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 0-11574
SHELTER PROPERTIES V
(Exact name of small business issuer as specified in its charter)
South Carolina 57-0721855
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
55 Beattie Place, P.O. Box 1089
Greenville, South Carolina 29602
(Address of principal executive offices)
Issuer's telephone number (864) 239-1000
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes X No____
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
a)
SHELTER PROPERTIES V
CONSOLIDATED BALANCE SHEET
(Unaudited)
(in thousands, except unit data)
March 31, 2002
Assets
Cash and cash equivalents $ 6,861
Receivables and deposits 217
Restricted escrows 500
Other assets 1,721
Investment properties:
Land $ 4,054
Buildings and related personal property 81,000
85,054
Less accumulated depreciation (50,901) 34,153
$ 43,452
Liabilities and Partners' Deficit
Liabilities
Accounts payable $ 386
Tenant security deposit liabilities 295
Accrued property taxes 244
Other liabilities 699
Mortgage notes payable 47,606
Partners' Deficit
General partners $ (330)
Limited partners (52,538 units
issued and outstanding) (5,448) (5,778)
$ 43,452
See Accompanying Notes to Consolidated Financial Statements
b)
SHELTER PROPERTIES V
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(in thousands, except unit data)
Three Months Ended
March 31,
2002 2001
Revenues:
Rental income $3,291 $3,291
Other income 376 373
Casualty gain 376 121
Total revenues 4,043 3,785
Expenses:
Operating 1,418 1,452
General and administrative 136 135
Depreciation 790 732
Interest 915 770
Property taxes 251 208
Total expenses 3,510 3,297
Net income $ 533 $ 488
Net income allocated to general partners (1%) $ 5 $ 5
Net income allocated to limited partners (99%) 528 483
$ 533 $ 488
Net income per limited partnership unit $10.05 $ 9.19
Distributions per limited partnership unit $ -- $14.41
See Accompanying Notes to Consolidated Financial Statements
SHELTER PROPERTIES V
CONSOLIDATED STATEMENT OF CHANGES IN PARTNERS' DEFICIT
(Unaudited)
(in thousands, except unit data)
Limited
Partnership General Limited
Units Partners Partners Total
Original capital contributions 52,538 $ 2 $52,538 $52,540
Partners' deficit at
December 31, 2001 52,538 $ (335) $(5,976) $(6,311)
Net income for the three months
ended March 31, 2002 -- 5 528 533
Partners' deficit at
March 31, 2002 52,538 $ (330) $(5,448) $(5,778)
See Accompanying Notes to Consolidated Financial Statements
d)
SHELTER PROPERTIES V
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
Three Months Ended
March 31,
2002 2001
Cash flows from operating activities:
Net income $ 533 $ 488
Adjustments to reconcile net income
to net cash provided by operating activities:
Depreciation 790 732
Amortization of discounts and loan costs 20 38
Casualty gain (376) (121)
Change in accounts:
Receivables and deposits 363 409
Other assets (254) (199)
Accounts payable 66 (207)
Tenant security deposit liabilities 10 --
Accrued property taxes (41) (32)
Due to Corporate General Partner -- 119
Other liabilities 101 104
Net cash provided by operating activities 1,212 1,331
Cash flows from investing activities:
Property improvements and replacements (1,169) (1,155)
Net withdrawals from restricted escrows 319 138
Settlement for defective property improvements -- 153
Insurance proceeds received 376 95
Net cash used in investing activities (474) (769)
Cash flows from financing activities:
Payments on mortgage notes payable (278) (169)
Loan costs paid -- (171)
Partners' distributions -- (800)
Net cash used in financing activities (278) (1,140)
Net increase (decrease) in cash and cash equivalents 460 (578)
Cash and cash equivalents at beginning of period 6,401 2,544
Cash and cash equivalents at end of period $ 6,861 $ 1,966
Supplemental disclosure of cash flow information:
Cash paid for interest $ 755 $ 727
Supplemental disclosure of non-cash activity:
Property improvements and replacements in accounts
payable $ 189 $ --
At December 31, 2001 and 2000, approximately $287,000 and $221,000,
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 month period
ended March 31, 2002 are not necessarily indicative of the results that may be
expected for the year ending December 31, 2002. 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, 2001. The Corporate General Partner is a a subsidiary of Apartment
Investment and Management Company ("AIMCO"), a publicly traded real estate
investment trust.
