UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Form 10-QSB
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended September 30, 2003
[ ] 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 Registrant 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, PO Box 1089
Greenville, South Carolina 29602
(Address of principal executive offices)
(864) 239-1000
Issuer's telephone number
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
SHELTER PROPERTIES V
CONSOLIDATED BALANCE SHEET
(Unaudited)
(in thousands, except unit data)
September 30, 2003
Assets
Cash and cash equivalents $ 732
Receivables and deposits 478
Restricted escrows 277
Other assets 1,534
Investment properties:
Land $ 4,054
Buildings and related personal property 83,777
87,831
Less accumulated depreciation (55,368) 32,463
$ 35,484
Liabilities and Partners' Deficit
Liabilities
Accounts payable $ 150
Tenant security deposit liabilities 304
Accrued property taxes 509
Other liabilities 654
Mortgage notes payable 45,759
Partners' Deficit
General partners $ (371)
Limited partners (52,538 units
issued and outstanding) (11,521) (11,892)
$ 35,484
See Accompanying Notes to Consolidated Financial Statements
SHELTER PROPERTIES V
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(in thousands, except per unit data)
Three Months Ended Nine Months Ended
September 30, September 30,
2003 2002 2003 2002
Revenues:
Rental income $ 3,201 $ 3,206 $ 9,366 $ 9,817
Other income 302 356 1,036 1,065
Casualty gains (Note D) 54 17 498 393
Total revenues 3,557 3,579 10,900 11,275
Expenses:
Operating 1,536 1,334 4,403 4,129
General and administrative 114 129 346 391
Depreciation 823 785 2,499 2,395
Interest 860 906 2,620 2,730
Property taxes 225 236 720 725
Total expenses 3,558 3,390 10,588 10,370
Net (loss) income $ (1) $ 189 $ 312 $ 905
Net (loss) income allocated to
general partners (1%) $ -- $ 2 $ 3 $ 9
Net (loss) income allocated to
limited partners (99%) (1) 187 309 896
$ (1) $ 189 $ 312 $ 905
Net (loss) income per limited
partnership unit $ (0.02) $ 3.56 $ 5.88 $ 17.05
Distributions per limited
partnership unit $ 2.76 $ -- $ 9.61 $119.23
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, 2002 52,538 $ (374) $(11,325) $(11,699)
Distributions to partners -- -- (505) (505)
Net income for the nine months
ended September 30, 2003 -- 3 309 312
Partners' deficit at
September 30, 2003 52,538 $ (371) $(11,521) $(11,892)
See Accompanying Notes to Consolidated Financial Statements
SHELTER PROPERTIES V
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
Nine Months Ended
September 30,
2003 2002
Cash flows from operating activities:
Net income $ 312 $ 905
Adjustments to reconcile net income to net cash
provided by operating activities:
Casualty gain (498) (393)
Depreciation 2,499 2,395
Amortization of loan costs 63 63
Change in accounts:
Receivables and deposits 202 291
Other assets (187) (105)
Accounts payable 81 (20)
Tenant security deposit liabilities 15 10
Accrued property taxes 289 235
Other liabilities (42) 238
Net cash provided by operating activities 2,734 3,619
Cash flows from investing activities:
Property improvements and replacements (1,899) (2,568)
Net withdrawals from restricted escrows 124 397
Insurance proceeds received 460 545
Net cash used in investing activities (1,315) (1,626)
Cash flows from financing activities:
Payments on mortgage notes payable (949) (871)
Loan costs paid -- (4)
Advance from affiliate 219 --
Payments on advance from affiliate (239) --
Distributions to partners (505) (6,316)
Net cash used in financing activities (1,474) (7,191)
Net decrease in cash and cash equivalents (55) (5,198)
Cash and cash equivalents at beginning of period 787 6,401
Cash and cash equivalents at end of period $ 732 $ 1,203
Supplemental disclosure of cash flow information:
Cash paid for interest $ 2,622 $ 2,530
At December 31, 2002 and 2001 approximately $291,000 and $287,000, respectively,
of property improvements and replacements were included in accounts payable.
At September 30, 2003, receivables and deposits include approximately $208,000
of insurance proceeds received from a casualty at Tar River Estates Apartments
held on deposit with the mortgage lender.
See Accompanying Notes to Consolidated Financial Statements
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, 2003 are not necessarily indicative of the results
that may be expected for the fiscal year ending December 31, 2003. 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, 2002. The Corporate General Partner is a
subsidiary of Apartment Investment and Management Company ("AIMCO"), a publicly
traded real estate investment trust. The other general partner of the
Partnership, AIMCO Properties, L.P., is also an affiliate of AIMCO.
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)
2003 2002
Net cash provided by operating activities $ 2,734 $ 3,619
Payments on mortgage notes payable (949) (871)
Property improvements and replacements (1,899) (2,568)
Change in restricted escrows, net 124 397
Changes in reserves for net operating
liabilities (358) (649)
Net cash used in operations $ (348) $ (72)
The Corporate General Partner believed it to be in the best interest of the
Partnership to use cash from operations of approximately $348,000 and $72,000
for the nine months ended September 30, 2003 and 2002, respectively, to fund
continuing capital improvements in order for the properties to remain
competitive.
