February , 2000
United States
Securities and Exchange Commission
Washington, D.C. 20549
RE: Shelter Properties VI
Form 10-KSB
File No. 0-13261
To Whom it May Concern:
The accompanying Form 10-KSB for the year ended October 31, 1999 describes a
change in the method of accounting to capitalize exterior painting and major
landscaping, which would have been expensed under the old policy. 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.
Please do not hesitate to contact the undersigned with any questions or comments
that you might have.
Sincerely,
Stephen Waters
Real Estate Controller
<PAGE>
FORM 10-KSB--ANNUAL OR TRANSITIONAL REPORT UNDER
SECTION 13 OR 15(d)
Form 10-KSB
[X] ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934 [No Fee Required]
For the fiscal year ended October 31, 1999
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 [No Fee Required]
For the transition period from _________to _________
Commission file number 0-13261
SHELTER PROPERTIES VI
(Name of small business issuer in its charter)
South Carolina 57-0755618
(State or other jurisdiction of (I.R.S.Employer
incorporation or organization) Identification No.)
55 Beattie Place, PO Box 1089
Greenville, South Carolina 29602
(Address of principal executive offices)
(864) 239-1000
Issuer's telephone number
Securities registered under Section 12(b) of the Exchange Act:
None
Securities registered under Section 12(g) of the Exchange Act:
Limited Partnership Units
-------------------------
(Title of class)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act of 1934 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___
Check if there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B contained in this form, and no disclosure will be contained, to
the best of the registrant's knowledge in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-KSB or any
amendment to this Form 10-KSB. Yes X No___
State issuer's revenues for its most recent fiscal year. $10,729,000
State the aggregate market value of the voting partnership interests held by
non-affiliates computed by reference to the price at which the partnership
interests were sold, or the average bid and asked prices of such partnership
interests, as of a specified date within the past 60 days. No market exists for
the limited partnership interests of the Registrant, and, therefore, no
aggregate market value can be determined.
-------------------------------------------
DOCUMENTS INCORPORATED BY REFERENCE
None
<PAGE>
PART I
Item 1. Description of Business
Shelter Properties VI (the "Partnership" or "Registrant") was organized as a
limited partnership under the laws of the State of South Carolina on August 3,
1983. The general partner responsible for management of the Partnership's
business is Shelter Realty VI Corporation, a South Carolina corporation (the
"Corporate General Partner"). The only other general partner of the Partnership
was N. Barton Tuck, Jr. Mr. Tuck was not an affiliate of the Corporate General
Partner and was effectively prohibited by the Partnership's partnership
agreement (the "Partnership Agreement") from participating in the management of
the Partnership. In June 1999, Mr. Tuck's general partner interest was purchased
by AIMCO Properties, L.P., an affiliate of the Corporate General Partner. The
Corporate General Partner is a subsidiary of Apartment Investment and Management
Company ("AIMCO").
The Registrant is engaged in the business of operating and holding real
properties for investment. In 1984 and 1985 during its acquisition phase, the
Registrant acquired eight existing apartment properties. The Registrant
continues to own and operate six of these properties. See "Item 2. Description
of Properties." The property management services are performed at the
Partnership's properties by AIMCO. The Partnership Agreement provides that the
Partnership is to terminate on December 31, 2023, unless terminated prior to
such date.
Commencing March 22, 1984, the Registrant offered, pursuant to a Registration
Statement filed with the Securities and Exchange Commission, up to 34,900 Units
of Limited Partnership Interest (the "Units") at a purchase price of $1,000 per
Unit with a minimum purchase of 5 Units ($5,000), or 2 Units ($2,000) for an
Individual Retirement Account. By means of Supplement No. 4 dated September 28,
1984, the Partnership offered for sale an additional 15,000 Units. The Corporate
General Partner purchased 100 units as required by the Partnership Agreement.
The offering terminated in October 1984. Upon termination of the offering, the
Registrant had accepted subscriptions for 42,324 Units, including 100 Units
purchased by the Corporate General Partner, for an aggregate of $42,324,000.
Unsold Units (numbering 7,676) were deregistered pursuant to Post Effective
Amendment No. 1 to Registration Statement No. 2-93285 filed with the Securities
and Exchange Commission on November 13, 1984. The Registrant invested
approximately $30,300,000 of such proceeds in eight existing apartment
properties. Since its initial offering, the Registrant has not received, nor are
limited partners required to make, additional capital contributions.
The Registrant has no employees. Management and administrative services are
performed by the Corporate General Partner and by agents retained by the
Corporate General Partner. The property management services are performed at the
Partnership's properties by AIMCO.
The business in which the Partnership is engaged is highly competitive. There
are other residential properties within the market area of the Partnership's
properties. The number and quality of competitive properties, including those
which may be managed by an affiliate of the Corporate General Partner, in such
market area could have a material effect on the rental market for apartment
properties owned by the Partnership and the rents that may be charged for such
properties. While the Corporate General Partner and its affiliates are a
significant factor in the United States in the apartment industry, they own an
insignificant percentage of the total apartment units in the United States and
competition for apartments is local.
Both the income and expenses of operating the properties owned by the
Partnership are subject to factors outside of the Partnership's control, such as
changes in the supply and demand of similar properties resulting from various
market conditions, increases/decreases in unemployment or population shifts,
changes in the availability of permanent mortgage financing, changes in zoning
laws, or changes in patterns or needs of users. In addition, there are risks
inherent in owning and operating residential properties because such properties
are susceptible to the impact of economic and other conditions outside of the
control of the Partnership.
There have been, and it is possible there may be other, Federal, state and local
legislation and regulations enacted relating to the protection of the
environment. The Partnership is unable to predict the extent, if any, to which
such new legislation or regulations might occur and the degree to which such
existing or new legislation or regulations might adversely affect the properties
owned by the Partnership.
The Partnership monitors its properties for evidence of pollutants, toxins and
other dangerous substances, including the presence of asbestos. In certain cases
environmental testing has been performed, which resulted in no material adverse
conditions or liabilities. In no case has the Partnership received notice that
it is a potentially responsible party with respect to an environmental clean up
site.
A further description of the Partnership's business is included in "Management's
Discussion and Analysis or Plan of Operation" included in "Item 6" of this Form
10-KSB.
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 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 had had or will have a
material effect on the affairs and operations of the Partnership.
<PAGE>
Item 2. Description of Properties
The following table sets forth the Partnership's investments in properties:
Date of
Property Purchase Type of Ownership Use
Rocky Creek Apartments 06/29/84 Fee ownership subject Apartment
Augusta, Georgia to first and second 120 units
mortgages
Carriage House Apartments 06/29/84 Fee ownership subject Apartment
Gastonia, North Carolina to first and second 102 units
mortgages
Nottingham Square Apartments 08/31/84 Fee ownership subject Apartment
Des Moines, Iowa to first and second 442 units
mortgages
Foxfire Apartments/ 09/30/84 Fee ownership subject Apartment
Barcelona Apartments 03/28/85 to first and second 354 units
Durham, North Carolina mortgages
River Reach Apartments 01/30/85 Fee ownership subject Apartment
Jacksonville, Florida to first and second 298 units
mortgages
Village Garden Apartments 03/01/85 Fee ownership subject Apartment
Fort Collins, Colorado to first and second 141 units
mortgages
Schedule of Properties
Set forth below for each of the Registrant's properties is the gross carrying
value, accumulated depreciation, depreciable life, method of depreciation and
Federal tax basis.
Gross
Carrying Accumulated Federal
Property Value Depreciation Rate Method Tax Basis
- -------- ----- ------------ ---- ------ ---------
(in thousands) (in thousands)
Rocky Creek $ 4,630 $ 2,392 5-35 yrs SL $ 882
Carriage House 4,022 2,379 5-27 yrs SL 492
Nottingham Square 15,207 8,008 5-29 yrs SL 4,211
Foxfire/Barcelona 12,298 6,418 5-31 yrs SL 3,619
River Reach 14,569 7,598 5-27 yrs SL 3,792
Village Garden 4,432 2,108 5-30 yrs SL 1,486
------ ------ ------
$55,158 $28,903 $14,482
====== ====== ======
See "Note A" to financial statements in "Item 7" for a description of the
Partnership's depreciation policy and "Note I" for change in accounting
principle.
