UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-QSB
(Mark One)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended September 30, 2005
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
For the transition period from _________to _________
Commission file number 0-10260
SHELTER PROPERTIES III
(Exact name of small business issuer as specified in its charter)
South Carolina 57-0718508
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
55 Beattie Place, P.O. Box 1089
Greenville, South Carolina 29602
(Address of principal executive offices)
(864) 239-1000
(Issuer's telephone number)
Check whether the issuer (i) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports) and (2) has been
subject to such filing requirements for the past 90 days.
Yes X No ___
Indicate by check mark whether the registrant is a shell company (as defined
in Rule 12b-2 of the Exchange Act). Yes ___ No _X_
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
SHELTER PROPERTIES III
CONSOLIDATED BALANCE SHEET
(Unaudited)
(in thousands, except unit data)
September 30, 2005
Assets
Cash and cash equivalents $ 115
Receivables and deposits 117
Restricted escrow 85
Other assets 474
Investment properties:
Land $ 762
Buildings and related personal property 16,434
17,196
Less accumulated depreciation (12,311) 4,885
$ 5,676
Liabilities and Partners' Deficit
Liabilities
Accounts payable $ 9
Tenant security deposit liabilities 79
Accrued property taxes 186
Other liabilities 312
Due to affiliates (Note C) 551
Mortgage notes payable 8,878
Partners' Deficit
General partners $ (78)
Limited partners (55,000 units issued and
outstanding) (4,261) (4,339)
$ 5,676
See Accompanying Notes to Consolidated Financial Statements
SHELTER PROPERTIES III
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(in thousands, except per unit data)
Three Months Ended Nine Months Ended
September 30, September 30,
2005 2004 2005 2004
Revenues:
Rental income $ 682 $ 667 $ 1,987 $ 1,979
Other income 74 82 212 232
Casualty gain (Note D) 21 -- 21 --
Total revenues 777 749 2,220 2,211
Expenses:
Operating 485 398 1,392 1,163
General and administrative 39 46 121 179
Depreciation 150 150 439 459
Interest 167 172 508 517
Property taxes 62 70 186 200
Total expenses 903 836 2,646 2,518
Loss from continuing operations (126) (87) (426) (307)
Gain on sale of discontinued
operations (Note A) -- -- 124 --
Income from discontinued
operations (Note A) -- 10 -- 185
Net loss $ (126) $ (77) $ (302) $ (122)
Net loss allocated
to general partners (1%) $ (1) $ (1) $ (3) $ (1)
Net loss allocated
to limited partners (99%) (125) (76) (299) (121)
$ (126) $ (77) $ (302) $ (122)
Per limited partnership unit:
Loss from continuing operations $ (2.27) $ (1.56) $ (7.68) $ (5.53)
Gain on sale of discontinued
operations -- -- 2.25 --
Income from discontinued
operations -- 0.18 -- 3.33
$ (2.27) $ (1.38) $ (5.43) $ (2.20)
See Accompanying Notes to Consolidated Financial Statements
SHELTER PROPERTIES III
CONSOLIDATED STATEMENT OF CHANGES IN PARTNERS' DEFICIT
(Unaudited)
(in thousands, except unit data)
Limited
Partnership General Limited
Units Partners Partners Total
Original capital contributions 55,000 $ 2 $27,500 $27,502
Partners' deficit at
December 31, 2004 55,000 $ (75) $(3,962) $(4,037)
Net loss for the nine months
ended September 30, 2005 -- (3) (299) (302)
Partners' deficit at
September 30, 2005 55,000 $ (78) $(4,261) $(4,339)
See Accompanying Notes to Consolidated Financial Statements
SHELTER PROPERTIES III
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
Nine Months Ended
September 30,
2005 2004
Cash flows from operating activities:
Net loss $ (302) $ (122)
Adjustments to reconcile net loss to net cash (used in)
provided by operating activities:
Depreciation 439 683
Amortization of loan costs 10 14
Bad debt expense 49 92
Gain on sale of discontinued operations (124) --
Casualty gain (21) (86)
Change in accounts:
Receivables and deposits (25) (84)
Other assets (23) (97)
Accounts payable (75) 34
Tenant security deposit liabilities 24 3
Accrued property taxes (7) (60)
Other liabilities (5) 31
Due to affiliates (70) 60
Net cash (used in) provided by operating activities (130) 468
Cash flows from investing activities:
Property improvements and replacements (242) (488)
Net insurance proceeds received 28 91
Net (deposits to) withdrawals from restricted escrows (1) 95
Net cash used in investing activities (215) (302)
Cash flows from financing activities:
Payments on mortgage notes payable (232) (291)
Advances received from affiliates 269 135
Repayment of advances from affiliates (52) (69)
Net cash used in financing activities (15) (225)
Net decrease in cash and cash equivalents (360) (59)
Cash and cash equivalents at beginning of period 475 192
Cash and cash equivalents at end of period $ 115 $ 133
Supplemental disclosure of cash flow information:
Cash paid for interest $ 496 $ 662
Supplemental disclosure of non-cash activity:
Property improvements and replacements in accounts payable $ 14 $ 45
See Accompanying Notes to Consolidated Financial Statements
SHELTER PROPERTIES III
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note A - Basis of Presentation
The accompanying unaudited consolidated financial statements of Shelter
Properties III (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 III Corporation, a South Carolina
corporation (the "Corporate General Partner"). The Corporate General Partner is
a subsidiary of Apartment Investment and Management Company ("AIMCO"), a
publicly traded real estate investment trust. In the opinion of the Corporate
General Partner, all adjustments (consisting of normal recurring accruals)
considered necessary for a fair presentation have been included. Operating
results for the three and nine month periods ended September 30, 2005, are not
necessarily indicative of the results that may be expected for the fiscal year
ending December 31, 2005. 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, 2004.