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 certain payments
to affiliates for services and 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 Partnership's properties as compensation for providing
property management services. The Partnership paid to such affiliates
approximately $511,000 and $555,000 for the nine months ended September 30, 2003
and 2002, respectively, which is included in operating expenses.
In accordance with the Partnership Agreement, the Corporate General Partner
loaned approximately $219,000 to the Partnership to cover real estate tax
payments at Woodland Village Apartments during the nine months ended September
30, 2003. Interest was accrued at the prime rate plus 2%. Interest expense was
approximately $1,000 for the nine months ended September 30, 2003. During the
nine months ended September 30, 2003, the Partnership repaid advances of
approximately $239,000 and related interest of approximately $1,000 to the
Corporate General Partner with cash from operations. At September 30, 2003,
there were no outstanding loans or accrued interest. There were no loans from
the Corporate General Partner or associated interest expense during the nine
months ended September 30, 2002.
Affiliates of the Corporate General Partner received reimbursement of
accountable administrative expenses amounting to approximately $360,000 and
$508,000 for the nine months ended September 30, 2003 and 2002, respectively.
Included in these amounts are fees related to construction management services
provided by an affiliate of the Corporate General Partner of approximately
$106,000 and $212,000 for the nine months ended September 30, 2003 and 2002,
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.
The Partnership insures 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 nine months ended September 30, 2003 and
2002, the Partnership was charged by AIMCO and its affiliates approximately
$192,000 and $232,000, respectively, for insurance coverage and fees associated
with policy claims administration.
Note D - Casualty Events
On January 18, 2003, there was a fire at Tar River Estates Apartments causing
damage to eight units. The property incurred damages of approximately $504,000
and lost rents of approximately $41,000. During the nine months ended September
30, 2003, the Partnership recognized a gain of approximately $369,000 as a
result of the receipt of insurance proceeds of approximately $452,000,
approximately $208,000 of which are on deposit with the mortgage lender at
September 30, 2003, offset by the write-off of the undepreciated damaged assets
of approximately $83,000.
In June 2002, Foxfire Apartments experienced a fire, causing damage to twelve
units. The property incurred damages of approximately $677,000 as a result of
the fire and lost rents of approximately $61,000. During the year ended December
31, 2002, insurance proceeds of approximately $494,000 were received to cover
the damage to the property, including approximately $59,000 which was held on
deposit with the mortgage lender at December 31, 2002 and released to the
Partnership during the nine months ended September 30, 2003. The Partnership
recognized a casualty gain of approximately $394,000 after writing off the
undepreciated cost of the damaged units during the year ended December 31, 2002.
During the nine months ended September 30, 2003, the Partnership received
additional proceeds of approximately $157,000 to cover the damages and
approximately $61,000 to cover the lost rents, which are included in rental
income. The Partnership recognized an additional gain of approximately $129,000
for the nine months ended September 30, 2003, after writing off additional
undepreciated damaged assets of approximately $28,000.
In September 2001, Lexington Green Apartments was damaged by a tropical storm.
There was extensive damage to two units in addition to 36 units with minor
damage. The property incurred damages of approximately $69,000 as a result of
the storm. During the fourth quarter of 2001, insurance proceeds of
approximately $52,000 were received to cover the damage to the property, which
were held on deposit with the mortgage lender. After writing off the
undepreciated costs of the damaged units, the Partnership recognized a casualty
gain of approximately $33,000 during the year ended December 31, 2001. During
the nine months ended September 30, 2002, insurance proceeds of approximately
$69,000 were received by the Partnership, which included the proceeds held on
deposit with the mortgage lender. The additional insurance proceeds received
resulted in an additional casualty gain of approximately $17,000 for the nine
months ended September 30, 2002.
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 nine months ended September 30,
2002 as a result of receiving additional insurance proceeds.
Note E - 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
purported to assert claims on behalf of a class of limited partners and
derivatively on behalf of a number of limited partnerships (including the
Partnership) that 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 that 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 sought monetary
damages and equitable relief, including judicial dissolution of the Partnership.
In addition, 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 Heller action was brought as a
purported derivative action, and asserted claims for, among other things, breach
of fiduciary duty, unfair competition, conversion, unjust enrichment, and
judicial dissolution.
On January 8, 2003, the parties filed a Stipulation of Settlement in proposed
settlement of the Nuanes action and the Heller action.
In general terms, the proposed settlement provides for certification for
settlement purposes of a settlement class consisting of all limited partners in
this Partnership and others (the "Partnerships") as of December 20, 2002, the
dismissal with prejudice and release of claims in the Nuanes and Heller
litigation, payment by AIMCO of $9.9 million (which shall be distributed to
settlement class members after deduction of attorney fees and costs of class
counsel and certain costs of settlement) and up to $1 million toward the cost of
independent appraisals of the Partnerships' properties by a Court appointed
appraiser. An affiliate of the Corporate General Partner has also agreed to make
at least one round of tender offers to purchase all of the partnership interests
in the Partnerships within one year of final approval, if it is granted, and to
provide partners with the independent appraisals at the time of these tenders.
