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 March 31, 2004
[ ] 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)
March 31, 2004
Assets
Cash and cash equivalents $ 574
Receivables and deposits 286
Restricted escrows 277
Other assets 1,729
Investment properties:
Land $ 4,054
Buildings and related personal property 84,658
88,712
Less accumulated depreciation (57,017) 31,695
$ 34,561
Liabilities and Partners' Deficit
Liabilities
Accounts payable $ 284
Tenant security deposit liabilities 286
Accrued property taxes 260
Other liabilities 697
Mortgage notes payable 45,096
Partners' Deficit
General partners $ (373)
Limited partners (52,538 units
issued and outstanding) (11,689) (12,062)
$ 34,561
See Accompanying Notes to Consolidated Financial Statements
SHELTER PROPERTIES V
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(in thousands, except per unit data)
Three Months Ended
March 31,
2004 2003
Revenues:
Rental income $ 3,059 $ 3,101
Other income 375 371
Casualty gain (Note D) -- 369
Total revenues 3,434 3,841
Expenses:
Operating 1,533 1,522
General and administrative 82 126
Depreciation 853 832
Interest 869 875
Property taxes 260 244
Total expenses 3,597 3,599
Net (loss) income $ (163) $ 242
Net (loss) income allocated to general partners (1%) $ (2) $ 2
Net (loss) income allocated to limited partners (99%) (161) 240
$ (163) $ 242
Net (loss) income per limited partnership unit $ (3.06) $ 4.57
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, 2003 52,538 $ (371) $(11,528) $(11,899)
Net loss for the three months
ended March 31, 2004 -- (2) (161) (163)
Partners' deficit at
March 31, 2004 52,538 $ (373) $(11,689) $(12,062)
See Accompanying Notes to Consolidated Financial Statements
SHELTER PROPERTIES V
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
Three Months Ended
March 31,
2004 2003
Cash flows from operating activities:
Net (loss) income $ (163) $ 242
Adjustments to reconcile net (loss) income
to net cash provided by operating activities:
Depreciation 853 832
Amortization of loan costs 19 21
Casualty gain -- (369)
Change in accounts:
Receivables and deposits 56 51
Other assets (319) 33
Accounts payable 99 95
Tenant security deposit liabilities (13) --
Accrued property taxes 23 28
Other liabilities 47 (80)
Net cash provided by operating activities 602 853
Cash flows from investing activities:
Property improvements and replacements (193) (566)
Net withdrawals from restricted escrows -- 1
Net cash used in investing activities (193) (565)
Cash flows from financing activities:
Payments on mortgage notes payable (293) (310)
Advances from affiliate 150 219
Payments on advances from affiliate (150) (239)
Net cash used in financing activities (293) (330)
Net increase (decrease) in cash and cash equivalents 116 (42)
Cash and cash equivalents at beginning of period 458 787
Cash and cash equivalents at end of period $ 574 $ 745
Supplemental disclosure of cash flow information:
Cash paid for interest $ 744 $ 902
Supplemental disclosure of non-cash activity:
Property improvements and replacements in accounts
payable $ 40 $ 215
At December 31, 2002, approximately $291,000 of property improvements and
replacements were included in accounts payable.
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 month period
ended March 31, 2004 are not necessarily indicative of the results that may be
expected for the fiscal year ending December 31, 2004. 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, 2003. 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 (loss) 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)
2004 2003
Net cash provided by operating activities $ 602 $ 853
Payments on mortgage notes payable (293) (310)
Property improvements and replacements (193) (566)
Change in restricted escrows, net -- 1
Changes in reserves for net operating
Liabilities 107 (127)
Net cash from (used in) operations $ 223 $ (149)
9
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 investment properties as compensation for
providing property management services. The Partnership paid to such affiliates
approximately $185,000 and $172,000 for the three months ended March 31, 2004
and 2003, respectively, which is included in operating expenses.
In accordance with the Partnership Agreement, the Corporate General Partner
loaned approximately $150,000 and $219,000 to the Partnership to cover real
estate tax payments at Woodland Village Apartments during the three months ended
March 31, 2004 and 2003, respectively. Interest was accrued at the prime rate
plus 2%. Interest expense was approximately $1,000 for each of the three months
ended March 31, 2004 and 2003. During the three months ended March 31, 2004 and
2003, the Partnership repaid advances of approximately $150,000 and $239,000,
respectively, and related interest of approximately $1,000 for each of the three
months ended March 31, 2004 and 2003 to the Corporate General Partner with cash
from operations. At March 31, 2004, there were no outstanding loans or accrued
interest due to the Corporate General Partner.