Certain 2004 balances have been reclassified to conform with the 2005
presentation.
In accordance with Statement of Financial Accounting Standards ("SFAS") No. 144,
the statements of operations for the three and nine months ended September 30,
2004 reflect the operations of Colony House Apartments as income from
discontinued operations due to its sale in October 2004. Included in income from
discontinued operations for the three and nine months ended September 30, 2004
is approximately $355,000 and $1,048,000, respectively, of revenues generated by
the property. The additional gain on sale recognized during the nine months
ended September 30, 2005 is due to a change in the estimated closing costs.
Note B - Reconciliation of Cash Flows
As required by the Partnership Agreement, the following is a reconciliation of
"Net cash (used in) provided by operating activities" in the accompanying
consolidated statements of cash flows to "Net cash from operations", as defined
in the Partnership Agreement. However, "Net cash from operations" should not be
considered an alternative to net income as an indicator of the Partnership's
operating performance or to cash flows as a measure of liquidity.
For the Nine Months Ended
September 30,
2005 2004
(in thousands)
Net cash (used in) provided by operating activities $ (130) $ 468
Payments on mortgage notes payable (232) (291)
Property improvements and replacements (242) (488)
Change in restricted escrow (1) 95
Changes in reserves for net operating assets 132 21
Net cash used in operations $ (473) $ (195)
Note C - Transactions with Affiliated Parties
The Partnership has no employees and depends 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 receive 5% of gross receipts from
the Partnership's properties as compensation for providing property management
services. The Partnership paid to such affiliates approximately $107,000 and
$159,000 during the nine months ended September 30, 2005 and 2004, respectively,
which is included in operating expenses and income from discontinued operations.
An affiliate of the Corporate General Partner charged the Partnership
reimbursement of accountable administrative expenses amounting to approximately
$79,000 and $176,000 for the nine months ended September 30, 2005 and 2004,
respectively, which is included in general and administrative expenses and
investment properties. The portion of these reimbursements included in
investment properties for the nine months ended September 30, 2005 and 2004 are
fees related to construction management services provided by an affiliate of the
Corporate General Partner of approximately $5,000 and $43,000, respectively. The
construction management service fees are calculated based on a percentage of
additions to the investment properties. At September 30, 2005, the Partnership
owed an affiliate of the Corporate General Partner approximately $16,000 in
reimbursements of accountable administrative expenses, which is included in due
to affiliates.
During 1986, a liability of approximately $185,000 was incurred to the general
partners for sales commissions earned. In connection with the sale of North
River Village Apartments in 2002, the Corporate General Partner earned a
commission of approximately $68,000 for its assistance in the sale. In
connection with the sale of Colony House Apartments in 2004, the Corporate
General Partner earned a commission of approximately $61,000. Payment of such
commissions is subordinate to the limited partners receiving a cumulative 7%
return on their investment. This return has not yet been met and the balance of
approximately $314,000 is included in due to affiliates.
Pursuant to the Partnership Agreement, an affiliate of the Corporate General
Partner advanced the Partnership approximately $269,000 and $135,000 during the
nine months ended September 30, 2005 and 2004, respectively, to aid in the
payment of property taxes at Essex Park Apartments. During the nine months ended
September 30, 2005 and 2004, the Partnership repaid advances and accrued
interest of approximately $60,000 and $69,000, respectively. Interest on
advances is charged at the prime rate plus 2% or 8.75% at September 30, 2005.
