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)
[ ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
[X] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from November 1, 1999 to December 31, 1999
Commission file number 0-13261
SHELTER PROPERTIES VI
(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.)
55 Beattie Place, 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 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
BALANCE SHEET
(Unaudited)
(in thousands, except per unit data)
December 31, 1999
Assets
Cash and cash equivalents $ 2,901
Receivables and deposits 662
Restricted escrows 766
Other assets 368
Investment properties:
Land $ 4,950
Buildings and related personal property 50,536
------
55,486
Less accumulated depreciation (29,198) 26,288
------ ------
$ 30,985
Liabilities and Partners' (Deficit) Capital
Liabilities
Accounts payable $ 210
Tenant security deposit liabilities 215
Accrued property taxes 655
Other liabilities 304
Distribution payable 428
Mortgage notes payable 25,302
Partners' (Deficit) Capital
General partners $ (306)
Limited partners (42,324 units issued and
outstanding) 4,177 3,871
------ ------
$ 30,985
See Accompanying Notes to Financial Statements
<PAGE>
b)
SHELTER PROPERTIES VI
STATEMENTS OF OPERATIONS
(Unaudited)
(in thousands, except unit data)
Two Months Ended
December 31,
1999 1998
---- ----
(Restated)
Revenues:
Rental income $1,716 $1,623
Other income 123 135
----- -----
Total revenues 1,839 1,758
----- -----
Expenses:
Operating 655 669
General and administrative 29 52
Depreciation 295 338
Interest 375 391
Property taxes 145 150
----- -----
Total expenses 1,499 1,600
----- -----
Income before cumulative effect of a change in
accounting principle 340 158
Cumulative effect on prior years of a change
in accounting for the cost of exterior
painting and major landscaping -- 253
----- -----
Net income $ 340 $ 411
==== ====
Net income allocated to general partners (1%) $ 3 $ 4
Net income allocated to limited partners (99%) 337 407
----- -----
$ 340 $ 411
==== ====
Net income per limited partnership unit:
Income before cumulative effect of a change
in accounting principle $ 7.96 $ 3.70
Cumulative effect on prior years of a change
in accounting for the cost of exterior
painting and major landscaping -- 5.92
----- -----
Net income $ 7.96 $ 9.62
===== =====
Distributions per limited partnership unit $10.02 $49.45
===== =====
See Accompanying Notes to Financial Statements
<PAGE>
c)
SHELTER PROPERTIES VI
STATEMENT OF CHANGES IN PARTNERS' (DEFICIT) CAPITAL
(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, 1999 42,324 $ (305) $ 4,264 $ 3,959
Distribution to partners -- (4) (424) (428)
Net income for the two months
ended December 31, 1999 -- 3 337 340
------ ------ ------ ------
Partners' (deficit) capital at
December 31, 1999 42,324 $ (306) $ 4,177 $ 3,871
====== ===== ====== ======
See Accompanying Notes to Financial Statements
<PAGE>
d)
SHELTER PROPERTIES VI
STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
Two Months Ended
December 31,
1999 1998
Cash flows from operating activities: (Restated)
Net income $ 340 $ 411
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation 295 338
Amortization of discounts and loan costs 41 47
Cumulative effect on prior years of a change in
accounting principle -- (253)
Change in accounts:
Receivables and deposits 89 128
Other assets 103 4
Accounts payable (9) (89)
Tenant security deposit liabilities 1 2
Accrued property taxes (111) (78)
Other liabilities (164) 17
------ ------
Net cash provided by operating activities 585 527
------ ------
Cash flows from investing activities:
Property improvements and replacements (328) (130)
Net (deposits to) withdrawals from restricted escrows (10) 64
------ ------
Net cash used in investing activities (338) (66)
------ ------
Cash flows from financing activities:
Payments on mortgage notes payable (159) (149)
Distribution paid to partners -- (2,100)
------ ------
Net cash used in financing activities (159) (2,249)
------ ------
Net increase (decrease) in cash and cash equivalents 88 (1,788)
Cash and cash equivalents at beginning of period 2,813 3,111
------ ------
Cash and cash equivalents at end of period $ 2,901 $ 1,323
====== ======
Supplemental disclosure of cash flow information:
Cash paid for interest $ 334 $ 344
====== ======
Supplemental disclosure of non-cash transaction:
Distribution payable $ 428 $ --
====== ======
See Accompanying Notes to Financial Statements
<PAGE>
e)
SHELTER PROPERTIES VI
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
Note A - Basis of Presentation
The accompanying unaudited financial statements of Shelter Properties VI (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"), all
adjustments (consisting of normal recurring accruals) considered necessary for a
fair presentation have been included. Operating results for the two month period
ended December 31, 1999, are not necessarily indicative of the results that may
be expected for the fiscal year ending December 31, 2000. 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,
1999.
