FORM 10-QSB--QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Quarterly or Transitional Report
U. S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-QSB
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended May 31, 1998
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from.........to.........
Commission file number 0-11574
SHELTER PROPERTIES V LIMITED PARTNERSHIP
(Exact name of small business issuer as specified in its charter)
South Carolina 57-0721855
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
One Insignia Financial Plaza, P.O. Box 1089
Greenville, South Carolina 29602
(Address of principal executive offices)
(864) 239-1000
Issuer's telephone number
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes X . No .
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
a)
SHELTER PROPERTIES V LIMITED PARTNERSHIP
CONSOLIDATED BALANCE SHEET
(Unaudited)
(in thousands, except unit data)
May 31, 1998
Assets
Cash and cash equivalents $ 3,848
Receivables and deposits 928
Restricted escrows 1,054
Other assets 642
Investment properties:
Land $ 4,242
Buildings and related personal property 71,420
75,662
Less accumulated depreciation (41,914) 33,748
$40,220
Liabilities and Partners' Capital (Deficit)
Liabilities
Accounts payable $ 86
Tenant security deposit liabilities 392
Accrued property taxes 360
Other liabilities 445
Mortgage notes payable 31,315
Partners' Capital (Deficit) $ (326)
General partners
Limited partners (52,538 units
issued and outstanding) 7,948 7,622
$40,220
See Accompanying Notes to Consolidated Financial Statements
b) SHELTER PROPERTIES V LIMITED PARTNERSHIP
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(in thousands, except per unit data)
Three Months Ended Six Months Ended
May 31, May 31,
1998 1997 1998 1997
Revenues:
Rental income $3,284 $3,107 $6,568 $6,198
Other income 230 230 433 440
Total revenues 3,514 3,337 7,001 6,638
Expenses:
Operating 1,495 1,564 2,875 3,072
General and administrative 97 96 202 167
Depreciation 730 747 1,450 1,482
Interest 685 694 1,369 1,389
Property taxes 219 203 420 412
Total expenses 3,226 3,304 6,316 6,522
Net income $ 288 $ 33 $ 685 $ 116
Net income allocated to
general partners (1%) $ 3 $ -- $ 7 $ 1
Net income allocated to
limited partners (99%) 285 33 678 115
$ 288 $ 33 $ 685 $ 116
Net income per limited
partnership unit $ 5.42 $ 0.63 $12.90 $ 2.19
See Accompanying Notes to Consolidated Financial Statements
c)
SHELTER PROPERTIES V LIMITED PARTNERSHIP
CONSOLIDATED STATEMENT OF CHANGES IN PARTNERS' CAPITAL (DEFICIT)
(Unaudited)
(in thousands, except unit data)
Limited
Partnership General Limited
Units Partners Partners Total
Original capital contributions 52,538 $ 2 $52,538 $52,540
Partners' (deficit) capital
at November 30, 1997 52,538 $(333) $ 7,825 $ 7,492
Net income for the six
months ended May 31, 1998 -- 7 678 685
Partners' distributions paid -- -- (555) (555)
Partners' (deficit) capital
at May 31, 1998 52,538 $(326) $ 7,948 $ 7,622
See Accompanying Notes to Consolidated Financial Statements
d) SHELTER PROPERTIES V LIMITED PARTNERSHIP
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
Six Months Ended
May 31,
1998 1997
Cash flows from operating activities:
Net income $ 685 $ 116
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation 1,450 1,482
Amortization of discounts and loan costs 90 89
Change in accounts:
Receivables and deposits (202) (20)
Other assets 97 (43)
Accounts payable (59) (231)
Tenant security deposit liabilities 30 29
Accrued property taxes 152 37
Other liabilities 9 (167)
Net cash provided by operating activities 2,252 1,292
Cash flows from investing activities:
Property improvements and replacements (409) (619)
Withdrawals from restricted escrows 195 158
Net cash used in investing activities (214) (461)
Cash flows from financing activities:
Payments on mortgage notes payable (232) (214)
Loan costs paid -- (12)
Partners' distributions (1,305) (3,520)
Net cash used in financing activities (1,537) (3,746)
Net increase (decrease) in cash 501 (2,915)
Cash and cash equivalents at beginning of period 3,347 6,103