Interest expense was approximately $11,000 and $3,000 for the nine months ended
September 30, 2005 and 2004, respectively. At September 30, 2005, the
Partnership owed an affiliate of the Corporate General Partner approximately
$221,000 in advances and accrued interest which is included in due to
affiliates.
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, general
liability and vehicle liability. The Partnership insures its properties above
the AIMCO limits through insurance policies obtained by AIMCO from insurers
unaffiliated with the Corporate General Partner. During the nine months ended
September 30, 2005 and 2004, the Partnership was charged by AIMCO and its
affiliates approximately $46,000 and $65,000, respectively, for insurance
coverage and fees associated with policy claims administration.
Note D - Casualty Gain
In May 2003, one of the Partnership's investment properties, Colony House
Apartments, incurred damages as a result of a hail storm. During the year ended
December 31, 2003, approximately $151,000 of fixed assets and approximately
$86,000 of accumulated depreciation were written off resulting in a net write
off of approximately $65,000. During 2003, the property received approximately
$244,000 in proceeds from the insurance company to repair the damage and
recognized a casualty gain of approximately $179,000 as a result of the
difference between the proceeds received and the net book value of the buildings
which were damaged. During the nine months ended September 30, 2004, the
Partnership received insurance proceeds of approximately $91,000 and wrote off
approximately $5,000 of additional assets which resulted in a casualty gain of
approximately $86,000. The casualty gain is included in income from discontinued
operations due to the sale of the property in October 2004.
In March 2005, one of the Partnership's investment properties, Essex Park
Apartments, incurred damages as a result of a fire. During the nine months ended
September 30, 2005, the Partnership received insurance proceeds of approximately
$28,000 and wrote off approximately $7,000 of undepreciated damaged assets which
resulted in a casualty gain of approximately $21,000.
Note E - Subsequent Event
Subsequent to September 30, 2005, the Partnership entered into a sale contract
with a third party to sell Essex Park Apartments for a purchase price of
approximately $8,980,000. The anticipated closing date is January 31, 2006. For
the nine months ended September 30, 2005 the property had total revenues of
approximately $1,516,000 and net loss of approximately $179,000. The net book
value of Essex Park Apartments assets at September 30, 2005 was approximately
$3,367,000.
Note F - 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 captioned Heller v.
Insignia Financial Group (the "Heller action") was filed against the same
defendants that are named in the Nuanes action. 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 28, 2002, the trial court granted defendants
motion to strike the complaint. Plaintiffs took an appeal from this order.
On January 8, 2003, the parties filed a Stipulation of Settlement in proposed
settlement of the Nuanes action and the Heller action. 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 (the "Appeal") seeking to vacate and/or reverse the order approving the
settlement and entering judgment thereto. On May 4, 2004, the Objector filed a
second appeal challenging the court's use of a referee and its order requiring
Objector to pay those fees.
On March 21, 2005, the Court of Appeals issued opinions in both pending appeals.
With regard to the settlement and judgment entered thereto, the Court of Appeals
vacated the trial court's order and remanded to the trial court for further
findings on the basis that the "state of the record is insufficient to permit
meaningful appellate review". With regard to the second appeal, the Court of
Appeals reversed the order requiring the Objector to pay referee fees. On April
26, 2005, the Court of Appeals lifted the stay of a pending appeal related to
the Heller action and the trial court's order striking the complaint. On April
28, 2005, the Objector filed a Petition for Review with the California Supreme
Court in connection with the opinion vacating the order approving settlement and
remanding for further findings. On June 10, 2005, the California Supreme Court
denied Objector's Petition for Review and the Court of Appeals sent the matter
back to the trial court on June 21, 2005. The parties intend to ask the trial
court to make further findings in connection with settlement consistent with the
Court of Appeal's remand order. With respect to the related Heller appeal, on
July 28, 2005, the Court of Appeals reversed the trial court's order striking
the first amended complaint.
On August 18, 2005, Objector and his counsel filed a motion to disqualify the
trial court based on a peremptory challenge and filed a motion to disqualify for
cause on October 17, 2005. On or about October 13, 2005 Objector filed a motion
to intervene and on or about October 19, 2005 filed both a motion to take
discovery relating to the adequacy of plaintiffs as derivative representatives
and a motion to dissolve the anti-suit injunction in connection with settlement.
