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, 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 0-13261
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 unit data)
June 30, 2001
Assets
Cash and cash equivalents $ 708
Receivables and deposits 126
Restricted escrows 954
Other assets 349
Investment properties:
Land $ 3,759
Buildings and related personal property 40,902
44,661
Less accumulated depreciation (25,440) 19,221
$ 21,358
Liabilities and Partners' Deficit
Liabilities
Accounts payable $ 181
Tenant security deposit liabilities 169
Accrued property taxes 651
Other liabilities 612
Mortgage notes payable 21,388
Partners' Deficit
General partners $ (260)
Limited partners (42,324 units issued and
outstanding) (1,383) (1,643)
$ 21,358
See Accompanying Notes to Financial Statements
b)
SHELTER PROPERTIES VI
STATEMENTS OF OPERATIONS
(Unaudited)
(in thousands, except per unit data)
Three Months Ended Six Months Ended
June 30, June 30,
2001 2000 2001 2000
Revenues:
Rental income $ 2,045 $ 2,633 $ 4,088 $ 5,230
Other income 222 217 467 391
Total revenues 2,267 2,850 4,555 5,621
Expenses:
Operating 901 1,131 1,661 2,279
General and administrative 124 93 234 201
Depreciation 447 475 891 1,088
Interest 454 561 928 1,159
Property taxes 211 246 419 531
Total expenses 2,137 2,506 4,133 5,258
Net income $ 130 $ 344 $ 422 $ 363
Net income allocated
to general partners (1%) $ 1 $ 3 $ 4 $ 4
Net income allocated
to limited partners (99%) 129 341 418 359
$ 130 $ 344 $ 422 $ 363
Net income per limited
partnership unit $ 3.05 $ 8.06 $ 9.88 $ 8.48
Distribution per limited
partnership unit $ 21.55 $ 44.91 $ 71.90 $ 44.91
See Accompanying Notes to Financial Statements
c)
SHELTER PROPERTIES VI
STATEMENT OF CHANGES IN PARTNERS' (DEFICIT) CAPITAL
(Unaudited)
(in thousands, except unit data)
Limited
Partnership General Limited
Units Partners Partners Total
Original capital contributions 42,324 $ 2 $42,324 $42,326
Partners' (deficit) capital at
December 31, 2000 42,324 $ (246) $ 1,242 $ 996
Distributions to partners (18) (3,043) (3,061)
Net income for the six months
ended June 30, 2001 -- 4 418 422
Partners' deficit at
June 30, 2001 42,324 $ (260) $(1,383) $(1,643)
See Accompanying Notes to Financial Statements
d)
SHELTER PROPERTIES VI
STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
Six Months Ended
June 30,
2001 2000
Cash flows from operating activities:
Net income $ 422 $ 363
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation 891 1,088
Amortization of discounts and loan costs 107 182
Change in accounts:
Receivables and deposits 545 380
Other assets (83) (13)
Accounts payable 21 (53)
Tenant security deposit liabilities 4 (4)
Accrued property taxes 97 55
Other liabilities 26 1
Net cash provided by operating activities 2,030 1,999
Cash flows from investing activities:
Property improvements and replacements (739) (343)
Net withdrawals from (deposits to) restricted escrows 117 (627)
Net cash used in investing activities (622) (970)
Cash flows from financing activities:
Payments on mortgage notes payable (419) (502)
Distribution paid to partners (3,061) (2,348)
Net cash used in financing activities (3,480) (2,850)
Net decrease in cash and cash equivalents (2,072) (1,821)
Cash and cash equivalents at beginning of period 2,780 2,901
Cash and cash equivalents at end of period $ 708 $ 1,080
Supplemental disclosure of cash flow information:
Cash paid for interest $ 797 $ 977
At December 31, 2000 accounts payable and fixed assets were adjusted $265,000
for non-cash activity.
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
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. The general
partner responsible for management of the Partnership's business is Shelter
Realty VI Corporation ("the Corporate General Partner"). The Corporate General
Partner is 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 and six month periods ended June 30, 2001, are
not necessarily indicative of the results that may be expected for the fiscal
year ending December 31, 2001. 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 December 31, 2000.