Cash and cash equivalents at end of period $ 3,848 $ 3,188
Supplemental disclosure of cash flow information:
Cash paid for interest $ 1,280 $ 1,266
See Accompanying Notes to Consolidated Financial Statements
e)
SHELTER PROPERTIES V LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note A - Basis of Presentation
The accompanying unaudited consolidated financial statements of Shelter
Properties V (the "Partnership") have been prepared in accordance with generally
accepted accounting principles for interim financial information and with the
instructions to Form 10-QSB and Article 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. In the
opinion of Shelter Realty V Corporation (the "Corporate General Partner"), all
adjustments (consisting of normal recurring accruals) considered necessary for a
fair presentation have been included. Operating results for the six month
period ended May 31, 1998, are not necessarily indicative of the results that
may be expected for the fiscal year ending November 30, 1998. 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 November 30,
1997.
Certain reclassifications have been made to the 1997 information to conform to
the 1998 presentation.
Note B - Reconciliation of Cash Flows
The following is a reconciliation of the subtotal on the accompanying statements
of cash flows captioned "net cash provided by operating activities" to "net cash
used in operations," as defined in the Partnership Agreement. However, "net
cash used in 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.
Six Months Ended
May 31,
1998 1997
(in thousands)
Net cash provided by operating activities $ 2,252 $ 1,292
Payments on mortgage notes payable (232) (214)
Property improvements and replacements (409) (619)
Change in restricted escrows, net 195 158
Changes in reserves for net operating
liabilities (27) 395
Additional reserves (1,779) (1,015)
Net cash used in operations $ -- $ (3)
At May 31, 1998, the Corporate General Partner reserved an additional $1,779,000
to fund continuing capital improvements and repairs at all of the properties.
At May 31, 1997, the Corporate General Partner reserved an additional $699,000
to fund capital improvement projects at the three properties refinanced in
November 1996, as required by the lender, along with funding continuing capital
improvements and repairs at the four other 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 Corporate General Partner is wholly-owned by
Insignia Properties Trust ("IPT"), an affiliate of Insignia Financial Group,
Inc. ("Insignia"). The Partnership Agreement provides for payments to
affiliates for services and as reimbursement of certain expenses incurred by
affiliates on behalf of the Partnership. The following transactions with
Insignia Financial Group, Inc. and its affiliates were incurred in 1998 and
1997:
Six Months Ended
May 31,
1998 1997
(in thousands)
Property management fees (included in operating expenses) $351 $330
Reimbursement for services of affiliates (included in general
and administrative expenses and investment properties) (1) 126 156
(1) Included in "Reimbursements for Services of Affiliates" for 1998 and 1997 is
approximately $4,000 and $39,000, in reimbursements for construction
oversight costs.
For the period of December 1, 1996 to August 31, 1997, the Partnership insured
its properties under a master policy through an agency affiliated with the
Corporate General Partner with an insurer unaffiliated with the Corporate
General Partner. An affiliate of the Corporate General Partner acquired, in the
acquisition of a business, certain financial obligations from an insurance
agency which was later acquired by the agent who placed the master policy. The
agent assumed the financial obligations to the affiliate of the Corporate
General Partner, which receives payment on these obligations from the agent.
The amount of the Partnership's insurance premiums accruing to the benefit of
the affiliate of the Corporate General Partner by virtue of the agent's
obligations was not significant.