On October 27, 2005, the Court denied Objector's peremptory challenge and struck
Objector's motion to disqualify for cause. No hearing has been set on Objector's
remaining motions. On November 3, 2005, Objector and his counsel filed a writ of
mandate to the Court of Appeals challenging the court's October 27, 2005 order.
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.
AIMCO Properties L.P. and NHP Management Company, both affiliates of the
Corporate General Partner, are defendants in a lawsuit alleging that they
willfully violated the Fair Labor Standards Act ("FLSA") by failing to pay
maintenance workers overtime for all hours worked in excess of forty per week.
The complaint, filed in the United States District Court for the District of
Columbia, attempts to bring 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. and NHP
Management Company failed to compensate maintenance workers for time that they
were required to be "on-call". Additionally, the complaint alleges AIMCO
Properties L.P. and NHP Management Company failed to comply with the FLSA in
compensating maintenance workers for time that they worked in excess of 40 hours
in a week. In June 2005 the Court conditionally certified the collective action
on both the on-call and overtime issues, which allows the plaintiffs to provide
notice of the collective action to all non-exempt maintenance workers from
August 7, 2000 through the present. Those employees will have the opportunity to
opt-in to the collective action, and AIMCO Properties, L.P. and NHP Management
Company will have the opportunity to move to decertify the collective action.
Because the court denied plaintiffs' motion to certify state subclasses, on
September 26, 2005, the plaintiffs filed a class action with the same
allegations in the Superior Court of California (Contra Costa County). Although
the outcome of any litigation is uncertain, AIMCO Properties, L.P. does not
believe that the ultimate outcome will have a material adverse effect on its
consolidated financial condition or results of operations. 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.
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.
Environmental
Various Federal, state and local laws subject property owners or operators to
liability for management, and the costs of removal or remediation, of certain
hazardous substances present on a property. Such laws often impose liability
without regard to whether the owner or operator knew of, or was responsible for,
the release or presence of the hazardous substances. The presence of, or the
failure to manage or remedy properly, hazardous substances may adversely affect
occupancy at affected apartment communities and the ability to sell or finance
affected properties. In addition to the costs associated with investigation and
remediation actions brought by government agencies, and potential fines or
penalties imposed by such agencies in connection therewith, the presence of
hazardous substances on a property could result in claims by private plaintiffs
for personal injury, disease, disability or other infirmities. Various laws also
impose liability for the cost of removal, remediation or disposal of hazardous
substances through a licensed disposal or treatment facility. Anyone who
arranges for the disposal or treatment of hazardous substances is potentially
liable under such laws. These laws often impose liability whether or not the
person arranging for the disposal ever owned or operated the disposal facility.
In connection with the ownership, operation and management of its properties,
the Partnership could potentially be liable for environmental liabilities or
costs associated with its properties.
Mold
The Partnership is aware of lawsuits against owners and managers of multifamily
properties asserting claims of personal injury and property damage caused by the
presence of mold, some of which have resulted in substantial monetary judgments
or settlements. The Partnership has only limited insurance coverage for property
damage loss claims arising from the presence of mold and for personal injury
claims related to mold exposure. Affiliates of the Corporate General Partner
have implemented a national policy and procedures to prevent or eliminate mold
from its properties and the Corporate General Partner believes that these
measures will minimize the effects that mold could have on residents. To date,
the Partnership has not incurred any material costs or liabilities relating to
claims of mold exposure or to abate mold conditions. Because the law regarding
mold is unsettled and subject to change the Corporate General Partner can make
no assurance that liabilities resulting from the presence of or exposure to mold
will not have a material adverse effect on the Partnership's consolidated
financial condition or results of operations.
SEC Investigation
The Central Regional Office of the United States Securities and Exchange
Commission (the "SEC") continues its formal investigation relating to certain
matters. Although the staff of the SEC is not limited in the areas that it may
investigate, AIMCO believes the areas of investigation have included AIMCO's
miscalculated monthly net rental income figures in third quarter 2003,
forecasted guidance, accounts payable, rent concessions, vendor rebates,
capitalization of payroll and certain other costs, tax credit transactions, and
tender offers for limited partnership interests. AIMCO is cooperating fully.
AIMCO is not able to predict when the investigation will be resolved. AIMCO does
not believe that the ultimate outcome will have a material adverse effect on its
consolidated financial condition or results of operations. 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.
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 two apartment complexes. The
following table sets forth the average occupancy of the properties for each of
the nine months ended September 30, 2005 and 2004:
Average
Occupancy
Property 2005 2004
Essex Park Apartments
Columbia, South Carolina 87% 88%
Willowick Apartments (1)
Greenville, South Carolina 87% 91%
(1) The Corporate General Partner attributes the decrease in occupancy
at Willowick Apartments to increased credit standards for
prospective tenants.
