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 April 30, 1998
[ ] TRANSITION REPORT PURSUANT TO 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)
(864) 239-1000
(Issuer's telephone number)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15 (d) of the 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 VI LIMITED PARTNERSHIP
BALANCE SHEET
(Unaudited)
April 30, 1998
(in thousands, except unit data)
Assets
Cash and cash equivalents $ 2,904
Receivables and deposits 707
Restricted escrows 1,594
Other assets 523
Investment properties:
Land $ 4,950
Buildings and related personal property 47,722
52,672
Less accumulated depreciation (25,739) 26,933
$ 32,661
Liabilities and Partners' Capital (Deficit)
Liabilities
Accounts payable $ 245
Tenant security deposits payable 190
Accrued property taxes 561
Other liabilities 240
Mortgage notes payable 26,477
Partners' Capital (Deficit)
General partners' $ (309)
Limited partners' (42,324 units
issued and outstanding) 5,257 4,948
$ 32,661
See Accompanying Notes to Financial Statements
b)
SHELTER PROPERTIES VI LIMITED PARTNERSHIP
STATEMENTS OF OPERATIONS
(Unaudited)
(in thousands, except unit data)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
April 30 April 30
1998 1997 1998 1997
<S> <C> <C> <C> <C>
Revenues:
Rental income $ 2,302 $ 2,358 $ 4,651 $ 4,729
Other income 179 166 343 333
Net casualty gain -- 268 -- 268
Total revenues 2,481 2,792 4,994 5,330
Expenses:
Operating 1,036 1,042 2,039 2,002
General and administrative 92 79 173 142
Depreciation 495 493 988 980
Interest 604 619 1,212 1,241
Property taxes 246 236 472 457
Total expenses 2,473 2,469 4,884 4,822
Net income $ 8 $ 323 $ 110 $ 508
Net income allocated
to general partners (1%) $ -- $ 3 $ 1 $ 5
Net income allocated
to limited partners (99%) 8 320 109 503
$ 8 $ 323 $ 110 $ 508
Net income per limited
partnership unit $ .19 $ 7.56 $ 2.58 $ 11.88
<FN>
See Accompanying Notes to Financial Statements
</FN>
</TABLE>
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' (deficit) capital
at October 31, 1997 42,324 $ (310) $ 5,148 $ 4,838
Net income for the six months
ended April 30, 1998 -- 1 109 110
Partners' (deficit) capital
at April 30, 1998 42,324 $ (309) $ 5,257 $ 4,948
<FN>
See Accompanying Notes to Financial Statements
</FN>
</TABLE>
d)
SHELTER PROPERTIES VI LIMITED PARTNERSHIP
STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
Six Months Ended
April 30,
1998 1997
Cash flows from operating activities:
Net income $ 110 $ 508
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation 988 980
Amortization of discounts and loan costs 154 152
Casualty gain -- (268)
Change in accounts:
Receivables and deposits 20 51
Other assets 89 24
Accounts payable (271) 14
Tenant security deposits payable (3) 2
Accrued property taxes (55) (62)
Other liabilities 11 (213)
Net cash provided by operating activities 1,043 1,188
Cash flows from investing activities:
Property improvements and replacements (463) (426)
Net deposits to restricted escrows (36) (17)
Insurance proceeds from casualty items 148 36
Net cash used in investing activities (351) (407)
Cash flows from financing activities:
Payments on mortgage notes payable (420) (390)
Net cash used in financing activities (420) (390)
Net increase in cash and cash equivalents 272 391
Cash and cash equivalents at beginning of period 2,632 3,104
Cash and cash equivalents at end of period $ 2,904 $ 3,495
Supplemental disclosure of cash flow information:
Cash paid for interest $ 1,058 $ 1,089
At April 30, 1997, receivables and deposits and accounts payable were adjusted
by approximately $308,000 and $132,000, respectively, for non-cash amounts in
connection with the recording of the casualty items.
See Accompanying Notes to Financial Statements
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 Shelter Realty VI 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 April 30, 1998, are not necessarily indicative of the
results that may be expected for the fiscal year ending October 31, 1998. For
further information, refer to the financial statements and footnotes thereto
included in the Partnership's annual report on Form 10-KSB for the fiscal year
ended October 31, 1997.
