FORM 10-QSB--QUARTERLY OR TRANSITIONAL REPORT UNDER SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
Quarterly or Transitional Report
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-QSB
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended September 30, 2000
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from __________ to __________
Commission file number 0-11574
SHELTER PROPERTIES V
(Exact name of small business issuer as specified in its charter)
South Carolina 57-0721855
(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)
Issuer's telephone number (864) 239-1000
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 V
CONSOLIDATED BALANCE SHEET
(Unaudited)
(in thousands, except unit data)
September 30, 2000
Assets
Cash and cash equivalents $ 3,076
Receivables and deposits 2,913
Restricted escrows 612
Other assets 652
Investment properties:
Land $ 4,242
Buildings and related personal property 73,195
77,437
Less accumulated depreciation (46,514) 30,923
$ 38,176
Liabilities and Partners' (Deficit) Capital
Liabilities
Accounts payable $ 224
Tenant security deposit liabilities 288
Accrued property taxes 449
Other liabilities 560
Mortgage notes payable 36,734
Partners' (Deficit) Capital
General partners $ (327)
Limited partners (52,538 units
issued and outstanding) 248 (79)
$ 38,176
See Accompanying Notes to Consolidated Financial Statements
b)
SHELTER PROPERTIES V
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(in thousands, except unit data)
Three Months Ended Nine Months Ended
September 30, September 30,
2000 1999 2000 1999
Revenues:
Rental income $ 3,442 $ 3,450 $10,262 $10,294
Other income 253 197 821 624
Casualty gain 1,662 -- 1,662 --
Total revenues 5,357 3,647 12,745 10,918
Expenses:
Operating 1,381 1,471 4,136 4,228
General and administrative 219 116 439 309
Depreciation 894 732 2,248 2,164
Interest 760 665 2,284 2,022
Property taxes 181 211 568 646
Total expenses 3,435 3,195 9,675 9,369
Net income $ 1,922 $ 452 $ 3,070 $ 1,549
Net income allocated to
general partners (1%) $ 19 $ 4 $ 31 $ 15
Net income allocated to
limited partners (99%) 1,903 448 3,039 1,534
$ 1,922 $ 452 $ 3,070 $ 1,549
Net income per limited
partnership unit $ 36.22 $ 8.53 $ 57.84 $ 29.20
Distributions per limited
partnership unit $ -- $ 12.62 $144.18 $ 48.42
See Accompanying Notes to Consolidated Financial Statements
c)
SHELTER PROPERTIES V
CONSOLIDATED STATEMENT OF CHANGES IN PARTNERS' (DEFICIT) CAPITAL
(Unaudited)
(in thousands, except unit data)
Limited
Partnership General Limited
Units Partners Partners Total
Original capital contributions 52,538 $ 2 $52,538 $52,540
Partners' (deficit) capital at
December 31, 1999 52,538 (339) 4,784 4,445
Net income for the nine months
ended September 30, 2000 -- 31 3,039 3,070
Distributions to partners -- (19) (7,575) (7,594)
Partners' (deficit) capital at
September 30, 2000 52,538 $ (327) $ 248 $ (79)
See Accompanying Notes to Consolidated Financial Statements
d)
SHELTER PROPERTIES V
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
Nine Months Ended
September 30,
2000 1999
Cash flows from operating activities:
Net income $ 3,070 $ 1,549
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 2,248 2,164
Amortization of discounts and loan costs 147 138
Casualty gain (1,662) --
Change in accounts:
Receivables and deposits (2,056) (275)
Other assets (97) (127)
Accounts payable (611) 60
Tenant security deposit liabilities 14 (31)
Accrued property taxes 38 246
Other liabilities (404) (24)
Net cash provided by operating activities 687 3,700
Cash flows from investing activities:
Property improvements and replacements (2,641) (1,225)
Net withdrawals from restricted escrows 39 265
Insurance proceeds received, net 4,324 --
Net cash provided by (used in) investing
activities 1,722 (960)
Cash flows from financing activities:
Payments on mortgage notes payable (508) (384)
Loan costs paid (83) (10)
Partners' distributions (7,594) (2,573)
Net cash used in financing activities (8,185) (2,967)
Net decrease in cash and cash equivalents (5,776) (227)
Cash and cash equivalents at beginning of period 8,852 2,892
Cash and cash equivalents at end of period $ 3,076 $ 2,665
Supplemental disclosure of cash flow information:
Cash paid for interest $ 2,138 $ 1,884
At December 31, 1999 approximately $548,000 of property improvements and
replacements were included in accounts payable.
