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 April 30, 1996
or
[ ] 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 0-13261
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 (864) 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 .
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
a) SHELTER PROPERTIES VI LIMITED PARTNERSHIP
BALANCE SHEET
(Unaudited)
April 30, 1996
Assets
Cash:
Unrestricted $ 2,867,916
Restricted--tenant security deposits 196,480
Accounts receivable 23,777
Escrow for taxes 381,981
Restricted escrows 1,503,159
Other assets 713,236
Investment properties:
Land $ 4,949,503
Buildings and related personal property 45,742,895
50,692,398
Less accumulated depreciation (21,950,751) 28,741,647
$34,428,196
Liabilities and Partners' Capital (Deficit)
Liabilities
Accounts payable $ 129,481
Tenant security deposits 189,052
Accrued taxes 507,835
Other liabilities 358,094
Mortgage notes payable 27,644,624
Partners' Capital (Deficit)
General partners $ (302,122)
Limited partners (42,324 units
issued and outstanding) 5,901,232 5,599,110
$34,428,196
See Accompanying Notes to Financial Statements
b) SHELTER PROPERTIES VI LIMITED PARTNERSHIP
STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
April 30, April 30,
1996 1995 1996 1995
<S> <C> <C> <C> <C>
Revenues:
Rental income $2,335,274 $2,586,562 $4,647,550 $5,104,418
Other income 172,165 187,487 327,790 328,570
Total revenues 2,507,439 2,774,049 4,975,340 5,432,988
Expenses:
Operating 712,773 828,629 1,393,776 1,586,323
General and administrative 115,560 83,071 169,953 140,450
Maintenance 283,376 308,514 626,381 677,851
Depreciation 489,674 546,385 970,200 1,080,022
Interest 629,869 714,541 1,263,675 1,431,984
Property taxes 218,034 235,486 438,293 466,671
Total expenses 2,449,286 2,716,626 4,862,278 5,383,301
Casualty loss -- -- (1,047) --
Net income $ 58,153 $ 57,423 $ 112,015 $ 49,687
Net income allocated
to general partners (1%) $ 582 $ 574 $ 1,120 $ 497
Net income allocated
to limited partners (99%) 57,571 56,849 110,895 49,190
$ 58,153 $ 57,423 $ 112,015 $ 49,687
Net income per limited
partnership unit $ 1.36 $ 1.34 $ 2.62 $ 1.16
<FN>
See Accompanying Notes to Financial Statements
</TABLE>
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 (deficit)
at October 31, 1995 42,324 $(303,242) $ 5,790,337 $ 5,487,095
Net income for the six months
ended April 30, 1996 -- 1,120 110,895 112,015
Partners' capital (deficit)
at April 30, 1996 42,324 $(302,122) $ 5,901,232 $ 5,599,110
<FN>
See Accompanying Notes to Financial Statements
</TABLE>
d) SHELTER PROPERTIES VI LIMITED PARTNERSHIP
STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended April 30,
1996 1995
<S> <C> <C>
Cash flows from operating activities:
Net income $ 112,015 $ 49,687
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation 970,200 1,080,022
Amortization of discounts and loan costs 147,496 159,206
Casualty loss 1,046 --
Change in accounts:
Restricted cash (1,250) (9,172)
Accounts receivable (7,209) (41,895)
Escrows for taxes 18,158 18,985
Other assets (55,558) 28,106
Accounts payable (157,849) (173,434)
Tenant security deposit liabilities 3,961 4,690
Accrued taxes (58,574) (56,571)
Other liabilities (1,462) (189)
Net cash provided by operating activities 970,974 1,059,435
Cash flows from investing activities:
Property improvements and replacements (523,908) (465,307)
Deposits to restricted escrows (30,782) (130,563)
Receipts from restricted escrows 67,647 17,235
Net insurance proceeds from property damages 35,586 --
Net cash used in investing activities (451,457) (578,635)
Cash flows from financing activities:
Payments on mortgage notes payable (361,159) (372,620)
Partners' distributions (1,000,000) --
Net cash used in financing activities (1,361,159) (372,620)
Net (decrease) increase in cash (841,642) 108,180
Cash at beginning of period 3,709,558 1,035,305
Cash at end of period $2,867,916 $1,143,485
Supplemental disclosure of cash flow information:
Cash paid for interest $1,117,271 $1,272,778
<FN>
See Accompanying Notes to Financial Statements
</TABLE>
e) SHELTER PROPERTIES VI LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
Note A - Basis of Presentation
The accompanying unaudited financial statements of Shelter Properties VI Limited
Partnership (the "Partnership") 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 six month period ended April 30, 1996, are
not necessarily indicative of the results that may be expected for the fiscal
year ending October 31, 1996. 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, 1995.
