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 0-11574
SHELTER PROPERTIES V
(Exact name of small business issuer as specified in its charter)
South Carolina 57-0721855
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
55 Beattie Place, P.O. Box 1089
Greenville, South Carolina 29602
(Address of principal executive offices)
Issuer's telephone number (864) 239-1000
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes X No____
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
a)
SHELTER PROPERTIES V
CONSOLIDATED BALANCE SHEET
(Unaudited)
(in thousands, except unit data)
September 30, 2001
Assets
Cash and cash equivalents $ 1,291
Receivables and deposits 692
Restricted escrows 2,983
Other assets 1,511
Investment properties:
Land $ 4,242
Buildings and related personal property 78,620
82,862
Less accumulated depreciation (49,405) 33,457
$ 39,934
Liabilities and Partners' Deficit
Liabilities
Accounts payable $ 151
Tenant security deposit liabilities 288
Accrued property taxes 500
Other liabilities 557
Mortgage notes payable 47,233
Partners' Deficit
General partners $ (385)
Limited partners (52,538 units
issued and outstanding) (8,410) (8,795)
$ 39,934
See Accompanying Notes to Consolidated Financial Statements
b)
SHELTER PROPERTIES V
CONSOLIDATED 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 $ 3,315 $ 3,442 $ 9,868 $10,262
Other income 238 253 951 821
Casualty gain -- 1,662 121 1,662
Total revenues 3,553 5,357 10,940 12,745
Expenses:
Operating 1,594 1,381 4,401 4,136
General and administrative 147 219 425 439
Depreciation 725 894 2,199 2,248
Interest 892 760 2,389 2,284
Property taxes 235 181 664 568
Total expenses 3,593 3,435 10,078 9,675
(Loss) income before extraordinary
item (40) 1,922 862 3,070
Extraordinary loss on early
extinguishment of debt (38) -- (112) --
Net (loss) income $ (78) $ 1,922 $ 750 $ 3,070
Net (loss) income allocated to
general partners (1%) $ (1) $ 19 $ 8 $ 31
Net (loss) income allocated to
limited partners (99%) (77) 1,903 742 3,039
$ (78) $ 1,922 $ 750 $ 3,070
Per limited partnership unit:
(Loss) income before
extraordinary item $ (.75) $ 36.22 $ 16.23 $ 57.84
Extraordinary item (.72) -- (2.11) --
Net (loss) income $ (1.47) $ 36.22 $ 14.12 $ 57.84
Distributions per limited
partnership unit $ 75.94 $ -- $106.53 $144.18
See Accompanying Notes to Consolidated Financial Statements
c)
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 -- (57) (5,597) (5,654)
Net income for the nine months
ended September 30, 2001 -- 8 742 750
Partners' deficit at
September 30, 2001 52,538 $ (385) $(8,410) $(8,795)
See Accompanying Notes to Consolidated Financial Statements
d)
SHELTER PROPERTIES V
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
Nine Months Ended
September 30,
2001 2000
Cash flows from operating activities:
Net income $ 750 $ 3,070
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 2,199 2,248
Amortization of discounts and loan costs 81 147
Casualty gain (121) (1,662)
Extraordinary loss on early extinguishment of debt 112 --
Change in accounts:
Receivables and deposits 371 (2,056)
Other assets (125) (97)
Accounts payable (247) (1,014)
Tenant security deposit liabilities 7 14
Accrued property taxes 240 38
Other liabilities (39) (404)
Net cash provided by operating activities 3,228 284
Cash flows from investing activities:
Property improvements and replacements (4,844) (2,238)
Net (deposits to) withdrawals from restricted escrows (204) 39
Settlement for defective property improvements 153 --
Insurance proceeds received, net 121 4,324
Net cash (used in) provided by investing
activities (4,774) 2,125
Cash flows from financing activities:
Payments on mortgage notes payable (593) (508)
Loan costs paid (852) (83)
Proceeds from mortgage notes payable 19,392 --
Repayment of mortgage notes payable (12,000) --
Partners' distributions (5,654) (7,594)
Net cash provided by (used in) financing
activities 293 (8,185)
Net decrease in cash and cash equivalents (1,253) (5,776)
Cash and cash equivalents at beginning of period 2,544 8,852
Cash and cash equivalents at end of period $ 1,291 $ 3,076
Supplemental disclosure of cash flow information:
Cash paid for interest $ 2,311 $ 2,138
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"). 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 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. Shelter Realty V Corporation is an
affiliate of Apartment Investment and Management Company ("AIMCO"), a publicly
traded real estate investment trust.
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 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 consolidated 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 operating activities" in the accompanying consolidated
statements of cash flows to "Net cash from operations", as defined in the
Partnership Agreement. However, "Net cash from operations" should not be
considered an alternative to net income as an indicator of the Partnership's
operating performance or to cash flows as a measure of liquidity.
Nine Months Ended
September 30,
(in thousands)
2001 2000
Net cash provided by
operating activities $ 3,228 $ 284
Payments on mortgage notes
payable (593) (508)
Property improvements and
replacements (4,844) (2,238)
Change in restricted escrows, net (204) 39
Changes in reserves for net
operating liabilities (207) 3,519
Releases from (additions to)
operating reserves 3,531 (634)
Net cash from operations $ 911 $ 462
The Corporate General Partner released previously reserved funds of
approximately $3,531,000 at September 30, 2001 and reserved approximately
$634,000 at September 30, 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 nine
months ended September 30, 2001 and 2000 (in thousands):
September 30,
2001 2000
Property management fees (included in
operating expenses) $ 545 $ 539
Reimbursement for services of affiliates
(included in operating, general and
administrative and interest expenses and
investment properties) 1,484 343
Loan costs (included in other assets) 364 --
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 Partnership's properties for providing property management services. The
Partnership paid to such affiliates approximately $545,000 and $539,000 for the
nine months ended September 30, 2001 and 2000, respectively.
Affiliates of the Corporate General Partner received reimbursement of
accountable administrative expenses amounting to approximately $1,484,000 and
$343,000 for the nine months ended September 30, 2001 and 2000, respectively.
Included in these charges for the nine months ended September 30, 2001 and 2000
is approximately $1,182,000 and $32,000, respectively, in reimbursements for
construction oversight costs.
For services provided in connection with the refinancing of five of the
Partnership's investment properties, the Corporate General Partner was paid
approximately $364,000 during the nine months ended September 30, 2001. These
costs were capitalized and are included in other assets on the consolidated
balance sheet.