Change in Fiscal Year End: The Partnership elected to change its fiscal year end
from October 31 to December 31, effective for the period ending December 31,
1999.
Change in Accounting Principle: During the two months ended December 31, 1999
(effective November 1, 1998), the Partnership changed its method of accounting
to capitalize the cost of exterior painting and major landscaping. The
Partnership believes that this accounting principle change is preferable because
it provides a better matching of expenses with the related benefit of the
expenditures and it is consistent with industry practice and the policies of the
Corporate General Partner. The effect of the change for the two months ended
December 31, 1998 was to decrease income before the change by approximately
$13,000 ($.31 per limited partnership unit). The cumulative effect adjustment of
approximately $253,000 is the result of applying retroactively the
aforementioned accounting principle change and is included in income for the two
months ended December 31, 1998. The accounting change will not have an affect on
cash flow, funds available for distribution or fees payable to the Corporate
General Partner and affiliates.
Note B - Transfer of Control
Pursuant to a series of transactions which closed on October 1, 1998 and
February 26, 1999, Insignia Financial Group, Inc. and Insignia Properties Trust
merged into Apartment Investment and Management Company ("AIMCO"), a publicly
traded real estate investment trust, with AIMCO being the surviving corporation
(the "Insignia Merger"). As a result, AIMCO acquired 100% ownership interest in
the Corporate General Partner. The Corporate General Partner does not believe
that this transaction has had or will have a material effect on the affairs and
operations of the Partnership.
Note C - 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 of the Partnership
(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.
Two Months Ended
December 31,
1999 1998
---- ----
(in thousands)
Net cash provided by operating activities $ 585 $ 527
Payments on mortgage notes payable (159) (149)
Property improvements and replacements (328) (130)
Change in restricted escrows, net (10) 64
Changes in reserves for net operating
liabilities 98 16
Additional reserves (186) (328)
------ ------
Net cash used in operations $ -- $ --
=== ===
The Corporate General Partner believed it to be in the best interest of the
Partnership to reserve net cash from operations of approximately $186,000 and
$328,000 at December 31, 1999 and 1998, respectively, to fund continuing capital
improvements and repairs at the Partnership's six investment properties.
Note D - 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 certain payments
to affiliates for services and the reimbursement of certain expenses incurred by
affiliates on behalf of the Partnership. The following transactions with the
Corporate General Partner and/or its affiliates were charged to expense for each
of the two months ended December 31, 1999 and 1998:
1999 1998
---- ----
(in thousands)
Property management fees (included in
operating expenses) $ 90 $ 87
Reimbursement for services of affiliates
(included in operating, general and
administrative expenses, and investment
properties) 34 35
During the two months ended December 31, 1999 and 1998, affiliates of the
Corporate General Partner were entitled to receive 5% of gross receipts from all
of the Registrant's properties as compensation for providing property management
services. The Registrant paid to such affiliates approximately $90,000 and
$87,000 for the two months ended December 31, 1999 and 1998, respectively.
Affiliates of the Corporate General Partner received reimbursements of
accountable administrative expenses amounting to approximately $34,000 and
$35,000 for the two months ended December 31, 1999 and 1998, respectively.
Several tender offers were made by various parties, including affiliates of the
general partners, during the two months ended December 31, 1999 and the fiscal
years ended October 31, 1999 and 1998. As a result of these tender offers, AIMCO
and it affiliates currently own 23,628 units of limited partnership units in the
Partnership representing 55.83% of the outstanding units. It is possible that
AIMCO or its affiliates will make one or more additional offers to acquire
additional limited partnership interests in the Partnership for cash or in
exchange for units in the operating partnership of AIMCO. Consequently, AIMCO is
in a position to influence all voting decisions with respect to the Registrant.