<PAGE>
Schedule of Property Indebtedness
The following table sets forth certain information relating to the loans
encumbering the Registrant's properties.
Principal Principal
Balance At Balance
October 31, Interest Period Maturity Due At
Property 1999 Rate Amortized Date Maturity(2)
- -------- ---- ---- --------- ---- -----------
(in thousands) (in thousands)
Rocky Creek
1st mortgage $ 1,991 7.60% (1) 11/15/02 $ 1,737
2nd mortgage 74 7.60% (1) 11/15/02 74
Carriage House
1st mortgage 1,836 7.60% (1) 11/15/02 1,601
2nd mortgage 68 7.60% (1) 11/15/02 68
Nottingham Square
1st mortgage 7,188 7.60% (1) 11/15/02 6,268
2nd mortgage 268 7.60% (1) 11/15/02 268
Foxfire/Barcelona
1st mortgage 5,195 7.60% (1) 11/15/02 4,531
2nd mortgage 193 7.60% (1) 11/15/02 193
River Reach
1st mortgage 6,754 7.60% (1) 11/15/02 5,890
2nd mortgage 252 7.60% (1) 11/15/02 252
Village Garden
1st mortgage 2,338 7.60% (1) 11/15/02 2,039
2nd mortgage 87 7.60% (1) 11/15/02 87
------ ------
26,244 $23,008
======
Less unamortized
discount (811)
------
$25,433
(1) The principal balance is being amortized over 257 months with a balloon
payment due November 15, 2002.
(2) See "Item 7. Financial Statements - Note C" for information with respect to
the Partnership's ability to prepay these loans and other specific details
about the loans.
<PAGE>
Rental Rates and Occupancy
Average annual rental rate and occupancy for 1999 and 1998 for each property:
Average Annual Average Annual
Rental Rates Occupancy
------------ ---------
(per unit)
1999 1998 1999 1998
---- ---- ---- ----
Rocky Creek $7,051 $6,886 92% 89%
Carriage House 7,561 7,352 93% 86%
Nottingham Square 6,929 6,724 94% 88%
Foxfire/Barcelona 7,325 7,219 96% 92%
River Reach 8,569 8,242 95% 97%
Village Garden 8,139 7,806 97% 96%
The Corporate General Partner attributes the increase in occupancy at Rocky
Creek to an increase in marketing efforts and the use of concessions. The
increase in occupancy at Carriage House is attributed to extensive marketing and
attention to renewals. The increase in occupancy at Nottingham Square is
attributed to an increase in marketing efforts and physical improvements made to
the property. The increase in occupancy at Foxfire/Barcelona is attributed to
renting the corporate units to a construction company building a hospital in the
area. Rental rates, at all the properties, increased during the twelve months
ended October 31, 1999.
As noted under "Item 1. Description of Business", the real estate industry is
highly competitive. All of the properties of the Partnership are subject to
competition from other properties in the area. The Corporate General Partner
believes that all of the properties are adequately insured. Each property is an
apartment complex which leases units for lease terms of one year or less. No
individual tenant leases 10% or more of the available rental space. All of the
properties are in good physical condition, subject to normal depreciation and
deterioration as is typical for assets of this type and age.
Schedule of Real Estate Taxes and Rates
Real estate taxes and rates in 1999 for each property were as follows:
1999 1999
Billing(1) Rate
---------- ----
(in thousands)
Rocky Creek $ 40 2.82%
Carriage House 40 1.30%
Nottingham Square 434 3.22%
Foxfire/Barcelona 163 1.61%
River Reach 221 2.07%
Village Garden 47 8.79%
(1) Due to these properties having a fiscal year different than the real
estate tax year, tax expense, as stated in the Partnership's Statement of
Operations, does not agree to the 1999 billings.
<PAGE>
Capital Improvements
Rocky Creek
During the twelve months ended October 31, 1999, the Partnership expended
approximately $39,000 for capital improvements at Rocky Creek primarily
consisting of floor covering, appliance replacement, landscaping, and structural
improvements. These improvements were funded from Partnership reserves. The
Partnership is currently evaluating the capital improvement needs of the
property for the upcoming year. The minimum amount to be budgeted is expected to
be $300 per unit or $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 twelve months ended October 31, 1999, the Partnership expended
approximately $128,000 for capital improvements at Carriage House primarily
consisting of floor covering, exterior painting, electrical upgrades, and
heating and air conditioning upgrades. These improvements were funded from
Partnership reserves and operating cash flow. The Partnership is currently
evaluating the capital improvement needs of the property for the upcoming year.
The minimum amount to be budgeted 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 twelve months ended October 31, 1999, the Partnership expended
approximately $286,000 for capital improvements at Nottingham Square primarily
consisting of floor covering, heating and air conditioning upgrades, cabinet and
countertop replacement, and other building improvements. These improvements were
funded from Partnership reserves. The Partnership is currently evaluating the
capital improvement needs of the property for the upcoming year. The minimum
amount to be budgeted 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 twelve months ended October 31, 1999, the Partnership expended
approximately $498,000 for capital improvements at Foxfire/Barcelona primarily
consisting of building and parking lot enhancements, floor covering, and pool
enhancements. These improvements were funded from Partnership reserves and
operating cash flows. The Partnership is currently evaluating the capital
improvement needs of the property for the upcoming year. The minimum amount to
be budgeted 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.
<PAGE>
River Reach
During the twelve months ended October 31, 1999, the Partnership expended
approximately $213,000 for capital improvements at River Reach primarily
consisting of floor covering, appliance replacement, interior decoration, air
conditioning upgrades, and landscaping. These improvements were funded from
Partnership reserves. The Partnership is currently evaluating the capital
improvement needs of the property for the upcoming year. The minimum amount to
be budgeted 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 twelve months ended October 31, 1999, the Partnership expended
approximately $318,000 for capital improvements at Village Gardens primarily
consisting of floor covering, structural improvements, recreation facility
improvements, swimming pool enhancements, exterior painting, and water heater
replacements. These improvements were funded from Partnership reserves and
operating cash flow. The Partnership is currently evaluating the capital
improvement needs of the property for the upcoming year. The minimum amount to
be budgeted 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.
Item 3. 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 ("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.
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 4. Submission of Matters to a Vote of Partners
-------------------------------------------
During the fiscal quarter ended October 31, 1999, no matter was submitted to a
vote of unit holders through the solicitation of proxies or otherwise.
<PAGE>
PART II
Item 5. Market for the Registrant's Common Equity and Related Security Holder
Matters
The Partnership, a publicly-held limited partnership, offered and sold 42,324
limited partnership units aggregating $42,324,000 inclusive of 100 units
purchased by the Corporate General Partner. The Partnership currently has 1,920
holders of record owning an aggregate of 42,324 Units. Affiliates of the
Corporate General Partner owned 16,519 units or 39.03% at October 31, 1999. No
public trading market has developed for the Units, and it is not anticipated
that such a market will develop in the future.
The following table sets forth the distributions made by the Partnership for the
years ended October 31, 1998 and 1999, as well as for the subsequent period from
November 1, 1999 to January 27, 2000:
Distributions
Per Limited
Aggregate Partnership Unit
--------- ----------------
(in thousands)
11/1/97 - 10/31/98 -- --
11/1/98 - 10/31/99 $2,100,000 (1) $49.45
11/1/99 - 1/27/00 $428,000 (2) $10.02
(1) Consists of $688,000 of cash from operations and $1,412,000 of cash from
previously undistributed surplus funds from a 1995 property sale.
