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 March 31, 2001
[ ] 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)
March 31, 2001
Assets
Cash and cash equivalents $ 1,966
Receivables and deposits 680
Restricted escrows 2,641
Other assets 1,039
Investment properties:
Land $ 4,242
Buildings and related personal property 74,931
79,173
Less accumulated depreciation (47,938) 31,235
$ 37,561
Liabilities and Partners' Deficit
Liabilities
Accounts payable $ 191
Tenant security deposit liabilities 281
Accrued property taxes 228
Other liabilities 700
Due to Corporate General Partner 119
Mortgage notes payable 40,245
Partners' Deficit
General partners $ (374)
Limited partners (52,538 units
issued and outstanding) (3,829) (4,203)
$ 37,561
See Accompanying Notes to Consolidated Financial Statements
b)
SHELTER PROPERTIES V
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(in thousands, except unit data)
Three Months Ended
March 31,
2001 2000
Revenues:
Rental income $3,291 $3,410
Other income 373 235
Casualty gain 121 --
Total revenues 3,785 3,645
Expenses:
Operating 1,452 1,401
General and administrative 135 115
Depreciation 732 686
Interest 770 762
Property taxes 208 172
Total expenses 3,297 3,136
Net income $ 488 $ 509
Net income allocated to
general partners (1%) $ 5 $ 5
Net income allocated to
limited partners (99%) 483 504
$ 488 $ 509
Net income per limited
partnership unit $ 9.19 $ 9.59
Distributions per limited
partnership unit $14.41 $ --
See Accompanying Notes to Consolidated Financial Statements
SHELTER PROPERTIES V
CONSOLIDATED STATEMENT OF CHANGES IN PARTNERS' DEFICIT
(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 at
December 31, 2000 52,538 $ (336) $(3,555) $(3,891)
Distributions to partners -- (43) (757) (800)
Net income for the three months
ended March 31, 2001 -- 5 483 488
Partners' deficit at
March 31, 2001 52,538 $ (374) $(3,829) $(4,203)
See Accompanying Notes to Consolidated Financial Statements
d)
SHELTER PROPERTIES V
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
Three Months Ended
March 31,
2001 2000
Cash flows from operating activities:
Net income $ 488 $ 509
Adjustments to reconcile net income
to net cash provided by (used in) operating
activities:
Depreciation 732 686
Amortization of discounts
and loan costs 38 50
Casualty gain (121) --
Change in accounts:
Receivables and deposits 409 410
Other assets (199) (147)
Accounts payable (207) (1,111)
Tenant security deposit liabilities -- 8
Accrued property taxes (32) (190)
Due to Corporate General Partner 119 --
Other liabilities 104 (309)
Net cash provided by (used in) operating
activities 1,331 (94)
Cash flows from investing activities:
Property improvements and replacements (1,155) (673)
Net withdrawals from restricted escrows 138 46
Settlement for defective property improvements 153 --
Insurance proceeds received, net 95 1,867
Net cash (used in) provided by investing
activities (769) 1,240
Cash flows from financing activities:
Payments on mortgage notes payable (169) (170)
Loan costs paid (171) (71)
Partners' distributions (800) --
Net cash used in financing activities (1,140) (241)
Net (decrease) increase in cash and cash equivalents (578) 905
Cash and cash equivalents at beginning of period 2,544 8,852
Cash and cash equivalents at end of period $ 1,966 $ 9,757
Supplemental disclosure of cash flow information:
Cash paid for interest $ 727 $ 712
At December 31, 2000 and 1999, approximately $221,000 and $145,000,
respectively, 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. The general partner responsible for management of the
Partnership's business is Shelter Realty V Corporation (the "Corporate General
Partner"), a subsidiary of Apartment Investment and Management Company
("AIMCO"), a publicly traded real estate investment trust. In the opinion of 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 month period ended March 31, 2001 are not
necessarily indicative of the results that may be expected for the year ending
December 31, 2001. 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 December 31, 2000.
Certain reclassifications have been made to the 2000 balances to conform to the
2001 presentation.
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 partnerships by the
Registrant; therefore, the consolidated partnerships are controlled and
consolidated by the Registrant. All significant interpartnership balances have
been eliminated.
Segment Reporting:
Statement of Financial Accounting Standards ("SFAS") No. 131, "Disclosure about
Segments of an Enterprise and Related Information" 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. As defined in SFAS No. 131, the
Partnership has only one reportable segment. The Corporate General Partner
believes that segment-based disclosures will not result in a more meaningful
presentation than the consolidated financial statements as currently presented.
Note B - 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.