The Partnership's financial results depend 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 environments 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 affect the Partnership's financial
results.
Results of Operations
The Partnership's net loss for the three and nine months ended September 30,
2005 was approximately $126,000 and $302,000, respectively, compared to net loss
of approximately $77,000 and $122,000 for the corresponding periods in 2004. The
increase in net loss for the three month period ended September 30, 2005 is due
to a decrease in income from discontinued operations and an increase in total
expenses partially offset by an increase in total revenues. The increase in net
loss for the nine month period ended September 30, 2005 is due to a decrease in
income from discontinued operations and an increase in total expenses partially
offset by a gain on sale of discontinued operations recognized in 2005.
In accordance with Statement of Financial Accounting Standards ("SFAS") No. 144,
the statements of operations for the three and nine months ended September 30,
2004 reflect the operations of Colony House Apartments as income from
discontinued operations due to its sale in October 2004. Included in income from
discontinued operations for the three and nine months ended September 30, 2004
is approximately $355,000 and $1,048,000, respectively, of revenues generated by
the property. The additional gain on sale recognized during the nine months
ended September 30, 2005 is due to a change in the estimated closing costs.
In May 2003, one of the Partnership's investment properties, Colony House
Apartments, incurred damages as a result of a hail storm. During the year ended
December 31, 2003, approximately $151,000 of fixed assets and approximately
$86,000 of accumulated depreciation were written off resulting in a net write
off of approximately $65,000. During 2003, the property received approximately
$244,000 in proceeds from the insurance company to repair the damage and
recognized a casualty gain of approximately $179,000 as a result of the
difference between the proceeds received and the net book value of the buildings
which were damaged. During the nine months ended September 30, 2004, the
Partnership received additional proceeds of approximately $91,000 and wrote off
approximately $5,000 of additional net assets which resulted in an additional
gain of approximately $86,000. This amount is included in income from
discontinued operations.
In March 2005, one of the Partnership's investment properties, Essex Park
Apartments, incurred damages as a result of a fire. During the nine months ended
September 30, 2005, the Partnership received insurance proceeds of approximately
$28,000 and wrote off approximately $7,000 of undepreciated damaged assets which
resulted in a casualty gain of approximately $21,000.
Excluding the income from discontinued operations and gain on sale of
discontinued operations, the Partnership had loss from continuing operations of
approximately $126,000 and $426,000 for the three and nine months ended
September 30, 2005, respectively, compared to loss from continuing operations of
approximately $87,000 and $307,000 for the corresponding periods in 2004. The
increase in loss from continuing operations for the three month period is due to
an increase in total expenses partially offset by an increase in total revenues.
The increase in loss from continuing operations for the nine month period is due
primarily to an increase in total expenses. Total revenues increased for the
three month period due to an increase in rental income and the recognition of a
casualty gain in 2005 partially offset by a decrease in other income. Total
revenues for the nine month period remained relatively constant. Rental income
for the three month period increased due to a decrease in bad debt expense at
both investment properties. Other income decreased due to decreases in late
charges and lease cancellation fees, primarily at Essex Park Apartments.
Total expenses increased for the three and nine months ended September 30, 2005
due to an increase in operating expense partially offset by decreases in general
and administrative, property tax, and interest expenses. Depreciation expense
decreased or the nine months ended September 30, 2005 due to assets at Willowick
Apartments becoming fully depreciated. Operating expenses increased for the
three and nine months ended September 30, 2005 due to an increase in payroll and
related benefits, applicant screening costs and contract services at both
investment properties. Property tax expense decreased due to a partial refund of
the 2004 taxes at one of the Partnership's properties that resulted in a lower
accrual for the 2005 period. Interest expense decreased as a result of regularly
scheduled principal payments on the mortgages encumbering the Partnership's
investment properties, partially offset by an increase in interest expense on
advances from an affiliate of the Corporate General Partner.
General and administrative expenses for both periods decreased due to a decrease
in the management reimbursements paid to the Corporate General Partner as
allowed under the Partnership Agreement. Also included in general and
administrative expenses are costs associated with the quarterly and annual
communications with investors and regulatory agencies.
Liquidity and Capital Resources
At September 30, 2005, the Partnership had cash and cash equivalents of
approximately $115,000 compared to approximately $133,000 at September 30, 2004.