Under the Partnership Agreement, unitholders holding a majority of the Units are
entitled to take action with respect to a variety of matters. When voting on
matters, AIMCO would in all likelihood vote the Units it acquired in a manner
favorable to the interest of the Corporate General Partner because of their
affiliation with the Corporate General Partner.
Note E - Distributions
During the two months ended December 31, 1999, a distribution was approved for
approximately $428,000 (approximately $424,000 to the limited partners, $10.02
per limited partnership unit) from operations. The distribution was paid in
January 2000. A cash distribution of approximately $2,100,000 was paid to the
partners during the two months ended December 31, 1998. Approximately $1,412,000
($33.36 per limited partnership unit) was paid to the limited partners from
previously undistributed proceeds of a fiscal year 1995 property sale and
approximately $688,000 (approximately $681,000 to the limited partners, $16.09
per limited partnership unit) was paid from operations.
Note F - Segment Reporting
Description of the types of products and services from which the reportable
segment derives its revenues: The Partnership has one reportable segment:
residential properties consisting of six apartment complexes located in five
states throughout the United States as follows: one each in Georgia, Iowa,
Florida, and Colorado, and two in North Carolina. The Partnership rents
apartment units to tenants for terms that are typically twelve months or less.
Measurement of segment profit or loss: The Partnership evaluates performance
based on net income. The accounting policies of the reportable segment are the
same as those described in the summary of significant accounting policies in the
Partnership's Annual Report on Form 10-KSB for the year ended October 31, 1999.
Factors management used to identify the Partnership's reportable segment: The
Partnership's reportable segment consists of investment properties that offer
similar products and services. Although each of the investment properties are
managed separately, they have been aggregated into one segment as they provide
services with similar types of products and customers.
Segment information for the two month period ended December 31, 1999 and 1998,
is shown in the tables below (in thousands). The "Other" column includes
partnership administration related items and income and expense not allocated to
the reportable segment.
1999 Residential Other Totals
---- ----------- ----- ------
Rental income $ 1,716 $ -- $ 1,716
Other income 120 3 123
Interest expense 375 -- 375
Depreciation 295 -- 295
General and administrative expense -- 29 29
Segment profit (loss) 366 (26) 340
Total assets 30,007 978 30,985
Capital expenditures for investment
properties 328 -- 328
1998 Residential Other Totals
---- ----------- ----- ------
Rental income $ 1,623 $ -- $ 1,623
Other income 114 21 135
Interest expense 391 -- 391
Depreciation 338 -- 338
General and administrative expense -- 52 52
Cumulative effect on prior years
of change in accounting principle 253 -- 253
Segment profit (loss) 442 (31) 411
Total assets 29,758 875 30,633
Capital expenditures for investment
properties 130 -- 130
Note G - 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 Corporate General Partner and several of their affiliated
partnerships and corporate entities. The action 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 Financial Group, Inc.
("Insignia") and entities which were, at one time, affiliates of Insignia
("Insignia 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 and the Insignia Merger (see
"Note B - Transfer of Control"). The plaintiffs seek monetary damages and
equitable relief, including judicial dissolution of the Partnership. On June 25,
1998, the Corporate General Partner filed a motion seeking dismissal of the
action. In lieu of responding to the motion, the plaintiffs have filed an
amended complaint. The Corporate General Partner filed demurrers to the amended
complaint which were heard February 1999. Pending the ruling on such demurrers,
settlement negotiations commenced. On November 2, 1999, the parties executed and
filed a Stipulation of Settlement, settling claims, subject to final court
approval, on behalf of the Partnership and all limited partners who own units as
of November 3, 1999. Preliminary approval of the settlement was obtained on
November 3, 1999 from the Superior Court of the State of California, County of
San Mateo, at which time the Court set a final approval hearing for December 10,
1999. Prior to the December 10, 1999 hearing the Court received various
objections to the settlement, including a challenge to the Court's preliminary
approval based upon the alleged lack of authority of class plaintiffs' counsel
to enter the settlement. On December 14, 1999, the Corporate General Partner and
its affiliates terminated the proposed settlement. Certain plaintiffs have filed
a motion to disqualify some of the plaintiffs' counsel in the action. The
Corporate General Partner does not anticipate that costs associated with this
case will be material to the Partnership's overall operations.