In addition to its indirect ownership of the general partner interest in the
Partnership, AIMCO and its affiliates own 36,879 limited partnership units in
the Partnership representing 70.20% 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 voting on certain amendments to the Partnership Agreement and
voting to remove the Corporate General Partner. As a result of its ownership of
70.20% of the outstanding units, AIMCO is in a position to control all such
voting decisions with respect to the Partnership. 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 Events
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 September 30, 2001, insurance proceeds of approximately
$5,316,000 have been received to cover lost rents and damage to the property,
resulting in a casualty gain of approximately $1,662,000 for the nine months
ended September 30, 2000. In addition, the Partnership has negotiated an
agreement with the city of Greenville, North Carolina, whereby a portion of the
land will be condemned and sold to the city (see "Note H" for further
discussion). Therefore, the apartment units previously located on this land will
not be reconstructed. The remaining damaged units have been completely
reconstructed. As part of the reconstruction process, the Partnership
capitalized the portion of the interest expense associated with the assets under
reconstruction. For the nine months ended September 30, 2001, approximately
$95,000 of interest had been capitalized.
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 nine months ended September 30,
2001 as a result of receiving additional insurance proceeds.
Note E - Refinancing and Extraordinary Loss
On August 31, 2001, the Partnership refinanced the mortgage note at Woodland
Village Apartments. Gross proceeds from the refinancing were $8,050,000 of which
approximately $4,950,000 was used to repay the existing mortgage note. The new
note requires monthly principal and interest payments at a fixed rate of 7.11%
and matures September 1, 2021 at which time the loan will be fully amortized.
The old debt carried a fixed interest rate of 7.33%. The Partnership recognized
an extraordinary loss on the early extinguishment of debt of approximately
$38,000, due to the write off of unamortized loan costs. Total capitalized loan
costs for the new mortgage were approximately $267,000 at September 30, 2001.
On June 28, 2001, the Partnership refinanced the mortgage notes encumbering Lake
Johnson Mews Apartments and Millhopper Village Apartments. The refinancings
replaced indebtedness of approximately $4,350,000 at Lake Johnson Mews
Apartments and $2,700,000 at Millhopper Village Apartments with new mortgages in
the amounts of $7,117,000 and $4,225,000, respectively. The new mortgages both
carry a stated interest rate of 7.43% as compared to 7.33% on the previous
loans. Payments of principal and interest on the new mortgage loans are due
monthly until the loans mature on July 1, 2021 at which time the loan will be
fully amortized. The Partnership recognized an extraordinary loss on the early
extinguishment of debt of approximately $38,000 at Lake Johnson Mews Apartments
and approximately $36,000 at Millhopper Village Apartments due to the write-off
of unamortized loan costs. Total capitalized loan costs for the new mortgages
were approximately $225,000 for Lake Johnson Mews Apartments and approximately
$171,000 for Millhopper Village Apartments at September 30, 2001.
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 at which time the
loan will be fully amortized. The old debt carried fixed interest rates of 7.60%
with maturities of November 15, 2002. Total capitalized loan costs for the new
mortgage were approximately $195,000 for the year ended December 31, 2000.
Additional loan costs of approximately $14,000 were capitalized during the nine
months ended September 30, 2001.
During October and November 1999, the Partnership refinanced the mortgage notes
at Foxfire and Old Salem Apartments, respectively. Gross proceeds from the
refinancings were $7,200,000 and $10,157,000, respectively, of which
approximately $4,519,000 and $6,287,000, respectively, was used to pay off the
existing mortgage notes. The new notes require monthly principal and interest
payments at fixed interest rates of 7.79% for Foxfire Apartments and 8.02% for
Old Salem Apartments and mature November 1, and December 1, 2019, respectively,
at which time the loans will be fully amortized. The old debt carried fixed
interest rates of 7.50% and 10.375% with maturities of May 1999 and December
2016, respectively. Total capitalized loan costs at December 31, 1999 were
approximately $143,000. An additional $83,000 was capitalized during the year
ended December 31, 2000 and an additional $175,000 was capitalized during the
nine months ended September 30, 2001.
Note F - Distributions
During the nine months ended September 30, 2001, the Partnership distributed
approximately $5,654,000 to the partners (approximately $5,597,000 to the
limited partners, or $106.53 per limited partnership unit), of which
approximately $1,664,000 (approximately $1,607,000 to the limited partners, or
$30.59 per limited partnership unit) was from operations and approximately
$3,990,000 (all to the limited partners, or $75.94 per limited partnership unit)
was from proceeds from the refinancings of Lake Johnson Mews Apartments,
Millhopper Village Apartments, and Woodland Village Apartments. In connection
with the transfer of funds from the majority owned sub-tier limited partnership
to the Partnership, approximately $41,000 was distributed to the general partner
of the majority owned sub-tier limited partnership. During the nine months ended
September 30, 2000, cash distributions of approximately $6,177,000 were paid to
the limited partners ($117.57 per limited partnership unit) from refinancing
proceeds and approximately $1,417,000 (approximately $1,398,000 of which was
paid to the limited partners or $26.61 per limited partnership unit) were paid
from operations. Subsequent to September 30, 2001, the Partnership distributed
approximately $911,000 to the limited partners ($17.34 per limited partnership
unit) from proceeds from the refinancing of Woodland Village Apartments.
Note G - Legal Proceedings
In March 1998, several putative unit holders of limited partnership units of the
Partnership commenced an action entitled Rosalie Nuanes, et al. v. Insignia
Financial Group, Inc., et al. (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.
Note H - Subsequent Event
On October 17, 2001, the Partnership sold a portion of the land from Tar River
Estates Apartments to the city of Greenville, North Carolina, for net proceeds
of approximately $6,176,000 after a reduction for FEMA funds previously
received. The Partnership realized a gain of approximately $5,968,000 as a
result of the sale. The Partnership used approximately $4,342,000 of the net
proceeds to repay the mortgages encumbering the property. In addition, the
Partnership recorded an extraordinary loss on early extinguishment of debt of
approximately $89,000 as a result of the write off of unamortized loan costs and
mortgage discounts.
The following pro-forma information reflects the operations of the Partnership
as if the portion of the land at Tar River Estates Apartments had been sold
January 1, 2000 (in thousands, except unit data).