Segment Reporting: Statement of Financial 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 required that those
enterprises report selected information about operating segments in interim
financial reports. It also established 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 financial statements as currently presented.
Note B - Reconciliation of Cash Flows
The following is a reconciliation of the subtotal on the accompanying statements
of cash flows captioned "net cash provided by operating activities" to "net cash
provided by operations", as defined in the partnership agreement of the
Partnership (the "Partnership Agreement"). However, "net cash provided by
operations" should not be considered an alternative to net income as an
indicator of the Partnership's operating performance or to cash flows as a
measure of liquidity.
Six Months Ended
June 30,
2001 2000
(in thousands)
Net cash provided by operating activities $ 2,030 $ 1,999
Payments on mortgage notes payable (419) (502)
Property improvements and replacements (739) (343)
Change in restricted escrows, net 117 (627)
Changes in reserves for net operating
liabilities (610) (366)
Change in additional reserves (379) (161)
Net cash provided by operations $ -- $ --
The Corporate General Partner believed it to be in the best interest of the
Partnership to reserve net cash from operations of approximately $379,000 and
$161,000 at June 30, 2001 and 2000, respectively, to fund continuing capital
improvements and repairs at the Partnership's 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 transactions
with the Corporate General Partner and/or its affiliates were incurred for each
of the six months ended June 30, 2001 and 2000:
2001 2000
(in thousands)
Property management fees (included in
operating expenses) $229 $296
Reimbursement for services of affiliates
(included in general and administrative
expenses and investment properties) 176 105
During the six months ended June 30, 2001 and 2000, 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 $229,000 and
$296,000 for the six months ended June 30, 2001 and 2000, respectively.
Affiliates of the Corporate General Partner received reimbursements of
accountable administrative expenses amounting to approximately $176,000 and
$105,000 for the six months ended June 30, 2001 and 2000, respectively.
In addition to its indirect ownership of the general partner interest in the
Partnership, AIMCO and its affiliates owned 26,750 limited partnership units in
the Partnership representing 63.20% of the outstanding units at June 30, 2001. 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 63.20% 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 - Distributions
During the six months ended June 30, 2001, the Partnership declared and paid
distributions of approximately $1,824,000 (approximately $1,806,000 to the
limited partners, $42.67 per limited partnership unit) of cash from operations
and approximately $1,237,000 (approximately $29.23 per limited partnership unit)
all to the limited partners from the sale proceeds of Foxfire/Barcelona
Apartments which sold in November 2000. 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).
Note E - Change in Accounting Estimate
During the six months ended June 30, 2001, certain accruals of approximately
$132,000 established related to the sale of Foxfire/Barcelona Apartments in
November 2000 were reversed due to actual costs being less than anticipated.
This accrual reversal is included as a reduction of operating expenses in the
six month period ended June 30, 2001.
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, among other things, 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; management of
the partnerships by the Insignia affiliates; and the series of transactions
which closed on October 1, 1998 and February 26, 1999 whereby Insignia and
Insignia Properties Trust, respectively, were merged into AIMCO. 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 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. On May 14, 2001, the Court heard the
demurrer to the third amended complaint. On July 10, 2001, the Court issued an
order sustaining defendants' demurrer on certain grounds. Plaintiffs have until
August 16, 2001 to file a fourth amended complaint. The Corporate General
Partner does not anticipate that any costs, whether legal or settlement 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 five apartment complexes. The
following table sets forth the average occupancy of the properties for each of
the six months ended June 30, 2001 and 2000:
Average
Occupancy
Property 2001 2000
Rocky Creek Apartments
Augusta, Georgia 97% 92%
Carriage House Apartments
Gastonia, North Carolina 86% 95%
Nottingham Square Apartments
Des Moines, Iowa 94% 97%
River Reach Apartments
Jacksonville, Florida 96% 96%
Village Gardens Apartments
Fort Collins, Colorado 95% 96%
The increase in average occupancy at Rocky Creek Apartments is attributed to a
more aggressive marketing campaign. The decrease in average occupancy at
Carriage House Apartments and Nottingham Square Apartments is due to a change in
demographics of the market areas in which the investment properties compete and
lower interest rates for home buyers.
