FORM 10-QSB--QUARTERLY OR TRANSITIONAL REPORT UNDER SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
Quarterly or Transitional Report
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-QSB
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended March 31, 2002
[ ] 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)
March 31, 2002
Assets
Cash and cash equivalents $ 477
Receivables and deposits 189
Restricted escrows 842
Other assets 428
Investment properties:
Land $ 3,745
Buildings and related personal property 42,255
46,000
Less accumulated depreciation (26,798) 19,202
$ 21,138
Liabilities and Partners' Deficit
Liabilities
Accounts payable $ 204
Tenant security deposit liabilities 168
Accrued property taxes 470
Other liabilities 385
Due to affiliates 142
Mortgage notes payable 20,893
Partners' Deficit
General partners $ (255)
Limited partners (42,324 units issued and
outstanding) (869) (1,124)
$ 21,138
See Accompanying Notes to Financial Statements
b)
SHELTER PROPERTIES VI
STATEMENTS OF OPERATIONS
(Unaudited)
(in thousands, except per unit data)
Three Months Ended
March 31,
2002 2001
(Restated)
Revenues:
Rental income $2,098 $2,043
Other income 219 245
Total revenues 2,317 2,288
Expenses:
Operating 850 892
General and administrative 131 110
Depreciation 466 444
Interest 439 474
Property taxes 205 208
Total expenses 2,091 2,128
Income from continuing operations 226 160
Income from discontinued operations (Note A) -- 132
Net income $ 226 $ 292
Net income allocated to general partners (1%) $ 2 $ 3
Net income allocated to limited partners (99%) 224 289
$ 226 $ 292
Per limited partnership unit:
Income from continuing operations $ 5.29 $ 3.73
Income from discontinued operations -- 3.10
Net income $ 5.29 $ 6.83
Distributions per limited partnership unit $ -- $50.35
See Accompanying Notes to Financial Statements
c)
SHELTER PROPERTIES VI
STATEMENT OF CHANGES IN PARTNERS' DEFICIT
(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 at
December 31, 2001 42,324 $ (257) $(1,093) $(1,350)
Net income for the three months
ended March 31, 2002 -- 2 224 226
Partners' deficit at
March 31, 2002 42,324 $ (255) $ (869) $(1,124)
See Accompanying Notes to Financial Statements
d)
SHELTER PROPERTIES VI
STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
Three Months Ended
March 31,
2002 2001
Cash flows from operating activities:
Net income $ 226 $ 292
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation 466 444
Amortization of discounts and loan costs 63 55
Change in accounts:
Receivables and deposits (17) 540
Other assets (199) (110)
Accounts payable 57 (51)
Tenant security deposit liabilities 12 --
Accrued property taxes (102) (85)
Other liabilities (7) (197)
Net cash provided by operating activities 499 888
Cash flows from investing activities:
Property improvements and replacements (429) (388)
Net withdrawals from restricted escrows 70 238
Net cash used in investing activities (359) (150)
Cash flows from financing activities:
Payments on mortgage notes payable (228) (198)
Distribution paid to partners -- (2,144)
Net cash used in financing activities (228) (2,342)
Net decrease in cash and cash equivalents (88) (1,604)
Cash and cash equivalents at beginning of period 565 2,780
Cash and cash equivalents at end of period $ 477 $ 1,176
Supplemental disclosure of cash flow information:
Cash paid for interest $ 398 $ 392
Supplemental disclosure of non-cash flow information:
At December 31, 2001, approximately $139,000 of property improvements and
replacements were included in accounts payable and are included in property
improvements and replacements for the three months ended March 31, 2002.
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 month period ended March 31, 2002, are not
necessarily indicative of the results that may be expected for the fiscal year
ending December 31, 2002. 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, 2001.
Effective January 1, 2002, the Partnership adopted Statement of Financial
Accounting Standards No. 144, "Accounting for the Impairment or Disposal of
Long-Lived Assets", which established standards for the way that public business
enterprises report information about long-lived assets that are either being
held for sale or have already been disposed of by sale or other means. The
standard requires that results of operations for a long-lived asset that is
being held for sale or has already been disposed of be reported as a
discontinued operation on the statement of operations. As a result, the
accompanying statements of operations have been restated as of March 31, 2001 to
reflect the operations of Foxfire/Barcelona Apartments as income from
discontinued operations.