Cash and Cash Equivalents:
Unrestricted - Unrestricted cash includes cash on hand and in banks, money
market funds and Certificates of Deposit with original maturities less than 90
days. At certain times, the amount of cash deposited at a bank may exceed the
limit on insured deposits.
Restricted cash - tenant security deposits - The Partnership requires security
deposits from lessees for the duration of the lease and such deposits are
considered restricted cash. Deposits are refunded when the tenant vacates,
provided the tenant has not damaged its space and is current on its rental
payments.
Certain reclassifications have been made to the 1995 information to conform to
the 1996 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.
Six Months Ended
April 30,
1996 1995
Net cash provided by operating activities $ 970,974 $1,059,435
Payments on mortgage notes payable (361,159) (372,620)
Property improvements and replacements (523,908) (465,307)
Change in restricted escrows, net 36,865 (113,328)
Changes in reserves for net operating
liabilities 259,783 229,480
Additional reserves (385,000) (350,000)
Net cash used in operations $ (2,445) $ (12,340)
The Corporate General Partner reserved an additional $385,000 on April 30, 1996,
to fund capital improvements and repairs at the properties. On April 30, 1995,
the General Partner reserved $350,000 due to the funding requirements of the
Reserve Escrow, as defined in the mortgage notes, having not been met.
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. These management fees are included in operating
expenses on the statements of operations. The partnership agreement provides
for payments to affiliates for services and the reimbursement of certain
expenses incurred by affiliates on behalf of the Partnership. These
reimbursements are included in general and administrative expenses on the
statements of operations. Balances and other transactions with Insignia
Financial Group, Inc. ("Insignia") and affiliates in 1996 and 1995 are as
follows:
For the Six Months Ended
April 30,
1996 1995
Property management fees $246,495 $266,949
Reimbursement for services of affiliates 95,251 87,690
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.
Note D - Contingencies
The Corporate General Partner owns 100 Limited Partnership Units ("Units"). On
or about April 26 and 27, 1995, six entities ("Affiliated Purchaser") affiliated
with the Partnership commenced tender offers for limited partner interests in
six limited partnerships, including the Partnership (collectively, the "Shelter
Properties Partnerships"). On May 27, 1995, the Affiliated Purchaser acquired
7,985 units of the Partnership pursuant to the tender offer. On or about May
12, 1995, in the United States District Court for the District of South
Carolina, certain limited partners of the Shelter Properties Partnerships
commenced a lawsuit, on behalf of themselves, on behalf of a putative class of
plaintiffs, and derivatively on behalf of the partnerships, challenging the
actions taken by defendants (including Insignia, the acquiring entities and
certain officers of Insignia) in the management of the Shelter Properties
Partnerships and in connection with the tender offers and certain other matters.
The plaintiffs alleged that, among other things: (i) the defendants
intentionally mismanaged the partnerships and acted contrary to the limited
partners' best interests by prolonging the existence of the partnerships in
order to perpetuate the revenues derived by Insignia (an affiliate of the
Corporate General Partner) and its affiliates from the partnerships, (ii) the
defendants' actions reduced the demand for the partnerships' limited partner
interests in the limited resale market by artificially depressing the trading
prices for limited partners interests in order to create a favorable environment
for the tender offers; (iii) through the tender offers, the acquiring entities
sought to acquire effective voting control over the partnerships while paying
highly inadequate prices; and (iv) the documents disseminated to the class in
connection with the tender offers contained false and misleading statements and
omissions of material facts concerning such issues as the advantages to limited
partners of tendering pursuant to the tender offers; the true value of the
interest; 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 true value of the limited
partner interests; the reasons for the limited secondary market for limited
partner interests; and the true nature of the market for the underlying real
estate assets owned by the partnerships, all in violation of the federal
securities laws.