Certain reclassifications have been made to the 1997 information to conform to
the 1998 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,
(in thousands)
1998 1997
Net cash provided by operating activities $ 1,043 $ 1,188
Payments on mortgage notes payable (420) (390)
Property improvements and replacements (463) (426)
Change in restricted escrows, net (36) (17)
Changes in reserves for net operating
liabilities 209 184
Additional reserves (333) (540)
Net cash used in operations $ -- $ (1)
The Corporate General Partner believed it to be in the best interest of the
Partnership to reserve net cash from operations of approximately $333,000 and
$540,000 at April 30, 1998 and 1997, respectively, to fund continuing capital
improvements at the Partnership's six investment 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 Corporate General Partner is wholly-owned by
Insignia Properties Trust ("IPT"), an affiliate of Insignia Financial Group,
Inc. ("Insignia"). The Partnership Agreement provides for payments to
affiliates for services and the reimbursement of certain expenses incurred by
affiliates on behalf of the Partnership. The following expenses were paid or
accrued to affiliates of the Corporate General Partner during the six months
ended April 30, 1998 and 1997 (in thousands):
1998 1997
Property management fees
(included in operating expenses) $ 251 $ 251
Reimbursements for services of affiliates
(included in investment properties, operating,
and general and administrative expenses) 126 101
Included in reimbursements for services of affiliates for the six month periods
ended April 30, 1998 and 1997, is approximately $19,000 and $7,000,
respectively, of reimbursements for construction oversight costs.
For the period of November 1, 1996 to August 31, 1997, the Partnership insured
its properties under a master policy through an agency affiliated with the
Corporate General Partner with an 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 master policy. The
agent assumed the financial obligations to the affiliate of the Corporate
General Partner which received payments on these obligations from the agent.
The amount of the Partnership's insurance premiums that accrued to the benefit
of the affiliate of the Corporate General Partner by virtue of the agent's
obligations was not significant.
On March 17, 1998, Insignia entered into an agreement to merge its national
residential property management operations, and its controlling interest in IPT,
with Apartment Investment and Management Company ("AIMCO"), a publicly-traded
real estate investment trust. The closing, which is anticipated to happen in
the third quarter of 1998, is subject to customary conditions, including
government approvals and the approval of Insignia's shareholders. If the
closing occurs, AIMCO will then control the Managing General Partner of the
Partnership.
NOTE D - CASUALTY LOSS
During the six months ended April 30, 1998, the Partnership received
approximately $148,000 in insurance proceeds, which were accrued at October 31,
1997. Approximately $35,000 of the proceeds was received in the first quarter of
1998, relating to tornado damage at River Reach Apartments in May 1997. The
tornado caused uprooted trees, minor damage to the parking lot, and damage to
roofs of two units. A casualty loss of approximately $19,000 resulted and was
recorded during the year ended October 31, 1997. Approximately $113,000 of the
insurance proceeds was received in the second quarter of 1998, relating to fire
damage at Foxfire/Barcelona in April 1997. This fire destroyed an entire
building consisting of eight units. A casualty gain of approximately $53,000
relating to the fire was recorded during the quarter ended April 30, 1997,
resulting from the expected insurance proceeds exceeding the basis of the units
destroyed plus the total estimated costs to replace the assets. An additional
amount of approximately $77,000 in insurance proceeds is expected to be received
subsequent to quarter end.
The following additional casualty gains and losses were recorded during the
second quarter of 1997. A casualty gain of approximately $232,000 resulted from
the insurance proceeds from hail and wind storm damage at Nottingham Square that
occurred in the second quarter of 1996. Approximately $27,000 of these proceeds
was received during the second quarter of 1997 and the remaining $205,000 was
received subsequent to quarter end. In November 1996, a fire occurred at
Carriage House which damaged one unit and caused smoke damage to two additional
units and the common area. The costs to repair the units exceeded the insurance
proceeds received and thus resulted in a casualty loss of approximately $7,000.
In March 1997, a fire occurred at Village Gardens which destroyed one unit and
caused smoke and water damage to additional units. The costs to repair the
units exceeded the insurance proceeds received and thus resulted in a casualty
loss of approximately $10,000. The combination of these casualty events resulted
in a casualty gain of approximately $268,000 for the six months ended April 30,
1997.