The Partnership is unaware of any other pending or outstanding litigation that
is not of a routine nature arising in the ordinary course of business.
<PAGE>
Item 2. Management's Discussion and Analysis or Plan of Operation
The matters discussed in this Form 10-QSB contain certain forward-looking
statements and involve risks and uncertainties (including changing market
conditions, competitive and regulatory matters, etc.) detailed in the
disclosures contained in this Form 10-QSB and the other filings with the
Securities and Exchange Commission made by the Registrant from time to time. The
discussion of the Registrant's business and results of operations, including
forward-looking statements pertaining to such matters, does not take into
account the effects of any changes to the Registrant's business and results of
operations. Accordingly, actual results could differ materially from those
projected in the forward-looking statements as a result of a number of factors,
including those identified herein.
The Partnership's investment properties consist of six apartment complexes. The
following table sets forth the average occupancy of the properties for each of
the two months ended December 31, 1999 and 1998:
Average
Occupancy
Property 1999 1998
-------- ---- ----
Rocky Creek Apartments
Augusta, Georgia 92% 94%
Carriage House Apartments
Gastonia, North Carolina (1) 93% 90%
Nottingham Square Apartments
Des Moines, Iowa (1) 97% 90%
Foxfire/Barcelona Apartments
Durham, North Carolina (2) 92% 97%
River Reach Apartments
Jacksonville, Florida 95% 94%
Village Gardens Apartments
Fort Collins, Colorado (3) 96% 99%
(1) The increase in average occupancy at Carriage House Apartments and
Nottingham Square Apartments is due to a more aggressive marketing
campaign during 1999.
(2) The decrease in average occupancy at Foxfire/Barcelona Apartments is due
to the renting, during the two months ended December 31, 1998, of
corporate units to a construction company that was building a hospital in
the area.
(3) The decrease in average occupancy at Village Gardens Apartments is due to
a change in demographics of the market area.
Results of Operations
The Partnership realized net income of approximately $340,000 for the two months
ended December 31, 1999, compared to net income of approximately $411,000 for
the corresponding period in 1998. The decrease in net income for the two month
period ended December 31, 1999, is primarily attributable to a cumulative effect
on prior years of a change in accounting principle as of December 31, 1998
partially offset by an increase in total revenues and a decrease in total
expenses for the two months ended December 31, 1999. Total revenues increased
during the two month period ended December 31, 1999, as a result of an increase
in rental income. Rental income increased due to the increase in average
occupancy at three of the Partnership's six investment properties (see occupancy
discussion above) and to the increase in average rental rates at all of the
properties.
The decrease in total expenses during the two month period ended December 31,
1999 is attributable to a decrease in depreciation, general and administrative,
interest, and operating expenses. Depreciation decreased due to several assets
at Rocky Creek and Village Gardens being fully depreciated. General and
administrative expenses decreased due to a decrease in reimbursements to the
Corporate General Partner and audit fees. Included in general and administrative
expenses at both December 31, 1999 and 1998, are reimbursements to the Corporate
General Partner allowed under the Partnership Agreement associated with the
quarterly and annual communications with investors and regulatory agencies and
the annual audit and appraisals required by the Partnership Agreement are also
included. Interest expense decreased as a result of principal payments being
made on the debt encumbering all of the Partnership's properties. Operating
expenses decreased primarily due to decreases in interior building improvements
and major landscaping partially offset by increased water and sewer expenses at
Nottingham Square.