Three Months Ended
March 31,
(in thousands)
2001 2000
Net cash provided by (used in)
operating activities $ 1,331 $ (94)
Payments on mortgage notes
payable (169) (170)
Property improvements and
replacements (1,155) (673)
Change in restricted escrows, net 138 46
Changes in reserves for net
operating liabilities (194) 1,339
Releases from (additions to)
operating reserves 659 (448)
Net cash from operations $ 610 $ --
The Corporate General Partner released previously reserved funds of
approximately $659,000 at March 31, 2001. The Corporate General Partner reserved
approximately $448,000 at March 31, 2000 to fund capital improvements and
repairs at the Partnership's seven investment properties.
Note C - 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 amounts were
paid or accrued to the Corporate General Partner and affiliates during the three
months ended March 31, 2001 and 2000 (in thousands):
March 31,
2001 2000
Property management fees (included in
operating expense) $ 179 $ 175
Reimbursement for services of affiliates
(included in operating, general and
administrative expenses and investment 99 74
properties)
Refinancing fees (included in capitalized loan
costs) 170 --
Due to Corporate General Partner 119 --
During the three months ended March 31, 2001 and 2000, 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 $179,000 and $175,000 for the
three months ended March 31, 2001 and 2000, respectively.
Affiliates of the Corporate General Partner received reimbursement of
accountable administrative expenses amounting to approximately $99,000 and
$74,000 for the three months ended March 31, 2001 and 2000, respectively.
For services provided in connection with the refinancing of two of the
Partnership's investment properties, the Corporate General Partner was paid
total commissions related to the refinancings of approximately $170,000 during
the three months ended March 31, 2001.
In addition to its indirect ownership of the general partner interest in the
Partnership, AIMCO and its affiliates own 36,768 limited partnership units in
the Partnership representing 69.98% 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 acquire additional limited
partnership interests in the Partnership for cash or in exchange for units in
the operating partnership of AIMCO either through private purchases or tender
offers. 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 69.98% 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 its
affiliation with the Corporate General Partner.
Note D - 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 $6,323,000 in damages as a result of this
flooding. As of March 31, 2001, insurance proceeds of approximately $5,316,000
have been received to cover lost rents and damage to the property. The property
is currently undergoing reconstruction.
In July 1999, Woodland Village Apartments experienced a fire, which resulted in
the destruction of eight apartment units. The property incurred damages of
approximately $448,000 and estimated lost rents of approximately $36,000.
Insurance proceeds of approximately $332,000 were received during the year ended
December 31, 1999 to cover the damages and lost rents, resulting in a casualty
gain in 1999 of $210,000. The repairs were completed and an additional gain of
approximately $121,000 was recorded during the three months ended March 31,
2001.
Note E - Distributions
During the three months ended March 31, 2001, cash distributions from operations
of approximately $800,000 were paid (approximately $757,000 to the limited
partners, or $14.41 per limited partnership unit). In connection with the
transfer of funds from the majority owned sub-tier limited partnership to the
Partnership, approximately $38,000 was distributed to the general partner of the
majority owned sub-tier limited partnership. No distributions were paid to the
partners during the three months ended March 31, 2000. Subsequent to March 31,
2001, the Partnership declared and paid a distribution from operations of
approximately $610,000 (approximately $601,000 to the limited partners, or
$11.44 per limited partnership unit) to the partners.
Note F - 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 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 and an appeal was taken from the order on
October 5, 2000. On December 4, 2000, the Court appointed the law firm of Lieff
Cabraser Heimann & Bernstein LLP as new lead counsel for plaintiffs and the
putative class. Plaintiffs filed a third amended complaint on January 19, 2001.
On March 2, 2001, the Corporate General Partner and its affiliates filed a
demurrer to the third amended complaint. The demurrer is scheduled to be heard
on May 14, 2001. The Court has also scheduled a hearing on a motion for class
certification for August 27, 2001. Plaintiffs must file their motion for class
certification no later than June 15, 2001. 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
three months ended March 31, 2001 and 2000:
March 31,
Property 2001 2000
Foxfire Apartments
Atlanta, Georgia 94% 94%
Old Salem Apartments
Charlottesville, Virginia 98% 98%
Woodland Village Apartments
Columbia, South Carolina (2) 95% 92%
Lake Johnson Mews Apartments
Raleigh, North Carolina 92% 93%
The Lexington Green Apartments
Sarasota, Florida 98% 97%
Millhopper Village Apartments
Gainesville, Florida (2) 96% 93%
Tar River Estates
Greenville, North Carolina 54% 35%
(1)
(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
expected that the costs incurred will be fully covered by insurance. The
occupancy for the units not damaged at the property was 87% at March 31,
2001. The Corporate General Partner is currently reconstructing the
property.
(2) The Corporate General Partner attributes the increases in occupancy at
Woodland Village Apartments and Millhopper Village Apartments to increased
marketing efforts.