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.
Three Months Ended
March 31,
(in thousands)
2002 2001
Net cash provided by operating activities $ 1,212 $ 1,331
Payments on mortgage notes payable (278) (169)
Property improvements and replacements (1,169) (1,155)
Change in restricted escrows, net 319 138
Changes in reserves for net operating
liabilities (245) (194)
Releases from operating reserves 161 659
Net cash from operations $ -- $ 610
For the three months ended March 31, 2002 and 2001, the Corporate General
Partner released previously reserved funds of approximately $161,000 and
$659,000, respectively.
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.
During the three months ended March 31, 2002 and 2001, affiliates of the
Corporate General Partner were entitled to receive 5% of gross receipts from all
of the Registrant's properties for providing property management services. The
Registrant paid to such affiliates approximately $188,000 and $179,000 for the
three months ended March 31, 2002 and 2001, respectively, which are included in
operating expenses.
Affiliates of the Corporate General Partner received reimbursement of
accountable administrative expenses amounting to approximately $197,000 and
$99,000 for the three months ended March 31, 2002 and 2001, respectively.
Included in these amounts are fees related to construction management services
provided by an affiliate of the Corporate General Partner of approximately
$98,000 and $2,000 for the three months ended March 31, 2002 and 2001,
respectively. The construction management service fees are calculated based on a
percentage of current additions to investment properties. These amounts are
included in general and administrative expenses and investment properties.
For services provided in connection with the refinancing of two of the
Partnership's investment properties between October 1999 and March 2001, the
Corporate General Partner was paid approximately $170,000 during the three
months ended March 31, 2001. These costs were capitalized and are included in
other assets.
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 was charged by AIMCO and its affiliates
approximately $165,000 and $217,000, respectively, for insurance coverage and
fees associated with policy claims administration.
Note D - Casualty Events
In September 1999, Tar River Estates Apartments was damaged by severe flooding
which affected certain areas of North Carolina. The property incurred damages of
approximately $6,323,000 as a result of this flooding. During 2000 and 2001,
insurance proceeds of approximately $5,316,000 were received to cover lost rents
and damage to the property, resulting in a casualty gain of approximately
$1,662,000 in 2000. In addition, the Partnership negotiated an agreement with
the city of Greenville, North Carolina, whereby a portion of the land was
condemned and sold to the city on October 17, 2001. Therefore, the apartment
units previously located on this land were not 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 which were under construction during 2001. An
additional gain of approximately $376,000 was recorded during the three months
ended March 31, 2002 as a result of receiving additional insurance proceeds.
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 1999 to cover
the damages and lost rents resulting in a casualty gain in 1999 of approximately
$210,000. The repairs were completed and an additional gain of approximately
$121,000 was recorded during the three months ended March 31, 2001 as a result
of receiving additional insurance proceeds.
Note E - Distributions
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 $ -- $ -- $ 800 $14.41
In connection with the transfer of funds from the majority owned sub-tier
limited partnership to the Partnership, approximately $38,000 was distributed to
the general partner of the majority owned sub-tier limited partnership during
the three months ended March 31, 2001. No distributions were paid to the
partners during the three months ended March 31, 2002. Subsequent to March 31,
2002, the Partnership declared and paid a distribution of approximately
$5,764,000 ($109.71 per limited partnership unit) to the limited partners,
consisting of approximately $2,479,000 ($47.18 per limited partnership unit) of
the remaining proceeds from the sale of a portion of the land at Tar River
Estates Apartments and approximately $3,285,000 ($62.53 per limited partnership
unit) of proceeds from the new financing obtained on Tar River Estates
Apartments.
