FORM 10-QSB--QUARTERLY OR TRANSITIONAL REPORT UNDER SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
Quarterly or Transitional Report
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-QSB
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended June 30, 2000
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from ________________ to ________________
Commission file number 0-13261
SHELTER PROPERTIES VI
(Exact name of small business issuer as specified in its charter)
South Carolina 57-0755618
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
55 Beattie Place, P.O. Box 1089
Greenville, South Carolina 29602
(Address of principal executive offices)
(864) 239-1000
(Issuer's telephone number)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes X No___
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
a)
SHELTER PROPERTIES VI
BALANCE SHEET
(Unaudited)
(in thousands, except per unit data)
June 30, 2000
<TABLE>
<CAPTION>
Assets
<S> <C> <C>
Cash and cash equivalents $ 1,080
Receivables and deposits 282
Restricted escrows 1,393
Other assets 330
Investment properties:
Land $ 4,950
Buildings and related personal property 50,879
55,829
Less accumulated depreciation (30,286) 25,543
$ 28,628
Liabilities and Partners' (Deficit) Capital
Liabilities
Accounts payable $ 157
Tenant security deposit liabilities 211
Accrued property taxes 710
Other liabilities 305
Mortgage notes payable 24,931
Partners' (Deficit) Capital
General partners $ (321)
Limited partners (42,324 units issued and
outstanding) 2,635 2,314
$ 28,628
See Accompanying Notes to Financial Statements
</TABLE>
b)
SHELTER PROPERTIES VI
STATEMENTS OF OPERATIONS
(Unaudited)
(in thousands, except unit data)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
2000 1999 2000 1999
Revenues:
<S> <C> <C> <C> <C>
Rental income $ 2,633 $ 2,514 $ 5,230 $ 4,950
Other income 217 173 391 343
Total revenues 2,850 2,687 5,621 5,293
Expenses:
Operating 1,131 1,022 2,279 2,135
General and administrative 93 95 201 181
Depreciation 475 499 1,088 1,009
Interest 561 579 1,159 1,164
Property taxes 246 219 531 450
Total expenses 2,506 2,414 5,258 4,939
Net income $ 344 $ 273 $ 363 $ 354
Net income allocated
to general partners (1%) $ 3 $ 3 $ 4 $ 4
Net income allocated
to limited partners (99%) 341 270 359 350
$ 344 $ 273 $ 363 $ 354
Net income per limited
partnership unit $ 8.06 $ 6.38 $ 8.48 $ 8.27
Distribution per limited
partnership unit $ 44.91 $ -- $ 44.91 $ --
See Accompanying Notes to Financial Statements
</TABLE>
c)
SHELTER PROPERTIES VI
STATEMENT OF CHANGES IN PARTNERS' (DEFICIT) CAPITAL
(Unaudited)
(in thousands, except unit data)
<TABLE>
<CAPTION>
Limited
Partnership General Limited
Units Partners Partners Total
<S> <C> <C> <C> <C>
Original capital contributions 42,324 $ 2 $42,324 $42,326
Partners' (deficit) capital at
December 31, 1999 42,324 $ (306) $ 4,177 $ 3,871
Distributions to partners (19) (1,901) (1,920)
Net income for the six months
ended June 30, 2000 -- 4 359 363
Partners' (deficit) capital at
June 30, 2000 42,324 $ (321) $ 2,635 $ 2,314
See Accompanying Notes to Financial Statements
</TABLE>
d)
SHELTER PROPERTIES VI
STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
<TABLE>
<CAPTION>
Six Months Ended
June 30,
2000 1999
Cash flows from operating activities:
<S> <C> <C>
Net income $ 363 $ 354
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation 1,088 1,009
Amortization of discounts and loan costs 182 145
Change in accounts:
Receivables and deposits 380 (38)
Other assets (13) (78)
Accounts payable (53) 18
Tenant security deposit liabilities (4) 18
Accrued property taxes 55 (8)
Other liabilities 1 (37)
Net cash provided by operating activities 1,999 1,383
Cash flows from investing activities:
Property improvements and replacements (343) (677)
Net (deposits to) withdrawals from restricted escrows (627) 821
Net cash (used in) provided by investing
activities (970) 144
Cash flows from financing activities:
Payments on mortgage notes payable (502) (458)
Distribution paid to partners (2,348) --
Net cash used in financing activities (2,850) (458)
Net (decrease) increase in cash and cash equivalents (1,821) 1,069
Cash and cash equivalents at beginning of period 2,901 1,323
Cash and cash equivalents at end of period $ 1,080 $ 2,392
Supplemental disclosure of cash flow information:
Cash paid for interest $ 977 $ 1,021
Distributions paid to partners include $428,000 which was accrued at December
31, 1999 and paid during January 2000.