Affiliates of the Corporate General Partner were eligible to receive
reimbursement of accountable administrative expenses amounting to approximately
$70,000 and $139,000 for the three months ended March 31, 2004 and 2003,
respectively. Included in these amounts are fees related to construction
management services provided by an affiliate of the Corporate General Partner of
approximately $14,000 and $41,000 for the three months ended March 31, 2004 and
2003, respectively. The construction management service fees are calculated
based on a percentage of current additions to investment properties. The
reimbursement of accountable administrative expenses includes approximately
$57,000 owed to affiliates of the Corporate General Partner at March 31, 2004.
These amounts are included in general and administrative expenses, investment
properties, and other liabilities.
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 2004, the Partnership anticipates its cost for
insurance coverage and fees associated with policy claims administration
provided by AIMCO and its affiliates will be approximately $113,000. The
Partnership was charged approximately $192,000 for 2003.
Note D - Casualty Event
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 three months ended March 31,
2003, the Partnership recognized a gain of approximately $369,000 as a result of
the receipt of insurance proceeds of approximately $452,000, which were held on
deposit with the mortgage lender at March 31, 2003, offset by the write-off of
the undepreciated damaged assets of approximately $83,000.
Note E - Contingencies
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
("Objector") filed an appeal seeking to vacate and/or reverse the order
approving the settlement and entering judgment thereto. On November 24, 2003,
the Objector filed an application requesting the Court order AIMCO to withdraw
settlement tender offers it had commenced, refrain from making further offers
pending the appeal and auction any units tendered to third parties, contending
that the offers did not conform with the terms of the Settlement. Counsel for
the Objector (on behalf of another investor) had alternatively requested the
Court take certain action purportedly to enforce the terms of the settlement
agreement. On December 18, 2003, the Court heard oral argument on the motions
and denied them both in their entirety. On January 28, 2004, Objector filed his
opening brief in his pending appeal. On April 23, 2004, the Corporate General
Partner and its affiliates filed a response brief in support of the settlement
and the judgment thereto. Plaintiffs have also filed a brief in support of the
settlement. Objector is scheduled to file a reply brief no later than May 13,
2004.
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. On March 5, 2004 Plaintiffs
filed an amended complaint also naming NHP Management Company, which is also an
affiliate of the Corporate General Partner. 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 Defendants have filed an answer to the Amended Complaint denying
the substantive allegations. Discovery is currently underway.
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.
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.
Pursuant to a formal order of investigation received by AIMCO on March 29, 2004,
the Central Regional Office of the United States Securities and Exchange
Commission is conducting an investigation relating to certain matters. AIMCO
believes the areas of investigation include AIMCO's miscalculated monthly net
rental income figures in third quarter 2003, forecasted guidance, accounts
payable, rent concessions, vendor rebates, and capitalization of expenses and
payroll. AIMCO is cooperating fully. AIMCO does not believe that the ultimate
outcome will have a material adverse effect on its consolidated financial
condition or results of operations taken as a whole. Similarly, the Corporate
General Partner does not believe that the ultimate outcome will have a material
adverse effect on the Partnership's consolidated financial condition or results
of operations taken as a whole.
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
three months ended March 31, 2004 and 2003:
March 31,
Property 2004 2003
Foxfire Apartments
Atlanta, Georgia (1) 90% 69%
Old Salem Apartments
Charlottesville, Virginia (2) 91% 94%
Woodland Village Apartments
Columbia, South Carolina (3) 88% 91%
Lake Johnson Mews Apartments
Raleigh, North Carolina 89% 89%
The Lexington Green Apartments
Sarasota, Florida 94% 94%
Millhopper Village Apartments
Gainesville, Florida (4) 89% 96%
Tar River Estates Apartments
Greenville, North Carolina (5) 88% 95%
(1) The Corporate General Partner attributes the increase in occupancy at
Foxfire Apartments to increased marketing and resident retention efforts.