Note F - Legal Proceedings
In March 1998, several putative unit holders of limited partnership units of the
Partnership commenced an action entitled Rosalie Nuanes, et al. v. Insignia
Financial Group, Inc., et al. (the "Nuanes action") in the Superior Court of the
State of California for the County of San Mateo. The plaintiffs named as
defendants, among others, the Partnership, its Corporate General Partner and
several of their affiliated partnerships and corporate entities. The action
purports to assert claims on behalf of a class of limited partners and
derivatively on behalf of a number of limited partnerships (including the
Partnership) which are named as nominal defendants, challenging, among other
things, the acquisition of interests in certain 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
discussions of the Registrant's business and results of operations, including
forward-looking statements pertaining to such matters, does not take into
account the effects of any changes to the Registrant's business and results of
operation. Accordingly, actual results could differ materially from those
projected in the forward-looking statements as a result of a number of factors,
including those identified herein.
The Partnership's investment properties consist of seven apartment complexes.
The following table sets forth the average occupancy of the properties for the
three months ended March 31, 2002 and 2001:
March 31,
Property 2002 2001
Foxfire Apartments
Atlanta, Georgia (2) 91% 94%
Old Salem Apartments
Charlottesville, Virginia 97% 98%
Woodland Village Apartments
Columbia, South Carolina (3) 89% 95%
Lake Johnson Mews Apartments
Raleigh, North Carolina (4) 96% 92%
The Lexington Green Apartments
Sarasota, Florida 97% 98%
Millhopper Village Apartments
Gainesville, Florida 96% 96%
Tar River Estates Apartments
Greenville, North Carolina (1) 86% 54%
(1) During September 1999, Tar River Estates Apartments was damaged by severe
flooding which affected certain areas of North Carolina. The property
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 87% at March 31,
2001. The Partnership completed reconstruction of the 220 remaining units
at the property by December 2001, therefore occupancy for the three months
ended March 31, 2002 as shown above is for the 220 remaining units. The
Partnership negotiated an agreement with the city of Greenville, North
Carolina, whereby a portion of the land containing 182 units was condemned
and sold to the city on October 17, 2001. Therefore, the 182 apartment
units previously located on this land were not reconstructed.
(2) The Corporate General Partner attributes the decrease in occupancy at
Foxfire Apartments to increased market competition in the Atlanta area.
(3) The Corporate General Partner attributes the decrease in occupancy at
Woodland Village Apartments to an increase in home purchases in the
Columbia area as a result of lower home mortgage interest rates.
(4) The Corporate General Partner attributes the increase in occupancy at Lake
Johnson Mews Apartments to increased marketing efforts at the property
along with pricing rents to be very competitive with other properties in
the Raleigh area.
Results of Operations
The Partnership's net income for the three months ended March 31, 2002 was
approximately $533,000 as compared to net income of approximately $488,000 for
the three months ended March 31, 2001. The increase in net income is due to an
increase in total revenues, partially offset by an increase in total expenses.
Total revenues increased primarily due to an increase in the recognition of
casualty gains. The casualty gain recognized in 2002 is a result of a casualty
at Tar River Estates Apartments (as discussed below). The casualty gain
recognized in 2001 is a result of a casualty at Woodland Village Apartments (as
discussed below). Rental income remained relatively constant for the comparable
periods as a decrease in occupancy at four of the Partnership's investment
properties was offset by the increase in occupancy at Tar River Estates
Apartments and Lake Johnson Mews Apartments and an increase in the average
rental rate at four of the Partnership's investment properties. Other income
remained relatively constant for the comparable periods as an increase in tenant
utility reimbursements offset a decrease in interest income.
Total expenses increased primarily due to increases in depreciation, interest,
and property tax expenses. Depreciation expense increased at all of the
Partnership's investment properties as a result of property improvements and
replacements being placed into service during the past twelve months. Interest
expense increased at Woodland Village Apartments, Millhopper Village Apartments,
Lake Johnson Mews Apartments and Tar River Estates Apartments as a result of an
increase in their respective loan balances due to refinancings in 2001. In
addition interest expense increased for Tar River Estates Apartments as a result
of a portion of interest costs being capitalized during 2001 (as discussed
below). The increase in property tax expense is primarily due to an increase in
the assessed value at five of the Partnership's investment properties. The
increase in total expenses was partially offset by a decrease in operating
expenses. The decrease in operating expenses is primarily due to decreases in
utility expenses at Old Salem Apartments, maintenance and payroll related
expenses at most of the Partnership's investment properties and a decrease in
professional fees at Lexington Green Apartments related to a dispute with a
contractor which was settled in 2001. The decrease in operating expenses was
partially offset by an increase in insurance premiums at all of the
Partnership's investment properties and an increase in advertising expense at
Millhopper Village Apartments. General and administrative expenses remained
relatively constant for the comparable periods. Included in general and
administrative expenses at both March 31, 2002 and 2001 are management
reimbursements to the Corporate General Partner allowed under the Partnership
Agreement. Also included in general and administrative expense 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.