During the first quarter 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 income from discontinued operations in the three month
period ended March 31, 2001.
Note B - Reconciliation of Cash Flows
The following is a reconciliation of "Net cash provided by operating activities"
on the accompanying statements of cash flows to "Net cash from operations", as
defined in the partnership agreement of the Partnership (the "Partnership
Agreement"). However, "Net cash from operations" should not be considered an
alternative to net income as an indicator of the Partnership's operating
performance or to cash flows as a measure of liquidity.
Three Months Ended
March 31,
2002 2001
(in thousands)
Net cash provided by operating activities $ 499 $ 888
Payments on mortgage notes payable (228) (198)
Property improvements and replacements (429) (388)
Change in restricted escrows, net 70 238
Changes in reserves for net operating
liabilities 256 (97)
(Additions to) release of operating reserves (168) 474
Net cash provided by operations $ -- $ 917
At March 31, 2002, the Corporate General Partner reserved approximately $168,000
to fund capital improvements at its properties. During the three months ended
March 31, 2001 the Corporate General Partner released previously reserved funds
of approximately $474,000.
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.
Affiliates of the Corporate General Partner are entitled to receive 5% of gross
receipts from all of the Registrant's properties as compensation for providing
property management services. The Partnership paid to such affiliates
approximately $119,000 and $115,000 for the three months ended March 31, 2002
and 2001, respectively, which is included in operating expenses.
Affiliates of the Corporate General Partner received reimbursements of
accountable administrative expenses amounting to approximately $140,000 and
$77,000 for the three months ended March 31, 2002 and 2001, respectively, which
are included in operating and general and administrative expenses and investment
properties. Included in these amounts are fees related to construction
management services provided by an affiliate of the Corporate General Partner of
approximately $34,000 and $1,000 for the three months ended March 31, 2002 and
2001, respectively. The construction management service fees are calculated
based on a percentage of certain additions to investment properties.
Pursuant to the Partnership Agreement and in connection with the sale of
Foxfire/Barcelona Village during 2000, 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 fee of approximately $142,000 was accrued and is included in due to
affiliates in the accompanying balance sheet at March 31, 2002.
Beginning in 2001, the Partnership began insuring its properties up to certain
limits through coverage provided by AIMCO which is generally self-insured for a
portion of losses and liabilities related to workers compensation, property
casualty and vehicle liability. The Partnership insures its properties above the
AIMCO limits through insurance policies obtained by AIMCO from insurers
unaffiliated with the Corporate General Partner. During the three months ended
March 31, 2002 and 2001, the Partnership paid AIMCO and its affiliates
approximately $102,000 and $125,000, respectively, for insurance coverage and
fees associated with policy claims administration.
Note D - Legal Proceedings
In March 1998, several putative unitholders 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 Corporate 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 was heard on December 11, 2001.
On February 2, 2002, the Court served its order granting in part the demurrer.
The Court has dismissed without leave to amend certain of the plaintiffs'
claims. On February 11, 2002, plaintiffs filed a motion seeking to certify a
putative class comprised of all non-affiliated persons who own or have owned
units in the partnerships. The Corporate General Partner and affiliated
defendants oppose the motion. On April 29, 2002, the Court heard argument on the
motion and ordered further briefing after which time the matter will be taken
under submission. 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. On December 11, 2001, the court heard argument on
the motions and took the matters under submission. On February 4, 2002, the
Court served notice of its order granting defendants' motion to strike the
Heller complaint as a violation of its July 10, 2001 order in the Nuanes action.
On March 27, 2002, the plaintiffs filed a notice appealing the order striking
the complaint.
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 three months ended March 31, 2002 and 2001:
Average
Occupancy
Property 2002 2001
Rocky Creek Apartments
Augusta, Georgia 87% 97%
Carriage House Apartments
Gastonia, North Carolina 91% 86%
Nottingham Square Apartments
Des Moines, Iowa 96% 94%
River Reach Apartments
Jacksonville, Florida 97% 97%
Village Garden Apartments
Fort Collins, Colorado 93% 95%
The increase in average occupancy at Carriage House Apartments is attributed to
a more aggressive marketing campaign and rental concessions. The decrease in
average occupancy at Rocky Creek is due to more tenants purchasing homes instead
of renting due to low interest rates.