(2) Distribution was made from cash 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 expenditures to permit any additional distributions to its
partners in fiscal year 2000 or subsequent periods. 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 such property. The reserve accounts are currently fully funded. See
"Item 6. Management's Discussion and Analysis or Plan of Operations" for
information relating to anticipated capital expenditures at the properties.
Several tender offers were made by various parties, including affiliates of the
general partners, during the fiscal years ended October 31, 1999 and 1998. As a
result of these tender offers, at October 31, 1999, AIMCO and its affiliates own
16,519 units of limited partnership units in the Partnership representing 39.03%
of the outstanding units. Subsequent to October 31, 1999, an affiliate of the
General Partners acquired an additional 7,109 units, or 16.80%, pursuant to a
tender offer. 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.
Item 6. Management's Discussion and Analysis or Plan of Operation
The matters discussed in this Form 10-KSB contain certain forward-looking
statements and involve risks and uncertainties (including changing market
conditions, competitive and regulatory matters, etc.) detailed in the disclosure
contained in this Form 10-KSB 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.
This item should be read in conjunction with the financial statements and other
items contained elsewhere in this report.
Results of Operations
The Registrant's net income for the year ended October 31, 1999, was
approximately $899,000 as compared to approximately $322,000 for the year ended
October 31, 1998. (See "Item 7. Financial Statements, Note D - Income Taxes" for
a reconciliation of these amounts to the Registrant's federal taxable income
(loss).) The increase in net income was due to an increase in total revenues and
a cumulative effect on prior years of a change in accounting principle which was
partially offset by a increase in total expenses.
Total revenues increased due to increases in rental income and other income. The
increase in rental income is primarily attributable to an increase in occupancy
at all of the Registrant's properties, with the exception of a small decrease at
River Reach, which was combined with increases in rental rates at all the
Registrant's investment properties. The increase in other income is primarily
due to an increase in telephone and lease cancellation fees.
The increase in total expenses during the twelve month period ended October 31,
1999, is attributable to an increase in operating expense, general and
administrative expenses and depreciation expense which were substantially offset
by a decrease in interest and property tax expenses. Operating expense increased
primarily due to increases in property and administrative expenses related to
the Partnership's efforts to increase occupancy. General and administrative
expenses increased primarily due to an increase in legal fees due to a lawsuit
settlement previously disclosed in the Partnership's Form 10-QSB as of April 30,
1999, and was partially offset by decreases in general partner reimbursements.
Included in general and administrative expenses at both October 31, 1999 and
1998, are reimbursements to the Corporate General Partner allowed under the
Partnership Agreement associated with its management of the Partnership. In
addition, costs associated with the quarterly and annual communication with
investors and regulatory agencies and the annual audit and appraisals required
by the Partnership Agreement are also included. The increase in depreciation
expense is due to the capital improvements and replacements in the last twelve
months. Interest expense decreased as a result of the principal payments made on
the debt encumbering all of the Partnership's properties. Property tax expense
decreased due to the timing of the receipt of tax bills.
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 in 1999 was to increase income before
the change by approximately $186,000. The cumulative effect adjustment of
approximately $253,000 is the result of applying the aforementioned change in
accounting principle retroactively and is included in income for 1999. The
accounting principle 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
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.
Liquidity and Capital Resources
At October 31, 1999, the Registrant had cash and cash equivalents of
approximately $2,813,000 as compared to approximately $3,111,000 at October 31,
1998. The decrease in cash and cash equivalents is due to approximately $612,000
of cash used in investing activities and approximately $3,020,000 of cash used
in financing activities, which was offset by approximately $3,334,000 of cash
provided by operating activities. Cash used in investing activities consisted of
capital improvements and replacements and was partially offset by withdrawals
from escrow accounts maintained by the mortgage lender. Cash used in financing
activities consisted of payments on the mortgages encumbering the Registrant's
properties and partner distributions. The Registrant invests its working capital
reserves in a money market account.
The sufficiency of existing liquid assets to meet future liquidity and capital
expenditure requirements is directly related to the level of capital
expenditures required at the properties to adequately maintain the physical
assets and other operating needs of the Registrant and to comply with Federal,
state, and local legal and regulatory requirements. The minimum amount to be
budgeted by the Partnership is expected to be approximately $437,000 in capital
improvements for all of the Partnership's properties in fiscal year 2000. The
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 Registrant's current assets are thought to be sufficient for any near-term
needs (exclusive of capital improvements) of the Registrant. The mortgage
indebtedness of approximately $25,433,000, net of discount, is 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 Registrant
will risk losing such properties through foreclosure.
During the year ended October 31, 1999, the Partnership made a distribution of
approximately $2,100,000, consisting of approximately $688,000 (approximately
$681,000, or $16.09 per Unit, to the limited partners) of cash from operations
and approximately $1,412,000 (or $33.36 per Unit) to the limited partners of
cash from previously undistributed surplus funds from a fiscal year 1995
property sale. The Partnership did not make any distributions for the fiscal
year ended October 31, 1998. The Partnership declared and paid a distribution of
approximately $428,000 (approximately $424,000, or $10.02 per unit, to the
limited partners) of cash from operations subsequent to October 31, 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 semi-annual basis. There can be no assurance, however,
that the Partnership will generate sufficient funds from operations after
required capital expenditures to permit any additional distributions to its
partners in fiscal year 2000 or subsequent periods. 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 such property. The reserve accounts are currently fully funded.
Several tender offers were made by various parties, including affiliates of the
general partners, during the fiscal years ended October 31, 1999 and 1998. As a
result of these tender offers, at October 31, 1999, AIMCO and its affiliates own
16,519 units of limited partnership units in the Partnership representing 39.03%
of the outstanding units. Subsequent to October 31, 1999, an affiliate of the
General Partners acquired an additional 7,109 units, or 16.80%, pursuant to a
tender offer. 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.
Subsequent Event
On January 3, 2000, the Partnership elected to change its fiscal year end from
October 31 to December 31, effective for the period ending December 31, 1999.
<PAGE>
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 7, 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>
Item 7. Financial Statements
SHELTER PROPERTIES VI
LIST OF FINANCIAL STATEMENTS
Report of Ernst & Young LLP, Independent Auditors
Balance Sheet - October 31, 1999
Statements of Operations - Years ended October 31, 1999 and 1998
Statements of Changes in Partners' (Deficit) Capital - Years ended October
31, 1999 and 1998
Statements of Cash Flows - Years ended October 31, 1999 and 1998
Notes to Financial Statements
<PAGE>
Report of Ernst & Young LLP, Independent Auditors
The Partners
Shelter Properties VI
We have audited the accompanying balance sheet of Shelter Properties VI as of
October 31, 1999, and the related statements of operations, changes in partners'
(deficit) capital and cash flows for each of the two years in the period ended
October 31, 1999. These financial statements are the responsibility of the
Partnership's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by the Partnership's management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Shelter Properties VI at
October 31, 1999, and the results of its operations and its cash flows for each
of the two years in the period ended October 31, 1999, in conformity with
accounting principles generally accepted in the United States.
As discussed in Note I to the financial statements, the Partnership changed its
method of accounting to capitalize the cost of exterior painting and major
landscaping effective November 1, 1998.