In September 1999, Tar River Estates Apartments was damaged by severe flooding
which affected certain areas of North Carolina. The property incurred damages of
approximately $6,323,000 as a result of this flooding. During 2000 and 2001,
insurance proceeds of approximately $5,316,000 were received to cover lost rents
and damage to the property, resulting in a casualty gain of approximately
$1,662,000 in 2000. In addition, the Partnership negotiated an agreement with
the city of Greenville, North Carolina, whereby a portion of the land was
condemned and sold to the city on October 17, 2001. Therefore, the apartment
units previously located on this land were not reconstructed. The remaining
damaged units have been completely reconstructed. An additional gain of
approximately $376,000 was recorded during the three months ended March 31, 2002
as a result of receiving additional insurance proceeds. As part of the
reconstruction process, the Partnership capitalized the portion of the interest
expense associated with the assets under reconstruction during 2001. For the
three months ended March 31, 2001, approximately $37,000 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 1999 to cover
the damages and lost rents resulting in a casualty gain in 1999 of approximately
$210,000. The repairs were completed and an additional gain of approximately
$121,000 was recorded during the three months ended March 31, 2001 as a result
of receiving additional insurance proceeds.
As part of the ongoing business plan of the Registrant, the Corporate General
Partner monitors the rental market environment of each of its investment
properties to assess the feasibility of increasing rents, maintaining or
increasing occupancy levels and protecting the Partnership from increases in
expense. As part of this plan, the Corporate General Partner attempts to protect
the Partnership from the burden of inflation-related increases in expenses by
increasing rents and maintaining a high overall occupancy level. However, due to
changing market conditions, which can result in the use of rental concessions
and rental reductions to offset softening market conditions, there is no
guarantee that the Corporate General Partner will be able to sustain such a
plan.
Liquidity and Capital Resources
At March 31, 2002, the Partnership had cash and cash equivalents of
approximately $6,861,000, compared to approximately $1,966,000 at March 31,
2001. The increase in cash and cash equivalents of approximately $460,000 for
the three months ended March 31, 2002, from the Partnership's calendar year end,
is due to approximately $1,212,000 of cash provided by operating activities,
partially offset by approximately $474,000 of cash used in investing activities
and approximately $278,000 of cash used in financing activities. Cash used in
financing activities consisted of payments of principal on the mortgages
encumbering the Registrant's properties. Cash used in investing activities
consisted of property improvements and replacements, partially offset by
insurance proceeds received for the casualty at Tar River Estates Apartments and
net receipts from escrow accounts maintained by the mortgage lender. 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, and local legal and regulatory requirements. Capital
improvements planned for each of the Registrant's properties are detailed below.
Millhopper Village Apartments: For 2002, the Partnership has budgeted
approximately $50,000 for capital improvements, consisting primarily of floor
covering replacement, appliances and office computers. The Partnership completed
approximately $17,000 in capital expenditures at Millhopper Village Apartments
for the three months ended March 31, 2002, consisting primarily of floor
covering replacement. These improvements were funded from operations. 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.
Foxfire Apartments: For 2002, the Partnership has budgeted approximately $97,000
for capital improvements, consisting primarily of floor covering replacement.
The Partnership completed approximately $122,000 in budgeted and non-budgeted
capital expenditures at Foxfire Apartments for the three months ended March 31,
2002, consisting primarily of construction related to a fire which occurred in
2001, plumbing upgrades, and floor covering replacement. These improvements were
funded from operations and insurance proceeds. 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.