See Accompanying Notes to Financial Statements
</TABLE>
e)
SHELTER PROPERTIES VI
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
Note A - Basis of Presentation
The accompanying unaudited financial statements of Shelter Properties VI (the
"Partnership" or "Registrant") have been prepared in accordance with generally
accepted accounting principles for interim financial information and with the
instructions to Form 10-QSB and Item 310 (b) of Regulation S-B. Accordingly,
they do not include all of the information and footnotes required by generally
accepted accounting principles for complete financial statements. In the opinion
of Shelter Realty VI Corporation (the "Corporate General Partner"), all
adjustments (consisting of normal recurring accruals) considered necessary for a
fair presentation have been included. Operating results for the three and six
month periods ended June 30, 2000, are not necessarily indicative of the results
that may be expected for the year ending December 31, 2000. For further
information, refer to the financial statements and footnotes thereto included in
the Partnership's Annual Report on Form 10-KSB for the year ended October 31,
1999.
Change in Fiscal Year End: The Partnership elected to change its fiscal year end
from October 31 to December 31, as announced in its Form 8-K filed on January
12, 2000. This quarterly report presents the unaudited results of the
Partnership's operations for the three and six months ended June 30, 2000 and
1999.
Reclassifications
Certain reclassifications have been made to the 1999 information to conform to
the 2000 presentation.
Note B - Transfer of Control
Pursuant to a series of transactions which closed on October 1, 1998 and
February 26, 1999, Insignia Financial Group, Inc. and Insignia Properties Trust
merged into Apartment Investment and Management Company ("AIMCO"), a publicly
traded real estate investment trust, with AIMCO being the surviving corporation
(the "Insignia Merger"). As a result, AIMCO acquired 100% ownership interest in
the Corporate General Partner. The Corporate General Partner does not believe
that this transaction has had or will have a material effect on the affairs and
operations of the Partnership.
Note C - Reconciliation of Cash Flows
The following is a reconciliation of the subtotal on the accompanying statements
of cash flows captioned "net cash provided by operating activities" to "net cash
used in operations", as defined in the partnership agreement of the Partnership
(the "Partnership Agreement"). However, "net cash used in operations" should not
be considered an alternative to net income as an indicator of the Partnership's
operating performance or to cash flows as a measure of liquidity.
<TABLE>
<CAPTION>
Six Months Ended
June 30,
2000 1999
(in thousands)
<S> <C> <C>
Net cash provided by operating activities $ 1,999 $ 1,383
Payments on mortgage notes payable (502) (458)
Property improvements and replacements (343) (677)
Change in restricted escrows, net (627) 821
Changes in reserves for net operating
liabilities (366) 125
Additional reserves (161) (1,194)
Net cash used in operations $ -- $ --
</TABLE>
The Corporate General Partner believed it to be in the best interest of the
Partnership to reserve net cash from operations of approximately $161,000 and
$1,194,000 at June 30, 2000 and 1999, respectively, to fund continuing capital
improvements and repairs at the Partnership's six investment properties.