(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
Woodland Village Apartments to unfavorable economic conditions in the
Columbia area.
(4) The Corporate General Partner attributes the decrease in occupancy at
Millhopper Village Apartments to increased competition in the Gainesville
area.
(5) The Corporate General Partner attributes the decrease in occupancy at Tar
River Estates Apartments to a decrease in the student population as a
result of increased mid-term graduations in the Greenville area.
The Partnership's financial results are dependent upon a number of factors
including the ability to attract and maintain tenants at the investment
properties, interest rates on mortgage loans, costs incurred to operate the
investment properties, general economic conditions and weather. As part of the
ongoing business plan of the Partnership, the Corporate General Partner monitors
the rental market environment of its investment properties to assess the
feasibility of increasing rents, maintaining or increasing occupancy levels and
protecting the Partnership from increases in expenses. As part of this plan, the
Corporate General Partner attempts to protect the Partnership from the burden of
inflation-related increases in expenses by increasing rents and maintaining a
high overall occupancy level. However, 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. Further, a number of factors which
are outside the control of the Partnership such as the local economic climate
and weather can adversely or positively impact the Partnership's financial
results.
Results of Operations
The Partnership's net loss for the three months ended March 31, 2004 was
approximately $163,000, as compared to net income of approximately $242,000 for
the three months ended March 31, 2003. The decrease in net income is due to a
decrease in total revenues. Total expenses remained relatively constant for the
comparable periods. The decrease in total revenues is due to a decrease in
rental income and the recognition during 2003 of a casualty gain. Other income
remained relatively constant for the comparable periods. The decrease in rental
income is primarily due to the decreases in occupancy at four of the
Partnership's investment properties and the average rental rates at five
properties, partially offset by the increases in occupancy at Foxfire Apartments
and the average rental rates at Woodland Village Apartments and Tar River
Estates Apartments. The casualty gain recognized in 2003 is the result of a
January 2003 fire at Tar River Estates Apartments causing damage to eight units.
The Partnership incurred damages of approximately $504,000 and lost rents of
approximately $41,000. During the three months ended March 31, 2003, the
Partnership recognized a gain of approximately $369,000 as a result of the
receipt of insurance proceeds of approximately $452,000, which were held on
deposit with the mortgage lender at March 31, 2003, offset by the write-off of
undepreciated damaged assets of approximately $83,000.
Total expenses remained relatively constant for the comparable periods as
increases in operating, depreciation and property tax expenses were offset by
decreases in interest and general and administrative expenses. Operating
expenses increased primarily due to increases in advertising expenses at Foxfire
Apartments and maintenance expense at Old Salem Apartments. Depreciation expense
increased as a result of property improvements and replacements placed into
service at the properties during the past twelve months. The increase in
property tax expense is primarily due to increases in the assessed value of four
properties and the tax rate at Woodland Village Apartments. Interest expense
decreased primarily 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.
The decrease in general and administrative expenses is primarily due to a
decrease in the management reimbursements to the Corporate General Partner as
allowed under the Partnership Agreement. Costs associated with the quarterly and
annual communications with investors and regulatory agencies and the annual
audit required by the Partnership Agreement are also included in general and
administrative expenses for the three months ended March 31, 2004 and 2003.
Liquidity and Capital Resources
At March 31, 2004, the Partnership had cash and cash equivalents of
approximately $574,000, compared to approximately $745,000 at March 31, 2003.
The increase in cash and cash equivalents of approximately $116,000, from the
Partnership's year ended December 31, 2003, is due to approximately $602,000 of
cash provided by operating activities, partially offset by approximately
$293,000 of cash used in financing activities and approximately $193,000 of cash
used in investing activities. Cash used in financing activities consisted of
payments of principal on the mortgages encumbering the Partnership's investment
properties and payment on an advance from an affiliate of the Corporate General
Partner, partially offset by the receipt of an advance from an affiliate of the
Corporate General Partner. Cash used in investing activities consisted of
property improvements and replacements. 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 three months ended March 31, 2004, the
Partnership completed approximately $9,000 of capital improvements at Millhopper
Village Apartments, consisting primarily of air conditioning unit 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 $66,000 in capital
improvements during the remainder of 2004. 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 three months ended March 31, 2004, the
Partnership completed approximately $30,000 of capital improvements at Foxfire
Apartments, consisting primarily of exterior painting and floor covering and
appliance 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 $116,000 in capital
improvements during the remainder of 2004. 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 three months ended March 31, 2004, the
Partnership completed approximately $38,000 of capital improvements at Lake
Johnson Mews 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 and currently expects to complete an additional $73,000 in capital
improvements during the remainder of 2004. 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.
