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 September 30, 2000
[ ] 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
(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 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
BALANCE SHEET
(Unaudited)
(in thousands, except per unit data)
September 30, 2000
<TABLE>
<CAPTION>
Assets
<S> <C> <C>
Cash and cash equivalents $ 1,333
Receivables and deposits 306
Restricted escrows 1,435
Other assets 319
Investment properties:
Land $ 4,950
Buildings and related personal property 51,184
56,134
Less accumulated depreciation (30,961) 25,173
$ 28,566
Liabilities and Partners' (Deficit) Capital
Liabilities
Accounts payable $ 106
Tenant security deposit liabilities 219
Accrued property taxes 742
Other liabilities 361
Mortgage notes payable 24,736
Partners' (Deficit) Capital
General partners $ (320)
Limited partners (42,324 units issued and
outstanding) 2,722 2,402
$ 28,566
See Accompanying Notes to Financial Statements
</TABLE>
b)
SHELTER PROPERTIES VI
STATEMENTS OF OPERATIONS
(Unaudited)
(in thousands, except unit data)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
2000 1999 2000 1999
Revenues:
<S> <C> <C> <C> <C>
Rental income $ 2,648 $ 2,563 $ 7,878 $ 7,513
Other income 230 228 621 571
Total revenues 2,878 2,791 8,499 8,084
Expenses:
Operating 1,108 1,098 3,387 3,233
General and administrative 178 101 379 282
Depreciation 675 556 1,763 1,565
Interest 574 571 1,733 1,735
Property taxes 255 222 786 672
Total expenses 2,790 2,548 8,048 7,487
Net income $ 88 $ 243 $ 451 $ 597
Net income allocated
to general partners (1%) $ 1 $ 2 $ 5 $ 6
Net income allocated
to limited partners (99%) 87 241 446 591
$ 88 $ 243 $ 451 $ 597
Net income per limited
partnership unit $ 2.06 $ 5.69 $ 10.54 $ 13.96
Distribution per limited
partnership unit $ -- $ -- $ 44.91 $ --
See Accompanying Notes to Financial Statements
</TABLE>
c)
SHELTER PROPERTIES VI
STATEMENT OF CHANGES IN PARTNERS' (DEFICIT) CAPITAL
(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
December 31, 1999 42,324 $ (306) $ 4,177 $ 3,871
Distributions to partners (19) (1,901) (1,920)
Net income for the nine months
ended September 30, 2000 -- 5 446 451
Partners' (deficit) capital at
September 30, 2000 42,324 $ (320) $ 2,722 $ 2,402
See Accompanying Notes to Financial Statements
</TABLE>
d)
SHELTER PROPERTIES VI
STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
2000 1999
Cash flows from operating activities:
<S> <C> <C>
Net income $ 451 $ 597
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation 1,763 1,565
Amortization of discounts and loan costs 269 212
Change in accounts:
Receivables and deposits 356 (269)
Other assets (32) (86)
Accounts payable (104) (72)
Tenant security deposit liabilities 4 3
Accrued property taxes 87 215
Other liabilities 57 (19)
Net cash provided by operating activities 2,851 2,146
Cash flows from investing activities:
Property improvements and replacements (648) (1,251)
Net (deposits to) withdrawals from restricted escrows (669) 807
Net cash used in investing activities (1,317) (444)
Cash flows from financing activities:
Payments on mortgage notes payable (754) (693)
Distributions paid to partners (2,348) --
Net cash used in financing activities (3,102) (693)
Net (decrease) increase in cash and cash equivalents (1,568) 1,009
Cash and cash equivalents at beginning of period 2,901 1,323
Cash and cash equivalents at end of period $ 1,333 $ 2,332
Supplemental disclosure of cash flow information:
Cash paid for interest $ 1,463 $ 1,525
Distributions paid to partners include $428,000 which was accrued at December
31, 1999 and paid during January 2000.
See Accompanying Notes to Financial Statements
</TABLE>
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 three and nine
month periods ended September 30, 2000, are not necessarily indicative of the
results that may be expected for the 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, as announced in its Form 8-K filed on January
12, 2000. This quarterly report presents the unaudited results of the
Partnership's operations for the three and nine months ended September 30, 2000
and 1999.
Reclassifications
Certain reclassifications have been made to the 1999 information to conform to
the 2000 presentation.
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
provided by operations", as defined in the partnership agreement of the
Partnership (the "Partnership Agreement"). However, "net cash provided by
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.