Cash and cash equivalents decreased approximately $360,000 from December 31,
2004 due to approximately $130,000, $215,000 and $15,000 of cash used in
operating, investing activities and financing activities, respectively. Cash
used in investing activities consisted of property improvements and replacements
partially offset by insurance proceeds received. Cash used in financing
activities consisted of payments of principal on the mortgages encumbering the
Partnership's properties and repayment of advances from an affiliate of the
Corporate General Partners partially offset by advances from an affiliate of the
Corporate General Partner. The Partnership invests its working capital reserves
in interest bearing accounts.
The sufficiency of existing liquid assets to meet future liquidity and capital
expenditure requirements is directly related to the level of capital
expenditures required at the 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.
For example, 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. Capital improvements planned for each of
the Partnership's properties are detailed below.
Essex Park Apartments
During the nine months ended September 30, 2005, the Partnership completed
approximately $160,000 of capital improvements at Essex Park Apartments,
consisting primarily of structural improvements, maintenance equipment, and
floor covering and appliance replacements. These improvements were funded from
operating cash flow and insurance proceeds. The Partnership regularly evaluates
the capital improvement needs of the property. While the Partnership has no
material commitments for property improvements and replacements, certain routine
capital expenditures are anticipated during 2005. Such capital expenditures will
depend on the physical condition of the property as well as the anticipated cash
flow generated by the property.
Willowick Apartments
During the nine months ended September 30, 2005, the Partnership completed
approximately $96,000 of capital improvements at Willowick Apartments consisting
primarily of major landscaping, electrical upgrades, and counter top, appliance,
air conditioning unit, and floor covering replacements. These improvements were
funded from operating cash flow. The Partnership regularly evaluates the capital
improvement needs of the property. While the Partnership has no material
commitments for property improvements and replacements, certain routine capital
expenditures are anticipated during 2005. Such capital expenditures will depend
on the physical condition of the property as well as the anticipated cash flow
generated by the property.
Capital expenditures will be incurred only if cash is available from operations
or from Partnership reserves. To the extent that 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 both of the investment properties of approximately
$8,878,000 is amortized over 240 months and is scheduled to be fully amortized
in January 2021.
No distributions were made during the nine months ended September 30, 2005 and
2004. Future cash distributions will depend on the levels of net cash generated
from operations, the availability of cash reserves, and the timing of debt
maturities, refinancings, and/or property sales. The Partnership's cash
available for distribution is reviewed on a monthly basis. There can be no
assurance, however, that the Partnership will generate sufficient funds from
operations, after planned capital improvement expenditures, to permit any
distributions to its partners during the remainder of 2005 or subsequent
periods.
Other
In addition to its indirect ownership of the general partner interest in the
Partnership, AIMCO and its affiliates owned 36,382 limited partnership units
(the "Units") in the Partnership representing 66.15% of the outstanding Units at
September 30, 2005. 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 66.15% 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 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 ake estimates and assumptions. The Partnership believes that of its
significant accounting policies, the following may involve a higher degree of
judgment and complexity.
Impairment of Long-Lived Assets
Investment properties are recorded at cost, less accumulated depreciation,
unless considered impaired. If events or circumstances indicate that the
carrying amount of a property may be impaired, the Partnership will make an
assessment of its recoverability by estimating the undiscounted future cash
flows, excluding interest charges, of the property. If the carrying amount
exceeds the aggregate future cash flows, the Partnership would recognize an
impairment loss to the extent the carrying amount exceeds the fair value of the
property.
Real property investments are subject to varying degrees of risk. Several
factors may adversely affect the economic performance and value of the
Partnership's investment properties. These factors include, but are not limited
to, changes in the national, regional and local economic climate; local
conditions, such as an oversupply of multifamily properties; competition from
other available multifamily property owners and changes in market rental rates.
Any adverse changes in these factors could cause impairment of the Partnership's
assets.
Revenue Recognition
The Partnership generally leases apartment units for twelve-month terms or less.
The Partnership will offer rental concessions during particularly slow months or
in response to heavy competition from other similar complexes in the area.
Rental income attributable to leases, net of any concessions, is recognized on a
straight-line basis over the term of the lease. 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.
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 captioned Heller v.
Insignia Financial Group (the "Heller action") was filed against the same
defendants that are named in the Nuanes action. 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 28, 2002, the trial court granted defendants
motion to strike the complaint. Plaintiffs took an appeal from this order.
On January 8, 2003, the parties filed a Stipulation of Settlement in proposed
settlement of the Nuanes action and the Heller action. 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 (the "Appeal") seeking to vacate and/or reverse the order approving the
settlement and entering judgment thereto. On May 4, 2004, the Objector filed a
second appeal challenging the court's use of a referee and its order requiring
Objector to pay those fees.