On September 27, 1995, the parties entered into a stipulation to settle the
matter. The principal terms of the stipulation require supplemental payments to
tendering limited partners aggregating approximately $6 million to be paid by
the Affiliated Purchaser of which approximately $722,000 is Shelter Properties
VI's portion; waiver by the Shelter Properties Partnership's general partners of
any right to certain proceeds from a sale or refinancing of the partnerships'
properties; some restrictions on Insignia's ability to vote the limited partner
interests it acquired; payment of $1.25 million (which amount is divided among
the various partnerships and acquiring entities) for plaintiffs' attorney fees
and expenses in the litigation; and general releases of all the defendants. On
April 23, 1996, the Court gave preliminary approval of the establishment of the
class for the purposes of the settlement and of the settlement terms, and
ordered that notice of the settlement be sent to the class. Notice has been
sent. A final hearing has been scheduled for June 24, 1996. If a certain
number of class members opt out, the settlement may be cancelled. Class members
also have the right to object to the settlement which could lead to alterations
in the terms of settlement or even cancellation of the settlement. No assurance
can be given that this matter will be settled on the terms set forth above or
otherwise.
Note E - Sale of Marble Hills Apartments
On September 29, 1995, the Partnership sold Marble Hills Apartments to an
unaffiliated party. The buyer assumed the related mortgage notes payable. The
total outstanding balance on the mortgage notes payable was $3,344,066. The
carrying amount of the property was $4,459,975. The Partnership received net
proceeds of $2,412,138 after payment of closing costs. This disposition
resulted in a gain of $1,296,229 recognized during the fourth quarter of 1995.
As of April 30, 1995, total assets of Marble Hills were $4,756,252, total
liabilities were $7,981,519 and partners' deficit was $3,225,267. Revenues and
expenses for the six months ended April 30, 1995, were $676,639 and $645,737,
respectively, resulting in net income of $30,902.
Note F - Casualty Loss
During the first quarter of 1996, the Partnership recorded a casualty loss
resulting from a fire which destroyed three units at Nottingham Square.
Although, the damage was covered by insurance, the damage resulted in a loss of
$1,047, arising from gross proceeds received of $43,141 which were less than the
basis of the property plus expenses to replace the interiors damaged.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
The Partnership's investment properties consist of six apartment complexes. The
following table sets forth the average occupancy of the properties for the six
months ended April 30, 1996 and 1995:
Average Occupancy
Property 1996 1995
Rocky Creek
Augusta, Georgia 80% 90%
Carriage House
Gastonia, North Carolina 97% 98%
Nottingham Square
Des Moines, Iowa 95% 93%
Foxfire/Barcelona
Durham, North Carolina 98% 98%
River Reach
Jacksonville, Florida 98% 99%
Village Gardens
Fort Collins, Colorado 93% 95%
The Corporate General Partner attributes the decrease in occupancy at Rocky
Creek to an increase in the number of tenants purchasing homes. Also
contributing to the decrease was the downsizing of the employment base with lay-
offs in the region. Occupancy also decreased at Village Gardens due to
competition from several new apartment complexes in the area. Occupancy
increased at Nottingham Square as a result of capital improvements completed in
1995 making the property more attractive while maintaining lower average rental
rates as compared to the competition in the region.
The Partnership's net income for the six months ended April 30, 1996, was
$112,015 with the second quarter having income of $58,153. The Partnership
reported net income of $49,687 and $57,423 for the corresponding periods of
1995. The increase in net income for the three and six months ended April 30,
1996, is primarily due to the reduction of operating, depreciation, property
tax, and interest expenses as a result of the sale of Marble Hills in the fourth
quarter of 1995. Offsetting the increase in net income is an increase in
general and administrative expenses due to an increase in General Partnership
cost reimbursements and an increase in insurance expense as a result of
additional coverage.