September 30, 2001
Assets
Cash and cash equivalents $ 3,528
Other assets 2,925
Fixed assets, net 33,249
$39,702
Liabilities and partners' deficit
Liabilities $ 1,496
Mortgage notes payable 42,939
Equity (4,733)
$39,702
Nine Months Ended Year Ended
September 30, 2001 September 30, 2000 December 31, 2000
Revenues $10,940 $10,297 $13,956
Total expenses 9,872 9,368 12,493
Income before extraordinary
item $ 1,068 $ 929 $ 1,463
Income before extraordinary
item per limited
partnership unit $ 20.12 $ 17.51 $ 27.56
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
The matters discussed in this Form 10-QSB contain certain forward-looking
statements and involve risks and uncertainties (including changing market
conditions, competitive and regulatory matters, etc.) detailed in the
disclosures contained in this Form 10-QSB and the other filings with the
Securities and Exchange Commission made by the Registrant from time to time. The
discussions of the Registrant's business and results of operations, including
forward-looking statements pertaining to such matters, does not take into
account the effects of any changes to the Registrant's business and results of
operation. Accordingly, actual results could differ materially from those
projected in the forward-looking statements as a result of a number of factors,
including those identified herein.
The Partnership's investment properties consist of seven apartment complexes.
The following table sets forth the average occupancy of the properties for the
nine months ended September 30, 2001 and 2000:
September 30,
Property 2001 2000
Foxfire Apartments
Atlanta, Georgia 94% 95%
Old Salem Apartments
Charlottesville, Virginia 97% 97%
Woodland Village Apartments
Columbia, South Carolina 94% 93%
Lake Johnson Mews Apartments
Raleigh, North Carolina 92% 93%
The Lexington Green Apartments
Sarasota, Florida 96% 97%
Millhopper Village Apartments
Gainesville, Florida 94% 94%
Tar River Estates Apartments
Greenville, North Carolina (1) 66% 35%
(1) During September 1999, Tar River Estates Apartments 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. The
occupancy for the units not damaged at the property was 99% at September
30, 2001. The Corporate General Partner has reconstructed a portion of the
property.
Results of Operations
The Partnership's net (loss) income for the three and nine months ended
September 30, 2001 was approximately ($78,000) and $750,000 respectively, as
compared to net income of approximately $1,922,000 and $3,070,000 for the three
and nine months ended September 30, 2000. The decrease in net income for the
three months ended September 30, 2001 is due to a decrease in total revenues, an
increase in total expenses, and an extraordinary loss on the early
extinguishment of debt as a result of the refinancing of the mortgage at
Woodland Village Apartments (as discussed in "Liquidity and Capital Resources").
The decrease in net income for the nine months ended September 30, 2001 is due
to a decrease in total revenues, an increase in total expenses, and the
extraordinary loss on the early extinguishment of debt as a result of the
refinancing of the mortgages at three of the Partnerships investment properties
(as discussed in "Liquidity and Capital Resources"). Total expenses increased
for the three and nine months ended September 30, 2001 due to increases in
operating, interest, and property tax expenses. Operating expenses increased
primarily due to an increase in hazard insurance expense at all of the
Partnership's investment properties, increases in payroll related expenses at
Lake Johnson Mews Apartments and Woodland Village Apartments and an increase in
utility expenses at Old Salem Apartments. The increase in operating expenses was
partially offset by decreases in maintenance and advertising expenses at all of
the Partnership's investment properties. Interest expense increased at Lake
Johnson Mews Apartments, Millhopper Village Apartments, Lexington Green
Apartments, and Woodland Village Apartments as a result of larger loan balances
due to recent refinancings. The increase in interest expense was partially
offset by a decrease in interest expense at Tar River Estates due to certain
interest costs being capitalized (see discussion below). 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. The increase in
total expenses for the three and nine months ended September 30, 2001 was
partially offset by decreases in depreciation and general and administrative
expenses. Depreciation expense decreased primarily due to fixed assets placed
into service in previous years becoming fully depreciated during 2001.
General and administrative expenses decreased primarily due to a decrease in the
management reimbursements to the Corporate General Partner allowed under the
Partnership Agreement and reduced professional fees associated with the
management of the Partnership. These decreases were partially offset by
increased audit fees. Also included in general and administrative expense at
both September 30, 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 decreased for the three and nine months ended September 30, 2001
primarily due to the recognition in 2000 of a casualty gain at Tar River Estates
(as discussed below), and to a lesser extent, a decrease in rental income. The
decrease in rental income is due to the receipt of insurance proceeds in 2000 to
cover lost rents as a result of the casualty at Tar River Estates, which more
than offset an increase in occupancy at Woodland Village Apartments and an
increase in the average rental rates at all of the Partnership's investment
properties. The decrease in total revenues for the nine months ended September
30, 2001 was partially offset by 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 in interest bearing accounts.
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 September 30, 2001, insurance proceeds of approximately
$5,316,000 have been received to cover lost rents and damage to the property,
resulting in a casualty gain of approximately $1,662,000 for the nine months
ended September 30, 2000. In addition, the Partnership has negotiated an
agreement with the city of Greenville, North Carolina, whereby a portion of the
land will be condemned and sold to the city (see "Note H" for further
discussion). Therefore, the apartment units previously located on this land will
not be reconstructed. The remaining damaged units have been completely
reconstructed. As part of the reconstruction process, the Partnership
capitalized the portion of the interest expense associated with the assets under
reconstruction. For the nine months ended September 30, 2001, approximately
$95,000 of interest had been capitalized.
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 nine months ended September 30,
2001.
On October 17, 2001, the Partnership sold a portion of the land from Tar River
Estates Apartments to the city of Greenville, North Carolina, for net proceeds
of approximately $6,176,000 after a reduction for FEMA funds previously
received. The Partnership realized a gain of approximately $5,968,000 as a
result of the sale. The Partnership used approximately $4,342,000 of the net
proceeds to repay the mortgages encumbering the property. In addition, the
Partnership recorded an extraordinary loss on early extinguishment of debt of
approximately $89,000 as a result of the write off of unamortized loan costs and
mortgage discounts.
As part of the ongoing business plan of the Registrant, the Corporate General
Partner monitors the rental market environment of each of its investment
properties to assess the feasibility of increasing rents, maintaining or
increasing occupancy levels and protecting the Partnership from increases in
expense. As part of this plan, the Corporate General Partner attempts to protect
the Partnership from the burden of inflation-related increases in expenses by
increasing rents and maintaining a high overall occupancy level. However, due to
changing market conditions, which can result in the use of rental concessions
and rental reductions to offset softening market conditions, there is no
guarantee that the Corporate General Partner will be able to sustain such a
plan.