The proposed settlement also provided for the limitation of the allowable costs
which the Corporate General Partner or its affiliates will charge the
Partnerships in connection with this litigation and imposes limits on the class
counsel fees and costs in this litigation. On April 11, 2003, notice was
distributed to limited partners providing the details of the proposed
settlement.
On June 13, 2003, the Court granted final approval of the settlement and entered
judgment in both the Nuanes and Heller actions. On August 12, 2003, an objector
filed an appeal seeking to vacate and/or reverse the order approving the
settlement and entering judgment thereto. The Corporate General Partner intends
to file a respondent's brief in support of the order approving settlement and
entering judgment thereto.
The Corporate General Partner does not anticipate that any costs to the
Partnership, whether legal or settlement costs, associated with these cases will
be material to the Partnership's overall operations.
On August 8, 2003 AIMCO Properties L.P., an affiliate of the Corporate General
Partner, was served with a Complaint in the United States District Court,
District of Columbia alleging that AIMCO Properties L.P. willfully violated the
Fair Labor Standards Act (FLSA) by failing to pay maintenance workers overtime
for all hours worked in excess of forty per week. The Complaint is styled as a
Collective Action under the FLSA and seeks to certify state subclasses in
California, Maryland, and the District of Columbia. Specifically, the plaintiffs
contend that AIMCO Properties L.P. failed to compensate maintenance workers for
time that they were required to be "on-call". Additionally, the Complaint
alleges AIMCO Properties L.P. failed to comply with the FLSA in compensating
maintenance workers for time that they worked in responding to a call while
"on-call". The Complaint also attempts to certify a subclass for salaried
service directors who are challenging their classification as exempt from the
overtime provisions of the FLSA. AIMCO Properties L.P. has filed an answer to
the Complaint denying the substantive allegations. Although the outcome of any
litigation is uncertain, in the opinion of the Corporate General Partner the
claims will not result in any material liability to the Partnership.
The Partnership is unaware of any other pending or outstanding litigation
matters involving it or its investment properties that are 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 report contain certain forward-looking statements,
including, without limitation, statements regarding future financial performance
and the effect of government regulations. Actual results may differ materially
from those described in the forward-looking statements and will be affected by a
variety of risks and factors including, without limitation: national and local
economic conditions; the terms of governmental regulations that affect the
Registrant and interpretations of those regulations; the competitive environment
in which the Registrant operates; financing risks, including the risk that cash
flows from operations may be insufficient to meet required payments of principal
and interest; real estate risks, including variations of real estate values and
the general economic climate in local markets and competition for tenants in
such markets; litigation, including costs associated with prosecuting and
defending claims and any adverse outcomes, and possible environmental
liabilities. Readers should carefully review the Registrant's financial
statements and the notes thereto, as well as the risk factors described in the
documents the Registrant files from time to time with the Securities and
Exchange Commission.
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, 2003 and 2002:
September 30,
Property 2003 2002
Foxfire Apartments
Atlanta, Georgia (1) 78% 90%
Old Salem Apartments
Charlottesville, Virginia (2) 91% 97%
Woodland Village Apartments
Columbia, South Carolina 91% 90%
Lake Johnson Mews Apartments
Raleigh, North Carolina (3) 92% 95%
The Lexington Green Apartments
Sarasota, Florida 94% 96%
Millhopper Village Apartments
Gainesville, Florida 95% 96%
Tar River Estates Apartments
Greenville, North Carolina (4) 89% 86%
(1) The Corporate General Partner attributes the decrease in occupancy at
Foxfire Apartments to an increase in home purchases in the Atlanta area as
a result of lower home mortgage interest rates and to the casualty which
occurred in June 2002 (as discussed in "Results of Operations").
(2) The Corporate General Partner attributes the decrease in occupancy at Old
Salem Apartments to unfavorable economic conditions and increased
competition in the Charlottesville area.
(3) The Corporate General Partner attributes the decrease in occupancy at Lake
Johnson Mews Apartments to the slowdown in the economy and an increase in
home purchases in the Raleigh area as a result of lower home mortgage
interest rates.
(4) The Corporate General Partner attributes the increase in occupancy at Tar
River Estates Apartments to completion of property amenities and an
increase in curb appeal.