During the two months ended December 31, 1999 (effective November 1, 1998), the
Partnership changed its method of accounting to capitalize the cost of exterior
painting and major landscaping. The Partnership believes that this accounting
principle change is preferable because it provides a better matching of expenses
with the related benefit of the expenditures and it is consistent with industry
practice and the policies of the Corporate General Partner. The effect of the
change for the two months ended December 31, 1998 was to decrease income before
the change by approximately $13,000 ($.31 per limited partnership unit). The
cumulative effect adjustment of approximately $253,000 is the result of applying
retroactively the aforementioned accounting principle change and is included in
income for the two months ended December 31, 1998. The accounting change will
not have an affect on cash flow, funds available for distribution or fees
payable to the Corporate General Partner and affiliates.
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
expenses. 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.
Liquidity and Capital Resources
At December 31, 1999, the Partnership had cash and cash equivalents of
approximately $2,901,000 as compared to approximately $1,323,000 at December 31,
1998. Cash and cash equivalents increased approximately $88,000 for the two
months ended December 31, 1999 from the Partnership's prior fiscal year of
October 31, 1999. The increase was due to approximately $88,000 and is due to
approximately $585,000 of cash provided by operating activities largely offset
by approximately $338,000 of cash used in investing activities and approximately
$159,000 of cash used in financing activities. Cash used in investing activities
consisted of property improvements and replacements and net deposits to
restricted escrows maintained by the mortgage lender. Cash used in financing
activities consisted of payments of principal made on the mortgages encumbering
the Registrant's properties. The Registrant invests its working capital reserves
in money market accounts.
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 and to comply with
Federal, state, local, legal, and regulatory requirements. Capital improvements
planned for each of the Registrant's properties are detailed below.
Rocky Creek
During the two months ended December 31, 1999, the Partnership expended
approximately $28,000 for capital improvements at Rocky Creek primarily
consisting of floor covering and parking lot improvements. The improvements were
funded from Partnership operating cash and reserves. The Partnership is
currently evaluating the capital improvement needs of the property for the
upcoming year. The minimum amount to be budgeted during the calendar year 2000
is expected to be $300 per unit or approximately $36,000. Additional
improvements may be considered and will depend on the physical condition of the
property as well as replacement reserves and anticipated cash flow generated by
the property.
Carriage House
During the two months ended December 31, 1999, the Partnership expended
approximately $68,000 for capital improvements at Carriage House primarily
consisting of pool improvements, electrical upgrades, and carpeting. These
improvements were funded from Partnership operating cash and reserves. The
Partnership is currently evaluating the capital improvement needs of the
property for the upcoming year. The minimum amount to be budgeted during the
calendar year 2000 is expected to be $300 per unit or approximately $31,000.
Additional improvements may be considered and will depend on the physical
condition of the property as well as replacement reserves and anticipated cash
flow generated by the property.
Nottingham Square
During the two months ended December 31, 1999, the Partnership expended
approximately $30,000 for capital improvements at Nottingham Square primarily
consisting of floor covering, other improvements, and pool upgrades. The
Partnership is currently evaluating the capital improvement needs of the
property for the upcoming year. The minimum amount to be budgeted during the
calendar year 2000 is expected to be $300 per unit or approximately $133,000.
Additional improvements may be considered and will depend on the physical
condition of the property as well as replacement reserves and anticipated cash
flow generated by the property.
Foxfire/Barcelona
During the two months ended December 31, 1999, the Partnership expended
approximately $104,000 for capital improvements at Foxfire/Barcelona primarily
consisting of electrical upgrades, other building improvements, and floor
covering. The Partnership is currently evaluating the capital improvement needs
of the property for the upcoming year. The minimum amount to be budgeted during
the calendar year 2000 is expected to be $300 per unit or approximately
$106,000. Additional improvements may be considered and will depend on the
physical condition of the property as well as replacement reserves and
anticipated cash flow generated by the property.
River Reach
During the two months ended December 31, 1999, the Partnership expended
approximately $63,000 for capital improvements at River Reach primarily
consisting of roof replacements and floor covering. These improvements were
funded from Partnership operating cash and reserves. The Partnership is
currently evaluating the capital improvement needs of the property for the
upcoming year. The minimum amount to be budgeted during the calendar year 2000
is expected to be $300 per unit or approximately $89,000. Additional
improvements may be considered and will depend on the physical condition of the
property as well as replacement reserves and anticipated cash flow generated by
the property.
