UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-QSB
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 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 0-13261
SHELTER PROPERTIES VI
(Exact Name of Registrant as Specified in Its Charter)
South Carolina 57-0755618
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
55 Beattie Place, P.O. Box 1089
Greenville, South Carolina 29602
(Address of principal executive offices)
(864) 239-1000
(Issuer's telephone number)
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
SHELTER PROPERTIES VI
BALANCE SHEET
(Unaudited)
(in thousands, except unit data)
March 31, 2004
Assets
Cash and cash equivalents $ 138
Receivables and deposits 147
Restricted escrows 248
Other assets 704
Investment properties:
Land $ 2,613
Buildings and related personal property 28,504
31,117
Less accumulated depreciation (19,699) 11,418
$ 12,655
Liabilities and Partners' Deficit
Liabilities
Accounts payable $ 70
Tenant security deposit liabilities 89
Accrued property taxes 126
Other liabilities 277
Due to affiliates (Note C) 330
Mortgage notes payable 18,475
Partners' Deficit
General partners $ (16)
Limited partners (42,324 units issued and
outstanding) (6,696) (6,712)
$ 12,655
See Accompanying Notes to Financial Statements
SHELTER PROPERTIES VI
STATEMENTS OF OPERATIONS
(Unaudited)
(in thousands, except per unit data)
Three Months Ended
March 31,
2004 2003
Revenues:
Rental income $1,230 $1,228
Other income 130 97
Total revenues 1,360 1,325
Expenses:
Operating 544 491
General and administrative 57 106
Depreciation 329 321
Interest 298 290
Property taxes 108 93
Total expenses 1,336 1,301
Income from continuing operations 24 24
Income from discontinued operations (Note A) -- 186
Net income $ 24 $ 210
Net income allocated to general partners (1%) $ -- $ 2
Net income allocated to limited partners (99%) 24 208
$ 24 $ 210
Per limited partnership unit:
Income from continuing operations $ 0.57 $ 0.56
Income from discontinued operations -- 4.35
Net income per limited partnership unit $ 0.57 $ 4.91
Distributions per limited partnership unit $ -- $34.33
See Accompanying Notes to Financial Statements
SHELTER PROPERTIES VI
STATEMENT OF CHANGES IN PARTNERS' DEFICIT
(Unaudited)
(in thousands, except unit data)
Limited
Partnership General Limited
Units Partners Partners Total
Original capital contributions 42,324 $ 2 $42,324 $42,326
Partners' deficit at
December 31, 2003 42,324 $ (16) $(6,720) $(6,736)
Net income for the three months
ended March 31, 2004 -- -- 24 24
Partners' deficit at
March 31, 2004 42,324 $ (16) $(6,696) $(6,712)
See Accompanying Notes to Financial Statements
SHELTER PROPERTIES VI
STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
Three Months Ended
March 31,
2004 2003
Cash flows from operating activities:
Net income $ 24 $ 210
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation 329 321
Amortization of loan costs 17 15
Change in accounts:
Receivables and deposits 31 153
Other assets (115) (83)
Accounts payable 6 (74)
Tenant security deposit liabilities (2) (2)
Accrued property taxes 35 61
Due to affiliates (5) (1)
Other liabilities (303) 19
Net cash provided by operating activities 17 619
Cash flows from investing activities:
Property improvements and replacements (76) (181)
Net (deposits to) withdrawals from restricted escrows (1) 457
Net cash (used in) provided by investing activities (77) 276
Cash flows from financing activities:
Payments on mortgage notes payable (134) (109)
Advances from affiliate 250 --
Repayment of advances from affiliate (173) --
Distribution paid to partners -- (1,454)
Net cash used in financing activities (57) (1,563)
Net decrease in cash and cash equivalents (117) (668)
Cash and cash equivalents at beginning of period 255 2,041
Cash and cash equivalents at end of period $ 138 $ 1,373
Supplemental disclosure of cash flow information:
Cash paid for interest $ 288 $ 275
Property improvements and replacements included in
accounts payable $ 27 $ --
Included in property improvements and replacements for the three months ended
March 31, 2004 are approximately $66,000 of improvements which were included in
accounts payable at December 31, 2003.