/s/ ERNST & YOUNG LLP
Greenville, South Carolina
February 7, 2000
<PAGE>
SHELTER PROPERTIES VI
BALANCE SHEET
(in thousands, except unit data)
October 31, 1999
Assets
Cash and cash equivalents $ 2,813
Receivables and deposits 751
Restricted escrows 756
Other assets 484
Investment properties (Notes C and F):
Land $ 4,950
Buildings and related personal property 50,208
------
55,158
Less accumulated depreciation (28,903) 26,255
------ ------
$31,059
Liabilities and Partners' (Deficit) Capital
Liabilities
Accounts payable $ 219
Tenant security deposit liabilities 214
Accrued property taxes 766
Other liabilities 468
Mortgage notes payable (Note C) 25,433
Partners' (Deficit) Capital
General partners $ (305)
Limited partners (42,324 units issued and
outstanding) 4,264 3,959
- ----- - -----
$ 31,059
See Accompanying Notes to Financial Statements
<PAGE>
SHELTER PROPERTIES VI
STATEMENTS OF OPERATIONS
(in thousands, except unit data)
Years Ended October 31,
1999 1998
---- ----
Revenues:
Rental income $ 9,972 $ 9,512
Other income 757 704
------ ------
Total revenues 10,729 10,216
------ ------
Expenses:
Operating 4,295 4,219
General and administrative 399 325
Depreciation 2,165 1,987
Interest 2,331 2,410
Property taxes 893 953
------ ------
Total expenses 10,083 9,894
------ ------
Income before cumulative effect of a change in
accounting principle 646 322
Cumulative effect on prior years of a change in
accounting for the cost of exterior painting and
major landscaping (Note I) 253 --
------ ------
Net income (Note D) $ 899 $ 322
====== ======
Net income allocated to general partners (1%) $ 9 $ 3
Net income allocated to limited partners (99%) 890 319
------ ------
$ 899 $ 322
====== ======
Net income per limited partnership unit:
Income before cumulative effect of a change in
accounting principle $ 15.11 $ 7.54
Cumulative effect on prior years of a change in
accounting for the cost of exterior painting and
major landscaping 5.92 --
------ ------
Net income $ 21.03 $ 7.54
====== ======
Distribution per limited partnership unit $ 49.45 $ --
====== ======
Proforma amounts assuming the new accounting principle was applied
retroactively:
Net income $ 646 $ 350
====== ======
Net income per limited partnership unit $ 15.11 $ 8.19
====== ======
See Accompanying Notes to Financial Statements
<PAGE>
SHELTER PROPERTIES VI
STATEMENTS OF CHANGES IN PARTNERS' (DEFICIT) CAPITAL
(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 year ended
October 31, 1998 -- 3 319 322
------ ------ ------ ------
Partners' (deficit) capital at
October 31, 1998 42,324 (307) 5,467 5,160
Distribution to partners (7) (2,093) (2,100)
Net income for the year
ended October 31, 1999 -- 9 890 899
------ ------ ------ ------
Partners' (deficit) capital
at October 31, 1999 42,324 $ (305) $ 4,264 $ 3,959
====== ====== ====== ======
See Accompanying Notes to Financial Statements
<PAGE>
SHELTER PROPERTIES VI
STATEMENTS OF CASH FLOWS
(in thousands)
Year Ended October 31,
1999 1998
Cash flows from operating activities:
Net income $ 899 $ 322
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation 2,165 1,987
Amortization of discounts and loan costs 296 311
Cumulative effect on prior years of change in
accounting principle (253) --
Change in accounts:
Receivables and deposits 163 (198)
Other assets (73) 60
Accounts payable (64) (233)
Tenant security deposit liabilities 5 16
Accrued taxes (11) 161
Other liabilities 207 32
------ ------
Net cash provided by operating activities 3,334 2,458
------ ------
Cash flows from investing activities:
Property improvements and replacements (1,482) (1,214)
Net withdrawals from (deposits to) restricted escrows 870 (68)
Net insurance proceeds from casualty loss -- 159
------ ------
Net cash used in investing activities (612) (1,123)
------ ------
Cash flows from financing activities:
Payments on mortgage notes payable (920) (856)
Distribution to partners (2,100) --
------ ------
Net cash used in financing activities (3,020) (856)
------ ------
Net (decrease) increase in cash and cash equivalents (298) 479
Cash and cash equivalents at beginning of the year 3,111 2,632
------ ------
Cash and cash equivalents at end of year $ 2,813 $ 3,111
====== ======
Supplemental disclosure of cash flow information:
Cash paid for interest $ 2,036 $ 2,100
====== ======
See Accompanying Notes to Financial Statements
<PAGE>
SHELTER PROPERTIES VI
Note to Financial Statements
October 31, 1999
Note A - Organization and Significant Accounting Policies
Organization: Shelter Properties VI (the "Partnership" or "Registrant") was
organized as a limited partnership under the laws of the State of South Carolina
on August 3, 1983. The general partner responsible for management of the
Partnership's business is Shelter Realty VI Corporation, a South Carolina
corporation (the "Corporate General Partner"). The only other general partner of
the Partnership was N. Barton Tuck, Jr. Mr. Tuck was not an affiliate of the
Corporate General Partner and was effectively prohibited by the Partnership's
partnership agreement (the "Partnership Agreement") from participating in the
management of the Partnership. In June 1999, Mr. Tuck's general partner interest
was purchased by AIMCO Properties, L.P., an affiliate of the Corporate General
Partner. The Corporate General Partner is a subsidiary of Apartment Investment
and Management Company ("AIMCO") (see "Note B - Transfer of Control"). The
directors and officers of the Corporate General Partner also serve as executive
officers of AIMCO. The Partnership Agreement provides that the Partnership is to
terminate on December 31, 2023 unless terminated prior to such date. The
Partnership commenced operations on June 29, 1984, and completed its acquisition
of apartment properties on March 28, 1985. The Partnership operates six
apartment properties located in the South, Midwest and West.
Uses of Estimates: The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
Allocation of Cash Distributions: Cash distributions by the Partnership are
allocated between general and limited partners in accordance with the provisions
of the Partnership Agreement. The Partnership Agreement provides that net cash
from operations means revenue received less operating expenses paid, adjusted
for certain specified items which primarily include mortgage payments on debt,
property improvements and replacements not previously reserved, and the effects
of other adjustments to reserves. In the following notes to financial
statements, whenever "net cash from (used by) operations" is used, it has the
aforementioned meaning. The following is a reconciliation of the subtotal in the
accompanying statements of cash flows captioned "net cash provided by operating
activities" to "net cash from operations", as defined in the Partnership
Agreement. However, "net cash from 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.
Years Ended October 31,
1999 1998
---- ----
(in thousands)
Net cash provided by operating activities $ 3,334 $ 2,458
Payments on mortgage notes payable (920) (856)
Property improvements and replacements (1,482) (1,214)
Changes in reserves for net operating
liabilities (227) 162
Changes in restricted escrows, net 870 (68)
Additional operating reserves (1,147) (482)
------ ----
Net cash provided by operations $ 428 $ 0
==== ==
The Corporate General Partner reserved approximately $1,147,000 and $482,000 on
October 31, 1999 and 1998, respectively, to fund capital improvements and
repairs at its properties.
Distributions made from reserves no longer considered necessary by the Corporate
General Partner are considered to be additional net cash from operations for
allocation purposes. During the year ended October 31, 1999, the Partnership
made a distribution of approximately $2,100,000, consisting of approximately
$688,000 (approximately $681,000 or $16.09 per Unit, to the limited partners) of
cash from operations and approximately $1,412,000 (or $33.36 per Unit) to the
limited partners of cash from previously undistributed surplus funds from a
fiscal year 1995 property sale. The Partnership declared and paid a distribution
of approximately $428,000 (approximately $424,000, or $10.02 per unit to the
limited partners) of cash from operations subsequent to October 31, 1999. The
Partnership did not make any distributions for the fiscal year ended October 31,
1998.
The Partnership Agreement provides that 99% of distributions of net cash from
operations are allocated to the limited partners until they receive net cash
from operations for such fiscal year equal to 7% of their adjusted capital
values (as defined in the Partnership Agreement), at which point the general
partners will be allocated all net cash from operations until they have received
distributions equal to 10% of the aggregate net cash from operations distributed
to partners for such fiscal year. Thereafter, the general partners will be
allocated 10% of any distributions of remaining net cash from operations for
such fiscal year.
