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 January 31, 1997
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)
(in thousands, except unit data)
January 31, 1997
Assets
Cash and cash equivalents:
Unrestricted $ 3,223
Restricted--tenant security deposits 192
Accounts receivable 16
Escrows for taxes 403
Restricted escrows 1,525
Other assets 671
Investment properties:
Land $ 4,950
Buildings and related personal property 46,291
51,241
Less accumulated depreciation (23,287) 27,954
$33,984
Liabilities and Partners' Capital (Deficit)
Liabilities
Accounts payable $ 192
Tenant security deposits 192
Accrued taxes 537
Other liabilities 221
Mortgage notes payable 27,231
Partners' Capital (Deficit)
General partners $ (302)
Limited partners (42,324 units
issued and outstanding) 5,913 5,611
$33,984
See Accompanying Notes to Financial Statements
b) SHELTER PROPERTIES VI LIMITED PARTNERSHIP
STATEMENTS OF OPERATIONS
(Unaudited)
(in thousands, except unit data)
Three Months Ended
January 31,
1997 1996
Revenues:
Rental income $2,386 $2,312
Other income 167 156
Total revenues 2,553 2,468
Expenses:
Operating 695 686
General and administrative 63 54
Maintenance 280 339
Depreciation 487 481
Interest 622 634
Property taxes 221 220
Total expenses 2,368 2,414
Net income $ 185 $ 54
Net income allocated
to general partners (1%) $ 2 $ 1
Net income allocated
to limited partners (99%) 183 53
$ 185 $ 54
Net income per limited
partnership unit $ 4.32 $ 1.26
See Accompanying Notes to Financial Statements
c) SHELTER PROPERTIES VI LIMITED PARTNERSHIP
STATEMENT OF CHANGES IN PARTNERS' CAPITAL (DEFICIT)
(Unaudited)
(in thousands, except unit data)
<TABLE>
<CAPTION>
Limited
Partnership General Limited
Units Partners Partners Total
<S> <C> <C> <C> <C>
Original capital contributions 42,324 $ 2 $42,324 $42,326
Partners' capital (deficit)
at October 31, 1996 42,324 $ (304) $ 5,730 $ 5,426
Net income for the three months
ended January 31, 1997 2 183 185
Partners' capital (deficit)
at January 31, 1997 42,324 $ (302) $ 5,913 $ 5,611
<FN>
See Accompanying Notes to Financial Statements
</TABLE>
d) SHELTER PROPERTIES VI LIMITED PARTNERSHIP
STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
<TABLE>
<CAPTION>
Three Months Ended
January 31,
1997 1996
<S> <C> <C>
Cash flows from operating activities:
Net income $ 185 $ 54
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation 487 481
Amortization of discounts and loan costs 76 73
Loss on disposal of property -- 4
Casualty loss -- 1
Change in accounts:
Restricted cash 7 1
Accounts receivable 4 (1)
Escrows for taxes 35 33
Other assets 25 31
Accounts payable (61) (79)
Tenant security deposit liabilities (5) --
Accrued taxes (73) (77)
Other liabilities (132) (43)
Net cash provided by operating activities 548 478
Cash flows from investing activities:
Property improvements and replacements (222) (282)
Deposits to restricted escrows (16) (13)
Receipts from restricted escrows -- 14
Net insurance proceeds from property damages -- 36
Net cash used in investing activities (238) (245)
Cash flows from financing activities:
Payments on mortgage notes payable (193) (179)
Partners' distributions -- (1,000)
Net cash used in financing activities (193) (1,179)
Net increase (decrease) in cash 117 (946)
Cash and cash equivalents at beginning of period 3,106 3,710
Cash and cash equivalents at end of period $3,223 $ 2,764
Supplemental disclosure of cash flow information:
Cash paid for interest $ 546 $ 560
<FN>
See Accompanying Notes to Financial Statements
</TABLE>
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" 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 VI Corporation (the "Corporate General Partner"
or "General Partner"), all adjustments (consisting of normal recurring accruals)
considered necessary for a fair presentation have been included. Operating
results for the three month period ended January 31, 1997, are not necessarily
indicative of the results that may be expected for the fiscal year ending
October 31, 1997. 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, 1996.
Cash and Cash Equivalents:
Unrestricted Cash: Unrestricted cash includes cash on hand and in banks, demand
deposits, money market funds, and certificates of deposits with original
maturities of less than ninety 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 the
apartment, provided the tenant has not damaged the unit and is current on its
rental payments.
Certain reclassifications have been made to the 1996 information to conform to
the 1997 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.
