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, 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)
September 30, 2001
Assets
Cash and cash equivalents $ 493
Receivables and deposits 120
Restricted escrows 886
Other assets 324
Investment properties:
Land $ 3,759
Buildings and related personal property 41,342
45,101
Less accumulated depreciation (25,878) 19,223
$ 21,046
Liabilities and Partners' Deficit
Liabilities
Accounts payable $ 69
Tenant security deposit liabilities 162
Accrued property taxes 621
Other liabilities 601
Mortgage notes payable 21,205
Partners' Deficit
General partners $ (260)
Limited partners (42,324 units issued and
outstanding) (1,352) (1,612)
$ 21,046
See Accompanying Notes to Financial Statements
b)
SHELTER PROPERTIES VI
STATEMENTS OF OPERATIONS
(Unaudited)
(in thousands, except per unit data)
Three Months Ended Nine Months Ended
September 30, September 30,
2001 2000 2001 2000
Revenues:
Rental income $ 2,136 $ 2,648 $ 6,224 $ 7,878
Other income 213 230 680 621
Total revenues 2,349 2,878 6,904 8,499
Expenses:
Operating 936 1,108 2,597 3,387
General and administrative 109 178 343 379
Depreciation 438 675 1,329 1,763
Interest 458 574 1,386 1,733
Property taxes 202 255 621 786
Total expenses 2,143 2,790 6,276 8,048
Net income $ 206 $ 88 $ 628 $ 451
Net income allocated
to general partners (1%) $ 2 $ 1 $ 6 $ 5
Net income allocated
to limited partners (99%) 204 87 622 446
$ 206 $ 88 $ 628 $ 451
Net income per limited
partnership unit $ 4.82 $ 2.06 $ 14.70 $ 10.54
Distributions per limited
partnership unit $ 4.09 $ -- $ 75.99 $ 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 (20) (3,216) (3,236)
Net income for the nine months
ended September 30, 2001 -- 6 622 628
Partners' deficit at
September 30, 2001 42,324 $ (260) $(1,352) $(1,612)
See Accompanying Notes to Financial Statements
d)
SHELTER PROPERTIES VI
STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
Nine Months Ended
September 30,
2001 2000
Cash flows from operating activities:
Net income $ 628 $ 451
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation 1,329 1,763
Amortization of discounts and loan costs 163 269
Change in accounts:
Receivables and deposits 551 356
Other assets (64) (32)
Accounts payable (91) (104)
Tenant security deposit liabilities (3) 4
Accrued property taxes 67 87
Other liabilities 15 57
Net cash provided by operating activities 2,595 2,851
Cash flows from investing activities:
Property improvements and replacements (1,179) (648)
Net withdrawals from (deposits to) restricted escrows 185 (669)
Net cash used in investing activities (994) (1,317)
Cash flows from financing activities:
Payments on mortgage notes payable (640) (754)
Distributions paid to partners (3,236) (2,348)
Loan cost paid (12) --
Net cash used in financing activities (3,888) (3,102)
Net decrease in cash and cash equivalents (2,287) (1,568)
Cash and cash equivalents at beginning of period 2,780 2,901
Cash and cash equivalents at end of period $ 493 $ 1,333
Supplemental disclosure of cash flow information:
Cash paid for interest $ 1,203 $ 1,463
At December 31, 2000, accounts payable and fixed assets were adjusted by
approximately $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 nine month periods ended September 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 requires 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
As required by the Partnership Agreement, the following is a reconciliation of
"Net cash provided by operations activities" in the accompanying statements of
cash flows to "Net cash provided by operations," as defined in the Partnership
Agreement.