Liquidity and Capital Resources
At September 30, 2001, the Partnership had cash and cash equivalents of
approximately $1,291,000 compared to approximately $3,076,000 at September 30,
2000. The decrease in cash and cash equivalents of approximately $1,253,000
since December 31, 2000 is due to approximately $4,774,000 of cash used in
investing activities, which was partially offset by approximately $3,228,000 of
cash provided by operating activities and approximately $293,000 of cash
provided by financing activities. Cash used in investing activities consisted of
property improvements and replacements and net deposits to escrow accounts
maintained by the mortgage lender, which was partially offset by a settlement
received for defective materials used in a construction project at The Lexington
Green Apartments and insurance proceeds received for the fire at Woodland
Village Apartments. Cash provided by financing activities consisted of net
proceeds received as a result of the refinancing of the mortgages of Woodland
Village Apartments, Lake Johnson Mews Apartments, and Millhopper Village
Apartments, which was partially offset by the repayment of the existing
mortgages at Woodland Village Apartments, Lake Johnson Mews Apartments, and
Millhopper Village Apartments, distributions to partners, loan costs related to
the refinancing of the mortgages encumbering six of the Partnership's investment
properties, and payments of principal made on the mortgages encumbering the
Partnership'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 Registrant and to comply with
Federal, state, local, legal and regulatory requirements. Capital improvements
planned for each of the Registrant's properties are detailed below.
Millhopper Village Apartments: For 2001, the Partnership has budgeted
approximately $115,000 for capital improvements, consisting primarily of air
conditioning unit and floor covering replacements. The Partnership completed
approximately $85,000 in capital expenditures at Millhopper Village Apartments
for the nine months ended September 30, 2001, consisting primarily of water
heater upgrades and floor covering replacement. These improvements were funded
from replacement reserves and operations.
Foxfire Apartments: For 2001, the Partnership has budgeted approximately
$171,000 for capital improvements, consisting primarily of floor covering
replacement. The Partnership completed approximately $195,000 in capital
expenditures at Foxfire Apartments for the nine months ended September 30, 2001,
consisting primarily of structural improvements, and floor covering, countertop,
and appliance replacement. These improvements were funded from operations.
Lake Johnson Mews Apartments: For 2001, the Partnership has budgeted
approximately $352,000 for capital improvements, consisting primarily of
structural improvements and floor covering and appliance replacements. The
Partnership completed approximately $139,000 in capital expenditures at Lake
Johnson Mews Apartments for the nine months ended September 30, 2001, consisting
primarily of structural improvements, air conditioning unit upgrades, and
cabinet and floor covering replacement. These improvements were funded from
replacement reserves and operations.
Woodland Village Apartments: For 2001, the Partnership has budgeted
approximately $487,000 for capital improvements, consisting primarily of
exterior painting and floor covering and appliance replacements. The Partnership
completed approximately $424,000 in capital expenditures for the nine months
ended September 30, 2001, consisting primarily of repairs related to the fire
which occurred July 1999, interior building improvements, and floor covering and
appliance replacement. These improvements were funded from operations,
replacement reserves, and insurance proceeds.
The Lexington Green Apartments: For 2001, the Partnership has budgeted
approximately $448,000 for capital improvements, consisting primarily of
exterior painting, floor covering and appliance replacements, and air
conditioning unit upgrades. The Partnership completed approximately $236,000 in
capital expenditures at Lexington Green Apartments for the nine months ended
September 30, 2001, consisting primarily of plumbing upgrades, interior building
improvements, and floor covering, cabinet and appliance replacements. These
improvements were funded primarily from operations.
Tar River Estates Apartments: For 2001, the Partnership has budgeted
approximately $955,000 for capital improvements consisting primarily of floor
covering replacement and other exterior and interior building improvements
associated with the repairs required due to severe flood damage which occurred
during September 1999 at Tar River Estates Apartments. The Partnership completed
approximately $3,178,000 in capital expenditures for the nine months ended
September 30, 2001, consisting primarily of floor covering replacement 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
$402,000 for capital improvements, consisting primarily of floor covering and
appliance replacements, structural improvements, and air conditioning unit
upgrades. The Partnership completed approximately $366,000 in capital
expenditures at Old Salem Apartments for the nine months ended September 30,
2001, consisting primarily of air conditioning unit upgrades and floor covering,
cabinet and appliance replacements. 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 $47,233,000 net of discount, is amortized over
varying periods. The mortgages encumbering Tar River Apartments of approximately
$4,359,000 were repaid subsequent to September 30, 2001 due to the condemnation
of a portion of the land and sale to the City of Greenville, North Carolina as
discussed in "Results of Operations". The remaining mortgages have maturity
dates ranging from November 1, 2019 to September 1, 2021 and will be fully
amortized at maturity.
On August 31, 2001, the Partnership refinanced the mortgage note at Woodland
Village Apartments. Gross proceeds from the refinancing were $8,050,000 of which
approximately $4,950,000 was used to repay the existing mortgage note. The new
note requires monthly principal and interest payments at a fixed rate of 7.11%
and matures September 1, 2021. The old debt carried a fixed interest rate of
7.33%. The Partnership recognized an extraordinary loss on the early
extinguishment of debt of approximately $38,000, due to the write off of
unamortized loan costs. Total capitalized loan costs for the new mortgage were
approximately $267,000 at September 30, 2001.
On June 28, 2001, the Partnership refinanced the mortgage notes encumbering Lake
Johnson Mews Apartments and Millhopper Village Apartments. The refinancings
replaced indebtedness of approximately $4,350,000 at Lake Johnson Mews
Apartments and $2,700,000 at Millhopper Village Apartments with new mortgages in
the amounts of $7,117,000 and $4,225,000, respectively. The new mortgages both
carry a stated interest rate of 7.43% as compared to 7.33% on the previous
loans. Payments of principal and interest on the new mortgage loans are due
monthly until the loans mature on July 1, 2021. The Partnership recognized an
extraordinary loss on the early extinguishment of debt of approximately $38,000
at Lake Johnson Mews Apartments and approximately $36,000 at Millhopper Village
Apartments due to the write-off of unamortized loan costs. Total capitalized
loan costs for the new mortgages were approximately $225,000 for Lake Johnson
Mews Apartments and approximately $171,000 for Millhopper Village Apartments at
September 30, 2001.
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. Total
capitalized loan costs for the new mortgage was approximately $195,000 for the
year ended December 31, 2000. Additional loan costs of approximately $14,000
were capitalized during the nine months ended September 30, 2001.
During October and November 1999, the Partnership refinanced the mortgage notes
at Foxfire and Old Salem Apartments, respectively. Gross proceeds from the
refinancings were $7,200,000 and $10,157,000, respectively, of which
approximately $4,519,000 and $6,287,000, respectively, was used to pay off the
existing mortgage notes. The new notes require monthly principal and interest
payments at fixed interest rates of 7.79% for Foxfire Apartments and 8.02% for
Old Salem Apartments and mature November 1, and December 1, 2019, respectively.
The old debt carried fixed interest rates of 7.50% and 10.375% with maturities
of May 1999 and December 2016, respectively. Total capitalized loan costs at
December 31, 1999 were approximately $143,000. An additional $83,000 was
capitalized during the year ended December 31, 2000 and an additional $175,000
was capitalized during the nine months ended September 30, 2001.