Results of Operations
The Partnership realized net income of approximately $226,000 for the three
months ended March 31, 2002, compared to net income of approximately $292,000
for the three months ended March 31, 2001. The decrease in net income is due to
the reduction in 2001 of certain accruals related to the sale of
Foxfire/Barcelona Apartments during 2000 which is included in income from
discontinued operations. Effective January 1, 2002, the Partnership adopted
Statement of Financial Accounting Standards No. 144, "Accounting for the
Impairment or Disposal of Long-Lived Assets", which established standards for
the way that public business enterprises report information about long-lived
assets that are either being held for sale or have already been disposed of by
sale or other means. The standard requires that results of operations for a
long-lived asset that is being held for sale or has already been disposed of be
reported as a discontinued operation on the statement of operations. As a
result, the accompanying statements of operations have been restated as of March
31, 2001 to reflect the operations of Foxfire/Barcelona Apartments as income
from discontinued operations.
The Partnership recognized income from continuing operations of approximately
$226,000 for the three months ended March 31, 2002, compared to income from
continuing operations of approximately $160,000 for the three months ended March
31, 2001. The increase in income from continuing operations is due to an
increase in total revenues and a decrease in total expenses. Total revenues
increased due to an increase in rental income offset by a decrease in other
income. Rental income increased due to an increase in average rental rates at
Village Garden, Nottingham Square, and River Reach Apartments and an increase in
occupancy at Carriage House and Nottingham Apartments, which more than offset
the decrease in occupancy at Rocky Creek and Village Garden Apartments. The
decrease in other income is due to a decrease in interest income as a result of
lower average cash balances in interest bearing accounts partially offset by an
increase in utility reimbursements and lease cancellation fees at River Reach
Apartments.
Total expenses decreased due to decreases in operating expenses partially offset
by increases in depreciation and general and administrative expenses. The
decrease in operating expense is due to a decrease in maintenance expense
partially offset by an increase in insurance expense. The decrease in
maintenance expense is primarily due to decreases in snow removal at Nottingham
Square Apartments and contract services at Carriage House Apartments. The
increase in insurance expense is due to increases in insurance premiums at all
of the investment properties. Depreciation expense increased due to property
improvements and replacements placed in service during the past twelve months.
General and administrative expenses increased for the three months ended March
31, 2002 due to an increase in the management reimbursements to the Corporate
General Partner allowed under the Partnership Agreement partially offset by a
decrease in administrative expenses necessary for the administration of the
Partnership. In addition to management reimbursements, costs associated with the
quarterly and annual communications with investors and regulatory agencies and
the annual audit required by the Partnership Agreement are also included in
general and administrative expenses.
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 March 31, 2002, the Partnership held cash and cash equivalents of
approximately $477,000 compared to approximately $1,176,000 at March 31, 2001.
Cash and cash equivalents decreased approximately $88,000 since December 31,
2001 due to approximately $228,000 and $359,000 of cash used in financing and
investing activities, respectively, partially offset by approximately $499,000
of cash provided by operating activities. Cash used in financing activities
consisted of principal payments on the mortgages encumbering the Partnership's
properties. Cash used in investing activities consisted of property improvements
and replacements which were partially offset by withdrawals from restricted
escrows maintained by the mortgage lenders. 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, local, legal, and regulatory requirements. Capital improvements
planned for each of the Registrant's properties are detailed below.
Rocky Creek Apartments
During the three months ended March 31, 2002, the Partnership completed
approximately $33,000 in capital improvements at Rocky Creek Apartments
primarily consisting of floor covering replacements, plumbing enhancements and
appliance replacements. The improvements were funded from operating cash flow.
Capital improvements of approximately $43,000 have been budgeted for 2002 which
include plumbing enhancements and floor covering and appliance replacements.
Additional improvements may be considered and will depend on the physical
condition of the property as well as replacement reserves and anticipated cash
flow generated by the property.
Carriage House Apartments
During the three months ended March 31, 2002, the Partnership completed
approximately $25,000 in capital improvements at Carriage House Apartments
primarily consisting of floor covering replacements, interior decoration and
plumbing enhancements. These improvements were funded from operating cash flow.
Capital improvements of approximately $63,000 have been budgeted for 2002 which
include floor covering replacements, water submetering project, air conditioning
unit upgrades and interior decoration. Additional improvements may be considered
and will depend on the physical condition of the property as well as replacement
reserves and anticipated cash flow generated by the property.