Nine Months Ended
September 30,
2001 2000
(in thousands)
Net cash provided by operating activities $ 2,595 $ 2,851
Payments on mortgage notes payable (640) (754)
Property improvements and replacements (1,179) (648)
Change in restricted escrows, net 185 (669)
Changes in reserves for net operating
liabilities (475) (368)
Change in additional reserves (486) (230)
Net cash provided by operations $ -- $ 182
The Corporate General Partner believed it to be in the best interest of the
Partnership to reserve net cash provided by operations of approximately $486,000
and $230,000 at September 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 nine months ended September 30, 2001 and 2000:
2001 2000
(in thousands)
Property management fees (included in
operating expenses) $348 $439
Reimbursement for services of affiliates
(included in general and administrative
expenses and investment properties) 454 245
Commission to Corporate General Partner 142 --
During the nine months ended September 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 $348,000 and
$439,000 for the nine months ended September 30, 2001 and 2000, respectively.
Affiliates of the Corporate General Partner received reimbursements of
accountable administrative expenses amounting to approximately $454,000 and
$245,000 for the nine months ended September 30, 2001 and 2000, respectively.
Included in this amount for the nine months ended September 30, 2001 is
approximately $217,000 of construction service reimbursements.
Pursuant to the Partnership Agreement and in connection with the November 2000
sale of Foxfire/Barcelona Village, the Corporate General Partner is entitled to
a commission of up to 1% for its assistance in the sale. Payment of such
commission is subordinate to the limited partners receiving a cumulative 7%
return on their investment. This return has not yet been met, and accordingly,
the $142,000 was accrued and is included in other liabilities in the
accompanying balance sheet at September 30, 2001.
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 September 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 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 control 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 nine months ended September 30, 2001, the Partnership declared and
paid distributions of approximately $1,999,000 (approximately $1,979,000 to the
limited partners, $46.76 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 nine months ended
September 30, 2000. During the nine months ended September 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) of cash from
operations.
Note E - Change in Accounting Estimate
During the nine months ended September 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 nine month period ended September 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. (the "Nuanes action") 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. On July 20, 2001,
Plaintiffs filed a motion for reconsideration of the Court's July 10, 2001 order
granting in part and denying in part defendants' demurrer. On September 7, 2001,
Plaintiffs filed a fourth amended class and derivative action complaint. On
September 12, 2001, the Court denied Plaintiffs' motion for reconsideration. On
October 5, 2001, the Corporate General Partner and affiliated defendants filed a
demurrer to the fourth amended complaint, which, together with a demurrer filed
by other defendants, is currently scheduled to be heard on November 15, 2001.
The Court has set the matter for trial in January 2003.
During the third quarter of 2001, a complaint (the "Heller action") was filed
against the same defendants that are named in the Nuanes action, captioned
Heller v. Insignia Financial Group. On or about August 6, 2001, plaintiffs filed
a first amended complaint. The first amended complaint in the Heller action is
brought as a purported derivative action, and asserts claims for among other
things breach of fiduciary duty; unfair competition; conversion, unjust
enrichment; and judicial dissolution. Plaintiffs in the Nuanes action filed a
motion to consolidate the Heller action with the Nuanes action and stated that
the Heller action was filed in order to preserve the derivative claims that were
dismissed without leave to amend in the Nuanes action by the Court order dated
July 10, 2001. On October 5, 2001, the Corporate General Partner and affiliated
defendants moved to strike the first amended complaint in its entirety for
violating the Court's July 10, 2001 order granting in part and denying in part
defendants' demurrer in the Nuanes action, or alternatively, to strike certain
portions of the complaint based on the statute of limitations. Other defendants
in the action demurred to the fourth amended complaint, and, alternatively,
moved to strike the complaint. The matters are currently scheduled to be heard
on November 15, 2001.
The Corporate General Partner does not anticipate that any costs, whether legal
or settlement costs, associated with these cases 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 nine months ended September 30, 2001 and 2000:
Average
Occupancy
Property 2001 2000
Rocky Creek Apartments
Augusta, Georgia 96% 93%
Carriage House Apartments
Gastonia, North Carolina 88% 95%
Nottingham Square Apartments
Des Moines, Iowa 95% 97%
River Reach Apartments
Jacksonville, Florida 96% 96%
Village Gardens Apartments
Fort Collins, Colorado 96% 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 is due to a change in demographics of the market areas
in which the investment property competes, lower interest rates for home buyers
and road construction in the area which is limiting road traffic.