See Accompanying Notes to Consolidated Financial Statements
e)
SHELTER PROPERTIES V
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note A - Basis of Presentation
The accompanying unaudited consolidated financial statements of Shelter
Properties V (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 V Corporation (the
"Corporate General Partner"), all adjustments (consisting of normal recurring
accruals) considered necessary for a fair presentation have been included.
Operating results for the three and nine month periods ended September 30, 2000
are not necessarily indicative of the results that may be expected for the year
ending December 31, 2000. For further information, refer to the consolidated
financial statements and footnotes thereto included in the Partnership's Annual
Report on Form 10-KSB for the fiscal year ended November 30, 1999.
Change in Fiscal Year End:
On January 3, 2000, the Partnership elected to change its fiscal year end from
November 30 to December 31, effective for the period ending December 31, 1999,
as announced in its Form 8-K filed on January 3, 2000. This Quarterly Report on
Form 10-QSB presents the unaudited results of the Partnership's operations for
the three and nine months ended September 30, 2000.
Principles of Consolidation:
The financial statements include all the accounts of the Partnership and its two
99.99% owned partnerships. The Corporate General Partner of the consolidated
partnerships is Shelter Realty V Corporation. Shelter Realty V Corporation may
be removed as the general partner of the consolidated partnership by the
Registrant; therefore, the consolidated partnerships are controlled and
consolidated by the Registrant. All significant interpartnership balances have
been eliminated.
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
consolidated 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.
Nine Months Ended
September 30,
(in thousands)
2000 1999
Net cash provided by operating
activities $ 687 $ 3,700
Payments on mortgage notes
payable (508) (384)
Property improvements and
replacements (2,641) (1,225)
Change in restricted escrows, net 39 265
Changes in reserves for net
operating liabilities 3,116 151
Additional operating reserves (231) (2,007)
Net cash provided by operations $ 462 $ 500
The Corporate General Partner reserved an additional $231,000 and $2,007,000 at
September 30, 2000 and 1999, respectively, to fund capital improvements and
repairs at the Partnership's seven 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 payments were
made to the Corporate General Partner and affiliates during the nine months
ended September 30, 2000 and 1999 (in thousands):
September 30,
2000 1999
Property management fees (included in
operating expense) $ 539 $ 552
Reimbursement for services of affiliates
(included in operating, general and
administrative expenses and investment
properties) 343 190
During the nine months ended September 30, 2000 and 1999, affiliates of the
Corporate General Partner were entitled to receive 5% of gross receipts from all
of the Registrant's properties for providing property management services. The
Registrant paid to such affiliates approximately $539,000 and $552,000 for the
nine months ended September 30, 2000 and 1999, respectively.
Affiliates of the Corporate General Partner received reimbursement of
accountable administrative expenses amounting to approximately $343,000 and
$190,000 for the nine months ended September 30, 2000 and 1999, respectively.
Included in these expenses for the nine months ended September 30, 2000 and 1999
is approximately $32,000 and $6,000, respectively, in reimbursements for
construction oversight costs.
In addition to its indirect ownership of the general partner interest in the
Partnership, AIMCO and its affiliates currently own 34,813 limited partnership
units in the Partnership representing 66.26% of the outstanding units. A number
of these units were acquired pursuant to tender offers made by AIMCO or its
affiliates. It is possible that AIMCO or its affiliates will make one or more
additional offers to acquire additional limited partnership interests in the
Partnership for cash or in exchange for units in the operating partnership of
AIMCO. Under the Partnership Agreement, unitholders holding a majority of the
Units are entitled to take action with respect to a variety of matters, which
would include without limitation, voting on certain amendments to the
Partnership Agreement and voting to remove the Corporate General Partner. As a
result of its ownership of 66.26% 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 nine months ended September 30, 2000, cash distributions of
approximately $6,177,000 were paid to the limited partners ($117.57 per limited
partnership unit) from refinancing proceeds and approximately $1,417,000
(approximately $1,398,000 of which was paid to the limited partners or $26.61
per limited partnership unit) were paid from operations. Subsequent to September
30, 2000, a distribution of approximately $462,000 (approximately $457,000 of
which was paid to the limited partners or $8.70 per limited partnership unit)
was paid from operations. During the nine months ended September 30, 1999, cash
distributions of approximately $2,573,000 (approximately $2,544,000 of which was
paid to the limited partners or $48.42 per limited partnership unit) were paid
from operations.