NOTE B - RECONCILIATION OF CASH FLOWS - CONTINUED
<TABLE>
<CAPTION>
Three Months Ended
January 31,
(in thousands)
1997 1996
<S> <C> <C>
Net cash provided by operating activities $ 548 $ 478
Payments on mortgage notes payable (193) (179)
Property improvements and replacements (222) (282)
Change in restricted escrows, net (16) 1
Changes in reserves for net operating
liabilities 200 135
Additional reserves (315) (155)
Net cash provided by (used in) operations $ 2 $ (2)
</TABLE>
The General Partner believed it to be in the best interest of the Partnership to
reserve net cash from operations of approximately $315,000 and $155,000 at
January 31, 1997 and 1996, respectively, to fund continuing capital improvements
at the Partnership's six properties.
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 the reimbursement of certain expenses incurred by
affiliates on behalf of the Partnership. Property management fees of
approximately $127,000 and $123,000 were paid to affiliates of the General
Partner for the three months ended January 31, 1997 and 1996, respectively.
These fees are included in operating expenses on the accompanying statements of
operations.
The Partnership Agreement also provides for reimbursement to the General Partner
and its affiliates for costs incurred in connection with the administration of
partnership activities. Reimbursements for services of affiliates of
approximately $45,000 and $32,000 were paid to the General Partner and
affiliates for the three months ended January 31, 1997 and 1996, respectively.
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 - 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 fire resulted in a loss of
approximately $1,000. The loss resulted from gross proceeds received of
approximately $43,000 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 three
months ended January 31, 1997 and 1996:
Average Occupancy
Property 1997 1996
Rocky Creek
Augusta, Georgia 87% 77%
Carriage House
Gastonia, North Carolina 92% 97%
Nottingham Square
Des Moines, Iowa 89% 95%
Foxfire/Barcelona
Durham, North Carolina 97% 98%
River Reach
Jacksonville, Florida 99% 98%
Village Gardens
Fort Collins, Colorado 96% 93%
The Corporate General Partner attributes the increase in occupancy at Rocky
Creek to the conversion of some of the two bedroom units to one bedroom units
for which there is greater demand. The decrease in occupancy at Carriage House
is the result of increased competition in the Gastonia market due to additional
units being built. The decrease in occupancy at Nottingham Square was due
primarily to additional units being built in the Des Moines market, as well as
tenants vacating to purchase homes.
The Partnership realized net income of approximately $185,000 and $54,000 for
the three months ended January 31, 1997, and 1996, respectively. The increased
net income is largely attributable to rental rate increases at all of the
Partnership's properties. Other income increased primarily due to increased
interest income as a result of the Partnership having higher cash balances
available for investment for the three months ended January 31, 1997, compared
to the three months ended January 31, 1996. Also contributing to the increase
in net income was a decrease in maintenance expense. The decrease is primarily
the result of gutter replacements and exterior painting at Foxfire/Barcelona
during the three months ended January 31, 1996.
Included in maintenance expense is approximately $25,000 of major repairs and
maintenance comprised primarily of exterior building improvements for the three
months ended January 31, 1997. For the three months ended January 31, 1996,
approximately $66,000 of major repairs and maintenance comprised primarily of
gutter replacements and exterior painting are included in maintenance expense.
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 fire resulted in a loss of
approximately $1,000, arising from gross proceeds received of approximately
$43,000 which were less than the basis of the property plus expenses to replace
the interiors damaged.
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 January 31, 1997, the Partnership had unrestricted cash of approximately
$3,223,000 compared to approximately $2,764,000 at January 31, 1996. Net cash
provided by operations increased primarily as a result of increased rental and
other income and decreased maintenance expenses as discussed above. Net cash
used in financing activities decreased due to approximately $1,000,000 of
accrued distributions to partners being paid in the first quarter of 1996. No
distributions were made during the three months ended January 31, 1997.
The Partnership has no material capital programs scheduled to be performed in
fiscal year 1997, 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 properties 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 approximately $27,231,000, net of discount, is being
amortized over 257 months with balloon payments of approximately $23,008,000 due
on November 15, 2002, at which time the properties are expected to either be
refinanced or sold. No cash distributions were paid in the first quarter of
1997. Distributions of the proceeds from the sale of Marble Hills of $1,000,000
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.
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 January 31, 1997:
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: March 14, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from Shelter
Properties VI 1997 First 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> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> OCT-31-1997
<PERIOD-END> JAN-31-1997
<CASH> 3,223
<SECURITIES> 0
<RECEIVABLES> 16
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0<F1>
<PP&E> 51,241
<DEPRECIATION> 23,287
<TOTAL-ASSETS> 33,984
<CURRENT-LIABILITIES> 0<F1>
<BONDS> 27,231
0
0
<COMMON> 0
<OTHER-SE> 5,611
<TOTAL-LIABILITY-AND-EQUITY> 33,984
<SALES> 0
<TOTAL-REVENUES> 2,553
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 2,368
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 622
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 185
<EPS-PRIMARY> 4.32<F2>
<EPS-DILUTED> 0
<FN>
<F1>Registrant has an unclassified balance sheet.
<F2>Multiplier is 1.
</FN>
</TABLE>
