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
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended January 31, 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)
(in thousands, except unit data)
January 31, 1998
Assets
Cash and cash equivalents $ 2,724
Receivables and deposits 825
Restricted escrows 1,576
Other assets 586
Investment properties:
Land $ 4,950
Buildings and related personal property 47,357
52,307
Less accumulated depreciation (25,244) 27,063
$32,774
Liabilities and Partners' (Deficit) Capital
Liabilities
Accounts payable $ 225
Tenant security deposits 191
Accrued taxes 546
Other liabilities 236
Mortgage notes payable 26,636
Partners' (Deficit) Capital
General partners $ (309)
Limited partners (42,324 units
issued and outstanding) 5,249 4,940
$32,774
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,
1998 1997
Revenues:
Rental income $2,349 $2,371
Other income 164 167
Total revenues 2,513 2,538
Expenses:
Operating 1,003 960
General and administrative 81 63
Depreciation 493 487
Interest 608 622
Property taxes 226 221
Total expenses 2,411 2,353
Net income $ 102 $ 185
Net income allocated
to general partners (1%) $ 1 $ 2
Net income allocated
to limited partners (99%) 101 183
$ 102 $ 185
Net income per limited
partnership unit $ 2.39 $ 4.32
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)
Limited
Partnership General Limited
Units Partners Partners Total
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 three months
ended January 31, 1998 1 101 102
Partners' (deficit) capital
at January 31, 1998 42,324 $ (309) $ 5,249 $ 4,940
See Accompanying Notes to Financial Statements
d) SHELTER PROPERTIES VI LIMITED PARTNERSHIP
STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
Three Months Ended
January 31,
1998 1997
Cash flows from operating activities:
Net income $ 102 $ 185
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation 493 487
Amortization of discounts and loan costs 78 76
Change in accounts:
Receivables and deposits 15 39
Other assets 49 25
Accounts payable (57) 29
Tenant security deposit liabilities (2) (5)
Accrued taxes (70) (73)
Other liabilities 7 (222)
Net cash provided by operating activities 615 541
Cash flows from investing activities:
Property improvements and replacements (332) (222)
Net increase in restricted escrows (18) (16)
Insurance proceeds from casualty loss 35 --
Net cash used in investing activities (315) (238)
Cash flows from financing activities:
Payments on mortgage notes payable (208) (193)
Net increase in unrestricted cash and
cash equivalents 92 110
Cash and cash equivalents at beginning of period 2,632 3,104
Cash and cash equivalents at end of period $ 2,724 $ 3,214
Supplemental disclosure of cash flow information:
Cash paid for interest $ 531 $ 546
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" 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 months ended January 31, 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.
Three Months Ended
January 31,
(in thousands)
1998 1997
Net cash provided by operating activities $ 615 $ 541
Payments on mortgage notes payable (208) (193)
Property improvements and replacements (332) (222)
Change in restricted escrows, net (18) (16)
Changes in reserves for net operating
liabilities 58 207
Additional reserves (115) (315)
Net cash provided by operations $ -- $ 2
The Corporate General Partner believed it to be in the best interest of the
Partnership to reserve net cash from operations of approximately $115,000 and
$315,000 at January 31, 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 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 three months
ended January 31, 1998 and 1997:
1998 1997
(in thousands)
Property management fees
(included in operating expenses) $ 127 $ 127
Reimbursements for services of affiliates
(included in investment properties,
operating, and general and administrative
expenses) 70 45
Included in reimbursements for services of affiliates for the three month
periods ended January 31, 1998 and 1997, is approximately $17,000 and $3,000,
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 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 master policy. The agent assumed the financial obligations to the
affiliate of the Corporate General Partner who receives payment 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.
NOTE D - CASUALTY LOSS
During the first quarter of 1998, the Partnership received approximately $35,000
in insurance proceeds, which were accrued at October 31, 1997, 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.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
This item should be read in conjunction with the financial statements and other
items contained elsewhere in this report.