Note F - Segment Reporting
Description of the types of products and services from which the reportable
segment derives its revenues:
The Partnership has one reportable segment: residential properties. The
Partnership's residential property segment consists of seven apartment complexes
located in Florida (2), South Carolina (1), Virginia (1), Georgia (1), and North
Carolina (2). 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 of the Partnership as described in the Partnership's Annual Report on Form
10-KSB for the year ended November 30, 1999.
Factors management used to identify the enterprise's reportable segment:
The Partnership's reportable segment consists of investment properties that
offer similar products and services. Although each of the investment properties
is managed separately, they have been aggregated into one segment as they
provide services with similar types of products and customers.
Segment information for the three and nine month periods ended September 30,
2000 and 1999 is shown in the tables below. The "Other" column includes
Partnership administration related items and income and expense not allocated to
the reportable segment.
Three Months Ended September 30, 2000 Residential Other Totals
(in thousands)
Rental income $ 3,442 $ -- $ 3,442
Other income 246 7 253
Casualty gain 1,662 -- 1,662
Interest expense 760 -- 760
Depreciation 894 -- 894
General and administrative expense -- 219 219
Segment profit (loss) 2,134 (212) 1,922
Nine Months Ended September 30, 2000 Residential Other Totals
(in thousands)
Rental income $10,262 $ -- $10,262
Other income 671 150 821
Casualty gain 1,662 -- 1,662
Interest expense 2,284 -- 2,284
Depreciation 2,248 -- 2,248
General and administrative expense -- 439 439
Segment profit (loss) 3,359 (289) 3,070
Total assets 38,039 137 38,176
Capital expenditures for
investment properties 2,093 -- 2,093
Three Months Ended September 30, 1999 Residential Other Totals
(in thousands)
Rental income $ 3,450 $ -- $ 3,450
Other income 192 5 197
Interest expense 665 -- 665
Depreciation 732 -- 732
General and administrative expense -- 116 116
Segment profit (loss) 563 (111) 452
Nine Months Ended September 30, 1999 Residential Other Totals
(in thousands)
Rental income $10,294 $ -- $10,294
Other income 602 22 624
Interest expense 2,022 -- 2,022
Depreciation 2,164 -- 2,164
General and administrative expense -- 309 309
Segment profit (loss) 1,836 (287) 1,549
Total assets 35,874 1,021 36,895
Capital expenditures for
investment properties 1,225 -- 1,225
Note G - Casualty Event
In September 1999, Tar River Estates Apartments, was damaged by severe flooding
which affected certain areas of North Carolina. It is estimated that the
property has incurred approximately $6,320,000 in damages as a result of this
flooding. As of September 30, 2000, insurance proceeds of approximately
$5,316,000 have been received to cover lost rents and damage to the property,
resulting in a casualty gain of approximately $1,662,000.
In July 1999, Woodland Village Apartments experienced a fire, which resulted in
the destruction of six apartment units. The property incurred damages of
approximately $324,000 and estimated lost rents of approximately $13,000. It is
anticipated that the costs incurred to restore the property will be fully
covered by insurance.
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, 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. ("Insignia") and entities which were,
at one time, affiliates of Insignia; past tender offers by the Insignia
affiliates to acquire limited partnership units; the management of partnerships
by the Insignia affiliates; and the Insignia Merger. The plaintiffs seek
monetary damages and equitable relief, including judicial dissolution of the
Partnership. On June 25, 1998, the Corporate General Partner filed a motion
seeking dismissal of the action. In lieu of responding to the motion, the
plaintiffs have filed an amended complaint. The Corporate General Partner filed
demurrers to the amended complaint which were heard February 1999.
Pending the ruling on such demurrers, settlement negotiations commenced. On
November 2, 1999, the parties executed and filed a Stipulation of Settlement,
settling claims, subject to final court approval, on behalf of the Partnership
and all limited partners who owned units as of November 3, 1999. Preliminary
approval of the settlement was obtained on November 3, 1999 from the Court, at
which time the Court set a final approval hearing for December 10, 1999. Prior
to the December 10, 1999 hearing, the Court received various objections to the
settlement, including a challenge to the Court's preliminary approval based upon
the alleged lack of authority of prior lead counsel to enter the settlement. On
December 14, 1999, the Corporate General Partner and its affiliates terminated
the proposed settlement. In February 2000, counsel for some of the named
plaintiffs filed a motion to disqualify plaintiff's lead and liaison counsel who
negotiated the settlement. On June 27, 2000, the Court entered an order
disqualifying them from the case. The Court is considering applications for lead
counsel and has currently scheduled a hearing on the matter for November 20,
2000. The Corporate General Partner does not anticipate that costs associated
with this case will be material to the Partnership's overall operations.
