge that the limited partners
were not aware of the High River Offer. The plaintiffs further
alleged that the defendants, since the close of the Affiliate
Offer, had caused the Partnerships to enter into several wasteful
transactions that had no business purpose or benefit to the
Partnerships solely in order to entrench themselves in their
positions of control over the Partnerships, with the effect of
impeding and possibly preventing nonaffiliated entities from
making tender offers that offer higher value to unit holders than
defendants paid.
Subsequent to the filing of the lawsuit by the Corporate General
Partner against High River and Carl C. Icahn, the Corporate General
Partner and High River began discussions in an attempt to settle the
lawsuit. On Friday, June 16, 1995, High River issued a press release
announcing that the expiration date of the High River Offer was extended
until 12:00 midnight, New York City time on Wednesday, June 28, 1995,
and that High River and the Corporate General Partner were engaged in
settlement discussions.
On Saturday, June 17, the Affiliated Purchaser and Insignia
entered into an agreement with Carl C. Icahn and High River (the
"Agreement") and the Corporate General Partner, among others, entered
into a letter agreement with High River (together with the Agreement,
the "Agreements"). The Agreements provide generally that Insignia would
not, and will not cause or permit its affiliates to, actively oppose the
High River Offer, but rather would take a neutral stance with respect to
the High River Offer, except in the case of a competing third party bid
made prior to the expiration of the High River Offer or the occurrence
of any event materially adversely affecting High River Offer. The High
River Offer would proceed in accordance with its terms, as amended, and
the Corporate General Partner would cooperate to facilitate the
admission of High River as a substitute limited partner with respect to
any Units High River purchases pursuant to the High River Offer in
accordance with the terms of the Partnership Agreement and applicable
law. The Agreements limit High River's ability to amend or extend the
High River Offer. Apart from purchases made by High River pursuant to
the High River Offer, neither High River nor Insignia nor any of their
respective affiliates would purchase any additional Units pursuant to a
tender offer and can only purchase additional Units from time to time
under certain conditions specified in the Agreements. High River would
vote on certain matters concerning the Partnership as directed by
Insignia. In addition, High River and its affiliates are prohibited
from soliciting proxies with respect to the Partnership or otherwise
making proposals concerning the Partnership directly to other Unit
holders. High River and Insignia have certain buy-sell rights with
respect to the other's Units which may be exercised 18 months after the
effective date of the Agreements and annually thereafter and at earlier
or later dates under other circumstances specified in the Agreements,
including the proposal of certain transactions otherwise protected by
the Agreements. The party selling Units pursuant to the buy-sell
transaction must sell or cause to be sold to the other party all Units
beneficially owned by the first party and its affiliates.
Litigation initiated by the Corporate General Partner concerning
the High River Offer and litigation initiated by High River concerning
the Affiliate Offer was dismissed with prejudice and mutual releases
were exchanged. On June 20, High River
13
<PAGE>
issued a press release announcing that the expiration date of the
High River Offer was extended until 12:00 midnight, New York City
time on Monday, July 3, 1995.
On July 20, 1995, the Partnership mailed a letter to limited
partners of the Partnership who tendered limited partnership units to
the Affiliated Purchaser in the recent tender offer. The letter
notifies the limited partners that the Affiliated Purchaser has offered
to increase the amount paid to such limited partners by an additional
45%.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a) Exhibits: None
b) Reports on Form 8-K filed in the third quarter ended July
31, 1995:
Current report on Form 8-K dated July 20, 1995, as filed
with the Securities and Exchange Commission on July 25,
1995.
14
<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 VI LIMITED
PARTNERSHIP
By: Shelter Realty VI Corporation
Corporate General Partner
By:/s/ William H. Jarrard, Jr.
William H. Jarrard, Jr.
President and Director
By:/s/ Ronald Uretta
Ronald Uretta
Treasurer
(Principal Financial Officer
and Principal Accounting Officer)
Date: September 14, 1995
15
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<PERIOD-END> JUL-31-1995
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