Results of Operations
The Partnership's net loss for the three months ended September 30, 2003 was
approximately $1,000, as compared to net income of approximately $189,000 for
the three months ended September 30, 2002. The Partnership's net income for the
nine months ended September 30, 2003 was approximately $312,000 as compared to
net income of approximately $905,000 for the nine months ended September 30,
2002. The decrease in net income for the three and nine months ended September
30, 2003 is due to a decrease in total revenues and an increase in total
expenses. The decrease in total revenues for the nine months ended September 30,
2003 is due to decreases in both rental and other income, partially offset by an
increase in the recognition of casualty gains. The decrease in total revenues
for the three months ended September 30, 2003 is due to decrease in other income
partially offset by an increase in the recognition of casualty gains. Rental
income remained relatively constant for the three months ended September 30,
2003. The decrease in rental income for the nine months ended September 30, 2003
is primarily due to the decrease in occupancy at five of the Partnership's
investment properties and the decrease in average rental rates at four
properties, partially offset by increases in occupancy at Woodland Village
Apartments and Tar River Estates Apartments, average rental rates at Old Salem
Apartments, Lexington Green Apartments, and Tar River Estates Apartments, and
insurance proceeds received to cover lost rents as a result of the casualty at
Foxfire Apartments (as discussed below). The casualty gains recognized in 2003
are the result of casualties at Foxfire Apartments and Tar River Estates
Apartments. The casualty gains recognized in 2002 are the result of casualties
at Tar River Estates Apartments and Lexington Green Apartments (as discussed
below). Other income decreased primarily due to decreases in lease cancellation
fees at Millhopper Village Apartments and Lexington Green Apartments, student
housing fees at Tar River Estates Apartments, and interest income, partially
offset by increases in utility reimbursements at Old Salem Apartments and late
charges at Foxfire Apartments.
The increase in total expenses for the three months ended September 30, 2003 is
due to increases in both operating and depreciation expense, partially offset by
decreases in interest, property tax and general and administrative expenses. The
increase in total expenses for the nine months ended September 30, 2003 is due
to increases in both operating and depreciation expense, partially offset by
decreases in both interest and general and administrative expenses. Property tax
expense remained relatively constant for the nine months ended September 30,
2003. The increase in operating expenses is primarily due to increases in
utility expenses at Old Salem Apartments, advertising expenses at Foxfire
Apartments and contract maintenance expense at most of the Partnership's
investment properties, partially offset by a decrease in property management
fees as a result of the decrease in rental income. Depreciation expense
increased as a result of property improvements and replacements placed into
service during the past twelve months. Interest expense decreased as a result of
scheduled principal payments made on the mortgages encumbering the Partnership's
investment properties, which reduced the carrying balance of the loans. Property
tax expenses decreased for the three months ended September 30, 2003 due to the
timing and receipt of the tax bills, which affected the estimation of the
property tax accrual at Tar River Estates Apartments.
General and administrative expenses decreased for both the three and nine months
ended September 30, 2003 due to a decrease in management reimbursements to the
Corporate General Partner allowed under the Partnership Agreement. In addition,
costs associated with the quarterly and annual communications with investors and
regulatory agencies and the annual audit and appraisals required by the
Partnership Agreement are also included in general and administrative expenses
for the three and nine months ended September 30, 2003 and 2002.
On January 18, 2003, there was a fire at Tar River Estates Apartments causing
damage to eight units. The property incurred damages of approximately $504,000
and lost rents of approximately $41,000. During the nine months ended September
30, 2003, the Partnership recognized a gain of approximately $369,000 as a
result of the receipt of insurance proceeds of approximately $452,000,
approximately $208,000 of which are on deposit with the mortgage lender at
September 30, 2003, offset by the write-off of the undepreciated damaged assets
of approximately $83,000.
In June 2002, Foxfire Apartments experienced a fire, causing damage to twelve
units. The property incurred damages of approximately $677,000 as a result of
the fire and lost rents of approximately $61,000. During the year ended December
31, 2002, insurance proceeds of approximately $494,000 were received to cover
the damage to the property, including approximately $59,000 which was held on
deposit with the mortgage lender at December 31, 2002 and released to the
Partnership during the nine months ended September 30, 2003. The Partnership
recognized a casualty gain of approximately $394,000 after writing off the
undepreciated cost of the damaged units during the year ended December 31, 2002.
During the nine months ended September 30, 2003, the Partnership received
additional proceeds of approximately $157,000 to cover the damages and
approximately $61,000 to cover the lost rents, which are included in rental
income. The Partnership recognized an additional gain of approximately $129,000
for the nine months ended September 30, 2003, after writing off additional
undepreciated damaged assets of approximately $28,000.
In September 2001, Lexington Green Apartments was damaged by a tropical storm.
There was extensive damage to two units in addition to 36 units with minor
damage. The property incurred damages of approximately $69,000 as a result of
the storm. During the fourth quarter of 2001, insurance proceeds of
approximately $52,000 were received to cover the damage to the property, which
were held on deposit with the mortgage lender. After writing off the
undepreciated costs of the damaged units, the Partnership recognized a casualty
gain of approximately $33,000 during the year ended December 31, 2001. During
the nine months ended September 30, 2002, insurance proceeds of approximately
$69,000 were received by the Partnership, which included the proceeds held on
deposit with the mortgage lender. The additional insurance proceeds received
resulted in an additional casualty gain of approximately $17,000 for the nine
months ended September 30, 2002.