Note D - Transactions with Affiliated Parties
The Partnership has no employees and is dependent on the Corporate General
Partner and its affiliates for the management and administration of all
Partnership activities. The Partnership Agreement provides for (i) certain
payments to affiliates for services and (ii) reimbursement of certain expenses
incurred by affiliates on behalf of the Partnership. The following transactions
with the Corporate General Partner and/or its affiliates were incurred for each
of the six months ended June 30, 2000 and 1999:
2000 1999
(in thousands)
Property management fees (included in
operating expenses) $296 $269
Reimbursement for services of affiliates
(included in general and administrative
expenses and investment properties) 105 90
During the six months ended June 30, 2000 and 1999, affiliates of the Corporate
General Partner were entitled to receive 5% of gross receipts from all of the
Registrant's properties as compensation for providing property management
services. The Registrant paid to such affiliates approximately $296,000 and
$269,000 for the six months ended June 30, 2000 and 1999, respectively.
Affiliates of the Corporate General Partner received reimbursements of
accountable administrative expenses amounting to approximately $105,000 and
$90,000 for the six months ended June 30, 2000 and 1999, respectively.
AIMCO and its affiliates currently own 24,320 limited partnership units in the
Partnership representing approximately 57.46% of the outstanding units. A number
of these units were acquired pursuant to tender offers made by AIMCO or its
affiliates. It is possible that AIMCO or its affiliates will make one or more
additional offers to acquire additional limited partnership interests in the
Partnership for cash or in exchange for units in the operating partnership of
AIMCO. In this regard, on July 24, 2000, an affiliate of AIMCO commenced a
tender offer to purchase any and all of the remaining partnership interests for
a purchase price of $531. Under the Partnership Agreement, unitholders holding a
majority of the Units are entitled to take action with respect to a variety of
matters. As a result of its ownership of approximately 57.46% of the outstanding
units, AIMCO is in a position to influence all voting decisions with respect to
the Registrant. When voting on matters, AIMCO would in all likelihood vote the
Units it acquired in a manner favorable to the interest of the Corporate General
Partner because of their affiliation with the Corporate General Partner.
Note E - Distributions
During the two months ended December 31, 1999, a distribution was approved and
accrued for approximately $428,000 (approximately $424,000 to the limited
partners, $10.02 per limited partnership unit) from operations. The distribution
was paid during the six months ended June 30, 2000. During the six months ended
June 30, 2000, the Partnership paid distributions of approximately $1,920,000
($1,901,000 paid to the limited partners or $44.91 per limited partnership
unit). No distributions were declared or paid during the six months ended June
30, 1999.
Note F - Segment Reporting
Description of the types of products and services from which the reportable
segment derives its revenues:
The Partnership has one reportable segment: residential properties consisting of
six apartment complexes located in five states throughout the United States as
follows: one each in Georgia, Iowa, Florida, and Colorado, and two in North
Carolina. The Partnership rents apartment units to tenants for terms that are
typically twelve months or less.
Measurement of segment profit or loss:
The Partnership evaluates performance based on segment profit (loss) before
depreciation. The accounting policies of the reportable segment are the same as
those described in the summary of significant accounting policies in the
Partnership's Annual Report on Form 10-KSB for the year ended October 31, 1999.
Factors management used to identify the Partnership's reportable segment:
The Partnership's reportable segment consists of investment properties that
offer similar products and services. Although each of the investment properties
are managed separately, they have been aggregated into one segment as they
provide services with similar types of products and customers.
Segment information for the three and six month periods ended June 30, 2000 and
1999, is shown in the tables below (in thousands). The "Other" column includes
Partnership administration related items and income and expense not allocated to
the reportable segment.