Repairs and maintenance expense increased for the six months ended April 30,
1996, at Foxfire due to gutter repairs and exterior painting and at Village
Garden due to increased exterior and interior improvements needed to maintain
market share. Overall repairs and maintenance decreased in the three months
ended April 30, 1996, due to the sale of Marble Hills. Other income increased
for the remaining six properties due to an increase in interest income resulting
from increased cash reserves invested at higher interest rates compared to 1995.
During the first quarter of 1996, the Partnership recorded a casualty loss
resulting from a fire which destroyed three units at Nottingham Square.
Although, the damage was covered by insurance, the damage resulted in a loss of
$1,047, arising from gross proceeds received of $43,141 which were less than the
basis of the property plus expenses to replace the interiors damaged.
On September 29, 1995, the Partnership sold Marble Hills Apartments to an
unaffiliated third party. The buyer assumed the related mortgage notes payable.
The total outstanding balance on the mortgage notes payable was $3,344,066. The
carrying amount of the property was $4,459,975. The Partnership received net
proceeds of $2,412,138 after payment of closing costs. This disposition
resulted in a gain of $1,296,229 recognized during the fourth quarter of 1995.
As of April 30, 1995, total assets of Marble Hills were $4,756,252, total
liabilities were $7,981,519 and partners' deficit was $3,225,267. Revenues and
expenses for the six months ended April 30, 1995, were $676,639 and $645,737,
respectively, resulting in net income of $30,902.
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 April 30, 1996, the Partnership reported unrestricted cash of $2,867,916
versus $1,143,485 for the same period of 1995. Net cash provided by operations
decreased primarily due to an increase in other assets due to a Federal tax
deposit required under Section 7519 of the Internal Revenue Code for future tax
liabilities which may be incurred from the income of the Partnership's
investment properties. Net cash used in investing activities decreased
primarily due to insurance proceeds received as a result of the fire discussed
above and an increase in net cash provided by restricted escrows. Offsetting
the decrease in net cash used in investing activities was an increase in
property improvements and replacements. Net cash used in financing activities
increased due to a distribution made to partners during the six months ended
April 30, 1996.
The Partnership has no material capital programs scheduled to be performed in
1996, although certain routine capital expenditures and maintenance expenses
have been budgeted. These capital expenditures and maintenance expenses will be
incurred only if cash is available from operations or is received from the
capital reserve account.
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 $27,644,624, net of discount, is amortized over 257 months with
balloon payments of $23,007,741 due on November 15, 2002, at which time the
properties will either be refinanced or sold. No cash distributions were paid
in 1995. However, at October 31, 1995, distributions of proceeds from the sale
of Marble Hills of $1,000,000 had been declared which were paid in the first
quarter of 1996. Future cash distributions will depend on the levels of net
cash generated from operations, refinancing, property sales and 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.
PART II - OTHER INFORMATION
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 April 30, 1996:
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 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
Principal Financial Officer
and Principal Accounting Officer
Date: June 3, 1996
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from Shelter
Properties VI Limited Partnership 1996 Second Quarter 10-QSB and is qualified in
its entirety by reference to such 10-QSB filing.
</LEGEND>
<CIK> 0000730013
<NAME> SHELTER PROPERTIES VI LIMITED PARTNERSHIP
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> OCT-31-1996
<PERIOD-END> APR-30-1996
<CASH> 2,876,916
<SECURITIES> 0
<RECEIVABLES> 23,777
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0<F1>
<PP&E> 50,692,398
<DEPRECIATION> 21,950,751
<TOTAL-ASSETS> 34,428,196
<CURRENT-LIABILITIES> 0<F1>
<BONDS> 27,644,624
0
0
<COMMON> 0
<OTHER-SE> 5,599,110
<TOTAL-LIABILITY-AND-EQUITY> 34,428,196
<SALES> 0
<TOTAL-REVENUES> 4,975,340
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 4,862,278
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,263,675
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 112,015
<EPS-PRIMARY> 2.62
<EPS-DILUTED> 0
<FN>
<F1>The Registrant has an unclassified balance sheet.
</FN>
</TABLE>