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 nine months ended September 30,
2002 as a result of receiving additional insurance proceeds.
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
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, the
Corporate General Partner may use rental concessions and rental rate reductions
to offset softening market conditions, accordingly, there is no guarantee that
the Corporate General Partner will be able to sustain such a plan.
Liquidity and Capital Resources
At September 30, 2003, the Partnership had cash and cash equivalents of
approximately $732,000, compared to approximately $1,203,000 at September 30,
2002. The decrease in cash and cash equivalents of approximately $55,000 for the
nine months ended September 30, 2003, from December 31, 2002, is due to
approximately $1,315,000 of cash used in investing activities and approximately
$1,474,000 of cash used in financing activities, partially offset by
approximately $2,734,000 of cash provided by operating activities. Cash used in
investing activities consisted of property improvements and replacements,
partially offset by net receipts from escrow accounts maintained by the mortgage
lenders and the receipt of insurance proceeds. Cash used in financing activities
consisted of distributions to partners, payments of principal on the mortgages
encumbering the Partnership's investment properties and payments on advances
from an affiliate of the Corporate General Partner, partially offset by an
advance from an affiliate of the Corporate General Partner. The Partnership
invests its working capital reserves in interest bearing accounts.
The sufficiency of existing liquid assets to meet future liquidity and capital
expenditure requirements is directly related to the level of capital
expenditures required at the investment properties to adequately maintain the
physical assets and other operating needs of the Partnership and to comply with
Federal, state, and local legal and regulatory requirements. The Corporate
General Partner monitors developments in the area of legal and regulatory
compliance and is studying new federal laws, including the Sarbanes-Oxley Act of
2002. The Sarbanes-Oxley Act of 2002 mandates or suggests additional compliance
measures with regard to governance, disclosure, audit and other areas. In light
of these changes, the Partnership expects that it will incur higher expenses
related to compliance, including increased legal and audit fees. Capital
improvements planned for each of the Partnership's properties are detailed
below.
Millhopper Village Apartments: During the nine months ended September 30, 2003,
the Partnership completed approximately $41,000 of capital improvements at
Millhopper Village Apartments, consisting primarily of roof and floor covering
replacements. These improvements were funded from operations. The Partnership
evaluates the capital improvement needs of the property during the year and
currently expects to complete an additional $11,000 in capital improvements
during the remainder of 2003. The additional capital improvements will consist
primarily of additional floor covering replacement. Additional capital
improvements may be considered and will depend on the physical condition of the
property as well as the anticipated cash flow generated by the property.
Foxfire Apartments: During the nine months ended September 30, 2003, the
Partnership completed approximately $710,000 of capital improvements at Foxfire
Apartments, consisting primarily of sewer upgrades, floor covering and appliance
replacements, and construction related to the fire discussed in "Results of
Operations". These improvements were funded from operations and insurance
proceeds. The Partnership evaluates the capital improvement needs of the
property during the year and currently expects to complete an additional
$165,000 in capital improvements during the remainder of 2003. The additional
capital improvements will consist primarily of construction related to the 2002
fire, HVAC upgrades, and additional floor covering and appliance replacements.
Additional capital improvements may be considered and will depend on the
physical condition of the property as well as the anticipated cash flow
generated by the property.
Lake Johnson Mews Apartments: During the nine months ended September 30, 2003,
the Partnership completed approximately $156,000 of capital improvements at Lake
Johnson Mews Apartments, consisting primarily of swimming pool upgrades, parking
area upgrades, and floor covering replacement. These improvements were funded
from operations. The Partnership evaluates the capital improvement needs of the
property during the year. The Partnership expects that only necessary
improvements will be made during the remainder of 2003 in order to maintain
occupancy at the property.
Woodland Village Apartments: During the nine months ended September 30, 2003,
the Partnership completed approximately $78,000 of capital improvements at
Woodland Village Apartments, consisting primarily of appliance and floor
covering replacements. These improvements were funded from operations. The
Partnership evaluates the capital improvement needs of the property during the
year and currently expects to complete an additional $26,000 in capital
improvements during the remainder of 2003. The additional capital improvements
will consist primarily of additional floor covering and appliance replacements.
Additional capital improvements may be considered and will depend on the
physical condition of the property as well as the anticipated cash flow
generated by the property.
The Lexington Green Apartments: During the nine months ended September 30, 2003,
the Partnership completed approximately $142,000 of capital improvements at The
Lexington Green Apartments, consisting primarily of exterior painting, plumbing
upgrades and floor covering replacement. These improvements were funded from
operations. The Partnership evaluates the capital improvement needs of the
property during the year and currently expects to complete an additional $9,000
in capital improvements during the remainder of 2003. The additional capital
improvements will consist primarily of additional floor covering replacement.
Additional capital improvements may be considered and will depend on the
physical condition of the property as well as the anticipated cash flow
generated by the property and replacement reserves.