On March 21, 2005, the Court of Appeals issued opinions in both pending appeals.
With regard to the settlement and judgment entered thereto, the Court of Appeals
vacated the trial court's order and remanded to the trial court for further
findings on the basis that the "state of the record is insufficient to permit
meaningful appellate review". With regard to the second appeal, the Court of
Appeals reversed the order requiring the Objector to pay referee fees. On April
26, 2005, the Court of Appeals lifted the stay of a pending appeal related to
the Heller action and the trial court's order striking the complaint. On April
28, 2005, the Objector filed a Petition for Review with the California Supreme
Court in connection with the opinion vacating the order approving settlement and
remanding for further findings. On June 10, 2005, the California Supreme Court
denied Objector's Petition for Review and the Court of Appeals sent the matter
back to the trial court on June 21, 2005. The parties intend to ask the trial
court to make further findings in connection with settlement consistent with the
Court of Appeal's remand order. With respect to the related Heller appeal, on
July 28, 2005, the Court of Appeals reversed the trial court's order striking
the first amended complaint.
On August 18, 2005, Objector and his counsel filed a motion to disqualify the
trial court based on a peremptory challenge and filed a motion to disqualify for
cause on October 17, 2005. On or about October 13, 2005 Objector filed a motion
to intervene and on or about October 19, 2005 filed both a motion to take
discovery relating to the adequacy of plaintiffs as derivative representatives
and a motion to dissolve the anti-suit injunction in connection with settlement.
On October 27, 2005, the Court denied Objector's peremptory challenge and struck
Objector's motion to disqualify for cause. No hearing has been set on Objector's
remaining motions. On November 3, 2005, Objector and his counsel filed a writ of
mandate to the Court of Appeals challenging the court's October 27, 2005 order.
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.
AIMCO Properties L.P. and NHP Management Company, both affiliates of the
Corporate General Partner, are defendants in a lawsuit alleging that they
willfully violated the Fair Labor Standards Act ("FLSA") by failing to pay
maintenance workers overtime for all hours worked in excess of forty per week.
The complaint, filed in the United States District Court for the District of
Columbia, attempts to bring 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. and NHP
Management Company failed to compensate maintenance workers for time that they
were required to be "on-call". Additionally, the complaint alleges AIMCO
Properties L.P. and NHP Management Company failed to comply with the FLSA in
compensating maintenance workers for time that they worked in excess of 40 hours
in a week. In June 2005 the Court conditionally certified the collective action
on both the on-call and overtime issues, which allows the plaintiffs to provide
notice of the collective action to all non-exempt maintenance workers from
August 7, 2000 through the present. Those employees will have the opportunity to
opt-in to the collective action, and AIMCO Properties, L.P. and NHP Management
Company will have the opportunity to move to decertify the collective action.
Because the court denied plaintiffs' motion to certify state subclasses, on
September 26, 2005, the plaintiffs filed a class action with the same
allegations in the Superior Court of California (Contra Costa County). Although
the outcome of any litigation is uncertain, AIMCO Properties, L.P. does not
believe that the ultimate outcome will have a material adverse effect on its
consolidated financial condition or results of operations. 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.
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS
See Exhibit Index.
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 III
By: Shelter Realty III Corporation
Corporate General Partner
By: /s/Martha L. Long
Martha L. Long
Senior Vice President
By: /s/Stephen B. Waters
Stephen B. Waters
Vice President
Date: November 14, 2005
SHELTER PROPERTIES III
EXHIBIT INDEX
Exhibit
3 See Exhibit 4(a)
4 (a) Amended and Restated Certificate and Agreement of Limited
Partnership, [included as Exhibit A to the Prospectus of
Registrant dated September 2, 1981 contained in Amendment
No. 1 to Registration Statement No. 2-72567 of Registrant
filed September 2, 1981 (the "Prospectus") and incorporated
herein by reference].
(b) Subscription Agreements and Signature Pages [Filed with
Amendment No. 1 of Registration Statement No. 2-72567 of
Registrant and incorporated herein by reference].
(d) Modification Agreement between Citibank, N.A. and Southern
Associates Limited Partnership and a Title to Real Estate
between Southern Associates Limited Partnership and Shelter
Properties III to acquire Essex Park Apartments.*
*Filed as Exhibit 4(d), respectively, to Form 10-K of
Registrant for year ended December 31, 1987 and incorporated
herein by reference.
10(i) Contract related to acquisition of properties.