Three Months Ended June 30, 2000
Residential Other Totals
Rental income $ 2,633 $ -- $ 2,633
Other income 212 5 217
Interest expense 561 -- 561
Depreciation 475 -- 475
General and administrative expense -- 93 93
Segment profit (loss) 432 (88) 344
Six Months Ended June, 2000
Residential Other Totals
Rental income $ 5,230 $ -- $ 5,230
Other income 374 17 391
Interest expense 1,159 -- 1,159
Depreciation 1,088 -- 1,088
General and administrative expense -- 201 201
Segment profit (loss) 547 (184) 363
Total assets 28,516 172 28,688
Capital expenditures for investment
properties 343 -- 343
Three Months Ended June 30, 1999
Residential Other Totals
Rental income $ 2,514 $ -- $ 2,514
Other income 162 11 173
Interest expense 579 -- 579
Depreciation 499 -- 499
General and administrative expense -- 95 95
Segment profit (loss) 357 (84) 273
Six Months Ended June 30, 1999
Residential Other Totals
Rental income $ 4,950 $ -- $ 4,950
Other income 323 20 343
Interest expense 1,164 -- 1,164
Depreciation 1,009 -- 1,009
General and administrative expense -- 181 181
Segment profit (loss) 515 (161) 354
Total assets 29,809 1,063 30,872
Capital expenditures for investment
properties 677 -- 677
Note G - Legal Proceedings
In March 1998, several putative unit holders of limited partnership units of the
Partnership commenced an action entitled Rosalie Nuanes, et al. v. Insignia
Financial Group, Inc., et al. in the Superior Court of the State of California
for the County of San Mateo. The plaintiffs named as defendants, among others,
the Partnership, its Corporate General Partner and several of their affiliated
partnerships and corporate entities. The action purports to assert claims on
behalf of a class of limited partners and derivatively on behalf of a number of
limited partnerships (including the Partnership) which are named as nominal
defendants, challenging the acquisition of interests in certain general partner
entities by Insignia Financial Group, Inc. and entities which were, at one time,
affiliates of Insignia; past tender offers by the Insignia affiliates to acquire
limited partnership units; the management of partnerships by the Insignia
affiliates; and the Insignia Merger. The plaintiffs seek monetary damages and
equitable relief, including judicial dissolution of the Partnership. On June 25,
1998, the Corporate General Partner filed a motion seeking dismissal of the
action. In lieu of responding to the motion, the plaintiffs have filed an
amended complaint. The Corporate General Partner filed demurrers to the amended
complaint which were heard February 1999.
Pending the ruling on such demurrers, settlement negotiations commenced. On
November 2, 1999, the parties executed and filed a Stipulation of Settlement,
settling claims, subject to final court approval, on behalf of the Partnership
and all limited partners who owned units as of November 3, 1999. Preliminary
approval of the settlement was obtained on November 3, 1999 from the Court, at
which time the Court set a final approval hearing for December 10, 1999. Prior
to the December 10, 1999 hearing, the Court received various objections to the
settlement, including a challenge to the Court's preliminary approval based upon
the alleged lack of authority of prior lead counsel to enter the settlement. On
December 14, 1999, the Corporate General Partner and its affiliates terminated
the proposed settlement. In February 2000, counsel for some of the named
plaintiffs filed a motion to disqualify plaintiff's lead and liaison counsel who
negotiated the settlement. On June 27, 2000, the Court entered an order
disqualifying them from the case. The Court will entertain applications for lead
counsel which must be filed by August 4, 2000. The Court has scheduled a hearing
on August 21, 2000 to address the issue of appointing lead counsel. The
Corporate General Partner does not anticipate that costs associated with this
case will be material to the Partnership's overall operations.
The Partnership is unaware of any other pending or outstanding litigation that
is not of a routine nature arising in the ordinary course of business.
Item 2. Management's Discussion and Analysis or Plan of Operation
The matters discussed in this Form 10-QSB contain certain forward-looking
statements and involve risks and uncertainties (including changing market
conditions, competitive and regulatory matters, etc.) detailed in the
disclosures contained in this Form 10-QSB and the other filings with the
Securities and Exchange Commission made by the Registrant from time to time. The
discussion of the Registrant's business and results of operations, including
forward-looking statements pertaining to such matters, does not take into
account the effects of any changes to the Registrant's business and results of
operations. Accordingly, actual results could differ materially from those
projected in the forward-looking statements as a result of a number of factors,
including those identified herein.