Tar River Estates Apartments: During the nine months ended September 30, 2003,
the Partnership completed approximately $321,000 of capital improvements at Tar
River Estates Apartments, consisting primarily of cabinet upgrades, floor
covering replacement, and construction related to the fire discussed in "Results
of Operations". These improvements were funded from operations, replacement
reserves, and insurance proceeds. The Partnership evaluates the capital
improvement needs of the property during the year and currently expects to
complete an additional $78,000 in capital improvements during the remainder of
2003. The additional capital improvements will consist primarily of
communications enhancements and additional floor covering replacement.
Additional capital improvements may be considered and will depend on the
physical condition of the property as well as the anticipated cash flow
generated by the property.
Old Salem Apartments: During the nine months ended September 30, 2003, the
Partnership completed approximately $160,000 of capital improvements at Old
Salem Apartments, consisting primarily of structural improvements and floor
covering replacement. These improvements were funded from operations. The
Partnership evaluates the capital improvement needs of the property during the
year. The Partnership expects that only necessary improvements will be made
during the remainder of 2003 in order to maintain occupancy at 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 Partnership's assets are thought to be sufficient for any near-term needs
(exclusive of capital improvements) of the Registrant. The mortgage indebtedness
encumbering the Partnership's properties of approximately $45,759,000 is
amortized over varying periods with maturity dates ranging from November 1, 2019
to January 1, 2022, at which time the loans are scheduled to be fully amortized.
The Partnership distributed the following amounts during the nine months ended
September 30, 2003 and 2002 (in thousands, except per unit data):
Nine Months Nine Months
Ended Per Limited Ended Per Limited
September 30, Partnership September 30, Partnership
2003 Unit 2002 Unit
Financing Proceeds (1) $ 505 $ 9.61 $3,785 $ 72.05
Sale Proceeds (2) -- -- 2,479 47.18
Other (3) -- -- 52 --
Total $ 505 $ 9.61 $6,316 $119.23
(1) From proceeds from the new financing obtained on Tar River Estates
Apartments in December 2001.
(2) From remaining proceeds from the sale of a portion of land at Tar River
Estates Apartments in October 2001.
(3) Distribution to the general partner of the majority owned sub-tier limited
partnership in connection with the transfer of funds from the majority
owned sub-tier limited partnership to the Partnership.
Future cash distributions will depend on the levels of net cash generated from
operations, the availability of cash reserves, property 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 expenditures,
to permit any additional distributions to its partners in 2003 or subsequent
periods.
Other
In addition to its indirect ownership of the general partner interests in the
Partnership, AIMCO and its affiliates owned 37,480 limited partnership units
(the "Units") in the Partnership representing 71.34% of the outstanding Units at
September 30, 2003. 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 Units in exchange for cash or a combination
of cash and units in AIMCO Properties, L.P., the operating partnership of AIMCO,
either through private purchases or tender offers. In this regard, on November
13, 2003, AIMCO Properties, L.P., commenced a tender offer to acquire 15,058
Units for a purchase price of $235.52 per Unit. Such offer expires on December
12, 2003. Pursuant to the Partnership Agreement, unitholders holding a majority
of the Units are entitled to take action with respect to a variety of matters
that include, but are not limited to, voting on certain amendments to the
Partnership Agreement and voting to remove the Corporate General Partner. As a
result of its ownership of 71.34% of the outstanding Units, AIMCO and its
affiliates are in a position to control all voting decisions with respect to the
Partnership. Although the Corporate General Partner owes fiduciary duties to the
limited partners of the Partnership, the Corporate General Partner also owes
fiduciary duties to AIMCO as its sole stockholder. As a result, the duties of
the Corporate General Partner, as corporate general partner, to the Partnership
and its limited partners may come into conflict with the duties of the Corporate
General Partner to AIMCO, as its sole stockholder.
Critical Accounting Policies and Estimates
The consolidated financial statements are prepared in accordance with accounting
principles generally accepted in the United States, which require the
Partnership to make estimates and assumptions. The Partnership believes that of
its significant accounting policies, the following may involve a higher degree
of judgment and complexity.
Impairment of Long-Lived Assets
Investment properties are recorded at cost, less accumulated depreciation,
unless considered impaired. If events or circumstances indicate that the
carrying amount of a property may be impaired, the Partnership will make an
assessment of its recoverability by estimating the undiscounted future cash
flows, excluding interest charges, of the property. If the carrying amount
exceeds the aggregate future cash flows, the Partnership would recognize an
impairment loss to the extent the carrying amount exceeds the fair value of the
property.
Real property investments are subject to varying degrees of risk. Several
factors may adversely affect the economic performance and value of the
Partnership's investment properties. These factors include, but are not limited
to, changes in the national, regional and local economic climate; local
conditions, such as an oversupply of multifamily properties; competition from
other available multifamily property owners and changes in market rental rates.
Any adverse changes in these factors could cause impairment of the Partnership's
assets.
Revenue Recognition
The Partnership generally leases apartment units for twelve-month terms or less.