All distributions of distributable net proceeds (as defined in the Partnership
Agreement) from property dispositions and refinancings will be allocated to the
limited partners until each limited partner has received an amount equal to a
cumulative 7% per annum of the average of the limited partners' adjusted capital
value, less any prior distributions of net cash from operations and
distributable net proceeds, and has also received an amount equal to the limited
partners' adjusted capital value. Thereafter, the general partners receive 1% of
the selling price of properties sold where they acted as a broker, and then the
limited partners will be allocated 85% of any remaining distributions of
distributable net proceeds and the general partners will receive 15%.
Distributions may be restricted by the requirement to deposit net operating
income (as defined in the mortgage note) into the Reserve Account until the
Reserve Account is funded in an amount equal to a minimum of $400 and a maximum
of $1,000 per apartment unit for each respective property for a total of
approximately $583,000 to $1,457,000. As of October 31, 1999, the Partnership
has deposits of approximately $755,000 in its Reserve Account.
Undistributed Net Proceeds from Disposition: Undistributed net proceeds from
dispositions in prior years totaled $1,412,000 at October 31, 1998. This amount
was fully distributed during the first fiscal quarter of 1999.
Allocation of Profits, Gains, and Losses: Profits, gains and losses of the
Partnership are allocated between general and limited partners in accordance
with the provisions of the Partnership Agreement.
For any fiscal year, to the extent that profits, not including gains from
property dispositions, do not exceed distributions of net cash from operations,
such profits are allocated in the same manner as such distributions. In any
fiscal year in which profits, not including gains from property dispositions,
exceed distributions of net cash from operations, such excess is treated on a
cumulative basis as if it constituted an equivalent of distributable net
proceeds and is allocated together with, and in the same manner as, that portion
of gain described in the second sentence of the following paragraph.
Any gain from property dispositions attributable to the excess, if any, of the
indebtedness relating to a property immediately prior to the disposition of such
property over the Partnership's adjusted basis in the property shall be
allocated to each partner having a negative capital account balance, to the
extent of such negative balance. The balance of any gain shall be treated on a
cumulative basis as if it constituted an equivalent amount of distributable net
proceeds and shall be allocated to the general partners to the extent that
general partners would have received distributable net proceeds in connection
therewith; the balance shall be allocated to the limited partners. However, the
interest of the general partners will be equal to at least 1% of each gain at
all times during the existence of the Partnership.
All losses, including losses attributable to property dispositions, are
allocated 99% to the limited partners and 1% to the general partners.
Accordingly, net income as shown in the statements of operations and changes in
partners' capital for 1999 and 1998 were allocated 99% to the limited partners
and 1% to the general partners. Net income per limited partnership unit for each
such year was computed as 99% of net income divided by 42,324 units outstanding.
Cash and Cash Equivalents: Cash and cash equivalents include cash on hand and in
banks, and money market accounts. At certain times, the amount of cash deposited
at a bank may exceed the limit on insured deposits.
Restricted Escrows: In relation to the mortgages at all six properties, the
mortgage lenders have required a "Replacement Reserve" for certain capital
improvements. These funds were established to cover necessary repairs and
replacements of existing improvements, debt service, out of pocket expenses
incurred for ordinary and necessary administrative tasks, and payment of real
property taxes and insurance premiums. The Partnership is required to deposit
net operating income (as defined in the mortgage note) from each property to the
respective reserve account until the accounts equal the minimum balance of $400
and a maximum balance of $1,000 per apartment unit for each respective property.
The minimum balance of $400 per apartment unit has currently been attained;
however, the maximum balance of $1,000 per apartment unit has not been attained.
At October 31, 1999, the balance was approximately $756,000.
Other Reserves: The Corporate General Partner may also designate a portion of
cash generated from operations as other reserves in determining net cash from
operations. Per the Partnership Agreement, the Corporate General Partner
designated as other reserves an amount equal to the net liabilities related to
the operations of apartment properties during the current fiscal year that are
expected to require the use of cash during the next fiscal year. The changes in
other reserves during 1999 and 1998 were a decrease of approximately $227,000
and an increase of approximately $162,000, respectively, which amounts were
determined by considering changes in the balances of receivables and deposits,
other assets, accounts payable, tenant security deposit liabilities, accrued
taxes and other liabilities. At this time, the Corporate General Partner expects
to continue to adjust other reserves based on the net change in the
aforementioned account balances.
Investment Properties: Investment properties consist of six apartment complexes
and are stated at cost. Acquisition fees are capitalized as a cost of real
estate. In accordance with Financial Accounting Standards Board Statement No.
121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to Be Disposed Of", the Partnership records impairment losses on
long-lived assets used in operations when events and circumstances indicate that
the assets might be impaired and the undiscounted cash flows estimated to be
generated by those assets are less than the carrying amounts of those assets.
Costs of apartment properties that have been permanently impaired have been
written down to appraised value. The Corporate General Partner relies on the
annual appraisals performed by the outside appraisers for the estimated value of
the Partnership's properties. There are three recognized approaches or
techniques available to the appraiser. When applicable, these approaches are
used to process the data considered significant to each to arrive at separate
value indications. In all instances the experience of the appraiser, coupled
with his objective judgment, plays a major role in arriving at the conclusions
of the indicated value for which the final estimate of value is made. The three
approaches commonly known are the cost approach, the sales comparison approach,
and the income approach. The cost approach is often not considered to be
reliable due to the lack of land sales and the significant amount of
depreciation and, therefore, is often not presented. Upon receipt of the
appraisals, any property which is stated on the books of the Partnership above
the estimated value given in the appraisal, is written down to the estimated
value given by the appraiser. The appraiser assumes a stabilized occupancy at
the time of the appraisal and, therefore, any impairment of value is considered
to be permanent by the Corporate General Partner. No adjustments for impairment
of value were recorded in the years ended October 31, 1999 and 1998.
Depreciation: Depreciation is provided by the straight-line method over the
estimated lives of the apartment properties and related personal property. For
Federal income tax purposes, the accelerated cost recovery method is used (1)
for real property over 15 years for the initial cost of Carriage House
Apartments, 18 years for other additions acquired before May 9, 1985, and 19
years for additions after May 8, 1985, and before January 1, 1987, and (2) for
personal property over 5 years for additions prior to January 1, 1987. As a
result of the Tax Reform Act of 1986, for additions after December 31, 1986, the
modified accelerated cost recovery method is used for depreciation of (1) real
property additions over 27.5 years and (2) personal property additions over 7
years.
Effective November 1, 1998, the Partnership changed its method of accounting to
capitalize the cost of exterior painting and major landscaping (see "Note I").
Loan Costs: Loan costs of approximately $943,000, less accumulated amortization
of approximately $651,000, are included in other assets and are being amortized
on a straight-line basis over the life of the loans.
Tenant Security Deposits: The Partnership requires security deposits from
lessees for the duration of the lease and such deposits are included in
receivables and deposits. Deposits are refunded when the tenant vacates,
provided the tenant has not damaged its space and is current on its rental
payments.
Leases: The Partnership generally leases apartment units for twelve-month terms
or less. The Partnership recognizes income as earned on its leases. In addition,
the Corporate General Partner's policy is to offer rental concessions during
particularly slow months or in response to heavy competition from other similar
complexes in the area. Concessions are charged against rental income as
incurred.
Segment Reporting: Statement of Financial Standards ("SFAS") No. 131, Disclosure
about Segments of an Enterprise and Related Information ("Statement 131")
established standards for the way that public business enterprises report
information about operating segments in annual financial statements and requires
that those enterprises report selected information about operating segments in
interim financial reports. It also establishes standards for related disclosures
about products and services, geographic areas, and major customers. See "Note G"
for required disclosure.
Advertising: The Partnership expenses the costs of advertising as incurred.
Advertising expense, included in operating expense, was approximately $157,000
and $134,000 for the years ended October 31, 1999 and 1998, respectively.