The Partnership's investment properties consist of six apartment complexes. The
following table sets forth the average occupancy of the properties for each of
the six months ended June 30, 2000 and 1999:
Average
Occupancy
Property 2000 1999
Rocky Creek Apartments
Augusta, Georgia 92% 90%
Carriage House Apartments
Gastonia, North Carolina 95% 93%
Nottingham Square Apartments
Des Moines, Iowa 97% 95%
Foxfire/Barcelona Apartments
Durham, North Carolina 92% 95%
River Reach Apartments
Jacksonville, Florida 96% 94%
Village Gardens Apartments
Fort Collins, Colorado 96% 98%
The decrease in average occupancy at Foxfire/Barcelona Apartments is due to the
renting, during the six months ended June 30, 1999, of corporate units to a
construction company that was building a hospital in the area. The construction
company is no longer renting such units.
Results of Operations
The Partnership recorded net income of approximately $344,000 for the three
months ended June 30, 2000 compared to net income of $273,000 for the three
months ended June 30, 1999. The Partnership's net income for the six months
ended June 30, 2000 was approximately $363,000 compared to net income of
approximately $354,000 for the six months ended June 30, 2000. The increase in
net income for the three and six months ended June 30, 2000 compared to the
three and six months ended June 30, 1999 was primarily due to an increase in
total revenues which was partially offset by an increase in total expenses.
Total revenues increased during the three and six month period ended June 30,
2000, primarily as a result of an increase in rental income. Rental income
increased due to an increase in average rental rates at all of the Partnership's
properties, reduced concession costs at Rocky Creek, Carriage House and
Nottingham Apartments and reduced bad debt expense at Carriage House, Nottingham
and Foxfire/Barcelona Apartments, which more than offset reductions in occupancy
at Foxfire/Barcelona Apartments and Village Gardens Apartments. Other income
increased due to an increase in interest income due to higher cash balances
invested in interest bearing accounts.
The increase in total expenses during the six month periods ended June 30, 2000
is primarily attributable to an increase in operating expenses, general and
administrative, and property tax expenses. The increase in total expenses during
the three months ended June 30, 2000 is primarily attributable to an increase in
operating and property tax expense. Operating expense increased as a result of
an increase in property expenses due to increases in commissions and bonuses,
and employee salaries and related employee benefit at all of the Partnership's
properties. General and administrative expenses increased due to an increase in
professional fees necessary to operate the Partnership. Included in general and
administrative expenses at both June 30, 2000 and 1999, are reimbursements to
the Corporate General Partner allowed under the Partnership Agreement associated
with the quarterly and annual communications with investors and regulatory
agencies and the annual audit and appraisals required by the Partnership
Agreement are also included. Property tax expense increased due to the timing of
the receipt of property tax bills which affected the Partnership's yearly
accruals.
As part of the ongoing business plan of the Partnership, the Corporate General
Partner monitors the rental market environment of each of its investment
properties to assess the feasibility of increasing rents, maintaining or
increasing occupancy levels and protecting the Partnership from increases in
expenses. As part of this plan, the Corporate General Partner attempts to
protect the Partnership from the burden of inflation-related increases in
expenses by increasing rents and maintaining a high overall occupancy level.
However, due to changing market conditions, which can result in the use of
rental concessions and rental reductions to offset softening market conditions,
there is no guarantee that the Corporate General Partner will be able to sustain
such a plan.
Liquidity and Capital Resources
At June 30, 2000, the Partnership had cash and cash equivalents of approximately
$1,080,000 as compared to approximately $2,392,000 at June 30, 1999. Cash and
cash equivalents decreased approximately $1,821,000 for the six months ended
June 30, 2000 from the Partnership's year end of December 31, 1999. The decrease
was due to approximately $2,850,000 of cash used in financing activities and
approximately $970,000 of cash used in investing activities which was partially
offset by approximately $1,999,000 of cash provided by operating activities.