Woodland Village Apartments: During the three months ended March 31, 2004, the
Partnership completed approximately $30,000 of capital improvements at Woodland
Village Apartments, consisting primarily of furniture 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 $139,000 in capital
improvements during the remainder of 2004. 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 three months ended March 31, 2004,
the Partnership completed approximately $35,000 of capital improvements at The
Lexington Green Apartments, consisting primarily of structural improvements,
major landscaping, 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
$112,000 in capital improvements during the remainder of 2004. 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 three months ended March 31, 2004, the
Partnership completed approximately $31,000 of capital improvements at Tar River
Estates 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 and currently expects to complete an additional $90,000 in capital
improvements during the remainder of 2004. 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 three months ended March 31, 2004, the
Partnership completed approximately $60,000 of capital improvements at Old Salem
Apartments, consisting primarily of sewer 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 $140,000 in capital improvements
during the remainder of 2004. 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 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 Partnership'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 Partnership. The mortgage
indebtedness encumbering all of the Partnership's investment properties of
approximately $45,096,000 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.
There were no distributions made to the partners during the three months ended
March 31, 2004 and 2003. 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 distributions to its partners in
2004 or subsequent periods.
Other
In addition to its indirect ownership of the general partner interests in the
Partnership, AIMCO and its affiliates owned 38,149 limited partnership units
(the "Units") in the Partnership representing 72.61% of the outstanding Units at
March 31, 2004. 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. 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 72.61% 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
The Partnership's 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. The
Partnership evaluates all accounts receivable from residents and establishes an
allowance, after the application of security deposits, for accounts greater than
30 days past due on current tenants and all receivables due from former tenants.
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
("Objector") filed an appeal seeking to vacate and/or reverse the order
approving the settlement and entering judgment thereto. On November 24, 2003,
the Objector filed an application requesting the Court order AIMCO to withdraw
settlement tender offers it had commenced, refrain from making further offers
pending the appeal and auction any units tendered to third parties, contending
that the offers did not conform with the terms of the Settlement. Counsel for
the Objector (on behalf of another investor) had alternatively requested the
Court take certain action purportedly to enforce the terms of the settlement
agreement. On December 18, 2003, the Court heard oral argument on the motions
and denied them both in their entirety. On January 28, 2004, Objector filed his
opening brief in his pending appeal. On April 23, 2004, the Corporate General
Partner and its affiliates filed a response brief in support of the settlement
and the judgment thereto. Plaintiffs have also filed a brief in support of the
settlement. Objector is scheduled to file a reply brief no later than May 13,
2004.
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. On March 5, 2004 Plaintiffs
filed an amended complaint also naming NHP Management Company, which is also an
affiliate of the Corporate General Partner. 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 Defendants have filed an answer to the Amended Complaint denying
the substantive allegations. Discovery is currently underway.
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.
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 March 31, 2004.
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/Martha L. Long
Martha L. Long
Senior Vice President
By: /s/Thomas M. Herzog
Thomas M. Herzog
Senior Vice President
and Chief Accounting Officer
Date: May 13, 2004
Exhibit 31.1
CERTIFICATION
I, Martha L. Long, 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: May 13, 2004
/s/Martha L. Long
Martha L. Long
Senior Vice President of
Shelter Realty V Corporation,
equivalent of the chief
executive officer of the
Partnership
Exhibit 31.2
CERTIFICATION
I, Thomas M. Herzog, 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: May 13, 2004
/s/Thomas M. Herzog
Thomas M. Herzog
Senior Vice President and
Chief Accounting 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 March 31, 2004 as filed with
the Securities and Exchange Commission on the date hereof (the "Report"), Martha
L. Long, as the equivalent of the chief executive officer of the Partnership,
and Thomas M. Herzog, 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/Martha L. Long
Name: Martha L. Long
Date: May 13, 2004
/s/Thomas M. Herzog
Name: Thomas M. Herzog
Date: May 13, 2004
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.