See Accompanying Notes to Financial Statements
SHELTER PROPERTIES VI
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
Note A - Basis of Presentation
The accompanying unaudited financial statements of Shelter Properties VI (the
"Partnership" or "Registrant") have been prepared in accordance with generally
accepted accounting principles for interim financial information and with the
instructions to Form 10-QSB and Item 310 (b) of Regulation S-B. Accordingly,
they do not include all of the information and footnotes required by generally
accepted accounting principles for complete financial statements. The general
partner responsible for management of the Partnership's business is Shelter
Realty VI Corporation ("the Corporate General Partner"). The Corporate General
Partner is a subsidiary of Apartment Investment and Management Company
("AIMCO"), a publicly traded real estate investment trust. The non-corporate
general partner, AIMCO Properties, L.P., is also an affiliate of AIMCO. 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 financial
statements and footnotes thereto included in the Partnership's Annual Report on
Form 10-KSB for the year ended December 31, 2003.
The Partnership has adopted Statement of Financial Accounting Standards ("SFAS")
No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets", which
established standards for the way that public business enterprises report
information about long-lived assets that are either being held for sale or have
already been disposed of by sale or other means. The standard requires that
results of operations for a long-lived asset that is being held for sale or has
already been disposed of be reported as a discontinued operation on the
statement of operations. As a result, the accompanying statement of operations
for the three months ended March 31, 2003 reflects the operations of Nottingham
Square Apartments as income from discontinued operations due to its sale in
December 2002.
Note B - Reconciliation of Cash Flows
The following, as required by the Partnership Agreement, is a reconciliation of
"Net cash provided by operating activities" on the accompanying statements of
cash flows to "Net cash from operations", as defined in the partnership
agreement of the Partnership (the "Partnership Agreement"). However, "Net cash
from operations" should not be considered an alternative to net income as an
indicator of the Partnership's operating performance or to cash flows as a
measure of liquidity.
Three Months Ended
March 31,
2004 2003
(in thousands)
Net cash provided by operating activities $ 17 $ 619
Payments on mortgage notes payable (134) (109)
Property improvements and replacements (76) (181)
Change in restricted escrows, net (1) 457
Changes in reserves for net operating
liabilities 353 (73)
Additions to operating reserves (159) (713)
Net cash provided by operations $ -- $ --
At March 31, 2004 and 2003, the Corporate General Partner reserved approximately
$159,000 and $713,000, respectively, to fund capital improvements at its
properties.
Note C - Transactions with Affiliated Parties
The Partnership has no employees and is dependent on the Corporate General
Partner and its affiliates for the management and administration of all
Partnership activities. The Partnership Agreement provides for (i) certain
payments to affiliates for services and (ii) reimbursement of certain expenses
incurred by affiliates on behalf of the Partnership.
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 $66,000 for both of the three month periods ended March 31, 2004
and 2003 which is included in operating expenses.
Affiliates of the Corporate General Partner received reimbursements of
accountable administrative expenses amounting to approximately $43,000 and
$87,000 for the three months ended March 31, 2004 and 2003, respectively, which
is included in general and administrative expenses and investment properties. As
of March 31, 2004, approximately $89,000 of these expenses were accrued as a
receivable from an affiliate of the Corporate General Partner and is included in
due to affiliates. The receivable was accrued as a result of the fourth quarter
adjustment reported in 2003 due to a difference in the estimated costs and the
actual costs incurred. Included in these amounts are fees related to
construction management services provided by an affiliate of the Corporate
General Partner of approximately $4,000 and $11,000 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.
Pursuant to the Partnership Agreement and in connection with the sale of
Foxfire/Barcelona Village during 2000 and Nottingham Square Apartments in
December 2002, the Corporate General Partner is entitled to a commission of up
to 1% for its assistance in the sale. Payment of such commission is subordinate
to the limited partners receiving a cumulative 7% return on their investment.
This return has not yet been met, and accordingly, the combined fees of
approximately $342,000 have been accrued and are included in due to affiliates.
During the three months ended March 31, 2004, an affiliate of the Corporate
General Partner advanced the Partnership approximately $250,000 to cover
additional costs related to the sale of Nottingham Square Apartments. Interest
was charged at prime plus 1% (5% at March 31, 2004). Interest expense on these
advances was approximately $2,000 for the three months ended March 31, 2004.
During the three months ended March 31, 2004, the Partnership made payment on
outstanding loans of approximately $173,000. Approximately $77,000 of the
advance and accrued interest remains unpaid at March 31, 2004 and is included in
due to affiliates. No such advances were made during the three months ended
March 31, 2003.