Results of Operations
The Partnership's net income for the six months ended June 30, 2001, totaled
approximately $422,000 as compared to net income of approximately $363,000 for
the six months ended June 30, 2000. The Partnership realized net income for the
three months ended June 30, 2001, of approximately $130,000 compared to net
income of approximately $344,000 for the three months ended June 30, 2000. The
increase in net income for the six months ended June 30, 2001 is attributable to
a decrease in total expenses, partially offset by a decrease in total revenues.
The decrease in net income for the three months ended June 30, 2001 is
attributable to a decrease in total revenues, partially offset by a decrease in
total expenses. The decrease in both total revenues and total expenses for the
three and six months ended June 30, 2001 is primarily due to the sale of
Foxfire/Barcelona Apartments during November 2000. Excluding the impact of the
reversal of $132,000 in accruals related to the sale of Foxfire/Barcelona
Apartments for the six months ended June 30, 2001 and the impact of the
operations of Foxfire/Barcelona Apartments for the three and six months ended
June 30, 2000, the Partnership had net income for the three and six months ended
June 30, 2001 of approximately $130,000 and $290,000, respectively, versus net
income of approximately $184,000 and $223,000 for the three and six months ended
June 30, 2000, respectively.
The decrease in net income for the three months ended June 30, 2001 is
attributable to an increase in total expenses, partially offset by an increase
in total revenues. Total expenses increased primarily due to an increase in
depreciation expense and interest expense which was partially offset by a
decrease in operating expense. The increase in depreciation expense is primarily
due to capital improvements placed in service during the last twelve months at
the Partnership's investment properties. Interest expense increased as a result
of the refinancing of the mortgage encumbering Village Gardens Apartments during
December 2000. Operating expense decreased for the three months as a result of a
decrease in property expenses which was partially offset by an increase in
insurance expense. Insurance expense increased primarily due to an increase in
hazard insurance at Nottingham Square Apartments and River Reach Apartments due
to an increase in insurance premiums. Property expenses decreased due to a
decrease in employee salaries and related benefits at the investment properties.
Total revenues increased primarily due to an increase in other income. Other
income increased primarily due to an increase in utility reimbursements being
charged at the investment properties, partially offset by a decrease in interest
income as a result of lower cash balances in interest bearing accounts.
The increase in net income for the six months ended June 30, 2001 is
attributable to an increase in total revenues, partially offset by an increase
in total expenses. Total revenues increased primarily due to an increase in
other income and an increase in rental income. The increase in other income is
primarily the result of an increase in utility reimbursements being charged at
the investment properties. Rental income increased due to an increase in average
rental rates at four of the Registrant's investment properties, which more than
offset the decrease in occupancy at Carriage House Apartments, Nottingham Square
Apartments and Village Gardens Apartments. Total expenses increased primarily
due to an increase in operating expense, depreciation expense and interest
expense. Operating expense increased as a result of an increase in property
expense and insurance expense which more than offset a decrease in maintenance
expense. Property expenses increased due to an increase in utility expenses
including gas and sewer expenses at the Partnership's investment properties.
Insurance expense increased as a result of an increase in insurance premiums
primarily at Nottingham Square Apartments and River Reach Apartments. Interest
expense increased as discussed above. The increase in depreciation expense is
primarily due to capital improvements placed in service during the last twelve
months at the Partnership's investment properties.
General and administrative expenses increased for the three and six months ended
June 30, 2001 as a result of an increase in the costs of services included in
the management reimbursements to the Corporate General Partner as allowed under
the Partnership Agreement. Included in general and administrative expenses at
both June 30, 2001 and 2000, are costs associated with the quarterly and annual
communications with investors and regulatory agencies and the annual audit and
appraisals required by the Partnership Agreement.
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, 2001, the Partnership had cash and cash equivalents of approximately
$708,000 as compared to approximately $1,080,000 at June 30, 2000. Cash and cash
equivalents decreased approximately $2,072,000 for the six months ended June 30,
2001 from the Partnership's year end of December 31, 2000. The decrease was due
to approximately $3,480,000 of cash used in financing activities and
approximately $622,000 of cash used in investing activities which was partially
offset by approximately $2,030,000 of cash provided by operating activities.