On March 17, 1998, Insignia entered into an agreement to merge its national
residential property management operations, and its controlling interest in IPT,
with Apartment Investment and Management Company ("AIMCO"), a publicly traded
real estate investment trust. The closing, which is anticipated to happen in
the third quarter of 1998, is subject to customary conditions, including
government approvals and the approval of Insignia's shareholders. If the
closing occurs, AIMCO will then control the Corporate General Partner of the
Partnership.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
The Partnership's investment properties consist of seven apartment complexes.
The following table sets forth the average occupancy of the properties for the
quarters ended May 31, 1998 and 1997:
Average
Occupancy
1998 1997
Foxfire Apartments
Atlanta, Georgia 93% 92%
Old Salem Apartments
Charlottesville, Virginia 94% 94%
Woodland Village Apartments
Columbia, South Carolina 91% 87%
Lake Johnson Mews
Raleigh, North Carolina 94% 93%
The Lexington Apartments
Sarasota, Florida 96% 97%
Millhopper Village Apartments
Gainesville, Florida 96% 93%
Tar River Estates
Greenville, North Carolina 97% 92%
The Corporate General Partner attributes the increase in occupancy at Millhopper
Village Apartments to exterior renovations. The increase in occupancy at Tar
River Estates is attributable to a decrease in new construction in the submarket
and to exterior and interior improvements completed over the last two years.
The increase in occupancy at Woodland Village is a result of management's
intensified marketing efforts.
Results of Operations
The Partnership's net income for the six months ended May 31, 1998, was
approximately $685,000 compared to approximately $116,000 for the corresponding
period in 1997. The Partnership reported net income of approximately $288,000
for the three months ended May 31, 1998, compared to net income of $33,000 for
the corresponding period in 1997. The increase in net income is primarily
attributable to an increase in rental income and a decrease in operating
expenses. The increase in rental income is due predominately to the increase in
average occupancy at five of the Partnership's seven properties. The decrease
in operating expenses is due to a decrease in maintenance expenses due to
preventative repairs to exterior patios and balconies which were performed at
Lexington Green and extensive landscaping improvements at Foxfire, Lake Johnson
Mews, Tar River Estates and The Lexington, all of which were performed in 1997.
Offsetting the above increases in net income was an increase in general and
administrative expenses due to increases in audit fees and general partner
reimbursements.
Included in operating expenses for the six months ended May 31, 1998 is
approximately $55,000 of major repairs and maintenance comprised primarily of
exterior building repairs, major landscaping and window coverings. For the six
months ended May 31, 1997 operating expenses included approximately $233,000 of
major repairs and maintenance comprised primarily of exterior building repairs,
exterior painting, and major landscaping.
As part of the ongoing business plan of the Partnership, the Corporate General
Partner monitors the rental market environment of each of its investment
properties to assess the feasibility of increasing rents, maintaining or
increasing occupancy levels and protecting the Partnership from increases in
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, due to changing market conditions, which can result in the use of
rental concessions and rental reductions to offset softening market conditions,
there is no guarantee that the Corporate General Partner will be able to sustain
such a plan.
Liquidity and Capital Reserves
At May 31, 1998, the Partnership had cash and cash equivalents of approximately
$3,848,000 compared to approximately $3,188,000 at May 31, 1997. The net
increase (decrease) in cash and cash equivalents for the six months ended May
31, 1998 and 1997 is $501,000 and $(2,915,000), respectively. Net cash provided
by operating activities increased due to the increase in net income as discussed
above, along with increases in accounts payable, accrued property taxes, and
other liabilities due to the timing of payments to creditors. Offsetting the
above is an increase in receivables and deposits as a result of an increase in
tax and insurance escrows. Net cash used in investing activities decreased as a
result of a decrease in property improvements and replacements and by an
increase in withdrawals from reserved escrows. Net cash used in financing
activities decreased as a result of a decrease in partners' distributions.
Distributions were larger for the six months ended May 31, 1997 due to the
distribution of excess funds from the refinancing of three properties in
November 1996.