The Partnership is unaware of any other pending or outstanding litigation that
is not of a routine nature arising in the ordinary course of business.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
The matters discussed in this Form 10-QSB contain certain forward-looking
statements and involve risks and uncertainties (including changing market
conditions, competitive and regulatory matters, etc.) detailed in the
disclosures contained in this Form 10-QSB and the other filings with the
Securities and Exchange Commission made by the Registrant from time to time. The
discussions 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
operation. 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 seven apartment complexes.
The following table sets forth the average occupancy of the properties for the
nine months ended September 30, 2000 and 1999:
September 30,
Property 2000 1999
Foxfire Apartments
Atlanta, Georgia 95% 94%
Old Salem Apartments
Charlottesville, Virginia 97% 95%
Woodland Village Apartments
Columbia, South Carolina 93% 94%
Lake Johnson Mews Apartments
Raleigh, North Carolina 93% 95%
The Lexington Green Apartments
Sarasota, Florida 97% 97%
Millhopper Village Apartments
Gainesville, Florida 94% 96%
Tar River Estates Apartments
Greenville, North Carolina (1) 35% 94%
(1) During September 1999, Tar River Estates was damaged by severe flooding
which affected certain areas of North Carolina. The property has incurred
extensive damage as a result of the flooding causing portions of the
property to be unavailable for occupancy since September 1999. It is
anticipated that the costs incurred to restore the property will be fully
covered by insurance. The occupancy for the units not damaged at the
property was 97% at September 30, 2000. The Corporate General Partner is
currently in discussions concerning the redevelopment of the property.
Results of Operations
The Registrant's net income for the three and nine months ended September 30,
2000 was approximately $1,922,000 and $3,070,000, respectively, as compared to
approximately $452,000 and $1,549,000 for the three and nine months ended
September 30, 1999. The increase in net income is due to an increase in total
revenues, which was partially offset by an increase in total expenses. Total
revenues increased primarily due to a gain resulting from the casualty at Tar
River Estates (as discussed below), and to a lesser extent, an increase in other
income. Other income increased primarily due to an increase in interest income,
as a result of higher cash balances maintained in interest bearing accounts. The
increase in other income was partially offset by a slight decrease in rental
income as a result of a decrease in occupancy at four of the Partnership's
investment properties which more than offset the increase in average rental
rates at all of the properties.
Total expenses increased primarily due to increases in interest, depreciation
and general and administrative expenses. Interest expense increased as a result
of the refinancing of the debt encumbering Old Salem Apartments and Foxfire
Apartments (as discussed below). Depreciation expense increased as a result of
recent capital improvements performed at all of the Partnership's investment
properties. The increase in depreciation expense was partially offset by the
write-off of a building and the related accumulated depreciation at Tar River
Estates due to damage sustained as a result of flooding in 1999. General and
administrative expenses increased primarily due to an increase in the cost of
services included in the management reimbursements to the Corporate General
Partner and its affiliates allowed under the Partnership Agreement and increased
professional fees associated with the management of the Partnership. Also
included in general and administrative expenses at both September 30, 2000 and
1999 are costs associated with the quarterly and annual communications with
investors and regulatory agencies and the annual audits and appraisals required
by the Partnership Agreement.
The increase in total expenses was partially offset by decreases in operating
and property tax expenses. The decrease in operating expenses is due primarily
to a decrease in maintenance expenses at most of the Partnership's properties,
partially offset by an increase in payroll expenses. The decrease in property
tax expense is due to the timing of the receipt of tax bills, which affected the
tax accruals recorded for the respective periods. The decrease in property tax
expense was partially offset by an increase in the tax assessment at Lake
Johnson Mews Apartments.