Fair Value of Financial Instruments: SFAS No. 107, "Disclosures about Fair Value
of Financial Instruments", as amended by SFAS No. 119, "Disclosures about
Derivative Financial Instruments and Fair Value of Financial Instruments",
requires disclosure of fair value information about financial instruments,
whether or not recognized in the balance sheet, for which it is practicable to
estimate fair value. Fair value is defined in the SFAS as the amount at which
the instruments could be exchanged in a current transaction between willing
parties, other than in a forced or liquidation sale. The Partnership believes
that the carrying amount of its financial instruments (except for long term
debt) approximates their fair value due to the short term maturity of these
instruments. The fair value of the Partnership's long term debt, after
discounting the scheduled loan payments at an estimated borrowing rate currently
available to the Partnership, approximates its carrying balance.
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 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 had had or will have a
material effect on the affairs and operations of the Partnership.
Note C - Mortgage Notes Payable
The principle terms of mortgage notes payable are as follows:
Principal Monthly Principal
Balance At Payment Stated Balance
October 31, Including Interest Maturity Due At
Property 1999 Interest Rate Date Maturity
- -------- ---- -------- ---- ---- --------
(in thousands) (in thousands)
Rocky Creek
1st mortgage $ 1,991 $ 19 7.60% 11/15/02 $ 1,737
2nd mortgage 74 (a) 7.60% 11/15/02 74
Carriage House
1st mortgage 1,836 17 7.60% 11/15/02 1,601
2nd mortgage 68 (a) 7.60% 11/15/02 68
Nottingham Square
1st mortgage 7,188 68 7.60% 11/15/02 6,268
2nd mortgage 268 2 7.60% 11/15/02 268
Foxfire/Barcelona
1st mortgage 5,195 49 7.60% 11/15/02 4,531
2nd mortgage 193 1 7.60% 11/15/02 193
River Reach
1st mortgage 6,754 64 7.60% 11/15/02 5,890
2nd mortgage 252 2 7.60% 11/15/02 252
Village Garden
1st mortgage 2,338 22 7.60% 11/15/02 2,039
2nd mortgage 87 1 7.60% 11/15/02 87
------ ---- ------
26,244 $ 245 $23,008
==== ======
Less unamortized discounts (811)
-------
Total $25,433
======
(a) Monthly payment including interest is less than $1,000.
The Partnership exercised interest rate buy-down options for the six properties
when the debt was refinanced in 1992, thereby, reducing the stated rate from
8.76% to 7.6%. The fee for the interest rate reduction amounted to approximately
$2,433,000 and is being amortized as a loan discount on the interest method over
the life of the loans. The unamortized discount fee is reflected as a reduction
of the mortgage notes payable and increases the effective rate of the debt to
8.76%.
The mortgage notes payable are non-recourse and are secured by pledge of the
respective apartment properties and by pledge of revenues from the respective
apartment properties. The notes could not be prepaid prior to November 15, 1997,
thereafter, prepayment penalties are required if repaid prior to maturity.
Further, the properties may not be sold subject to existing indebtedness.
The estimated fair values of the Partnership's aggregate debt is approximately
$26,244,000. This estimate is not necessarily indicative of the amounts the
Partnership may pay in actual market transactions.
Scheduled principal payments of mortgage notes payable subsequent to October 31,
1999 are as follows (in thousands):
2000 $ 998
2001 1,076
2002 1,161
2003 23,009
------
$26,244
Note D - Income Taxes
The Partnership has received a ruling from the Internal Revenue Service that it
will be classified as a partnership for Federal income tax purposes.
Accordingly, no provision for income taxes is made in the financial statements
of the Partnership. Taxable income or loss of the Partnership is reported in the
income tax returns of its partners.
The following is a reconciliation of reported net income and Federal taxable
income (loss) (in thousands, except per unit data):
1999 1998
Net income as reported $ 899 $ 322
Add (deduct):
Amortization of present value
discounts 9 (2)
Depreciation differences (264) (333)
Change in prepaid rental income 69 (44)
Cumulative effect on prior years
of a change in accounting
principle (253) --
Other 9 20
---- ----
Federal taxable income (loss) $ 469 $ (37)
==== ====
Federal taxable income (loss) per
limited partnership unit $ 10.96 $ (.87)
====== =====
The following is a reconciliation between the Partnership's reported amounts and
Federal tax basis of net assets and liabilities (in thousands):
Net assets as reported $ 3,959
Land and buildings 3,379
Accumulated depreciation (15,151)
Syndication 5,286
Other 160
-------
Net liabilities - tax basis $ (2,367)
=======
Note E - 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 as 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 during the years
ended October 31, 1999 and 1998:
1999 1998
---- ----
(in thousands)
Property management fees (included in
operating expense) $ 543 $ 512
Reimbursement for services of affiliates
(included in operating, general and
administrative expenses, and investment
properties) 204 240
During the years ended October 31, 1999 and 1998, affiliates of the Corporate
General Partner were entitled to receive 5% of the gross receipts from all of
Registrant's properties as compensation for providing property management
services. The Registrant paid to such affiliates approximately $543,000 and
$512,000 for the years ended October 31, 1999 and 1998, respectively.
Affiliates of the Corporate General Partner received reimbursements of
accountable administrative expense amounting to approximately $204,000 and
$240,000 for the years ended October 31, 1999 and 1998, respectively.
Several tender offers were made by various parties, including affiliates of the
General Partners, during the fiscal years ended October 31, 1999 and 1998. As a
result of these tender offers, at October 31, 1999, AIMCO and its affiliates own
16,519 units of limited partnership units in the Partnership representing 39.03%
of the outstanding units. Subsequent to October 31, 1999, an affiliate of the
General Partners acquired an additional 7,109 units, or 16.80%, pursuant to a
tender offer. 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 F - Real Estate and Accumulated Depreciation
Initial Cost
To Partnership
--------------
(in thousands)
Buildings Cost
and Related Capitalized
Personal Subsequent to
Description Encumbrances Land Property Acquisition
----------- ------------ ---- -------- -----------
(in thousands) (in thousands)
Rocky Creek $ 2,065 $ 168 $ 3,821 $ 641
Carriage House 1,904 166 3,038 818
Nottingham Square 7,456 1,133 9,980 4,094
Foxfire/Barcelona 5,388 1,191 9,998 1,109
River Reach 7,006 1,872 10,854 1,843
Village Garden 2,425 420 3,050 962
----- ------ ------ -----
Totals $26,244 $ 4,950 $40,741 $ 9,467
====== ====== ====== ======
Gross Amount At Which Carried
At October 31, 1999
-------------------
(in thousands)
Buildings
And
<TABLE>
<CAPTION>
Related Date of Depreciable
Personal Accumulated Construc- Date Life-
Description Land Property Total Depreciation tion Acquired Years
<S> <C> <C> <C> <C> <C> <C> <C>
Rocky Creek Apartments
Augusta, Georgia $ 168 $ 4,462 $ 4,630 $ 2,392 1979 06/29/84 5-35
Carriage House Apartments
Gastonia, North Carolina 166 3,856 4,022 2,379 1970-1971 06/29/84 5-27
Nottingham Square
Apartments
Des Moines, Iowa 1,133 14,074 15,207 8,008 1972 08/31/84 5-29
Foxfire/Barcelona
Apartments
Durham, North Carolina 1,191 11,107 12,298 6,418 1973 03/28/85 5-29
1975 09/30/84 5-31
River Reach Apartments
Jacksonville, Florida 1,872 12,697 14,569 7,598 1971 01/30/85 5-27
Village Garden Apartments
Fort Collins, Colorado 420 4,012 4,442 2,108 1974 03/01/85 5-30
------ ------ ------ ------
Totals $ 4,950 $50,208 $55,158 $28,903
====== ====== ====== ======
</TABLE>
Reconciliation of "Investment Properties and Accumulated Depreciation" (in
thousands):
Years Ended October 31,
1999 1998
---- ----
Investment Properties
Balance at beginning of year $53,423 $52,209
Property improvements 1,482 1,214
Cumulative effect on prior
years of change in accounting
principle 253 --
------ ------
Balance at end of year $55,158 $53,423
====== ======
Accumulated Depreciation
Balance at beginning of year $26,738 $24,751
Additions charged to expense 2,088 1,987
Cumulative effect on prior
years of change in accounting
principle 77 --
------ ------
Balance at end of year $28,903 $26,738
====== ======
The aggregate cost of the real estate for Federal income tax purposes at October
31, 1999 and 1998 is approximately $58,536,000 and approximately $57,054,000,
respectively. The accumulated depreciation taken for Federal income tax purposes
at October 31, 1999 and 1998 is approximately $44,054,000 and approximately
$41,625,000, respectively.