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
2000 1999
(in thousands)
<S> <C> <C>
Net cash provided by operating activities $ 2,851 $ 2,146
Payments on mortgage notes payable (754) (693)
Property improvements and replacements (648) (1,251)
Change in restricted escrows, net (669) 807
Changes in reserves for net operating
liabilities (368) 228
Additional reserves (230) (1,237)
Net cash provided by operations $ 182 $ --
</TABLE>
The Corporate General Partner believed it to be in the best interest of the
Partnership to reserve net cash from operations of approximately $230,000 and
$1,237,000 at September 30, 2000 and 1999, 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 (i) certain
payments to affiliates for services and (ii) 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 incurred for each
of the nine months ended September 30, 2000 and 1999:
2000 1999
(in thousands)
Property management fees (included in
operating expenses) $439 $408
Reimbursement for services of affiliates
(included in general and administrative
expenses and investment properties) 245 151
During the nine months ended September 30, 2000 and 1999, 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 $439,000 and
$408,000 for the nine months ended September 30, 2000 and 1999, respectively.
Affiliates of the Corporate General Partner received reimbursements of
accountable administrative expenses amounting to approximately $245,000 and
$151,000 for the nine months ended September 30, 2000 and 1999, respectively.
In addition to its indirect ownership of the general partner interest in the
Partnership, AIMCO and its affiliates currently own 25,828 limited partnership
units in the Partnership representing approximately 61.02% of the outstanding
units. A number of these units were acquired pursuant to tender offers made by
AIMCO or its affiliates. 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. Under the Partnership Agreement, unitholders holding a
majority of the Units are entitled to take action with respect to a variety of
matters, which would include without limitation, voting on certain amendments to
the Partnership Agreement and voting to remove the Corporate General Partner. As
a result of its ownership of approximately 61.02% of the outstanding units,
AIMCO is in a position to influence all voting decisions with respect to the
Registrant. 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 and
accrued for approximately $428,000 (approximately $424,000 to the limited
partners, $10.02 per limited partnership unit) from operations. The distribution
was paid during the nine months ended September 30, 2000. During the nine months
ended September 30, 2000, the Partnership paid distributions of approximately
$1,920,000 (approximately $1,901,000 paid to the limited partners or $44.91 per
limited partnership unit) from operations. No distributions were declared or
paid during the nine months ended September 30, 1999.
Subsequent to September 30, 2000, the Corporate General Partner approved and
paid a distribution of $182,000 from operations (approximately $180,000 of which
was paid to limited partners, $4.25 per limited partnership unit).
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 segment profit (loss) before
depreciation. 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 three and nine month periods ended September 30,
2000 and 1999, 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.
Three Months Ended September 30, 2000
Residential Other Totals
Rental income $ 2,648 $ -- $ 2,648
Other income 228 2 230
Interest expense 574 -- 574
Depreciation 675 -- 675
General and administrative expense -- 178 178
Segment profit (loss) 264 (176) 88
Nine months Ended September 30, 2000
Residential Other Totals
Rental income $ 7,878 $ -- $ 7,878
Other income 602 19 621
Interest expense 1,733 -- 1,733
Depreciation 1,763 -- 1,763
General and administrative expense -- 379 379
Segment profit (loss) 811 (360) 451
Total assets 28,446 120 28,566
Capital expenditures for investment
properties 648 -- 648
Three Months Ended September 30, 1999
Residential Other Totals
Rental income $ 2,563 $ -- $ 2,563
Other income 221 7 228
Interest expense 571 -- 571
Depreciation 556 -- 556
General and administrative expense -- 101 101
Segment profit (loss) 337 (94) 243
Nine Months Ended September 30, 1999
Residential Other Totals
Rental income $ 7,513 $ -- $ 7,513
Other income 544 27 571
Interest expense 1,735 -- 1,735
Depreciation 1,565 -- 1,565
General and administrative expense -- 282 282
Segment profit (loss) 852 (255) 597
Total assets 30,147 1,014 31,161
Capital expenditures for investment
properties 1,251 -- 1,251
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, its 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 of interests in certain general partner
entities by Insignia Financial Group, Inc. and entities which were, at one time,
affiliates of Insignia; past tender offers by the Insignia affiliates to acquire
limited partnership units; the management of partnerships by the Insignia
affiliates; and the Insignia Merger. 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 owned units as of November 3, 1999. Preliminary
approval of the settlement was obtained on November 3, 1999 from the Court, 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 prior lead counsel to enter the settlement. On
December 14, 1999, the Corporate General Partner and its affiliates terminated
the proposed settlement. In February 2000, counsel for some of the named
plaintiffs filed a motion to disqualify plaintiff's lead and liaison counsel who
negotiated the settlement. On June 27, 2000, the Court entered an order
disqualifying them from the case. The Court is considering applications for lead
counsel and has currently scheduled a hearing on the matter for November 20,
2000. 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.