Cash used in investing activities consisted primarily of net deposits to
restricted escrows maintained by the mortgage lender and, to a lesser extent,
property improvements and replacements. Cash used in financing activities
consisted primarily of distributions paid to partners and, to a lesser extent,
payments of principal made on the mortgages encumbering the Registrant's
properties. The Registrant invests its working capital reserves in money market
accounts.
The sufficiency of existing liquid assets to meet future liquidity and capital
expenditure requirements is directly related to the level of capital
expenditures required at the investment properties to adequately maintain the
physical assets and other operating needs of the Partnership and to comply with
Federal, state, local, legal, and regulatory requirements. Capital improvements
planned for each of the Registrant's properties are detailed below.
Rocky Creek Apartments
Approximately $92,000 has been budgeted for capital improvements at Rocky Creek
Apartments for the year 2000 consisting primarily of flooring covering
replacement, air conditioning unit replacements, major landscaping and appliance
replacements. During the six months ended June 30, 2000, the Partnership
expended approximately $52,000 for capital improvements at Rocky Creek
Apartments primarily consisting of floor covering replacement, major
landscaping, other building enhancements, and roof replacement. The improvements
were funded from Partnership operating cash flow.
Carriage House Apartments
Approximately $71,000 has been budgeted for capital improvement at Carriage
House Apartments for the year 2000 consisting primarily of floor covering
replacement, air conditioning unit replacements and appliance replacements.
During the six months ended June 30, 2000, the Partnership expended
approximately $35,000 for capital improvements at Carriage House Apartments
primarily consisting of floor covering, air conditioning unit, and appliance
replacements. These improvements were funded from Partnership operating cash
flow.
Nottingham Square Apartments
Approximately $159,000 has been budgeted for capital improvements at Nottingham
Square Apartments for the year 2000 consisting primarily of floor covering
replacement, plumbing enhancements and appliance replacements. During the six
months ended June 30, 2000, the Partnership expended approximately $62,000 for
capital improvements at Nottingham Square Apartments primarily consisting of
floor covering and appliance replacements. These improvements were funded from
Partnership operating cash flow.
Foxfire/Barcelona Apartments
Approximately $149,000 has been budgeted for capital improvements at
Foxfire/Barcelona Apartments for the year 2000 consisting primarily of floor
covering replacements, cabinet replacements, air conditioning units replacements
and appliance replacements. During the six months ended June 30, 2000, the
Partnership expended approximately $49,000 for capital improvements at
Foxfire/Barcelona Apartments primarily consisting of floor covering replacement,
appliance replacement, cabinet replacements, and other structural improvements.
These improvements were funded from operating cash flows.
River Reach Apartments
Approximately $519,000 has been budgeted for capital improvements at River Reach
Apartments for the year 2000 consisting primarily of floor covering replacement,
plumbing enhancements, air conditioning unit replacements, appliance
replacements and other structural enhancements. During the six months ended June
30, 2000, the Partnership expended approximately $137,000 for capital
improvements at River Reach Apartments primarily consisting of floor covering
replacement, air conditioning unit replacements, plumbing fixtures and appliance
replacements. These improvements were funded from Partnership operating cash
flow.
Village Gardens Apartments
Approximately $112,000 has been budgeted for capital improvements at Village
Gardens Apartments for the year 2000 consisting primarily of plumbing
enhancements, floor covering replacements and appliance replacements. During the
six months ended June 30, 2000, the Partnership expended approximately $8,000
for capital improvements at Village Gardens Apartments primarily consisting of
floor covering replacements. These improvements were funded from Partnership
operating cash flow.
The additional capital expenditures will be incurred only if cash is available
from operations and Partnership reserves. To the extent that such budgeted
capital improvements are completed, the Registrant's distributable cash flow, if
any, may be adversely affected at least in the short term.