Nottingham Square Apartments
During the three months ended March 31, 2002, the Partnership completed
approximately $113,000 in capital improvements at Nottingham Square Apartments
primarily consisting of floor covering and appliance replacements and fire
suppression improvements. These improvements were funded from operating cash
flow. Capital improvements of approximately $360,000 have been budgeted for 2002
which include floor covering replacements, swimming pool improvements, fencing,
parking lot improvements and structural upgrades. Additional improvements may be
considered and will depend on the physical condition of the property as well as
replacement reserves and anticipated cash flow generated by the property.
River Reach Apartments
During the three months ended March 31, 2002, the Partnership completed
approximately $93,000 in capital improvements at River Reach Apartments
primarily consisting of floor covering and appliance replacements, structural
improvements, exterior painting and recreational facility enhancements. These
improvements were funded from operating cash and replacement reserves. Capital
improvements of approximately $246,000 have been budgeted for 2002 which include
floor covering and appliance replacements, interior decoration, landscaping
improvements, exterior painting, and plumbing enhancements. Additional
improvements may be considered and will depend on the physical condition of the
property as well as replacement reserves and anticipated cash flow generated by
the property.
Village Garden Apartments
During the three months ended March 31, 2002, the Partnership completed
approximately $26,000 in capital improvements at Village Garden Apartments
primarily consisting of floor covering replacements, electrical improvements and
appliance replacements. These improvements were funded from operating cash and
replacement reserves. Capital improvements of approximately $113,000 have been
budgeted for 2002 which include floor covering and appliance replacements,
fitness equipment and water heater replacements. Additional improvements may be
considered and will depend on the physical condition of the property as well as
replacement reserves and anticipated cash flow generated by the property.
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. Exclusive of
Village Garden's mortgage, the mortgage indebtedness of approximately
$16,498,000, net of discounts, has a maturity date of November 2002 at which
time balloon payments totaling $16,158,000 are due. The Corporate General
Partner will attempt to refinance such indebtedness and/or sell the properties
prior to such maturity date. If the properties cannot be refinanced or sold for
a sufficient amount, the Partnership will risk losing such properties through
foreclosure. During the three months ended March 31, 2002, the Partnership
recognized approximately $2,006,000 in total revenues and approximately
$1,844,000 in total expense at the investment properties which have balloon
payments due in 2002. Loss of such properties through foreclosure would
represent a substantial portion of the Partnership's operations.
The mortgage encumbering Village Garden Apartments of approximately $4,395,000
matures in January 2021 at which time the mortgage is scheduled to be fully
amortized.
The Partnership distributed the following amounts during the three months ended
March 31, 2002 and 2001 (in thousands except per unit data):
Three Months Per Limited Three Months Per Limited
Ended Partnership Ended Partnership
March 31, 2002 Unit March 31, 2001 Unit
Operations $ -- $ -- $1,305 $30.53
Sale (1) -- -- 839 19.82
$ -- $ -- $2,144 $50.35
(1) From the sale of Foxfire/Barcelona Apartments in 2000.
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 cash
available for distribution is reviewed on a monthly basis. There can be no
assurance that the Partnership will generate sufficient funds from operations,
after required capital improvements, to permit distributions to its partners
during the remainder of 2002 or subsequent periods. 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 properties
is less than $400 per apartment unit at each property. At March 31, 2002, the
reserve account was adequately funded with a balance of approximately $822,000.
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 Corporate 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 was heard on December 11, 2001.
On February 2, 2002, the Court served its order granting in part the demurrer.
The Court has dismissed without leave to amend certain of the plaintiffs'
claims. On February 11, 2002, plaintiffs filed a motion seeking to certify a
putative class comprised of all non-affiliated persons who own or have owned
units in the partnerships. The Corporate General Partner and affiliated
defendants oppose the motion. On April 29, 2002, the Court heard argument on the
motion and ordered further briefing after which time the matter will be taken
under submission. 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. On December 11, 2001, the court heard argument on
the motions and took the matters under submission. On February 4, 2002, the
Court served notice of its order granting defendants' motion to strike the
Heller complaint as a violation of its July 10, 2001 order in the Nuanes action.
On March 27, 2002, the plaintiffs filed a notice appealing the order striking
the complaint.
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 for the quarter ended March 31, 2002:
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: May 14, 2002