Results of Operations
The Registrant's net income for the three months ended March 31, 2001 was
approximately $488,000 compared to approximately $509,000 for the three months
ended March 31, 2000. The decrease in net income for the three months ended
March 31, 2001 is due to an increase in total expenses which was partially
offset by an increase in total revenues. Total expenses increased primarily due
to increases in operating, depreciation, and property tax expenses, and to a
lesser extent, increases in general and administrative and interest expenses.
The increase in operating expenses is primarily due to increases in payroll
expenses at most of the Partnership's investment properties and utility expenses
at Old Salem Apartments. The increase in operating expenses was partially offset
by a decrease in maintenance expenses at most of the Partnership's investment
properties. Depreciation expense increased as a result of recent capital
improvements performed at all of the Partnership's investment properties. The
increase in property tax expense is due to the timing of the receipt of tax
bills, which affected the tax accruals recorded for the respective periods.
Interest expense increased as a result of the refinancing of the debt
encumbering The Lexington Green Apartments which increased the debt balance (as
discussed below).
General and administrative expenses increased primarily due to an increase in
the costs of services included in management reimbursements to the Corporate
General Partner as allowed under the Partnership Agreement. Also included in
general and administrative expense at both March 31, 2001 and 2000 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.
Total revenues increased due to an increase in other income and the recognition
of a gain resulting from the casualty at Woodland Village Apartments (as
discussed below). Other income increased primarily due to an increase in tenant
reimbursements, which was partially offset by a decrease in interest income as a
result of lower average cash balances invested in interest bearing accounts. The
increase in total revenues was partially offset by a decrease in the rental
income. The decrease in rental income is primarily due to the receipt of
insurance proceeds in 2000 to cover lost rents as a result of the casualty at
Tar River Estates (as discussed below), which more than offset increases in
occupancy at three of the Partnership's investment properties and increases in
the average rental rates at six of the Partnership's investment properties.
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 $6,323,000 in damages as a result of this
flooding. As of March 31, 2001, insurance proceeds of approximately $5,316,000
have been received to cover lost rents and damage to the property. The property
is currently undergoing reconstruction.
In July 1999, Woodland Village Apartments experienced a fire, which resulted in
the destruction of eight apartment units. The property incurred damages of
approximately $448,000 and estimated lost rents of approximately $36,000.
Insurance proceeds of approximately $332,000 were received during the year ended
December 31, 1999 to cover the damages and lost rents, resulting in a casualty
gain in 1999 of $210,000. The repairs were completed and an additional gain of
approximately $121,000 was recorded during the three months ended March 31,
2001.
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 March 31, 2001, the Registrant had cash and cash equivalents of approximately
$1,966,000 as compared to approximately $9,757,000 at March 31, 2000. The
decrease in cash and cash equivalents of approximately $578,000 for the three
months ended March 31, 2001, from the Partnership's calendar year end, is due to
approximately $1,140,000 of cash used in financing activities and approximately
$769,000 of cash used in investing activities which was partially offset by
approximately $1,331,000 of cash provided by operating activities. Cash used in
financing activities consisted primarily of partner distributions, loan costs
related to the refinancing of the mortgages encumbering Old Salem Apartments and
Foxfire Apartments and payments of principal made on the mortgages encumbering
the Registrant's properties. Cash used in investing activities consisted of
property improvements and replacements, partially offset by a settlement
received for defective materials used in a construction project at The Lexington
Green Apartments, net receipts from escrow accounts maintained by the mortgage
lender, and insurance proceeds received for the fire at Woodland Village
Apartments. The Partnership invests its working capital reserves in interest
bearing 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, and local, legal, and regulatory requirements. Capital
improvements planned for each of the Registrant's properties are detailed below.
Millhopper Village Apartments: For 2001, the Partnership has budgeted
approximately $40,000 for capital improvements, consisting primarily of floor
covering and air conditioning unit replacements. The Partnership completed
approximately $32,000 in capital expenditures at Millhopper Village Apartments
for the three months ended March 31, 2001, consisting primarily of floor
covering replacements. These improvements were funded from operations and
replacement reserves.
Foxfire Apartments: For 2001, the Partnership has budgeted approximately $73,000
for capital improvements, consisting primarily of floor covering replacement.
The Partnership completed approximately $26,000 in capital expenditures at
Foxfire Apartments for the three months ended March 31, 2001, consisting
primarily of floor covering replacements. These improvements were funded from
operations.
Lake Johnson Mews Apartments: For 2001, the Partnership has budgeted
approximately $66,000 for capital improvements, consisting primarily of floor
covering replacements and interior building improvements. The Partnership
completed approximately $18,000 in capital expenditures at Lake Johnson Mews
Apartments for the three months ended March 31, 2001, consisting primarily of
interior building improvement and floor covering replacements. These
improvements were funded from replacement reserves.