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 and administration
provided by AIMCO and its affiliates will be approximately $49,000. The
Partnership was charged approximately $75,000 for 2003.
Note D - 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 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 four apartment complexes. The
following table sets forth the average occupancy of the properties for each of
the three months ended March 31, 2004 and 2003:
Average
Occupancy
Property 2004 2003
Rocky Creek Apartments (1)
Augusta, Georgia 93% 89%
Carriage House Apartments (1)
Gastonia, North Carolina 89% 85%
River Reach Apartments (2)
Jacksonville, Florida 94% 97%
Village Gardens Apartments (1)
Fort Collins, Colorado 87% 78%
(1) The Corporate General Partner attributes the increase in average occupancy
at Rocky Creek, Carriage House and Village Gardens Apartments to increased
marketing efforts by the local management at the properties.
(2) The Corporate General Partner attributes the decrease in average occupancy
at River Reach Apartments to low mortgage interest rates which has
resulted in tenants purchasing homes.
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 recognized net income for the three months ended March 31, 2004
of approximately $24,000 compared to net income of approximately $210,000 for
the three months ended March 31, 2003. The decrease in net income is primarily
due to a decrease in income from discontinued operations. Income from continuing
operations remained constant for the comparable periods.
The Partnership has adopted Statement of Financial Accounting Standards No. 144,
"Accounting for the Impairment or Disposal of Long-Lived Assets"' which
established standards for the way that public business enterprises report
information about long-lived assets that are either being held for sale or have
already been disposed of by sale or other means. The standard requires that
results of operations for a long-lived asset that is being held for sale or has
already been disposed of be reported as a discontinued operation on the
statement of operations. As a result, the accompanying statement of operations
for the three months ended March 31, 2003 reflects the operations of Nottingham
Square Apartments as income from discontinued operations due to the property's
sale in December 2002.
On December 20, 2002, the Partnership sold Nottingham Square Apartments to an
unaffiliated third party. The income from discontinued operations for the three
months ended March 31, 2003 includes a refund of property tax of approximately
$193,000, partially offset by operating expenses of approximately $7,000 at
Nottingham Square Apartments.
The Partnership recognized income from continuing operations of approximately
$24,000 for both of the three months ended March 31, 2004 and March 31, 2003.
The increase in total revenues for the three months ended March 31, 2004 was
offset by an increase in total expenses compared to the corresponding period in
2003. Total revenues increased primarily due to an increase in other income.
Other income increased primarily due to increases in utility reimbursements and
fees at River Reach Apartments.
Total expenses increased due to increases in operating and property tax expenses
partially offset by a decrease in general and administrative expenses. Operating
expenses increased primarily due to an increase in maintenance expenses.
Maintenance expense increased primarily due to an increase in contract services
at Village Gardens and Carriage House Apartments. Property tax expense increased
due to an increase in the assessed value of River Reach Apartments.
General and administrative expenses decreased for the three months ended March
31, 2004 due to a decrease in the costs of services included in management
reimbursements to the Corporate General Partner as allowed under the Partnership
Agreement. Also included in general and administrative expenses for both March
31, 2004 and 2003 are costs associated with the quarterly and annual
communications with investors and regulatory agencies and the annual audit
required by the Partnership Agreement.
Liquidity and Capital Resources
At March 31, 2004 the Partnership had cash and cash equivalents of approximately
$138,000 compared to approximately $1,373,000 at March 31, 2003. Cash and cash
equivalents decreased approximately $117,000 since December 31, 2003 due to
approximately $57,000 and $77,000 of cash used in financing and investing
activities, respectively, partially offset by approximately $17,000 of cash
provided by operating activities. Cash used in financing activities consisted of
principal payments on the mortgages encumbering the Partnership's properties and
repayments on advances from affiliates partially offset by advances from
affiliates. Cash used in investing activities consisted of property improvements
and replacements and net deposits to restricted escrows maintained by the
mortgage lenders. 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.
Rocky Creek Apartments
During the three months ended March 31, 2004, the Partnership completed
approximately $11,000 in capital improvements at Rocky Creek Apartments
primarily consisting of floor covering replacements. The improvements were
funded from operating cash flow. The Partnership evaluates the capital
improvement needs of the property during the year and currently expects to
complete an additional $55,000 in capital improvements during the remainder of
2004. The additional capital improvements will consist primarily of clubhouse
renovations, roof replacement and parking area resurfacing. Additional capital
improvements may be considered and will depend on the physical condition of the
property as well as replacement reserves and anticipated cash flow generated by
the property.