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, 1998 and 1997:
Average
Occupancy
Property 1998 1997
Rocky Creek Apartments
Augusta, Georgia 89% 87%
Carriage House Apartments
Gastonia, North Carolina (1) 82% 91%
Nottingham Square Apartments
Des Moines, Iowa (2) 85% 90%
Foxfire/Barcelona Apartments
Durham, North Carolina (3) 91% 96%
River Reach Apartments
Jacksonville, Florida 97% 98%
Village Gardens Apartments
Fort Collins, Colorado 96% 95%
(1) The decrease in average occupancy at Carriage House Apartments is
attributable to an increase in home purchases and transfers to stronger job
markets in areas outside the Gastonia market. At April 30, 1998, occupancy
had increased to 92% at the property.
(2) Occupancy decreased at Nottingham Square Apartments due to competition from
new construction in the Des Moines market.
(3) The decrease in occupancy at Foxfire/Barcelona Apartments is primarily the
result of competition due to new construction in the Durham market and
rental rate increases. However, management anticipates the use of rental
concessions will help increase occupancy.
The Partnership realized net income of approximately $110,000 for the six months
ended April 30, 1998, versus approximately $508,000 for the corresponding period
in 1997. During the three months ended April 30, 1998 and 1997, the Partnership
realized net income of approximately $8,000 and $323,000 respectively. The
decrease in net income for the three and six month periods ended April 30, 1998,
is primarily attributable to a decrease in total revenues resulting from the
recognition of a $268,000 casualty gain in the second quarter of 1997. A
decrease in rental income and an increase in operating and general and
administrative expenses also contributed to the decrease in net income for the
six months ended April 30, 1998. The decrease in rental income is due primarily
to decreased occupancy as discussed above. Partially, offsetting the impact of
decreased occupancy is an increase in rental rates at Foxfire/Barcelona, River
Reach, and Village Gardens. General and administrative expenses increased due
to increased expense reimbursements during the six month period ended April 30,
1998. Operating expenses increased primarily due to an increase in property
expenses at River Reach Apartments, resulting from drainage repairs at the
property. Included in operating expense is approximately $52,000 of major
repairs and maintenance comprised primarily of landscaping, gutter repairs, and
exterior building improvements for the six months ended April 30, 1998. For the
six months ended April 30, 1997, approximately $98,000 comprised primarily of
exterior building improvements and landscaping are included in operating
expense. While operating expenses increased for the six month period ended April
30, 1998, they decreased slightly for the three month period ended April 30,
1998. All other revenues and expenses for the three months ended April 30,
1998, were consistent with the results during the six month period ended April
30, 1998.
Major capital improvement projects budgeted for the Partnership's investment
properties during 1998 include replacement of all the vinyl siding at Nottingham
Square Apartments. This is anticipated to be a three year project with estimated
costs of approximately $300,000 to be incurred during 1998. Additionally,
approximately $200,000 is budgeted for parking lot repairs during 1998 at
Nottingham Square and Foxfire/Barcelona Apartments.
The following casualty gains and losses were recorded during the second quarter
of 1997. At Foxfire/Barcelona in April 1997, a fire destroyed an entire building
consisting of eight units. A casualty gain of approximately $53,000 relating to
the fire was recorded during the quarter ended April 30, 1997, resulting from
the expected insurance proceeds exceeding the basis of the units destroyed plus
the total estimated costs to replace the assets. A casualty gain of
approximately $232,000 resulted from the insurance proceeds from hail and wind
storm damage at Nottingham Square that occurred in the second quarter of 1996.
Approximately $27,000 of these proceeds was received during the second quarter
of 1997 and the remaining $205,000 was received subsequent to quarter end. In
November 1996, a fire occurred at Carriage House which damaged one unit and
caused smoke damage to two additional units and the common area. The costs to
repair the units exceeded the insurance proceeds received and thus resulted in a
casualty loss of approximately $7,000. In March 1997, a fire occurred at
Village Gardens which destroyed one unit and caused smoke and water damage to
additional units. The costs to repair the units exceeded the insurance proceeds
received and thus resulted in a casualty loss of approximately $10,000. The
combination of these casualty events resulted in a casualty gain of
approximately $268,000 for the six months ended April 30, 1997.
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, 1998, the Partnership held cash and cash equivalents of
approximately $2,904,000 compared to approximately $3,495,000 at April 30, 1997.