During the nine months ended September 30, 2001, the Partnership distributed
approximately $5,654,000 to the partners (approximately $5,597,000 to the
limited partners, or $106.53 per limited partnership unit), of which
approximately $1,664,000 (approximately $1,607,000 to the limited partners, or
$30.59 per limited partnership unit) was from operations and approximately
$3,990,000 (all to the limited partners, or $75.94 per limited partnership unit)
was from proceeds from the refinancings of Lake Johnson Mews Apartments,
Millhopper Village Apartments, and Woodland Village Apartments. In connection
with the transfer of funds from the majority owned sub-tier limited partnership
to the Partnership, approximately $41,000 was distributed to the general partner
of the majority owned sub-tier limited partnership. During the nine months ended
September 30, 2000, cash distributions of approximately $6,177,000 were paid to
the limited partners ($117.57 per limited partnership unit) from refinancing
proceeds and approximately $1,417,000 (approximately $1,398,000 of which was
paid to the limited partners or $26.61 per limited partnership unit) were paid
from operations. Subsequent to September 30, 2001, the Partnership distributed
approximately $911,000 to the limited partners ($17.34 per limited partnership
unit) from proceeds from the refinancing of Woodland Village Apartments. 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. 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 to its indirect ownership of the general partner interest in the
Partnership, AIMCO and its affiliates own 36,879 limited partnership units in
the Partnership representing 70.20% 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 voting on certain amendments to the Partnership Agreement and
voting to remove the Corporate General Partner. As a result of its ownership of
70.20% of the outstanding units, AIMCO is in a position to control all such
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:
Exhibit 10(iii)q, Multifamily Note dated August 30, 2001, by
and between Shelter Properties V Limited Partnership, a South
Carolina limited partnership, and GMAC Commercial Mortgage
Corporation, relating to Woodland Village Apartments.
b) Reports on Form 8-K:
None filed during the quarter ended September 30, 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: November 13, 2001
EXHIBIT 10(iii)q
FHLMC Loan No. 002692406
Woodland Village Apartments
MULTIFAMILY NOTE
(MULTISTATE - REVISION DATE 11-01-2000)
US $8,050,000.00 As of August 30, 2001
FOR VALUE RECEIVED, the undersigned ("Borrower") jointly and severally (if
more than one) promises to pay to the order of GMAC COMMERCIAL MORTGAGE
CORPORATION, a California corporation, the principal sum of Eight Million Fifty
Thousand and 00/100 Dollars (US $8,050,000.00), with interest on the unpaid
principal balance at the annual rate of seven and one hundred ten thousandths
percent (7.110%).
Defined Terms. As used in this Note, (i) the term "Lender" means the
holder of this Note, and (ii) the term "Indebtedness" means the principal of,
interest on, and any other amounts due at any time under, this Note, the
Security Instrument or any other Loan Document, including prepayment premiums,
late charges, default interest, and advances to protect the security of the
Security Instrument under Section 12 of the Security Instrument. "Event of
Default" and other capitalized terms used but not defined in this Note shall
have the meanings given to such terms in the Security Instrument.
Address for Payment. All payments due under this Note shall be payable at
200 Witmer Road, Post Office Box 809, Horsham, Pennsylvania 19044, Attn:
Servicing - Account Manager, or such other place as may be designated by written
notice to Borrower from or on behalf of Lender.
Payment of Principal and Interest. Principal and interest shall be paid as
follows:
Unless disbursement of principal is made by Lender to Borrower on the
first day of the month, interest for the period beginning on the date of
disbursement and ending on and including the last day of the month in which such
disbursement is made shall be payable simultaneously with the execution of this
Note. Interest under this Note shall be computed on the basis of a 360-day year
consisting of twelve 30-day months.
Consecutive monthly installments of principal and interest, each in the
amount of Sixty-Two Thousand Nine Hundred Forty-Four and 19/100 Dollars (US
$62,944.19), shall be payable on the first day of each month beginning on
October 1, 2001, until the entire unpaid principal balance evidenced by this
Note is fully paid.
Any accrued interest remaining past due for 30 days or more may, at
Lender's discretion, be added to and become part of the unpaid principal balance
and shall bear interest at the rate or rates specified in this Note, and any
reference below to "accrued interest" shall refer to accrued interest which has
not become part of the unpaid principal balance. Any remaining principal and
interest shall be due and payable on September 1, 2021 or on any earlier date on
which the unpaid principal balance of this Note becomes due and payable, by
acceleration or otherwise (the "Maturity Date"). The unpaid principal balance
shall continue to bear interest after the Maturity Date at the Default Rate set
forth in this Note until and including the date on which it is paid in full.
Any regularly scheduled monthly installment of principal and interest that
is received by Lender before the date it is due shall be deemed to have been
received on the due date solely for the purpose of calculating interest due.
Application of Payments. If at any time Lender receives, from Borrower or
otherwise, any amount applicable to the Indebtedness which is less than all
amounts due and payable at such time, Lender may apply that payment to amounts
then due and payable in any manner and in any order determined by Lender, in
Lender's discretion. Borrower agrees that neither Lender's acceptance of a
payment from Borrower in an amount that is less than all amounts then due and
payable nor Lender's application of such payment shall constitute or be deemed
to constitute either a waiver of the unpaid amounts or an accord and
satisfaction.
Security. The Indebtedness is secured, among other things, by a
multifamily mortgage, deed to secure debt or deed of trust dated as of the date
of this Note (the "Security Instrument"), and reference is made to the Security
Instrument for other rights of Lender as to collateral for the Indebtedness.
Acceleration. If an Event of Default has occurred and is continuing, the
entire unpaid principal balance, any accrued interest, the prepayment premium
payable under Paragraph 10, if any, and all other amounts payable under this
Note and any other Loan Document shall at once become due and payable, at the
option of Lender, without any prior notice to Borrower (except if notice is
required by applicable law, then after such notice). Lender may exercise this
option to accelerate regardless of any prior forbearance.
Late Charge. If any monthly amount payable under this Note or under the
Security Instrument or any other Loan Document is not received by Lender within
ten (10) days after the amount is due (unless applicable law requires a longer
period of time before a late charge may be imposed, in which event such longer
period shall be substituted), Borrower shall pay to Lender, immediately and
without demand by Lender, a late charge equal to five percent (5%) of such
amount (unless applicable law requires a lesser amount be charged, in which
event such lesser amount shall be substituted). Borrower acknowledges that its
failure to make timely payments will cause Lender to incur additional expenses
in servicing and processing the loan evidenced by this Note (the "Loan"), and
that it is extremely difficult and impractical to determine those additional
expenses. Borrower agrees that the late charge payable pursuant to this
Paragraph represents a fair and reasonable estimate, taking into account all
circumstances existing on the date of this Note, of the additional expenses
Lender will incur by reason of such late payment. The late charge is payable in
addition to, and not in lieu of, any interest payable at the Default Rate
pursuant to Paragraph 8.