Results of Operations
The Partnership's net income for the nine months ended September 30, 2001,
totaled approximately $628,000 as compared to net income of approximately
$451,000 for the nine months ended September 30, 2000. The Partnership's net
income for the three months ended September 30, 2001, totaled approximately
$206,000 compared to net income of approximately $88,000 for the three months
ended September 30, 2000. The increase in net income for the three and nine
months ended September 30, 2001 is attributable to a decrease in total expenses,
partially offset by a decrease in total revenues. The decrease in both total
revenues and total expenses for the three and nine months ended September 30,
2001 is primarily due to the sale of Foxfire/Barcelona Apartments during
November 2000. Excluding the impact of the reversal of approximately $132,000 in
accruals related to the sale of Foxfire/Barcelona Apartments for the nine months
ended September 30, 2001 and the impact of the operations of Foxfire/Barcelona
Apartments for the three and nine months ended September 30, 2000, the
Partnership had net income for the three and nine months ended September 30,
2001 of approximately $204,000 and $495,000, respectively, compared to a net
loss of approximately $70,000 and net income of approximately $152,000 for the
three and nine months ended September 30, 2000, respectively.
The increase in net income for the three and nine months ended September 30,
2001 is attributable to a decrease in total expenses and an increase in total
revenues. Total expenses decreased for both periods primarily due to a decrease
in general and administrative expenses partially offset by an increase in
operating expense and interest expense. Operating expense increased during the
three months ended September 30, 2001 primarily due to an increase in insurance
expense and administrative expense partially offset by a decrease in maintenance
expense. Operating expense increased during the nine months ended September 30,
2001 primarily due to an increase in insurance expense and property expense
partially offset by a decrease in maintenance expense. Insurance expense
increased during the three and nine months ended September 30, 2001 primarily
due to an increase in insurance premiums at Nottingham Square Apartments and
River Reach Apartments. Maintenance expense decreased primarily due to a
decrease in contract labor used for cleaning, yard and ground care and parking
at several of the investment properties, especially at River Reach Apartments.
Interest expense increased as a result of the refinancing of the mortgage
encumbering Village Gardens Apartments during December 2000. Administrative
expense increased for the three months ended September 30, 2001 primarily due to
increases in employee bonuses at River Reach Apartments and Village Gardens
Apartments. Property expense increased for the nine months ended September 30,
2001 due to an increase in utility costs for vacant apartments at several
investment properties as a result of their decrease in occupancy.
Total revenues increased during the three and nine months ended September 30,
2001 primarily due to an increase in rental income and other income. Rental
income increased primarily due to an increase in average rental rates at four of
the Registrant's investment properties. 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.
General and administrative expenses decreased for the three and nine months
ended September 30, 2001. The decrease in general and administrative expenses
for the three months ended September 30, 2001 is primarily due to a decrease in
the costs of services included in the management reimbursements to the Corporate
General Partner as allowed under the Partnership Agreement. The decrease in
general and administrative expenses for the nine months ended September 30, 2001
is primarily due to a decrease in professional expenses necessary to operate the
Partnership.
Also included in general and administrative expenses at both September 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 September 30, 2001, the Partnership had cash and cash equivalents of
approximately $493,000 as compared to approximately $1,333,000 at September 30,
2000. Cash and cash equivalents decreased approximately $2,467,000 for the nine
months ended September 30, 2001 from the Partnership's year end of December 31,
2000. The decrease in cash and cash equivalents was due to approximately
$3,888,000 of cash used in financing activities and approximately $994,000 of
cash used in investing activities which was partially offset by approximately
$2,595,000 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 and the
payment of additional loan costs in connection with the December 2000
refinancing of the Village Gardens Apartments mortgage. 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 nine months ended September 30, 2001, the Partnership expended
approximately $72,000 for budgeted and non budgeted capital improvements at
Rocky Creek Apartments primarily consisting of floor covering, appliance
replacements, and plumbing enhancements. The improvements were funded from
Partnership operating cash flow. Capital improvements of approximately $66,000
have been budgeted for 2001 which include, but are not limited to, plumbing
enhancements, and floor covering and appliance replacements.