For the six months ended April 30, 1998, net cash increased approximately
$272,000 compared to a net increase of approximately $391,000 for the six months
ended April 30, 1997. Net cash provided by operating activities decreased
primarily due to a decrease in rental income as discussed above and an increase
in cash used for accounts payable due to the timing of payments to vendors. The
decrease in net cash provided by operating activities was partially offset by a
decrease in cash used for other liabilities. Net cash used in investing
activities decreased primarily as a result of insurance proceeds received in
1998 for damages to several of the Partnership's properties in 1997. Net cash
used in financing activities increased due to an increase in principal payments
on mortgage notes.
The sufficiency of existing liquid assets to meet future liquidity and capital
expenditure requirements is directly related to the level of capital
expenditures required at the investment properties to adequately maintain the
physical assets and other operating needs of the Partnership. Such assets are
currently thought to be sufficient for any near-term needs of the Partnership.
The mortgage indebtedness of approximately $26,477,000, net of discounts, 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 during the six
months ended April 30, 1998 and 1997. Future cash distributions will depend on
the levels of net cash generated from operations, refinancings, property sales
and the availability of cash reserves. The Corporate General Partner is
currently planning to make a distribution during the fourth quarter 1998.
Year 2000
The Partnership is dependent upon the Corporate General Partner and Insignia for
management and administrative services. Insignia has completed an assessment
and will have to modify or replace portions of its software so that its computer
systems will function properly with respect to dates in the year 2000 and
thereafter (the "Year 2000 Issue"). The project is estimated to be completed
not later than December 31, 1998, which is prior to any anticipated impact on
its operating systems. The Corporate General Partner believes that with
modifications to existing software and conversions to new software, the Year
2000 Issue will not pose significant operational problems for its computer
systems. However, if such modifications and conversions are not made, or are not
completed timely, the Year 2000 Issue could have a material impact on the
operations of the Partnership.
Other
Certain items discussed in this quarterly report may constitute forward-looking
statements within the meaning of the Private Securities Litigation Reform Act of
1995 (the "Reform Act") and as such may involve known and unknown risks,
uncertainties and other factors which may cause the actual results, performance
or achievements of the Partnership to be materially different from any future
results, performance or achievements expressed or implied by such forward-
looking statements. Such forward-looking statements speak only as of the date
of this quarterly report. The Partnership expressly disclaims any obligation or
undertaking to release publicly any updates of revisions to any forward-looking
statements contained herein to reflect any change in the Partnership's
expectations with regard thereto or any change in events, conditions or
circumstances on which any such statement is based.
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, the Managing General Partner and several of their affiliated
partnerships and corporate entities. The complaint 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 by Insignia and its affiliates of
interests in certain general partner entities, past tender offers by Insignia
affiliates to acquire limited partnership units, the management of partnerships
by Insignia affiliates as well as a recently announced agreement between
Insignia and AIMCO. The complaint seeks monetary damages and equitable relief,
including judicial dissolution of the Partnership. The Managing General Partner
was only recently served with the complaint, which it believes to be without
merit, and intends to vigorously defend the action.
The Partnership is unaware of any other pending or outstanding litigation that
is not of a routine nature. The General Partner of the Partnership believes all
such pending or outstanding litigation will be resolved without a material
adverse effect upon the business, financial condition or operations of the
Partnership.
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 April 30, 1998.
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
Its Corporate General Partner
By: /s/ William H. Jarrard, Jr.
William H. Jarrard, Jr.
President and Director
By: /s/ Ronald Uretta
Ronald Uretta
Vice President and Treasurer
Date: June 10, 1998
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from
Shelter Properties VI Limited Partnership 1998 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> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> OCT-31-1998
<PERIOD-END> APR-30-1998
<CASH> 2,904
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0<F1>
<PP&E> 52,672
<DEPRECIATION> 25,739
<TOTAL-ASSETS> 32,661
<CURRENT-LIABILITIES> 0<F1>
<BONDS> 26,477
0
0
<COMMON> 0
<OTHER-SE> 4,948
<TOTAL-LIABILITY-AND-EQUITY> 32,661
<SALES> 0
<TOTAL-REVENUES> 4,994
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 4,884
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,212
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 110
<EPS-PRIMARY> 2.58<F2>
<EPS-DILUTED> 0
<FN>
<F1>Registrant has an unclassified balance sheet.
<F2>Multiplier is 1.
</FN>
</TABLE>