As part of the ongoing business plan of the Registrant, 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 September 30, 2000, the Registrant had cash and cash equivalents of
approximately $3,076,000 as compared to approximately $2,665,000 at September
30, 1999. The decrease in cash and cash equivalents of approximately $5,776,000
for the nine months ended September 30, 2000, from the Partnership's year ended
December 31, 1999, is due to approximately $8,185,000 of cash used in financing
activities, which was partially offset by approximately $1,722,000 of cash
provided by investing activities and approximately $687,000 of cash provided by
operating activities. Cash provided by investing activities consisted of the
receipt of insurance proceeds and net withdrawals from escrow accounts
maintained by the mortgage lender, which was partially offset by property
improvements and replacements. Cash used in financing activities consisted
primarily of partner distributions and, to a lesser extent, payments of
principal made on the mortgages encumbering the Registrant's properties and loan
costs related to the refinancing of the mortgages encumbering Old Salem
Apartments and Foxfire Apartments. The Partnership 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 Registrant and to comply with
Federal, state, local, legal and regulatory requirements. Capital improvements
planned for each of the Registrant's properties are detailed below.
Millhopper Village Apartments: For 2000, the Partnership has budgeted
approximately $44,000 for capital improvements, consisting primarily of
appliance and floor covering replacements and HVAC unit replacements. The
Partnership completed approximately $109,000 in budgeted and non-budgeted
capital expenditures for the nine months ended September 30, 2000. The capital
expenditures incurred consisted primarily of balcony replacements, and floor
covering replacements. These improvements were funded primarily from operations.
Foxfire Apartments: For 2000, the Partnership has budgeted approximately
$201,000 for capital improvements, consisting primarily of parking area and
swimming pool improvements, floor covering and appliance replacements and other
interior building improvements. The Partnership completed approximately $224,000
in budgeted and non-budgeted capital expenditures for the nine months ended
September 30, 2000. The capital expenditures incurred consisted primarily of
exterior painting, plumbing upgrades, air conditioning unit replacements, floor
covering and appliance replacements. These improvements were funded primarily
from operations.
Lake Johnson Mews Apartments: For 2000, the Partnership has budgeted
approximately $131,000 for capital improvements, consisting primarily of
structural improvements, HVAC upgrades and floor covering and appliance
replacements. The Partnership completed approximately $132,000 in budgeted and
non-budgeted capital expenditures for the nine months ended September 30, 2000.
The capital expenditures incurred consisted primarily of parking lot repairs and
cabinet and floor covering replacements. These improvements were funded
primarily from operations.
Woodland Village Apartments: For 2000, the Partnership has budgeted
approximately $326,000 for capital improvements, consisting primarily of
exterior painting, floor covering replacements and other interior and exterior
building improvements. The Partnership completed approximately $313,000 in
capital expenditures for the nine months ended September 30, 2000. The capital
expenditures incurred consisted primarily of floor covering replacements and
interior building improvements. These improvements were funded primarily from
operations. In addition approximately $339,000 has been spent during 2000 on
structural improvements required after a fire which occurred in July 1999. These
improvements were funded from insurance proceeds.
The Lexington Green Apartments: For 2000, the Partnership has budgeted
approximately $420,000 for capital improvements, consisting primarily of
plumbing improvements, swimming pool upgrades, floor covering and appliance
replacements and structural improvements. The Partnership completed
approximately $261,000 in capital expenditures for the nine months ended
September 30, 2000. The capital expenditures incurred consisted primarily of
exterior painting, plumbing upgrades, structural improvements, sewer
replacements, and floor covering replacement. These improvements were funded
primarily from operations.
Tar River Estates Apartments: For 2000, the Partnership has budgeted
approximately $135,000 for capital improvements excluding costs associated with
repairing the damage incurred from flooding, consisting primarily of HVAC unit
upgrades and floor covering and appliance replacements and structural
improvements. The Partnership completed approximately $430,000 in budgeted and
non-budgeted capital expenditures for the nine months ended September 30, 2000.
The capital expenditures incurred consisted primarily of floor covering
replacement and other exterior and interior building improvements associated
with the repairs required due to the severe flood damage which occurred during
September 1999. These improvements were funded primarily from Partnership
reserves and insurance proceeds.
Old Salem Apartments: For 2000, the Partnership has budgeted approximately
$438,000 for capital improvements, consisting primarily of parking lot
improvements, floor covering and appliance replacements, structural
improvements, and other interior and exterior improvements. The Partnership
completed approximately $285,000 in capital expenditures for the nine months
ended September 30, 2000. The capital expenditures incurred consisted primarily
of structural improvements, parking lot improvements, and floor covering,
heating upgrades, and appliance replacements. These improvements were funded
primarily from Partnership reserves and operations.