Note G - 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.
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 years ended October 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 $ 9,972 $ -- $ 9,972
Other income 704 53 757
Interest expense 2,331 -- 2,331
Depreciation 2,165 -- 2,165
General and administrative expense -- 399 399
Cumulative effect on prior years
of change in accounting
principle 253 -- 253
Segment profit (loss) 1,245 (346) 899
Total assets 30,054 1,005 31,059
Capital expenditures for investment
properties 1,482 -- 1,482
1998 Residential Other Totals
---- ----------- ----- ------
Rental income $ 9,512 $ -- $ 9,512
Other income 574 130 704
Interest expense 2,410 -- 2,410
Depreciation 1,987 -- 1,987
General and administrative expense -- 325 325
Segment profit (loss) 517 (195) 322
Total assets 29,421 3,419 32,840
Capital expenditures for investment
properties 1,214 -- 1,214
Note H - 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 ("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.
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.
Note I - Change in Accounting Principle
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 in 1999 was to increase income before
the change by approximately $186,000 ($4.35 per limited partnership unit). The
cumulative effect adjustment of approximately $253,000 is the result of applying
the aforementioned change in accounting principle retroactively and is included
in income for 1999. The pro forma amounts shown on the statements of operations
have been adjusted for the effect of retroactive application of this change. The
accounting principle change will not have an affect on cash flow, funds
available for distribution or fees payable to the Corporate General Partner and
affiliates.
The effect of the new method for each quarter of 1999 on net income and net
income per limited partnership unit before the cumulative effect is as follows:
Increase/(Decrease) in Per limited
Net income partnership unit
---------- ----------------
First Quarter $(19,000) $ (.44)
Second Quarter (10,000) (.23)
Third Quarter 170,000 3.98
Fourth Quarter 45,000 1.04
Note J - Subsequent Event
On January 3, 2000, the Partnership elected to change its fiscal year end from
October 31 to December 31, effective for the period ending December 31, 1999.
<PAGE>
Item 8. Changes in and Disagreements with Accountant on Accounting and Financial
Disclosures
None.
<PAGE>
PART III
Item 9. Directors, Executive Officers, Promoters and Control Persons;
Compliance with Section 16(a) of the Exchange Act
The Registrant has no officers or directors. The corporate general partner is
Shelter Realty VI Corporation ("Corporate General Partner"). The names and ages
of, as well as the position and offices held by, the present executive officers
and director of the Corporate General Partner are set forth below. There are no
family relationships between or among any officers or directors.
Name Age Position
Patrick J. Foye 42 Executive Vice President and Director
Martha L. Long 40 Senior Vice President and Controller
Patrick J. Foye has been Executive Vice President and Director of the Corporate
General Partner since October 1, 1998. Mr. Foye has served as Executive Vice
President of AIMCO since May 1998. Prior to joining AIMCO, Mr. Foye was a
partner in the law firm of Skadden, Arps, Slate, Meagher & Flom LLP from 1989 to
1998 and was Managing Partner of the firm's Brussels, Budapest and Moscow
offices from 1992 through 1994. Mr. Foye is also Deputy Chairman of the Long
Island Power Authority and serves as a member of the New York State
Privatization Council. He received a B.A. from Fordham College and a J.D. from
Fordham University Law School.
Martha L. Long has been Senior Vice President and Controller of the Corporate
General Partner and AIMCO since October 1998, as a result of the acquisition of
Insignia Financial Group, Inc. From June 1994 until January 1997, she was the
Controller for Insignia, and was promoted to Senior Vice President - Finance and
Controller in January 1997, retaining that title until October 1998. From 1988
to June 1994, Ms. Long was Senior Vice President and Controller for The First
Savings Bank, FSB in Greenville, South Carolina.
Item 10. Executive Compensation
None of the directors and officers of the Corporate General Partner received any
remuneration from the Registrant.
Item 11. Security Ownership of Certain Beneficial Owners and Management
Except as noted below, no person or entity was known by the Registrant to be the
beneficial owner of more than 5% of the Limited Partnership Units of the
Registrant as of October 31, 1999.
Entity Number of Units Percentage
Cooper River Properties, LLC
(an affiliate of AIMCO) 3,364 7.948%
Insignia Properties LP
(an affiliate of AIMCO) 11,547 27.282%
AIMCO Properties, L.P.
(an affiliate of AIMCO) 1,608 3.799%
Cooper River Properties LLC and Insignia Properties LP are directly ultimately
owned by AIMCO. Their business address is 55 Beattie Place, Greenville, South
Carolina 29602.
AIMCO Properties, L.P. is indirectly ultimately owned by AIMCO. Their business
address is 2000 South Colorado Boulevard, Denver, Colorado 80222.
No director or officer of the Corporate General Partner owns any units. The
Corporate General Partner owns 100 units as required by the terms of the
Partnership Agreement. AIMCO Properties, L.P., the other general partner, has
acquired 1,608 units during the current fiscal year.
Item 12. Certain Relationships and Related Transactions
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 as 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 during the years
ended October 31, 1999 and 1998:
1999 1998
---- ----
(in thousands)
Property management fees (included in
operating expense) $ 543 $ 512
Reimbursement for services of affiliates
(included in operating, general and
administrative expenses properties) 204 240
During the years ended October 31, 1999 and 1998, affiliates of the Corporate
General Partner were entitled to receive 5% of the gross receipts from all of
Registrant's properties as compensation for providing property management
services. The Registrant paid to such affiliates approximately $543,000 and
$512,000 for the years ended October 31, 1999 and 1998, respectively.
Affiliates of the Corporate General Partner received reimbursements of
accountable administrative expense amounting to approximately $204,000 and
$240,000 for the years ended October 31, 1999 and 1998, respectively.
Several tender offers were made by various parties, including affiliates of the
General Partners, during the fiscal years ended October 31, 1999 and 1998. As a
result of these tender offers, at October 31, 1999, AIMCO and its affiliates own
16,519 units of limited partnership units in the Partnership representing 39.03%
of the outstanding units. Subsequent to October 31, 1999, an affiliate of the
General Partners acquired an additional 7,109 units, or 16.80%, pursuant to a
tender offer. 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.
<PAGE>
PART IV
Item 13. Exhibits and Reports on Form 8-K
(a) Exhibits:
Exhibit 18, Independent Accountants' Preferability Letter, is
filed as an exhibit to this report.
Exhibit 27, Financial Data Schedule, is filed as an exhibit to
this report.
(b) Reports on Form 8-K filed during the fiscal fourth quarter
of 1999:
None.
<PAGE>
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the Registrant has
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:
In accordance with the Exchange Act, this report has been signed below by the
following persons on behalf of the Registrant and in the capacities on the date
indicated.
/s/Patrick J. Foye Executive Vice President Date:
- ------------------
Patrick J. Foye and Director
/s/Martha L. Long Senior Vice President Date:
- -----------------
Martha L. Long and Controller
<PAGE>
SHELTER PROPERTIES VI
EXHIBIT INDEX
Exhibit Number Description of Exhibit
3 See Exhibit 4(a)
4 (a) Amended and Restated Certificate and Agreement of Limited Partnership
(included as Exhibit A to the Prospectus of Registrant dated March 22,
1984 contained in Amendment No. 1 to Registration Statement No.
2-86995, of Registrant filed March 21, 1984 (the "Prospectus") and
incorporated herein by reference.)