Village Gardens
During the two months ended December 31, 1999, the Partnership expended
approximately $35,000 for capital improvements at Village Gardens primarily
consisting of other enhancements and floor covering. These improvements were
funded from Partnership operating cash and reserves. The Partnership is
currently evaluating the capital improvement needs of the property for the
upcoming year. The minimum amount to be budgeted during the calendar year 2000
is expected to be $300 per unit or approximately $42,000. Additional
improvements may be considered and will depend on the physical condition of the
property as well as replacement reserves and anticipated cash flow generated by
the property.
The additional capital expenditures will be incurred only if cash is available
from operations and Partnership reserves. To the extent that such budgeted
capital improvements are completed, the Registrant's distributable cash flow, if
any, may be adversely affected at least in the short term.
The Partnership's current assets are thought to be sufficient for any near term
needs (exclusive of capital improvements) of the Partnership. The mortgage
indebtedness of approximately $25,302,000, net of discounts, is being amortized
over 257 months with a balloon payment of approximately $23,008,000 due on
November 15, 2002. The Corporate General Partner will attempt to refinance such
indebtedness and/or sell the properties prior to such maturity date. If the
properties cannot be refinanced or sold for a sufficient amount, the Partnership
will risk losing such properties through foreclosure.
During the two months ended December 31, 1999, a distribution was approved for
approximately $428,000 (approximately $424,000 to the limited partners, $10.02
per limited partnership unit) from operations. The distribution was paid in
January 2000. A cash distribution of approximately $2,100,000 was paid to the
partners during the two months ended December 31, 1998. Approximately $1,412,000
($33.36 per limited partnership unit) was paid from the previously undistributed
proceeds of a 1995 property sale and approximately $688,000 ($16.09 per limited
partnership unit) was paid from operations. Future cash distributions will
depend on the levels of net cash generated from operations, the availability of
cash reserves, and the timing of debt maturities, refinancings, and/or property
sales. The Partnership's distribution policy is reviewed on a semi-annual basis.
There can be no assurance, however, that the Partnership will generate
sufficient funds from operations, after required capital improvements, to permit
further distributions to its partners in fiscal year 2000 or subsequent periods.
Tender Offers
Several tender offers were made by various parties, including affiliates of the
general partners, during the two months ended December 31, 1999 and the fiscal
years ended October 31, 1999 and 1998. As a result of these tender offers, AIMCO
and it affiliates currently owns 23,628 units of limited partnership units in
the Partnership representing 55.83% of the outstanding units. It is possible
that AIMCO or its affiliates will make one or more additional offers to acquire
additional limited partnership interests in the Partnership for cash or in
exchange for units in the operating partnership of AIMCO. Consequently, AIMCO is
in a position to influence all voting decisions with respect to the Registrant.
Under the Partnership Agreement, unitholders holding a majority of the Units are
entitled to take action with respect to a variety of matters. When voting on
matters, AIMCO would in all likelihood vote the Units it acquired in a manner
favorable to the interest of the Corporate General Partner because of their
affiliation with the Corporate General Partner.
Year 2000 Compliance
General Description
The Year 2000 issue is the result of computer programs being written using two
digits rather than four digits to define the applicable year. The Partnership is
dependent upon the Corporate General Partner and its affiliates for management
and administrative services ("Managing Agent"). Any of the Managing Agent's
computer programs or hardware that had date-sensitive software or embedded chips
might have recognized a date using "00" as the year 1900 rather than the year
2000. This could have resulted in a system failure or miscalculations causing
disruptions of operations, including, among other things, a temporary inability
to process transactions, send invoices, or engage in similar normal business
activities.
Computer Hardware, Software and Operating Equipment
In 1999, the Managing Agent completed all phases of its Year 2000 program by
completing the replacement and repair of any hardware or software system or
operating equipment that was not yet Year 2000 compliant. The Managing Agent's
hardware and software systems and its operating equipment are now Year 2000
compliant. As of February 11, 2000, no material failure or erroneous results
have occurred in the Managing Agent's computer applications related to the
failure to reference the Year 2000.