Cash used in investing activities consisted primarily of property improvements
and replacements which were partially offset by net withdrawals from restricted
escrows maintained by the mortgage lender. Cash used in financing activities
consisted primarily of distributions paid to the 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 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 Partnership 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.
Rocky Creek Apartments
During the six months ended June 30, 2001, the Partnership expended
approximately $44,000 for budgeted and non budgeted capital improvements at
Rocky Creek Apartments primarily consisting of floor covering and appliance
replacements, and plumbing enhancements. The improvements were funded from
Partnership operating cash flow. Capital improvements of approximately $36,000
have been budgeted for 2001 which include, but are not limited to, plumbing
enhancements, and floor covering replacements.
Carriage House Apartments
During the six months ended June 30, 2001, the Partnership expended
approximately $106,000 for budgeted and non budgeted capital improvements at
Carriage House Apartments primarily consisting of floor covering replacements,
wall covering replacements, air conditioning and plumbing improvements, and
interior decoration. These improvements were funded from Partnership operating
cash flow. Capital improvements of approximately $38,000 have been budgeted for
2001 which include, but are not limited to, floor covering replacements, air
conditioning improvements, and interior decoration.
Nottingham Square Apartments
During the six months ended June 30, 2001, the Partnership expended
approximately $121,000 for capital improvements at Nottingham Square Apartments
primarily consisting of floor covering and appliance replacements and air
conditioning improvements, and other building improvements. These improvements
were funded from Partnership operating cash flow. Capital improvements of
approximately $513,000 have been budgeted for 2001 which include, but are not
limited to, floor covering and appliance replacements, HVAC unit upgrades, and
other building improvements.
River Reach Apartments
During the six months ended June 30, 2001, the Partnership expended
approximately $187,000 for capital improvements at River Reach Apartments
primarily consisting of floor covering and appliance replacements, interior
decoration, roof replacement, and major landscaping. These improvements were
funded from Partnership operating cash flow. Capital improvements of
approximately $839,000 have been budgeted for 2001 which included, but are not
limited to, floor covering and appliance replacements, interior decoration and
HVAC unit upgrades.
Village Gardens Apartments
During the six months ended June 30, 2001, the Partnership expended
approximately $16,000 for capital improvements at Village Gardens Apartments
primarily consisting of floor covering replacements and parking area upgrades.
These improvements were funded from Partnership operating cash flow. Capital
improvements of approximately $121,000 have been budgeted for 2001 which
included, but are not limited to, floor covering and appliance replacements,
electrical improvements, water heater replacements, and recreational facilities
upgrades.
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 $21,388,000, net of discounts, has maturity dates
ranging from November 2002 to January 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 Partnership will risk losing such properties through foreclosure.
During the six months ended June 30, 2001, the Partnership declared and paid
distributions of approximately $1,824,000 (approximately $1,806,000 to the
limited partners, $42.67 per limited partnership unit) of cash from operations
and approximately $1,237,000 (approximately $29.23 per limited partnership unit)
all to the limited partners from the sale proceeds of Foxfire/Barcelona
Apartments which sold in November 2000. 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). 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 monthly 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 for
four of the five remaining properties is less than $400 per apartment unit at
each property. At June 30, 2001, the reserve account was adequately funded with
a balance of approximately $931,000. 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 2001 or subsequent periods.
In addition to its indirect ownership of the general partner interest in the
Partnership, AIMCO and its affiliates owned 26,750 limited partnership units in
the Partnership representing 63.20% of the outstanding units at June 30, 2001. 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 63.20% 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, among other things, 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; management of
the partnerships by the Insignia affiliates; and the series of transactions
which closed on October 1, 1998 and February 26, 1999 whereby Insignia and
Insignia Properties Trust, respectively, were merged into AIMCO. 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 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. On May 14, 2001, the Court heard the
demurrer to the third amended complaint. On July 10, 2001, the Court issued an
order sustaining defendants' demurrer on certain grounds. Plaintiffs have until
August 16, 2001 to file a fourth amended complaint. The Corporate General
Partner does not anticipate that any costs, whether legal or settlement 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 filed during the quarter ended June 30, 2001:
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: July 31, 2001