Lake Johnson Mews Apartments: For 2002, the Partnership has budgeted
approximately $251,000 for capital improvements, consisting primarily of parking
area improvements, electrical upgrades, structural improvements, and floor
covering replacement. The Partnership completed approximately $141,000 in
capital expenditures at Lake Johnson Mews Apartments for the three months ended
March 31, 2002, consisting primarily of interior building improvements and
structural upgrades. These improvements were funded from replacement reserves
and operations. 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.
Woodland Village Apartments: For 2002, the Partnership has budgeted
approximately $100,000 for capital improvements, consisting primarily of air
conditioning unit upgrades, interior improvements and floor covering and
appliance replacements. The Partnership completed approximately $48,000 in
capital expenditures at Woodland Village Apartments for the three months ended
March 31, 2002, consisting primarily of exterior painting, structural
improvements, and floor covering replacement. These improvements were funded
from replacement reserves and operations. 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 Lexington Green Apartments: For 2002, the Partnership has budgeted
approximately $203,000 for capital improvements, consisting primarily of
structural improvements, plumbing upgrades, cabinet and air conditioning unit
replacements and floor covering and appliance replacements. The Partnership
completed approximately $98,000 in capital expenditures at The Lexington Green
Apartments for the three months ended March 31, 2002, consisting primarily of
cabinet and floor covering replacements. These improvements were funded from
operations. 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.
Tar River Estates Apartments: For 2002, the Partnership has budgeted
approximately $169,000 for capital improvements, consisting primarily of cabinet
upgrades and appliance and floor covering replacements. The Partnership
completed approximately $598,000 in budgeted and non-budgeted capital
expenditures at Tar River Estates Apartments for the three months ended March
31, 2002, consisting primarily of swimming pool and clubhouse construction and
floor covering replacement. These improvements were funded from operations and
insurance proceeds. 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.
Old Salem Apartments: For 2002, the Partnership has budgeted approximately
$131,000 for capital improvements, consisting primarily of floor covering
replacement. The Partnership completed approximately $47,000 in capital
expenditures at Old Salem Apartments for the three months ended March 31, 2002,
consisting primarily of floor covering replacement. These improvements were
funded from operations. 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 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. On December 28,
2001, the Partnership obtained new financing on Tar River Estates Apartments.
Gross proceeds from the new financing were approximately $5,200,000. The new
note requires monthly principal and interest payments at a fixed rate of 7.23%
and matures January 1, 2022, at which time it will be fully amortized. The old
debt of approximately $4,342,000 carried a fixed interest rate of 7.60% and was
repaid with proceeds from the condemnation and sale of a portion of the land to
the city of Greenville, North Carolina (as discussed above).
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%.
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 they will be fully
amortized.
The remaining mortgage indebtedness of approximately $23,295,000 is amortized
over varying periods with maturity dates ranging from November 1, 2019 to
January 1, 2021, at which time the loans will 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 $ -- $ -- $ 800 $14.41
In connection with the transfer of funds from the majority owned sub-tier
limited partnership to the Partnership, approximately $38,000 was distributed to
the general partner of the majority owned sub-tier limited partnership during
the three months ended March 31, 2001. No distributions were paid to the
partners during the three months ended March 31, 2002. Subsequent to March 31,
2002, the Partnership declared and paid a distribution of approximately
$5,764,000 ($109.71 per limited partnership unit) to the limited partners,
consisting of approximately $2,479,000 ($47.18 per limited partnership unit) of
the remaining proceeds from the sale of a portion of the land at Tar River
Estates Apartments and approximately $3,285,000 ($62.53 per limited partnership
unit) of proceeds from the new financing obtained on Tar River Estates
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 cash
available for distribution 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 2002 or
subsequent periods.
In addition to its indirect ownership of the general partner interest in the
Partnership, AIMCO and its affiliates owned 36,981 limited partnership units in
the Partnership representing 70.39% of the outstanding units at March 31, 2002.
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 70.39% 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 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:
Current report on Form 8-K filed on January 14, 2002 in
connection with the new financing obtained on Tar River
Estates Apartments on December 28, 2001.
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
SHELTER PROPERTIES V
By: Shelter Realty V Corporation
Corporate General Partner
By: /s/Patrick J. Foye
Patrick J. Foye
Executive Vice President
By: /s/Martha L. Long
Martha L. Long
Senior Vice President and
Controller
Date: May 14, 2002