Woodland Village Apartments: For 2001, the Partnership has budgeted
approximately $238,000 for capital improvements, consisting primarily of floor
covering and appliance replacements. The Partnership completed approximately
$168,000 in capital expenditures at Woodland Village Apartments for the three
months ended March 31, 2001, consisting primarily of repairs related to the fire
which occurred July 1999, interior building improvements, and floor covering
replacements. These improvements were funded from operations and insurance
proceeds.
The Lexington Green Apartments: For 2001, the Partnership has budgeted
approximately $332,000 for capital improvements, consisting primarily of floor
covering and air conditioning unit repairs and interior building improvements.
The Partnership completed approximately $35,000 in capital expenditures at The
Lexington Green Apartments for the three months ended March 31, 2001, consisting
primarily of cabinet replacements and floor covering replacements. These
improvements were funded from operations.
Tar River Estates Apartments: For 2001, the Partnership has budgeted
approximately $441,000 for capital improvements, consisting primarily of air
conditioning upgrades, floor covering replacements, and other exterior and
interior building improvements associated with repairs required due to severe
flood damage which occurred during September 1999. The Partnership completed
approximately $617,000 in capital expenditures at Tar River Estates for the
three months ended March 31, 2001, consisting primarily of floor covering
replacements and other exterior and interior building improvements associated
with repairs required due to severe flood damage which occurred during September
1999. These improvements were funded from replacement reserves and insurance
proceeds.
Old Salem Apartments: For 2001, the Partnership has budgeted approximately
$154,000 for capital improvements, consisting primarily of air conditioning
upgrades, floor covering replacements, and interior building improvements. The
Partnership completed approximately $38,000 in capital expenditures at Old Salem
Apartments for the three months ended March 31, 2001, consisting primarily of
floor covering replacements and HVAC upgrades. These improvements were funded
from 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 $40,245,000 net of discount, is amortized over
varying periods with required balloon payments ranging from November 15, 2002 to
January 1, 2021. 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.
On December 15, 2000, the Partnership refinanced the mortgage notes at The
Lexington Green Apartments. Gross proceeds from refinancing were $7,020,000 of
which approximately $3,272,000 was used to pay off the existing first and second
mortgage notes. The new note requires monthly principal and interest payments at
a fixed interest rate of 7.22% and matures January 1, 2021. The old debt carried
fixed interest rates of 7.60% with maturities of November 15, 2002.
During the three months ended March 31, 2001, cash distributions from operations
of approximately $800,000 were paid (approximately $757,000 to the limited
partners, or $14.41 per limited partnership unit). In connection with the
transfer of funds from the majority owned sub-tier limited partnership to the
Partnership, approximately $38,000 was distributed to the general partner of the
majority owned sub-tier limited partnership. No distributions were paid to the
partners during the three months ended March 31, 2000. Subsequent to March 31,
2001, the Partnership declared and paid a distribution from operations of
approximately $610,000 (approximately $601,000 to the limited partners, or
$11.44 per limited partnership unit) to the partners. 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 required capital improvement
expenditures, to permit any additional distributions to its partners during the
remainder of 2001 or subsequent periods. In addition, the Partnership may be
restricted from making distributions by the requirement to deposit in the
reserve account maintained by the mortgage lender for Tar River Estates a
minimum of $400 and a maximum of $1,000 per apartment unit for a total of
$160,800 to $402,000. As of March 31, 2001, the reserve account totaled
approximately $162,000.
In addition to its indirect ownership of the general partner interest in the
Partnership, AIMCO and its affiliates own 36,768 limited partnership units in
the Partnership representing 69.98% 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 acquire additional limited
partnership interests in the Partnership for cash or in exchange for units in
the operating partnership of AIMCO either through private purchases or tender
offers. 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 69.98% 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 its
affiliation with the Corporate General Partner.
PART II - OTHER INFORMATION
ITEM 1. 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 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 and an appeal was taken from the order on
October 5, 2000. On December 4, 2000, the Court appointed the law firm of Lieff
Cabraser Heimann & Bernstein LLP as new lead counsel for plaintiffs and the
putative class. Plaintiffs filed a third amended complaint on January 19, 2001.
On March 2, 2001, the Corporate General Partner and its affiliates filed a
demurrer to the third amended complaint. The demurrer is scheduled to be heard
on May 14, 2001. The Court has also scheduled a hearing on a motion for class
certification for August 27, 2001. Plaintiffs must file their motion for class
certification no later than June 15, 2001. 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:
None.
b) Reports on Form 8-K:
None filed during the quarter ended March 31, 2001.
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: May 15, 2001