Rental income attributable to leases is recognized monthly as it is earned and
the Partnership fully reserves all balances outstanding over thirty days. The
Partnership will offer rental concessions during particularly slow months or in
response to heavy competition from other similar complexes in the area. Any
concessions given at the inception of the lease are amortized over the life of
the lease.
ITEM 3. CONTROLS AND PROCEDURES
(a) Disclosure Controls and Procedures. The Partnership's management, with the
participation of the principal executive officer and principal financial officer
of the Corporate General Partner, who are the equivalent of the Partnership's
principal executive officer and principal financial officer, respectively, has
evaluated the effectiveness of the Partnership's disclosure controls and
procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the
Securities Exchange Act of 1934, as amended (the "Exchange Act")) as of the end
of the period covered by this report. Based on such evaluation, the principal
executive officer and principal financial officer of the Corporate General
Partner, who are the equivalent of the Partnership's principal executive officer
and principal financial officer, respectively, have concluded that, as of the
end of such period, the Partnership's disclosure controls and procedures are
effective.
(b) Internal Control Over Financial Reporting. There have not been any changes
in the Partnership's internal control over financial reporting (as such term is
defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the
fiscal quarter to which this report relates that have materially affected, or
are reasonably likely to materially affect, the Partnership's internal control
over financial reporting.
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
purported to assert claims on behalf of a class of limited partners and
derivatively on behalf of a number of limited partnerships (including the
Partnership) that 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 that 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 sought monetary
damages and equitable relief, including judicial dissolution of the Partnership.
In addition, 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 Heller action was brought as a
purported derivative action, and asserted claims for, among other things, breach
of fiduciary duty, unfair competition, conversion, unjust enrichment, and
judicial dissolution.
On January 8, 2003, the parties filed a Stipulation of Settlement in proposed
settlement of the Nuanes action and the Heller action.
In general terms, the proposed settlement provides for certification for
settlement purposes of a settlement class consisting of all limited partners in
this Partnership and others (the "Partnerships") as of December 20, 2002, the
dismissal with prejudice and release of claims in the Nuanes and Heller
litigation, payment by AIMCO of $9.9 million (which shall be distributed to
settlement class members after deduction of attorney fees and costs of class
counsel and certain costs of settlement) and up to $1 million toward the cost of
independent appraisals of the Partnerships' properties by a Court appointed
appraiser. An affiliate of the Corporate General Partner has also agreed to make
at least one round of tender offers to purchase all of the partnership interests
in the Partnerships within one year of final approval, if it is granted, and to
provide partners with the independent appraisals at the time of these tenders.
The proposed settlement also provided for the limitation of the allowable costs
which the Corporate General Partner or its affiliates will charge the
Partnerships in connection with this litigation and imposes limits on the class
counsel fees and costs in this litigation. On April 11, 2003, notice was
distributed to limited partners providing the details of the proposed
settlement.
On June 13, 2003, the Court granted final approval of the settlement and entered
judgment in both the Nuanes and Heller actions. On August 12, 2003, an objector
filed an appeal seeking to vacate and/or reverse the order approving the
settlement and entering judgment thereto. The Corporate General Partner intends
to file a respondent's brief in support of the order approving settlement and
entering judgment thereto.
The Corporate General Partner does not anticipate that any costs to the
Partnership, whether legal or settlement costs, associated with these cases will
be material to the Partnership's overall operations.
On August 8, 2003 AIMCO Properties L.P., an affiliate of the Corporate General
Partner, was served with a Complaint in the United States District Court,
District of Columbia alleging that AIMCO Properties L.P. willfully violated the
Fair Labor Standards Act (FLSA) by failing to pay maintenance workers overtime
for all hours worked in excess of forty per week. The Complaint is styled as a
Collective Action under the FLSA and seeks to certify state subclasses in
California, Maryland, and the District of Columbia. Specifically, the plaintiffs
contend that AIMCO Properties L.P. failed to compensate maintenance workers for
time that they were required to be "on-call". Additionally, the Complaint
alleges AIMCO Properties L.P. failed to comply with the FLSA in compensating
maintenance workers for time that they worked in responding to a call while
"on-call". The Complaint also attempts to certify a subclass for salaried
service directors who are challenging their classification as exempt from the
overtime provisions of the FLSA. AIMCO Properties L.P. has filed an answer to
the Complaint denying the substantive allegations. Although the outcome of any
litigation is uncertain, in the opinion of the Corporate General Partner the
claims will not result in any material liability to the Partnership.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
3 Amended and Restated Certificate and Agreement of Limited
Partnership (Exhibit A to the Prospectus included in
Registrant's Amendment No. 1 to Registration Statement,
filed June 8, 1982 (File No. 2-81308), is incorporated
herein by reference).
31.1 Certification of equivalent of Chief Executive Officer
pursuant to Securities Exchange Act Rules
13a-14(a)/15d-14(a), as Adopted Pursuant to Section 302 of
the Sarbanes-Oxley Act of 2002.