Default Rate. So long as (a) any monthly installment under this Note
remains past due for thirty (30) days or more, or (b) any other Event of Default
has occurred and is continuing, interest under this Note shall accrue on the
unpaid principal balance from the earlier of the due date of the first unpaid
monthly installment or the occurrence of such other Event of Default, as
applicable, at a rate (the "Default Rate") equal to the lesser of four (4)
percentage points above the rate stated in the first paragraph of this Note and
the maximum interest rate which may be collected from Borrower under applicable
law. If the unpaid principal balance and all accrued interest are not paid in
full on the Maturity Date, the unpaid principal balance and all accrued interest
shall bear interest from the Maturity Date at the Default Rate. Borrower also
acknowledges that its failure to make timely payments will cause Lender to incur
additional expenses in servicing and processing the Loan, that, during the time
that any monthly installment under this Note is delinquent for more than thirty
(30) days, Lender will incur additional costs and expenses arising from its loss
of the use of the money due and from the adverse impact on Lender's ability to
meet its other obligations and to take advantage of other investment
opportunities, and that it is extremely difficult and impractical to determine
those additional costs and expenses. Borrower also acknowledges that, during the
time that any monthly installment under this Note is delinquent for more than
thirty (30) days or any other Event of Default has occurred and is continuing,
Lender's risk of nonpayment of this Note will be materially increased and Lender
is entitled to be compensated for such increased risk. Borrower agrees that the
increase in the rate of interest payable under this Note to the Default Rate
represents a fair and reasonable estimate, taking into account all circumstances
existing on the date of this Note, of the additional costs and expenses Lender
will incur by reason of the Borrower's delinquent payment and the additional
compensation Lender is entitled to receive for the increased risks of nonpayment
associated with a delinquent loan.
Limits on Personal Liability.
Except as otherwise provided in this Paragraph 9, Borrower shall have no
personal liability under this Note, the Security Instrument or any other Loan
Document for the repayment of the Indebtedness or for the performance of any
other obligations of Borrower under the Loan Documents, and Lender's only
recourse for the satisfaction of the Indebtedness and the performance of such
obligations shall be Lender's exercise of its rights and remedies with respect
to the Mortgaged Property and any other collateral held by Lender as security
for the Indebtedness. This limitation on Borrower's liability shall not limit or
impair Lender's enforcement of its rights against any guarantor of the
Indebtedness or any guarantor of any obligations of Borrower.
Borrower shall be personally liable to Lender for the repayment of a
portion of the Indebtedness equal to zero percent (0%) of the original principal
balance of this Note, plus any other amounts for which Borrower has personal
liability under this Paragraph 9.
In addition to Borrower's personal liability under Paragraph 9(b),
Borrower shall be personally liable to Lender for the repayment of a further
portion of the Indebtedness equal to any loss or damage suffered by Lender as a
result of (1) failure of Borrower to pay to Lender upon demand after an Event of
Default all Rents to which Lender is entitled under Section 3(a) of the Security
Instrument and the amount of all security deposits collected by Borrower from
tenants then in residence; (2) failure of Borrower to apply all insurance
proceeds and condemnation proceeds as required by the Security Instrument; or
(3) failure of Borrower to comply with Section 14(d) or (e) of the Security
Instrument relating to the delivery of books and records, statements, schedules
and reports.
For purposes of determining Borrower's personal liability under Paragraph
9(b) and Paragraph 9(c), all payments made by Borrower or any guarantor of this
Note with respect to the Indebtedness and all amounts received by Lender from
the enforcement of its rights under the Security Instrument shall be applied
first to the portion of the Indebtedness for which Borrower has no personal
liability.
Borrower shall become personally liable to Lender for the repayment of all
of the Indebtedness upon the occurrence of any of the following Events of
Default: (1) Borrower's acquisition of any property or operation of any business
not permitted by Section 33 of the Security Instrument; (2) a Transfer
(including, but not limited to, a lien or encumbrance) that is an Event of
Default under Section 21 of the Security Instrument, other than a Transfer
consisting solely of the involuntary removal or involuntary withdrawal of a
general partner in a limited partnership or a manager in a limited liability
company; or (3) fraud or written material misrepresentation by Borrower or any
officer, director, partner, member or employee of Borrower in connection with
the application for or creation of the Indebtedness or any request for any
action or consent by Lender.
In addition to any personal liability for the Indebtedness, Borrower shall
be personally liable to Lender for (1) the performance of all of Borrower's
obligations under Section 18 of the Security Instrument (relating to
environmental matters); (2) the costs of any audit under Section 14(d) of the
Security Instrument; and (3) any costs and expenses incurred by Lender in
connection with the collection of any amount for which Borrower is personally
liable under this Paragraph 9, including fees and out of pocket expenses of
attorneys and expert witnesses and the costs of conducting any independent audit
of Borrower's books and records to determine the amount for which Borrower has
personal liability.
To the extent that Borrower has personal liability under this Paragraph 9,
Lender may exercise its rights against Borrower personally without regard to
whether Lender has exercised any rights against the Mortgaged Property or any
other security, or pursued any rights against any guarantor, or pursued any
other rights available to Lender under this Note, the Security Instrument, any
other Loan Document or applicable law. For purposes of this Paragraph 9, the
term "Mortgaged Property" shall not include any funds that (1) have been applied
by Borrower as required or permitted by the Security Instrument prior to the
occurrence of an Event of Default or (2) Borrower was unable to apply as
required or permitted by the Security Instrument because of a bankruptcy,
receivership, or similar judicial proceeding. To the fullest extent permitted by
applicable law, in any action to enforce Borrower's personal liability under
this Paragraph 9, Borrower waives any right to set off the value of the
Mortgaged Property against such personal liability.
Voluntary and Involuntary Prepayments.