(b) Subscription Agreement and Signature Page (included as Exhibits 4(A)
and 4 (B) 8 to the Prospectus and incorporated herein by reference).
10(i) Contracts related to acquisition of properties.
(a) Purchase Agreement dated March 19, 1984 between ICA-Broad Reach
Limited Partnership and U.S. Shelter Corporation to acquire River
Village Apartments.*
(b) Purchase Agreement dated March 8, 1984 between Rocky Creek Associates
Limited Partnership and U.S. Shelter Corporation to acquire Rocky
Creek Apartments.*
(c) Purchase Agreement dated January 16, 1984 between Carriage House
Associates Limited Partnership and U.S. Shelter Corporation to acquire
Carriage House Apartments.*
*Filed as Exhibits 10(D) through 10(F), respectively, to Amendment No.
1 of Registration Statement No. 2-86995 of Registrant filed March 21,
1984 and incorporated herein by reference.
(d) Purchase Agreement dated May 8, 1984 between Daniel Realty Corporation
and U.S. Shelter Corporation to acquire Marble Hill Apartments. (Filed
as Exhibit 10(G) to Post-Effective Amendment No, 1 of Registration
Statement No. 2-86995 of Registrant filed June 25, 1984 and
incorporated herein by reference.)
(e) Purchase Agreement dated June 6, 1984 between Charleston Court
Associates and U.S. Shelter Corporation to acquire Nottingham Square
Apartments. (Filed as Exhibit 10(H) to Post-Effective Amendment No, 2
of Registration Statement No. 2-86995 of Registrant filed July 18,
1984 and incorporated herein by reference.)
(f) Purchase Agreement dated July 10, 1984 between National Properties
Investors II and U.S. Shelter Corporation to acquire Foxfire
Apartments. (Filed as Exhibit 10(I) to Post-Effective Amendment No, 2
of Registration Statement No. 2-86995 of Registrant filed July 18,
1984 and incorporated herein by reference.)
(g) Purchase Agreement dated August 24, 1984 between American Century
Corporation and U.S. Shelter Corporation to acquire River Reach
Apartments. (Filed as Exhibit 10(I) to Post-Effective Amendment No, 2
of Registration Statement No. 2-86995 of Registrant filed July 18,
1984 and incorporated herein by reference.)
(h) Purchase Agreement dated January 7, 1985 between Village Garden
Apartments Fort Collins and U.S. Shelter Corporation to acquire
Village Garden Apartments. (Filed as Exhibit a(5) to Form 10-QSB for
the Quarter ended January 31, 1985 filed March 14, 1985 and
incorporated herein by reference.
(i) Purchase Agreement dated January 18, 1985 between Barcelona Investors
and U.S. Shelter Corporation to acquire Barcelona Apartments. (Filed
as Exhibit a(6) to Form 10-QSB for the Quarter ended January 31, 1985
filed March 14, 1985 and incorporated herein by reference.
(ii) Form of Management Agreement with U.S. Shelter Corporation
subsequently assigned to Shelter Management Group, L.P. (now known as
Insignia Management Group, L.P.). (Filed with Amendment No. 1 of
Registration Statement No. 2-86995 of Registrant filed March 21, 1984
and incorporation herein by reference).
(iii) Contracts related to refinancing of debt:
(a) First Deeds of Trust and Security Agreements dated October 28, 1992
between Shelter Properties VI and Joseph Philip Forte (Trustee) and
First Commonwealth Realty Credit Corporation, a Virginia Corporation,
securing the following properties: Rocky Creek, Carriage House, Marble
Hills Nottingham, Foxfire/Barcelona, River Reach and Village Garden.*
(b) Second Deeds of Trust and Security Agreements dated October 28, 1992
between Shelter Properties VI and Joseph Philip Forte (Trustee) and
First Commonwealth Realty Credit Corporation, a Virginia Corporation,
securing the following properties: Rocky Creek, Carriage House, Marble
Hills Nottingham, Foxfire/Barcelona, River Reach and Village Garden.*
(c) First Assignments of Leases and Rents dated October 28, 1992 between
Shelter Properties VI and Joseph Philip Forte (Trustee) and First
Commonwealth Realty Credit Corporation, a Virginia Corporation,
securing the following properties: Rocky Creek, Carriage House, Marble
Hills, Nottingham, Foxfire/Barcelona, River Reach and Village Garden.
(d) Second Assignment of Leases and Rents dated October 28, 1992 between
Shelter Properties VI and Joseph Philip Forte (Trustee) and First
Commonwealth Realty Credit Corporation, a Virginia Corporation,
securing the following properties: Rocky Creek, Carriage House, Marble
Hills, Nottingham, Foxfire/Barcelona, River Reach and Village Garden.*
(e) First Deeds of Trust Notes dated October 28, 1992 between Shelter
Properties VI and First Commonwealth Realty Credit Corporation,
relating to the following properties: Rocky Creek, Carriage House,
Marble Hills, Nottingham, Foxfire/Barcelona, River Reach and Village
Garden.*
(f) Second Deeds of Trust Notes dated October 28, 1992 between Shelter
Properties VI and First Commonwealth Realty Credit Corporation,
relating to the following properties: Rocky Creek, Carriage House,
Marble Hills, Nottingham, Foxfire/Barcelona, River Reach and Village
Garden.*
*Filed as Exhibits 10 (iii) a through 10(iii) f, respectively, to Form
10-KSB - Annual or Transitional Report filed January 29, 1993 and
incorporated herein by reference.
(iv) Contracts related to disposition of properties:
(a) Agreement of Purchase and Sale dated June 2, 1995, between Shelter
Properties VI and United Dominion Realty Trust, Inc., relating to
Marble Hills Apartments.
18 Independent Accountants' Preferability Letter for change in
accounting principle.
27 Financial Data Schedule.
<PAGE>
Exhibit 18
February 7, 2000
Mr. Patrick J. Foye
Executive Vice President
Shelter Realty VI Corporation
Corporate General Partner of Shelter Properties VI
55 Beattie Place
P.O. Box 1089
Greenville, South Carolina 29602
Dear Mr. Foye:
Note I of Notes to the Financial Statements of Shelter Properties VI included in
its Form 10-KSB for the year ended October 31, 1999 describes a change in the
method of accounting to capitalize exterior painting and major landscaping,
which would have been expensed under the old policy. You have advised us that
you believe that the change is to a preferable method in your circumstances
because it provides a better matching of expenses with the related benefit of
the expenditures and is consistent with policies currently being used by your
industry and conforms to the policies of the Corporate General Partner.
There are no authoritative criteria for determining a preferable method based on
the particular circumstances; however, we conclude that the change in the method
of accounting for exterior painting and major landscaping is to an acceptable
alternative method which, based on your business judgment to make this change
for the reasons cited above, is preferable in your circumstances.
Very truly yours,
/s/Ernst & Young LLP
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from Shelter
Properties VI 1999 Fiscal Year-end 10-KSB and is qualified in its entirety by
reference to such 10-KSB filing.
</LEGEND>
<CIK> 0000730013
<NAME> Shelter Properties VI
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> OCT-31-1999
<PERIOD-START> NOV-01-1998
<PERIOD-END> OCT-31-1999
<CASH> 2,813
<SECURITIES> 0
<RECEIVABLES> 751
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0 <F1>
<PP&E> 55,158
<DEPRECIATION> 28,903
<TOTAL-ASSETS> 31,059
<CURRENT-LIABILITIES> 0 <F1>
<BONDS> 25,433
0
0
<COMMON> 0
<OTHER-SE> 3,959
<TOTAL-LIABILITY-AND-EQUITY> 31,059
<SALES> 0
<TOTAL-REVENUES> 10,729
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 7,752
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,331
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 646
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 253
<NET-INCOME> 899
<EPS-BASIC> 21.03 <F2>
<EPS-DILUTED> 0
<FN>
<F1> Registrant has an unclassified balance sheet.
<F2> Multiplier is 1.
</FN>
</TABLE>