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 property to adequately maintain the physical assets
and other operating needs of the Partnership. Such assets are currently thought
to be sufficient for any near-term needs of the Partnership. The mortgage
indebtedness of approximately $31,315,000, net of discount, is amortized over
varying periods with required balloon payments ranging from February 1, 1999, to
November 1, 2003, at which time the properties will either be refinanced or
sold. During the first six months of 1998 the Partnership distributed
approximately $1,305,000 to the partners, $750,000 of which was accrued at
November 30, 1997. The remaining $555,000 was from refinancing proceeds and
accordingly was distributed entirely to the limited partners. The Partnership
made a distribution during the corresponding period of 1997 of approximately
$3,520,000. The Corporate General Partner anticipates making a distribution of
approximately $1,000,000 during September or October of 1998. Future cash
distributions will depend on the levels of net cash generated from operations,
property sales, and the availability of cash reserves.
Year 2000
The Partnership is dependent upon the Corporate General Partner and Insignia for
management and administrative services. Insignia has completed an assessment
and will have to modify or replace portions of its software so that its computer
systems will function properly with respect to dates in the year 2000 and
thereafter (the "Year 2000 Issue"). The project is estimated to be completed
not later than December 31, 1998, which is prior to any anticipated impact on
its operating systems. The Corporate General Partner believes that with
modifications to existing software and conversions to new software, the Year
2000 Issue will not pose significant operational problems for its computer
systems. However, if such modifications and conversions are not made, or are not
completed timely, the Year 2000 Issue could have a material impact on the
operations of the Partnership.
Other
Certain items discussed in this quarterly report may constitute forward-looking
statements within the meaning of the Private Securities Litigation Reform Act of
1995 (the "Reform Act") and as such may involve known and unknown risks,
uncertainties and other factors which may cause the actual results, performance
or achievements of the Partnership to be materially different from any future
results, performance or achievements expressed or implied by such forward-
looking statements. Such forward-looking statements speak only as of the date
of this quarterly report. The Partnership expressly disclaims any obligation or
undertaking to release publicly any updates of revisions to any forward-looking
statements contained herein to reflect any change in the Partnership's
expectations with regard thereto or any change in events, conditions or
circumstances on which any such statement is based.
PART II - OTHER INFORMATION
Item 1. LEGAL PROCEEDING
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. in the Superior Court of the State of California
for the County of San Mateo. The Plaintiffs named as defendants, among others,
the Partnership, the Corporate General Partner and several of their affiliated
partnerships and corporate entities. The complaint purports to assert claims on
behalf of a class of limited partners and derivatively on behalf of a number of
limited partnerships (including the Partnership) which are named as nominal
defendants, challenging the acquisition by Insignia Financial Group, Inc.
("Insignia") and its affiliates of interests in certain general partner
entities, past tender offers by Insignia affiliates to acquire limited
partnership units, the management of partnerships by Insignia affiliates as well
as a recently announced agreement between Insignia and Apartment Investment and
Management Company. The complaint seeks monetary damages and equitable relief,
including judicial dissolution of the Partnership. The Corporate General
Partner was only recently served with the complaint which it believes to be
without merit, and intends to vigorously defend the action.
The Partnership is unaware of any other pending or outstanding litigation that
is not of a routine nature. The Corporate General Partner believes that all
such pending or outstanding litigation will be resolved without a material
adverse effect upon the business, financial condition or operations of the
Partnership.
ITEM 6.EXHIBITS AND REPORTS ON FORM 8-K
a) Exhibits:
Exhibit 27, Financial Data Schedule, is filed as an exhibit to this
report.
b) Reports on Form 8-K filed during the quarter ended May 31, 1998:
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 V LIMITED PARTNERSHIP
By: Shelter Realty V Corporation
Corporate General Partner
By: /s/William H. Jarrard, Jr.
William H. Jarrard, Jr.
President/Director
By: /s/Ronald Uretta
Ronald Uretta
Vice President/Treasurer
Date: July 13, 1998