A prepayment premium shall be payable in connection with any prepayment
(any receipt by Lender of principal, other than principal required to be paid in
monthly installments pursuant to Paragraph 3(b), prior to the scheduled Maturity
Date set forth in Paragraph 3(c)) under this Note as provided below:
Borrower may voluntarily prepay all of the unpaid principal balance
of this Note on a Business Day designated as the date for such prepayment in a
written notice from Borrower to Lender given at least 30 days prior to the date
of such prepayment. Such prepayment shall be made by paying (A) the amount of
principal being prepaid, (B) all accrued interest, (C) all other sums due Lender
at the time of such prepayment, and (D) the prepayment premium calculated
pursuant to Paragraph 10(c). For all purposes including the accrual of interest,
any prepayment received by Lender on any day other than the last calendar day of
the month shall be deemed to have been received on the last calendar day of such
month. For purposes of this Note, a "Business Day" means any day other than a
Saturday, Sunday or any other day on which Lender is not open for business.
Unless expressly provided for in the Loan Documents, Borrower shall not have the
option to voluntarily prepay less than all of the unpaid principal balance.
However, if a partial prepayment is provided for in the Loan Documents or is
accepted by Lender in Lender's discretion, a prepayment premium calculated
pursuant to Paragraph 10(c) shall be due and payable by Borrower.
Upon Lender's exercise of any right of acceleration under this Note,
Borrower shall pay to Lender, in addition to the entire unpaid principal balance
of this Note outstanding at the time of the acceleration, (A) all accrued
interest and all other sums due Lender, and (B) the prepayment premium
calculated pursuant to Paragraph 10(c).
Any application by Lender of any collateral or other security to the
repayment of any portion of the unpaid principal balance of this Note prior to
the Maturity Date and in the absence of acceleration shall be deemed to be a
partial prepayment by Borrower, requiring the payment to Lender by Borrower of a
prepayment premium.
Notwithstanding the provisions of Paragraph 10(a), no prepayment premium
shall be payable with respect to (A) any prepayment made during the period from
one hundred eighty (180) days before the scheduled Maturity Date to the
scheduled Maturity Date, or (B) any prepayment occurring as a result of the
application of any insurance proceeds or condemnation award under the Security
Instrument.
Any prepayment premium payable under this Note shall be computed as
follows: (1) If the prepayment is made between the date of this Note
and the
date that is 180 months after the first day of the first calendar month
following the date of this Note (the "Yield Maintenance Period"), the prepayment
premium shall be whichever is the greater of subparagraphs (i) and (ii) below:
(i) 1.0% of the unpaid principal balance of this Note; or
(ii) the product obtained by multiplying:
(A) the amount of principal being prepaid, by
(B) the excess (if any) of the Monthly Note Rate over the Assumed
Reinvestment Rate, by
(C) the Present Value Factor.
For purposes of subparagraph (ii), the following definitions shall
apply:
Monthly Note Rate: one-twelfth (1/12) of the annual interest rate of
this Note, expressed as a decimal calculated to five digits.
Prepayment Date: in the case of a voluntary prepayment, the date on
which the prepayment is made; in the case of the application by
Lender of collateral or security to a portion of the principal
balance, the date of such application; and in any other case, the
date on which Lender accelerates the unpaid principal balance of
this Note.
Assumed Reinvestment Rate: one-twelfth (1/12) of the yield rate as
of the date 5 Business Days before the Prepayment Date, on the
9.250% U.S. Treasury Security due February 1, 2016, as reported in
The Wall Street Journal, expressed as a decimal calculated to five
digits. In the event that no yield is published on the applicable
date for the Treasury Security used to determine the Assumed
Reinvestment Rate, Lender, in its discretion, shall select the
non-callable Treasury Security maturing in the same year as the
Treasury Security specified above with the lowest yield published in
The Wall Street Journal as of the applicable date. If the
publication of such yield rates in The Wall Street Journal is
discontinued for any reason, Lender shall select a security with a
comparable rate and term to the Treasury Security used to determine
the Assumed Reinvestment Rate. The selection of an alternate
security pursuant to this Paragraph shall be made in Lender's
discretion.
Present Value Factor: the factor that discounts to present value the
costs resulting to Lender from the difference in interest rates
during the months remaining in the Yield Maintenance Period, using
the Assumed Reinvestment Rate as the discount rate, with monthly
compounding, expressed numerically as follows:
[OBJECT OMITTED]
n = number of months remaining in Yield Maintenance Period
ARR = Assumed Reinvestment Rate
(2) If the prepayment is made after the expiration of the Yield
Maintenance Period but before the period set forth in Paragraph 10(b)(A) above,
the prepayment premium shall be 1.0% of the unpaid principal balance of this
Note.
Any permitted or required prepayment of less than the unpaid principal
balance of this Note shall not extend or postpone the due date of any subsequent
monthly installments or change the amount of such installments, unless Lender
agrees otherwise in writing.
Borrower recognizes that any prepayment of the unpaid principal balance of
this Note, whether voluntary or involuntary or resulting from a default by
Borrower, will result in Lender's incurring loss, including reinvestment loss,
additional expense and frustration or impairment of Lender's ability to meet its
commitments to third parties. Borrower agrees to pay to Lender upon demand
damages for the detriment caused by any prepayment, and agrees that it is
extremely difficult and impractical to ascertain the extent of such damages.
Borrower therefore acknowledges and agrees that the formula for calculating
prepayment premiums set forth in this Note represents a reasonable estimate of
the damages Lender will incur because of a prepayment.
Borrower further acknowledges that the prepayment premium provisions of
this Note are a material part of the consideration for the Loan, and
acknowledges that the terms of this Note are in other respects more favorable to
Borrower as a result of the Borrower's voluntary agreement to the prepayment
premium provisions.
Costs and Expenses. To the fullest extent allowed by applicable law,
Borrower shall pay all expenses and costs, including fees and out-of-pocket
expenses of attorneys (including Lender's in-house attorneys) and expert
witnesses and costs of investigation, incurred by Lender as a result of any
default under this Note or in connection with efforts to collect any amount due
under this Note, or to enforce the provisions of any of the other Loan
Documents, including those incurred in post-judgment collection efforts and in
any bankruptcy proceeding (including any action for relief from the automatic
stay of any bankruptcy proceeding) or judicial or non-judicial foreclosure
proceeding.
Forbearance. Any forbearance by Lender in exercising any right or remedy
under this Note, the Security Instrument, or any other Loan Document or
otherwise afforded by applicable law, shall not be a waiver of or preclude the
exercise of that or any other right or remedy. The acceptance by Lender of any
payment after the due date of such payment, or in an amount which is less than
the required payment, shall not be a waiver of Lender's right to require prompt
payment when due of all other payments or to exercise any right or remedy with
respect to any failure to make prompt payment. Enforcement by Lender of any
security for Borrower's obligations under this Note shall not constitute an
election by Lender of remedies so as to preclude the exercise of any other right
or remedy available to Lender.