Carriage House Apartments
During the nine months ended September 30, 2001, the Partnership expended
approximately $141,000 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 $78,000 have been budgeted for
2001 which include, but are not limited to, floor covering replacements,
interior decoration, appliance replacements, and air conditioning improvements.
Nottingham Square Apartments
During the nine months ended September 30, 2001, the Partnership expended
approximately $172,000 for capital improvements at Nottingham Square Apartments
primarily consisting of floor covering and appliance replacements, air
conditioning improvements, and other building improvements. These improvements
were funded from Partnership operating cash flow. Capital improvements of
approximately $550,000 have been budgeted for 2001 which include, but are not
limited to, floor covering and appliance replacements and painting.
River Reach Apartments
During the nine months ended September 30, 2001, the Partnership expended
approximately $439,000 for capital improvements at River Reach Apartments
primarily consisting of floor covering and appliance replacements, interior
decoration, roof replacement, major landscaping, and air conditioning and
structural improvements. These improvements were funded from Partnership
operating cash flow. Capital improvements of approximately $966,000 have been
budgeted for 2001 which include, but are not limited to, floor covering and
appliance replacements, interior decoration, structural improvements, roof
replacement, and other building improvements.
Village Gardens Apartments
During the nine months ended September 30, 2001, the Partnership expended
approximately $90,000 for capital improvements at Village Gardens Apartments
primarily consisting of floor covering and appliance replacements and parking
area upgrades. These improvements were funded from Partnership operating cash
flow. Capital improvements of approximately $196,000 have been budgeted for 2001
which include, but are not limited to, floor covering and appliance
replacements, plumbing enhancements, parking area upgrades 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 $21,205,000, 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 nine months ended September 30, 2001, the Partnership declared and
paid distributions of approximately $1,999,000 (approximately $1,979,000 to the
limited partners, $46.76 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 nine months ended
September 30, 2000. During the nine months ended September 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) of cash from
operations. Future cash distributions will depend on the levels of net cash
generated from operations, the availability of cash reserves, and the timing of
debt maturities, refinancings, and/or property sales. The Partnership's
distribution policy is reviewed on a 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 September
30, 2001, the reserve account was adequately funded with a balance of
approximately $862,000. 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 September 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 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 control 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. (the "Nuanes action") 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. On July 20, 2001,
Plaintiffs filed a motion for reconsideration of the Court's July 10, 2001 order
granting in part and denying in part defendants' demurrer. On September 7, 2001,
Plaintiffs filed a fourth amended class and derivative action complaint. On
September 12, 2001, the Court denied Plaintiffs' motion for reconsideration. On
October 5, 2001, the Corporate General Partner and affiliated defendants filed a
demurrer to the fourth amended complaint, which, together with a demurrer filed
by other defendants, is currently scheduled to be heard on November 15, 2001.
The Court has set the matter for trial in January 2003.
During the third quarter of 2001, a complaint (the "Heller action") was filed
against the same defendants that are named in the Nuanes action, captioned
Heller v. Insignia Financial Group. On or about August 6, 2001, plaintiffs filed
a first amended complaint. The first amended complaint in the Heller action is
brought as a purported derivative action, and asserts claims for among other
things breach of fiduciary duty; unfair competition; conversion, unjust
enrichment; and judicial dissolution. Plaintiffs in the Nuanes action filed a
motion to consolidate the Heller action with the Nuanes action and stated that
the Heller action was filed in order to preserve the derivative claims that were
dismissed without leave to amend in the Nuanes action by the Court order dated
July 10, 2001. On October 5, 2001, the Corporate General Partner and affiliated
defendants moved to strike the first amended complaint in its entirety for
violating the Court's July 10, 2001 order granting in part and denying in part
defendants' demurrer in the Nuanes action, or alternatively, to strike certain
portions of the complaint based on the statute of limitations. Other defendants
in the action demurred to the fourth amended complaint, and, alternatively,
moved to strike the complaint. The matters are currently scheduled to be heard
on November 15, 2001.
The Corporate General Partner does not anticipate that any costs, whether legal
or settlement costs, associated with these cases 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 September
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: October 30, 2001