Carriage House Apartments
During the three months ended March 31, 2004, the Partnership completed
approximately $1,000 in capital improvements at Carriage House Apartments
primarily consisting of floor covering replacements. These improvements were
funded from operating cash flow. The Partnership evaluates the capital
improvement needs of the property during the year and currently expects to
complete an additional $55,000 in capital improvements during the remainder of
2004. The additional capital improvements will consist primarily of roof
replacement and structural improvements. Additional capital improvements may be
considered and will depend on the physical condition of the property as well as
replacement reserves and anticipated cash flow generated by the property.
River Reach Apartments
During the three months ended March 31, 2004, the Partnership completed
approximately $19,000 in capital improvements at River Reach Apartments
primarily consisting of floor covering replacements. These improvements were
funded from operating cash flow. The Partnership evaluates the capital
improvement needs of the property during the year and currently expects to
complete an additional $145,000 in capital improvements during the remainder of
2004. The additional capital improvements will consist primarily of roof
replacement and swimming pool improvements. Additional capital improvements may
be considered and will depend on the physical condition of the property as well
as replacement reserves and anticipated cash flow generated by the property.
Village Gardens Apartments
During the three months ended March 31, 2004, the Partnership completed
approximately $6,000 in capital improvements at Village Gardens Apartments
consisting primarily of water heater upgrades. These improvements were funded
from operating cash flow. The Partnership evaluates the capital improvement
needs of the property during the year and currently expects to complete an
additional $72,000 in capital improvements during the remainder of 2004. The
additional capital improvements will consist primarily of fitness equipment and
heating upgrades. Additional capital improvements may be considered and will
depend on the physical condition of the property as well as replacement reserves
and anticipated cash flow generated by the property.
The additional capital expenditures will be incurred only if cash is available
from operations and Partnership reserves. To the extent that such budgeted
capital improvements are completed, the 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 mortgages
encumbering River Reach and Village Gardens Apartments aggregating approximately
$14,365,000 mature in June 2022 and January 2021, respectively, at which time
the mortgages are scheduled to be fully amortized. The mortgages encumbering
Rocky Creek and Carriage House Apartments aggregating approximately $4,110,000
have a maturity date of September 1, 2007 at which time balloon payments
totaling approximately $3,736,000 are due. The Corporate General Partner has the
option to extend the maturity on the Rocky Creek and Carriage House Apartments
loans for another five years. After that period the Corporate General Partner
will attempt to refinance such indebtedness and/or sell the properties prior to
the optional extended maturity date. If the properties cannot be refinanced or
sold, the Partnership will risk losing such properties through foreclosure.
The Partnership distributed the following amounts during the three months ended
March 31, 2004 and 2003 (in thousands except per unit data):
Three Months Per Limited Three Months Per Limited
Ended Partnership Ended Partnership
March 31, 2004 Unit March 31, 2003 Unit
Operations $ -- $ -- $ 126 $ 2.95
Sale (1) -- -- 1,328 31.38
$ -- $ -- $1,454 $34.33
(1) Proceeds from the sale of Nottingham Square Apartments in December 2002.
The Partnership's cash available for distribution is reviewed on a monthly
basis. Future cash distributions will depend on the levels of net cash generated
from operations, the availability of cash reserves, and the timing of debt
maturities, refinancings, and/or property sales. There can be no assurance that
the Partnership will generate sufficient funds from operations, after required
capital improvements, to permit any distributions to its partners during the
remainder of 2004 or subsequent periods.
Other
In addition to its indirect ownership of the general partner interests in the
Partnership, AIMCO and its affiliates owned 28,400 limited partnership units
(the "Units") in the Partnership representing 67.10% 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 67.10% of
the outstanding Units, AIMCO and its affiliates are in a position to control all
such 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 managing 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 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 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:
4(a) Amended and Restated Certificate and Agreement of Limited
Partnership (included as Exhibit A to the Prospectus of
Registrant dated March 22, 1984 contained in Amendment No. 1
to Registration Statement No. 2-86995, of Registrant filed
March 21, 1984 (the "Prospectus") and 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 filed for the quarter ended March 31, 2004:
None.
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
SHELTER PROPERTIES VI
By: Shelter Realty VI Corporation
Corporate General Partner
By: /s/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
VI;
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 VI
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
VI;
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 VI 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 VI
Limited Partnership (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.