(b) Purchase Agreement dated July 31, 1981, between Southern
Associated Limited Partnership and U.S. Shelter Corporation
to purchase Essex Park Apartments.**
**Filed as Exhibit 12(b) to Amendment No. 1 of Registration
Statement No. 2-72567 of Registrant filed September 2, 1981
and incorporated herein by reference.
(e) Purchase Agreement dated May 14, 1982 between Lincoln
Willowick Greenville Associates and U.S. Shelter Corporation
to purchase Willowick Apartments. [Filed with Form 8-K of
Registrant dated May 14, 1982 and incorporated herein by
reference.]
10(iii) Contracts related to refinancing the debt:
(m) Multifamily Note dated December 15, 2000 between Shelter
Properties III and Reilly Mortgage Group, Inc., a District of
Columbia corporation securing Colony House Apartments, Essex
Park Apartments, and Willowick Apartments (filed as Exhibit
10(iii)(m) on Form 8-K February 1, 2001 and incorporated
herein by reference).
(n) Multifamily Deed of Trust, Assignment of Rents, and Security
Agreement dated December 15, 2000 between Shelter Properties
III and Reilly Mortgage Group, Inc., a District of Columbia
corporation, securing Colony House Apartments, Essex Park
Apartments, and Willowick Apartments (filed as Exhibit
10(iii)(n) on Form 8-K February 1, 2001, and incorporated
herein by reference).
SHELTER PROPERTIES III
EXHIBIT INDEX - CONTINUED
10(iv) Contracts related to disposition of properties:
(c) Purchase and Sale Contract between Registrant and The Dama
Realty Investors, LLC, dated August 18, 2004 (filed as exhibit
10 (iv)(c) on Form 8-K dated November 3, 2004, and
incorporated herein by reference).
(d) Assignment and Assumption of Real Estate Sale Agreement
between The Dama Realty Investors, LLC and Colony House
General Partnership, dated August 18, 2004 (filed as exhibit
10 (iv)(d) on Form 8-K dated November 3, 2004, 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 of the equivalent of the Chief Executive
Officer and Chief Financial Officer Pursuant to 18 U.S.C.
Section 1350, as Adopted Pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
99 (a) Prospectus of Registrant dated September 2, 1981 [included
in Registration Statement No. 2-72567, of Registrant] and
incorporated herein by reference.
Exhibit 31.1
CERTIFICATION
I, Martha L. Long, certify that:
1. I have reviewed this quarterly report on Form 10-QSB of Shelter Properties
III;
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 small business issuer as of, and for, the periods presented in this
report;
4. The small business issuer'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 small business issuer 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
small business issuer, 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 small business issuer'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 small business issuer's
internal control over financial reporting that occurred during the
small business issuer's most recent fiscal quarter (the small
business issuer's fourth fiscal quarter in the case of an annual
report) that has materially affected, or is reasonably likely to
materially affect, the small business issuer's internal control over
financial reporting; and
5. The small business issuer's other certifying officer(s) and I have
disclosed, based on our most recent evaluation of internal control over
financial reporting, to the small business issuer's auditors and the audit
committee of the small business issuer'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 small business issuer'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 small business
issuer's internal control over financial reporting.
Date: November 14, 2005
/s/Martha L. Long
Martha L. Long
Senior Vice President of Shelter Realty III
Corporation, equivalent of the chief
executive officer of the Partnership
Exhibit 31.2
CERTIFICATION
I, Stephen B. Waters, certify that:
1. I have reviewed this quarterly report on Form 10-QSB of Shelter Properties
III;
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 small business issuer as of, and for, the periods presented in this
report;
4. The small business issuer'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 small business issuer 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
small business issuer, 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 small business issuer'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 small business issuer's
internal control over financial reporting that occurred during the
small business issuer's most recent fiscal quarter (the small
business issuer's fourth fiscal quarter in the case of an annual
report) that has materially affected, or is reasonably likely to
materially affect, the small business issuer's internal control over
financial reporting; and
5. The small business issuer's other certifying officer(s) and I have
disclosed, based on our most recent evaluation of internal control over
financial reporting, to the small business issuer's auditors and the audit
committee of the small business issuer'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 small business issuer'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 small business
issuer's internal control over financial reporting.
Date: November 14, 2005
/s/Stephen B. Waters
Stephen B. Waters
Vice President of Shelter Realty III
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 III
Limited Partnership (the "Partnership"), for the quarterly period ended
September 30, 2005 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 Stephen B. Waters, 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: November 14, 2005
/s/Stephen B. Waters
Name: Stephen B. Waters
Date: November 14, 2005
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.