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 nine months ended September 30, 2000 and 1999:
Average
Occupancy
Property 2000 1999
Rocky Creek Apartments
Augusta, Georgia 93% 92%
Carriage House Apartments
Gastonia, North Carolina 95% 93%
Nottingham Square Apartments
Des Moines, Iowa 97% 95%
Foxfire/Barcelona Apartments
Durham, North Carolina 92% 96%
River Reach Apartments
Jacksonville, Florida 96% 95%
Village Gardens Apartments
Fort Collins, Colorado 96% 97%
The decrease in average occupancy at Foxfire/Barcelona Apartments is due to the
renting, during the nine months ended September 30, 1999, of corporate units to
a construction company that was building a hospital in the area. The
construction company is no longer renting such units.
Results of Operations
The Partnership recorded net income of approximately $88,000 for the three
months ended September 30, 2000 compared to a net income of approximately
$243,000 for the three months ended September 30, 1999. The Partnership's net
income for the nine months ended September 30, 2000 was approximately $451,000
compared to a net income of approximately $597,000 for the nine months ended
September 30, 1999. The decrease in net income for the three and nine months
ended September 30, 2000 compared to the three and nine months ended September
30, 1999 was primarily due to an increase in total expenses offset by an
increase in total revenues.
The increase in total expenses for the three and nine months ended September 30,
2000 is primarily attributable to an increase in operating, general and
administrative, depreciation, and property tax expenses. Operating expense
increased as a result of an increase in property expenses due to an increase in
commissions and bonuses, and increases in employee salaries and related employee
benefits at the Partnership's investment properties. Depreciation expense
increased as a result of property additions during the past twelve months at the
Partnership's investment properties. The increase in property tax expense is due
to the timing of the receipt of tax bills, which affected the tax accruals
recorded for the respective periods. General and administrative expenses
increased for the three and nine months ended September 30, 2000 as a result of
an increase in costs associated with professional fees necessary to operate the
Partnership and an increase in the costs of services included in the management
reimbursements to the Corporate General Partner as allowed under the Partnership
Agreement. Included in general and administrative expenses at both September 30,
2000 and 1999, are costs associated with the quarterly and annual communications
with investors and regulatory agencies and the annual audit and appraisals
required by the Partnership Agreement.
Total revenues increased for the three and nine month periods ended September
30, 2000 primarily due to an increase in rental income. Rental income increased
due to an increase in average rental rates at all six of the Registrant's
properties and an increase in occupancy at four of the investment properties.
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 September 30, 2000, the Partnership had cash and cash equivalents of
approximately $1,333,000 as compared to approximately $2,332,000 at September
30, 1999. Cash and cash equivalents decreased approximately $1,568,000 for the
nine months ended September 30, 2000 from the Partnership's year end of December
31, 1999. The decrease was due to approximately $3,102,000 of cash used in
financing activities and approximately $1,317,000 of cash used in investing
activities which was partially offset by approximately $2,851,000 of cash
provided by operating activities. Cash used in investing activities consisted
primarily of net deposits to restricted escrows maintained by the mortgage
lender and property improvements and replacements. Cash used in financing
activities consisted primarily of distributions paid to partners and, to a
lesser extent, 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 Apartments
Approximately $92,000 has been budgeted for capital improvements at Rocky Creek
Apartments for the year 2000 consisting primarily of flooring covering
replacement, air conditioning unit replacements, major landscaping, and
appliance replacements. During the nine months ended September 30, 2000, the
Partnership expended approximately $72,000 for capital improvements at Rocky
Creek Apartments primarily consisting of floor covering replacement, major
landscaping, other building enhancements, and roof replacement. The improvements
were funded from Partnership operating cash flow.
Carriage House Apartments
Approximately $71,000 has been budgeted for capital improvement at Carriage
House Apartments for the year 2000 consisting primarily of floor covering
replacement, air conditioning unit replacements and appliance replacements.