Waivers. Presentment, demand, notice of dishonor, protest, notice of
acceleration, notice of intent to demand or accelerate payment or maturity,
presentment for payment, notice of nonpayment, grace, and diligence in
collecting the Indebtedness are waived by Borrower and all endorsers and
guarantors of this Note and all other third party obligors.
Loan Charges. Neither this Note nor any of the other Loan Documents shall
be construed to create a contract for the use, forbearance or detention of money
requiring payment of interest at a rate greater than the maximum interest rate
permitted to be charged under applicable law. If any applicable law limiting the
amount of interest or other charges permitted to be collected from Borrower in
connection with the Loan is interpreted so that any interest or other charge
provided for in any Loan Document, whether considered separately or together
with other charges provided for in any other Loan Document, violates that law,
and Borrower is entitled to the benefit of that law, that interest or charge is
hereby reduced to the extent necessary to eliminate that violation. The amounts,
if any, previously paid to Lender in excess of the permitted amounts shall be
applied by Lender to reduce the unpaid principal balance of this Note. For the
purpose of determining whether any applicable law limiting the amount of
interest or other charges permitted to be collected from Borrower has been
violated, all Indebtedness that constitutes interest, as well as all other
charges made in connection with the Indebtedness that constitute interest, shall
be deemed to be allocated and spread ratably over the stated term of the Note.
Unless otherwise required by applicable law, such allocation and spreading shall
be effected in such a manner that the rate of interest so computed is uniform
throughout the stated term of the Note.
Commercial Purpose. Borrower represents that the Indebtedness is being
incurred by Borrower solely for the purpose of carrying on a business or
commercial enterprise, and not for personal, family, household or agricultural
purposes.
Counting of Days. Except where otherwise specifically provided, any
reference in this Note to a period of "days" means calendar days, not Business
Days.
Governing Law. This Note shall be governed by the law of the jurisdiction
in which the Land is located.
Captions. The captions of the paragraphs of this Note are for convenience
only and shall be disregarded in construing this Note.
Notices; Written Modifications. All notices, demands and other
communications required or permitted to be given by Lender to Borrower pursuant
to this Note shall be given in accordance with Section 31 of the Security
Instrument. Any modification or amendment to this Note shall be ineffective
unless in writing signed by the party sought to be charged with such
modification or amendment; provided, however, that in the event of a Transfer
under the terms of the Security Instrument, any or some or all of the
Modifications to Multifamily Note may be modified or rendered void by Lender at
Lender's option by notice to Borrower/transferee.
Consent to Jurisdiction and Venue. Borrower agrees that any controversy
arising under or in relation to this Note shall be litigated exclusively in the
jurisdiction in which the Land is located (the "Property Jurisdiction"). The
state and federal courts and authorities with jurisdiction in the Property
Jurisdiction shall have exclusive jurisdiction over all controversies which
shall arise under or in relation to this Note. Borrower irrevocably consents to
service, jurisdiction, and venue of such courts for any such litigation and
waives any other venue to which it might be entitled by virtue of domicile,
habitual residence or otherwise.
WAIVER OF TRIAL BY JURY. BORROWER AND LENDER EACH (A) AGREES NOT TO ELECT
A TRIAL BY JURY WITH RESPECT TO ANY ISSUE ARISING OUT OF THIS NOTE OR THE
RELATIONSHIP BETWEEN THE PARTIES AS LENDER AND BORROWER THAT IS TRIABLE OF RIGHT
BY A JURY AND (B) WAIVES ANY RIGHT TO TRIAL BY JURY WITH RESPECT TO SUCH ISSUE
TO THE EXTENT THAT ANY SUCH RIGHT EXISTS NOW OR IN THE FUTURE. THIS WAIVER OF
RIGHT TO TRIAL BY JURY IS SEPARATELY GIVEN BY EACH PARTY, KNOWINGLY AND
VOLUNTARILY WITH THE BENEFIT OF COMPETENT LEGAL COUNSEL.
ATTACHED EXHIBIT. The following Exhibit is attached to this Note:
-----
X Exhibit A Modifications to Multifamily Note
-----
IN WITNESS WHEREOF, Borrower has signed and delivered this Note under seal
or has caused this Note to be signed and delivered under seal by its duly
authorized representative. Borrower intends that this Note shall be deemed to be
signed and delivered as a sealed instrument.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
SHELTER PROPERTIES V LIMITED PARTNERSHIP, a
South Carolina limited partnership
By: Shelter Realty V Corporation, a South
Carolina corporation, its general partner
By:_________________________________
Patti K. Fielding
Senior Vice President
13-3140364
Borrower's Social Security/Employer ID Number
PAY TO THE ORDER OF FEDERAL HOME LOAN MORTGAGE CORPORATION, WITHOUT RECOURSE,
THIS ____ DAY OF AUGUST, 2001.
GMAC COMMERCIAL MORTGAGE CORPORATION, a
California corporation
By:_________________________________
Donald W. Marshall
Vice President
PAGE A-1
EXHIBIT A
MODIFICATIONS TO MULTIFAMILY NOTE
1. The first sentence of Paragraph 8 of the Note ("Default
Rate") is hereby deleted and replaced with the following:
So long as (a) any monthly installment under this Note remains past
due for more than thirty (30) days or (b) any other event of Default
has occurred and is continuing, interest under this Note shall
accrue on the unpaid principal balance from the earlier of the due
date of the first unpaid monthly installment or the occurrence of
such other Event of Default, as applicable, at a rate (the "Default
Rate") equal to the lesser of (1) the maximum interest rate which
may be collected from Borrower under applicable law or (2) the
greater of (i) three percent (3%) above the Interest Rate or (ii)
four percent (4.0%) above the then-prevailing Prime Rate. As used
herein, the term "Prime Rate" shall mean the rate of interest
announced by The Wall Street Journal from time to time as the "Prime
Rate".
2. Paragraph 9(c) of the Note is amended to add the following subparagraph (4):
(4) failure by Borrower to pay the amount of the water and sewer
charges, taxes, fire, hazard or other insurance premiums, ground
rents, assessments or other charges in accordance with the terms
of the Security Instrument.
3. Paragraph 19 is modified by deleting: "; provided, however, that in the
event of a Transfer under the terms of the Security Instrument, any or
some or all of the Modifications to Multifamily Note may be modified or
rendered void by Lender at Lender's option by notice to
Borrower/transferee" in the last sentence of the Paragraph; and by adding
the following new sentence:
The Modifications to Multifamily Note set forth in this Exhibit A
shall be null and void unless title to the Mortgaged Property is
vested in an entity whose Controlling Interest(s) are directly or
indirectly held by AIMCO REIT or AIMCO OP. The capitalized terms
used in this paragraph are defined in the Security Instrument.
Last revised 11/00