The Partnership's current assets are thought to be sufficient for any near term
needs (exclusive of capital improvements) of the Partnership. The mortgage
indebtedness of approximately $24,931,000, net of discounts, is being amortized
over 257 months with a balloon payment of approximately $23,008,000 due on
November 15, 2002. The Corporate General Partner will attempt to refinance such
indebtedness and/or sell the properties prior to such maturity date. If the
properties cannot be refinanced or sold for a sufficient amount, the Partnership
will risk losing such properties through foreclosure.
During the two months ended December 31, 1999, a distribution was approved and
accrued for approximately $428,000 (approximately $424,000 to the limited
partners, $10.02 per limited partnership unit) from operations. The distribution
was paid during the six months ended June 30, 2000. During the six months ended
June 30, 2000, the Partnership paid distributions of approximately $1,920,000
($1,901,000 to the limited partners or $44.91 per limited partnership unit). No
distributions were declared or paid during the six months ended June 30, 1999.
Future cash distributions will depend on the levels of net cash generated from
operations, the availability of cash reserves, and the timing of debt
maturities, refinancings, and/or property sales. The Partnership's distribution
policy is reviewed on a semi-annual basis. In addition, the Partnership is
restricted from making distributions if the amount in the reserve account for
each property maintained by the mortgage lender is less than $400 per apartment
unit at all six of the Partnership's investment properties. At June 30, 2000,
the reserve account was adequately funded with a balance of approximately
$1,393,000. There can be no assurance, however, that the Partnership will
generate sufficient funds from operations, after required capital improvements,
to permit further distributions to its partners during the remainder of 2000 or
subsequent periods.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEDINGS
In March 1998, several putative unit holders of limited partnership units of the
Partnership commenced an action entitled Rosalie Nuanes, et al. v. Insignia
Financial Group, Inc., et al. in the Superior Court of the State of California
for the County of San Mateo. The plaintiffs named as defendants, among others,
the Partnership, its Corporate General Partner and several of their affiliated
partnerships and corporate entities. The action purports to assert claims on
behalf of a class of limited partners and derivatively on behalf of a number of
limited partnerships (including the Partnership) which are named as nominal
defendants, challenging the acquisition of interests in certain general partner
entities by Insignia Financial Group, Inc. and entities which were, at one time,
affiliates of Insignia; past tender offers by the Insignia affiliates to acquire
limited partnership units; the management of partnerships by the Insignia
affiliates; and the Insignia Merger. The plaintiffs seek monetary damages and
equitable relief, including judicial dissolution of the Partnership. On June 25,
1998, the Corporate General Partner filed a motion seeking dismissal of the
action. In lieu of responding to the motion, the plaintiffs have filed an
amended complaint. The Corporate General Partner filed demurrers to the amended
complaint which were heard February 1999.
Pending the ruling on such demurrers, settlement negotiations commenced. On
November 2, 1999, the parties executed and filed a Stipulation of Settlement,
settling claims, subject to final court approval, on behalf of the Partnership
and all limited partners who owned units as of November 3, 1999. Preliminary
approval of the settlement was obtained on November 3, 1999 from the Court, at
which time the Court set a final approval hearing for December 10, 1999. Prior
to the December 10, 1999 hearing, the Court received various objections to the
settlement, including a challenge to the Court's preliminary approval based upon
the alleged lack of authority of prior lead counsel to enter the settlement. On
December 14, 1999, the Corporate General Partner and its affiliates terminated
the proposed settlement. In February 2000, counsel for some of the named
plaintiffs filed a motion to disqualify plaintiff's lead and liaison counsel who
negotiated the settlement. On June 27, 2000, the Court entered an order
disqualifying them from the case. The Court will entertain applications for lead
counsel which must be filed by August 4, 2000. The Court has scheduled a hearing
on August 21, 2000 to address the issue of appointing lead counsel. The
Corporate General Partner does not anticipate that costs associated with this
case will be material to the Partnership's overall operations.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a) Exhibits:
Exhibit 27, Financial Data Schedule, is filed as an exhibit to
this report.
b) Reports on Form 8-K filed during the quarter ended June 30, 2000:
None.
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
SHELTER PROPERTIES VI
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: August 14, 2000