During the nine months ended September 30, 2000, the Partnership expended
approximately $49,000 for capital improvements at Carriage House Apartments
primarily consisting of floor covering, air conditioning unit replacement, and
appliance replacements. These improvements were funded from Partnership
operating cash flow.
Nottingham Square Apartments
Approximately $159,000 has been budgeted for capital improvements at Nottingham
Square Apartments for the year 2000 consisting primarily of floor covering
replacement, plumbing enhancements and appliance replacements. During the nine
months ended September 30, 2000, the Partnership expended approximately $141,000
for capital improvements at Nottingham Square Apartments primarily consisting of
floor covering and appliance replacements and other building improvements. These
improvements were funded from Partnership operating cash flow.
Foxfire/Barcelona Apartments
Approximately $149,000 has been budgeted for capital improvements at
Foxfire/Barcelona Apartments for the year 2000 consisting primarily of floor
covering replacements, cabinet replacements, air conditioning units replacements
and appliance replacements. During the nine months ended September 30, 2000, the
Partnership expended approximately $75,000 for capital improvements at
Foxfire/Barcelona Apartments primarily consisting of floor covering replacement,
appliance replacement, cabinet replacements, and other structural improvements.
These improvements were funded from operating cash flows.
River Reach Apartments
Approximately $519,000 has been budgeted for capital improvements at River Reach
Apartments for the year 2000 consisting primarily of floor covering replacement,
plumbing enhancements, air conditioning unit replacements, appliance
replacements and other structural enhancements. During the nine months ended
September 30, 2000, the Partnership expended approximately $254,000 for capital
improvements at River Reach Apartments primarily consisting of floor covering
replacement, air conditioning unit replacements, plumbing fixtures, appliance
replacements, and interior decoration. These improvements were funded from
Partnership operating cash flow.
Village Gardens Apartments
Approximately $112,000 has been budgeted for capital improvements at Village
Gardens Apartments for the year 2000 consisting primarily of plumbing
enhancements, floor covering replacements and appliance replacements. During the
nine months ended September 30, 2000, the Partnership expended approximately
$57,000 for capital improvements at Village Gardens Apartments primarily
consisting of floor covering replacements, plumbing enhancements, electrical
enhancements, and appliance replacements. These improvements were funded from
Partnership operating cash flow.
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 $24,736,000, 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 and
accrued for approximately $428,000 (approximately $424,000 to the limited
partners, $10.02 per limited partnership unit) from operations. The distribution
was paid during the nine months ended September 30, 2000. During the nine months
ended September 30, 2000, the Partnership paid distributions of approximately
$1,920,000 ($1,901,000 to the limited partners or $44.91 per limited partnership
unit) from operations. Subsequent to September 30, 2000, the Corporate General
Partner approved and paid a distribution of approximately $182,000 from
operations (approximately $180,000 of which was paid to limited partners, $4.25
per limited partnership unit). No distributions were declared or paid during the
nine months ended September 30, 1999. 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 quarterly basis.
In addition, the Partnership is restricted from making distributions if the
amount in the reserve account for each property maintained by the mortgage
lender is less than $400 per apartment unit at all six of the Partnership's
investment properties. At September 30, 2000, the reserve account was adequately
funded with a balance of approximately $1,435,000. 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 during the remainder of 2000 or subsequent periods.
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, its 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 of interests in certain general partner
entities by Insignia Financial Group, Inc. and entities which were, at one time,
affiliates of Insignia; past tender offers by the Insignia affiliates to acquire
limited partnership units; the management of partnerships by the Insignia
affiliates; and the Insignia Merger. 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 owned units as of November 3, 1999. Preliminary
approval of the settlement was obtained on November 3, 1999 from the Court, 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 prior lead counsel to enter the settlement. On
December 14, 1999, the Corporate General Partner and its affiliates terminated
the proposed settlement. In February 2000, counsel for some of the named
plaintiffs filed a motion to disqualify plaintiff's lead and liaison counsel who
negotiated the settlement. On June 27, 2000, the Court entered an order
disqualifying them from the case. The Court is considering applications for lead
counsel and has currently scheduled a hearing on the matter for November 20,
2000. The Corporate General Partner does not anticipate that costs associated
with this case will be material to the Partnership's overall operations.
<PAGE>
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 September
30, 2000:
None.
<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
By: /s/Martha L. Long
Martha L. Long
Senior Vice President
and Controller
Date: November 13, 2000