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, 1998 and 1997:
Average
Occupancy
Property 1998 1997
Rocky Creek Apartments
Augusta, Georgia (1) 87% 87%
Carriage House Apartments
Gastonia, North Carolina (2) 78% 92%
Nottingham Square Apartments
Des Moines, Iowa (3) 86% 89%
Foxfire/Barcelona Apartments
Durham, North Carolina (4) 92% 97%
River Reach Apartments
Jacksonville, Florida (5) 95% 99%
Village Gardens Apartments
Fort Collins, Colorado 96% 96%
(1) The Corporate General Partner attributes the continued low occupancy level
at Rocky Creek Apartments to an overall softness in the Augusta market due
to a weakened job market.
(2) The decrease in 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.
(3) Occupancy decreased at Nottingham Square Apartments due to competition from
new construction and an overall softness in the Des Moines market due to
low job growth.
(4) The decrease in occupancy at Foxfire/Barcelona Apartments is primarily the
result of competition due to new construction in the Durham market.
However, the overall market in the Durham area is strong, and occupancy is
expected to increase subsequent to the first quarter of 1998.
(5) The decrease in occupancy at River Reach Apartments is primarily
attributable to an overall softness in the Jacksonville market. Also,
there is competition from new construction in the area.
The Partnership realized net income of approximately $102,000 for the three
months ended January 31, 1998, versus approximately $185,000 for the
corresponding period in 1996. The decrease in net income for the three months
ended January 31, 1998, is primarily attributable to a decrease in rental income
and an increase in operating expenses. The decrease in rental income is due to
decreased occupancy as discussed above. Offsetting the impact of decreased
occupancy is an increase in rental rates at most of the properties. Operating
expenses increased due to an increase in maintenance expense at River Reach
Apartments for the installation of a drainage system at the waterfront area of
this property. Additional expenditures of approximately $100,000 are budgeted
for 1998 to repair the seawall and water pipes due to drainage problems at River
Reach Apartments. Another major capital improvement project totaling
approximately $300,000 is budgeted to replace all the vinyl siding at Nottingham
Square Apartments. Additionally, approximately $200,000 is budgeted for parking
lot repairs during 1998 at Foxfire/Barcelona Apartments.
Included in operating expense is approximately $39,000 of major repairs and
maintenance comprised primarily of major landscaping and exterior painting for
the three months ended January 31, 1998. For the three months ended January 31,
1997, approximately $42,000 comprised primarily of exterior building
improvements and major landscaping is included in operating expense.
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, 1998, the Partnership held cash and cash equivalents of
approximately $2,724,000 compared to approximately $3,214,000 at January 31,
1997. For the quarter ended January 31, 1998, net cash increased approximately
$92,000 compared to a net increase of approximately $110,000 for the quarter
ended January 31, 1997. Net cash provided by operating activities increased
primarily due to an increase in other liabilities. Net cash used in investing
activities increased due to an increase in property improvements and
replacements. Net cash used in financing activities remained consistent with a
slight increase in 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 $26,636,000, 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 first quarter of 1998 and 1997.
Future cash distributions will depend on the levels of net cash generated from
operations, refinancing, property sales and cash reserves. The Corporate
General Partner is currently evaluating the economic position of the Partnership
and the Partnership's ability to make a distribution during fiscal year ending
October 31, 1998.
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, 1998:
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
Vice President and Treasurer
Date: March 13, 1998
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from
Shelter Properties VI Limited Partnership 1998 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-31-1998
<PERIOD-END> JAN-31-1998
<CASH> 2,724
<SECURITIES> 0
<RECEIVABLES> 825
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0<F1>
<PP&E> 52,307
<DEPRECIATION> (25,244)
<TOTAL-ASSETS> 32,774
<CURRENT-LIABILITIES> 0<F1>
<BONDS> 26,636
0
0
<COMMON> 0
<OTHER-SE> 4,940
<TOTAL-LIABILITY-AND-EQUITY> 32,774
<SALES> 0
<TOTAL-REVENUES> 2,513
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 2,411
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 608
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 102
<EPS-PRIMARY> 2.39<F2>
<EPS-DILUTED> 0
<FN>
<F1>Registrant has an unclassified balance sheet.
<F2>Multiplier is 1.
</FN>
</TABLE>