Third Parties
To date, the Managing Agent is not aware of any significant supplier or
subcontractor (external agent) or financial institution of the Partnership that
has a Year 2000 issue that would have a material impact on the Partnership's
results of operations, liquidity or capital resources. However, the Managing
Agent has no means of ensuring or determining the Year 2000 compliance of
external agents. At this time, the Managing Agent does not believe that a Year
2000 issue of any non-compliant external agent will have a material impact on
the Partnership's financial position or results of operations.
Costs
The total cost of the Managing Agent's Year 2000 project was approximately $3.2
million and was funded from operating cash flows.
Risks Associated with the Year 2000
The Managing Agent completed all necessary phases of its Year 2000 program in
1999, and did not experience system or equipment malfunctions related to a
failure to reference the Year 2000. The Managing Agent or Partnership have not
been materially adversely effected by disruptions in the economy generally
resulting from the Year 2000 issue.
At this time, the Managing Agent does not believe that the Partnership's
businesses, results of operations or financial condition will be materially
adversely effected by the Year 2000 issue.
Contingency Plans Associated with the Year 2000
The Managing Agent has not had to implement contingency plans such as manual
workarounds or selecting new relationships for its banking or elevator operation
activities in order to avoid the Year 2000 issue.
<PAGE>
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEDINGS
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 Corporate General Partner and several of their affiliated
partnerships and corporate entities. The action 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 Financial Group, Inc.
("Insignia") and entities which were, at one time, affiliates of Insignia
("Insignia 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 and the Insignia Merger (see
"Note B - Transfer of Control"). The plaintiffs seek monetary damages and
equitable relief, including judicial dissolution of the Partnership. On June 25,
1998, the Corporate General Partner filed a motion seeking dismissal of the
action. In lieu of responding to the motion, the plaintiffs have filed an
amended complaint. The Corporate General Partner filed demurrers to the amended
complaint which were heard February 1999. Pending the ruling on such demurrers,
settlement negotiations commenced. On November 2, 1999, the parties executed and
filed a Stipulation of Settlement ("Stipulation"), settling claims, subject to
final court approval, on behalf of the Partnership and all limited partners who
own units as of November 3, 1999. Preliminary approval of the settlement was
obtained on November 3, 1999 from the Superior Court of the State of California,
County of San Mateo, at which time the Court set a final approval hearing for
December 10, 1999. Prior to the December 10, 1999 hearing the Court received
various objections to the settlement, including a challenge to the Court's
preliminary approval based upon the alleged lack of authority of class
plaintiffs' counsel to enter the settlement. On December 14, 1999, the Corporate
General Partner and its affiliates terminated the proposed settlement. Certain
plaintiffs have filed a motion to disqualify some of the plaintiffs' counsel in
the action. The Corporate General Partner does not anticipate that costs
associated with this case will be material to the Partnership's overall
operations.
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:
None filed during the two months ended December 31, 1999.
<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
By: Shelter Realty VI Corporation
Corporate General Partner
By: /s/Patrick J. Foye
Patrick J. Foye
Executive Vice President and Director
By: /s/Martha L. Long
Martha L. Long
Senior Vice President
and Controller
Date: February 14, 2000
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from Shelter
Properties VI 1999 Transitional Report on 10-QSB and is qualified in its
entirety by reference to such 10-QSB filing.
</LEGEND>
<CIK> 0000730013
<NAME> Shelter Properties VI
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 2-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> NOV-1-1999
<PERIOD-END> DEC-31-1999
<CASH> 2,901
<SECURITIES> 0
<RECEIVABLES> 662
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0 <F1>
<PP&E> 55,486
<DEPRECIATION> 29,198
<TOTAL-ASSETS> 30,985
<CURRENT-LIABILITIES> 0 <F1>
<BONDS> 25,302
0
0
<COMMON> 0
<OTHER-SE> 3,871
<TOTAL-LIABILITY-AND-EQUITY> 30,985
<SALES> 0
<TOTAL-REVENUES> 1,839
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 1,124
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 375
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 340
<EPS-BASIC> 7.96 <F2>
<EPS-DILUTED> 0
<FN>
<F1> Registrant has an unclassified balance sheet. <F2> Multiplier is 1.
</FN>
</TABLE>