The additional capital expenditures will be incurred only if cash is available
from operations and from 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 $36,734,000 net of discount, is amortized over
varying periods with required balloon payments ranging from November 15, 2002 to
December 1, 2019. The Corporate General Partner will attempt to refinance such
indebtedness and/or sell the properties prior to such maturity dates. If the
properties cannot be refinanced or sold for a sufficient amount, the Registrant
will risk losing such properties through foreclosure.
During October and November 1999, the Partnership refinanced the mortgage notes
at Foxfire and Old Salem Apartments, respectively. Gross proceeds from the
refinancings were $7,200,000 and $10,157,000, respectively, of which
approximately $4,519,000 and $6,287,000 respectively was used to pay off the
existing mortgage notes. The new notes require monthly principal and interest
payments at fixed interest rates of 7.79% for Foxfire Apartments and 8.02% for
Old Salem Apartments. The old debt carried fixed interest rates of 7.50% and
10.375% with maturities beginning in May 1999.
During the nine months ended September 30, 2000, cash distributions of
approximately $6,177,000 were paid to the limited partners ($117.57 per limited
partnership unit) from refinancing proceeds and approximately $1,417,000
(approximately $1,398,000 of which was paid to the limited partners or $26.61
per limited partnership unit) were paid from operations. Subsequent to September
30, 2000, a distribution of approximately $462,000 (approximately $457,000 of
which was paid to the limited partners or $8.70 per limited partnership unit)
was paid from operations. During the nine months ended September 30, 1999, cash
distributions of approximately $2,573,000 (approximately $2,544,000 of which was
paid to the limited partners or $48.42 per limited partnership unit) were paid
from operations. Future cash distributions will depend on the levels of net cash
generated from operations, the availability of cash reserves, and the timing of
debt maturities, refinancings and/or property sales. The Partnership's
distribution policy is reviewed on a quarterly basis. There can be no assurance,
however, that the Partnership will generate sufficient funds from operations,
after planned capital improvement expenditures, to permit additional
distributions to its partners during the remainder of 2000 or subsequent
periods. In addition, the Partnership may be restricted from making
distributions if the amount in the reserve account for each property maintained
by the mortgage lender for The Lexington Green Apartments and Tar River Estates
Apartments is less than $400 per apartment unit for each respective property for
a total of $267,600. As of September 30, 2000, the reserve accounts were fully
funded with approximately $508,000 on deposit with the mortgage lender.
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. ("Insignia") and entities which were,
at one time, affiliates of Insignia; past tender offers by the Insignia
affiliates to acquire limited partnership units; the management of partnerships
by the Insignia affiliates; and the Insignia Merger. The plaintiffs seek
monetary damages and equitable relief, including judicial dissolution of the
Partnership. On June 25, 1998, the Corporate General Partner filed a motion
seeking dismissal of the action. In lieu of responding to the motion, the
plaintiffs have filed an amended complaint. The Corporate General Partner filed
demurrers to the amended complaint which were heard February 1999.
Pending the ruling on such demurrers, settlement negotiations commenced. On
November 2, 1999, the parties executed and filed a Stipulation of Settlement,
settling claims, subject to final court approval, on behalf of the Partnership
and all limited partners who owned units as of November 3, 1999. Preliminary
approval of the settlement was obtained on November 3, 1999 from the Court, at
which time the Court set a final approval hearing for December 10, 1999. Prior
to the December 10, 1999 hearing, the Court received various objections to the
settlement, including a challenge to the Court's preliminary approval based upon
the alleged lack of authority of prior lead counsel to enter the settlement. On
December 14, 1999, the Corporate General Partner and its affiliates terminated
the proposed settlement. In February 2000, counsel for some of the named
plaintiffs filed a motion to disqualify plaintiff's lead and liaison counsel who
negotiated the settlement. On June 27, 2000, the Court entered an order
disqualifying them from the case. The Court is considering applications for lead
counsel and has currently scheduled a hearing on the matter for November 20,
2000. The Corporate General Partner does not anticipate that costs associated
with this case will be material to the Partnership's overall operations.
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:
None filed during the quarter ended September 30, 2000.
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 V
By: Shelter Realty V Corporation
Corporate General Partner
By: /s/Patrick J. Foye
Patrick J. Foye
Executive Vice President
By: /s/Martha L. Long
Martha L. Long
Senior Vice President and
Controller
Date: November 14, 2000