31.2 Certification of equivalent of Chief Financial Officer
pursuant to Securities Exchange Act Rules
13a-14(a)/15d-14(a), as Adopted Pursuant to Section 302 of
the Sarbanes-Oxley Act of 2002.
32.1 Certification Pursuant to 18 U.S.C. Section 1350, as Adopted
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
b) Reports on Form 8-K:
None filed during the quarter ended September 30, 2003.
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/Paul J. McAuliffe
Paul J. McAuliffe
Executive Vice President and
Chief Financial Officer
Date: November 13, 2003
Exhibit 31.1
CERTIFICATION
I, Patrick J. Foye, certify that:
1. I have reviewed this quarterly report on Form 10-QSB of Shelter Properties
V;
2. Based on my knowledge, this report does not contain any untrue statement
of a material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material
respects the financial condition, results of operations and cash flows of
the registrant as of, and for, the periods presented in this report;
4. The registrant's other certifying officer(s) and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant
and have:
(a) Designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the
registrant, including its consolidated subsidiaries, is made known
to us by others within those entities, particularly during the
period in which this report is being prepared;
(b) Evaluated the effectiveness of the registrant's disclosure controls
and procedures and presented in this report our conclusions about
the effectiveness of the disclosure controls and procedures, as of
the end of the period covered by this report based on such
evaluation; and
(c) Disclosed in this report any change in the registrant's internal
control over financial reporting that occurred during the
registrant's most recent fiscal quarter (the registrant's fourth
fiscal quarter in the case of an annual report) that has materially
affected, or is reasonably likely to materially affect, the
registrant's internal control over financial reporting; and
5. The registrant's other certifying officer(s) and I have disclosed, based on
our most recent evaluation of internal control over financial reporting, to the
registrant's auditors and the audit committee of the registrant's board of
directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design
or operation of internal control over financial reporting which are
reasonably likely to adversely affect the registrant's ability to
record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's
internal control over financial reporting.
Date: November 13, 2003
/s/Patrick J. Foye
Patrick J. Foye
Executive Vice President of Shelter Realty V
Corporation, equivalent of the chief
executive officer of the Partnership
Exhibit 31.2
CERTIFICATION
I, Paul J. McAuliffe, certify that:
1. I have reviewed this quarterly report on Form 10-QSB of Shelter Properties
V;
2. Based on my knowledge, this report does not contain any untrue statement
of a material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material
respects the financial condition, results of operations and cash flows of
the registrant as of, and for, the periods presented in this report;
4. The registrant's other certifying officer(s) and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant
and have:
(a) Designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the
registrant, including its consolidated subsidiaries, is made known
to us by others within those entities, particularly during the
period in which this report is being prepared;
(b) Evaluated the effectiveness of the registrant's disclosure controls
and procedures and presented in this report our conclusions about
the effectiveness of the disclosure controls and procedures, as of
the end of the period covered by this report based on such
evaluation; and
(c) Disclosed in this report any change in the registrant's internal
control over financial reporting that occurred during the
registrant's most recent fiscal quarter (the registrant's fourth
fiscal quarter in the case of an annual report) that has materially
affected, or is reasonably likely to materially affect, the
registrant's internal control over financial reporting; and
5. The registrant's other certifying officer(s) and I have disclosed, based
on our most recent evaluation of internal control over financial
reporting, to the registrant's auditors and the audit committee of the
registrant's board of directors (or persons performing the equivalent
functions):
(a) All significant deficiencies and material weaknesses in the design
or operation of internal control over financial reporting which are
reasonably likely to adversely affect the registrant's ability to
record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves
management or other employees who have a significant role in
the registrant's internal control over financial reporting.
Date: November 13, 2003
/s/Paul J. McAuliffe
Paul J. McAuliffe
Executive Vice President and Chief Financial
Officer of Shelter Realty V Corporation,
equivalent of the chief financial officer of
the Partnership
Exhibit 32.1
Certification of CEO and CFO
Pursuant to 18 U.S.C. Section 1350,
As Adopted Pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002
In connection with the Quarterly Report on Form 10-QSB of Shelter Properties V
(the "Partnership"), for the quarterly period ended September 30, 2003 as filed
with the Securities and Exchange Commission on the date hereof (the "Report"),
Patrick J. Foye, as the equivalent of the chief executive officer of the
Partnership, and Paul J. McAuliffe, as the equivalent of the chief financial
officer of the Partnership, each hereby certifies, pursuant to 18 U.S.C. Section
1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002,
that, to the best of his knowledge:
(1) The Report fully complies with the requirements of Section 13(a) or
15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all
material respects, the financial condition and results of operations
of the Partnership.
/s/Patrick J. Foye
Name: Patrick J. Foye
Date: November 13, 2003
/s/Paul J. McAuliffe
Name: Paul J. McAuliffe
Date: November 13, 2003
This certification is furnished with this Report pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002 and shall not be deemed filed by the Partnership for
purposes of Section 18 of the Securities Exchange Act of 1934, as amended.