FORM 10-QSB--QUARTERLY REPORT UNDER SECTION 13 or 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
Quarterly or Transitional Report
(As last amended by 34-32231, eff. 6/3/93.)
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 August 31, 1995
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period.........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) (Zip Code)
Issuer's telephone number (803) 239-1000
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 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
BALANCE SHEET
(Unaudited)
August 31, 1995
Assets
Cash:
Unrestricted $ 1,036,152
Restricted--tenant security deposits 382,644
Investments 2,532,076
Accounts receivable 34,823
Escrow for taxes and insurance 495,014
Restricted escrows 870,066
Other assets 747,856
Investment properties:
Land $ 4,241,860
Buildings and related personal property 68,223,266
72,465,126
Less accumulated depreciation (33,745,350) 38,719,776
$44,818,407
Liabilities and Partners' Capital (Deficit)
Liabilities
Accounts payable $ 677,479
Tenant security deposits 383,759
Accrued taxes 382,662
Other liabilities 620,694
Mortgage notes payable 29,166,880
Partners' Capital (Deficit)
General partner $ (306,843)
Limited partners (52,538 units
issued and outstanding) 13,893,776 13,586,933
$44,818,407
[FN]
See Accompanying Notes to Financial Statements
b) SHELTER PROPERTIES V LIMITED PARTNERSHIP
STATEMENTS OF OPERATIONS
(Unaudited)
Three Months Ended Nine Months Ended
August 31, August 31,
1995 1994 1995 1994
Revenues:
Rental income $2,875,849 $2,808,215 $8,786,788 $8,452,088
Other income 168,812 179,849 514,356 476,949
Total revenues 3,044,661 2,988,064 9,301,144 8,929,037
Expenses:
Operating 858,408 879,929 2,528,859 2,426,371
General and administrative 264,277 82,224 509,041 238,388
Property management fees 151,444 146,582 459,002 439,162
Maintenance 446,842 547,907 1,212,578 1,332,887
Depreciation 740,340 703,206 2,154,700 2,051,318
Interest 685,477 705,134 2,077,511 2,159,013
Property taxes 197,239 186,326 587,651 595,690
Total expenses 3,344,027 3,251,308 9,529,342 9,242,829
Casualty gain -- -- 213,794 --
Net loss before
extraordinary loss (299,366) (263,244) (14,404) (313,792)
Extraordinary loss on
extinguishment of debt -- -- -- (30,785)
Net loss $ (299,366) $ (263,244) $ (14,404) $ (344,577)
Net loss allocated
to general partners (1%) $ (2,994) $ (2,632) $ (144) $ (3,446)
Net loss allocated
to limited partners (99%) (296,372) (260,612) (14,260) (341,131)
$ (299,366) $ (263,244) $ (14,404) $ (344,577)
Per limited partnership unit:
Net loss before
extraordinary item $ (5.64) $ (4.96) $ (.27) $ (5.91)
Extraordinary loss -- -- -- (.58)
Net loss per limited
partnership unit $ (5.64) $ (4.96) $ (.27) $ (6.49)
[FN]
See Accompanying Notes to Financial Statements
c) SHELTER PROPERTIES V LIMITED PARTNERSHIP
STATEMENT OF CHANGES IN PARTNERS' CAPITAL (DEFICIT)
(Unaudited)
Limited
Partnership General Limited
Units Partners Partners Total
Original capital contributions 52,538 $ 2,000 $52,538,000 $52,540,000
Partners' capital (deficit) at
October 31, 1994 52,538 $(304,182) $14,157,555 $13,853,373
Net loss for the nine months
ended August 31, 1995 -- (144) (14,260) (14,404)
Distributions paid -- (2,517) (249,519) (252,036)
Partners' capital (deficit) at
August 31, 1995 52,538 $(306,843) $13,893,776 $13,586,933
[FN]
See Accompanying Notes to Financial Statements
d) SHELTER PROPERTIES V LIMITED PARTNERSHIP
STATEMENTS OF CASH FLOWS
(Unaudited)
Nine Months Ended
August 31,
1995 1994
Cash flows from operating activities:
Net loss $ (14,404) $ (344,577)
Adjustments to reconcile net loss to
net cash provided by operating activities:
Depreciation 2,154,700 2,051,318
Amortization of discounts and loan costs 123,662 125,783
Casualty gain (213,794) --
Extraordinary loss on extinguishment of debt -- 30,785
Change in accounts:
Restricted cash (7,094) (12,074)
Accounts receivable (16,681) (468)
Escrows for taxes and insurance 136,150 9,164
Other assets 122,946 (19,320)
Accounts payable 258,979 (169,235)
Tenant security deposit liabilities (5,955) 25,304
Accrued taxes (65,030) 51,944
Other liabilities 64,415 70,477
Net cash provided by operating activities 2,537,894 1,819,101
Cash flows from investing activities:
Property improvements and replacements (1,479,936) (1,101,884)
Cash invested in short-term investments (6,821,194) (4,597,543)
Cash received from matured investments 6,176,895 6,090,990
Deposits to restricted escrows (273,425) (163,658)
Receipts from restricted escrows 273,913 103,773
Insurance proceeds from property damage 73,056 89,472
Net cash (used in) provided by
investing activities (2,050,691) 421,150
Cash flows from financing activities:
Payments on mortgage notes payable (556,662) (520,092)
Repayment of mortgage notes payable -- (5,301,710)
Proceeds from long-term borrowing -- 5,000,000
Loan costs -- (26,565)
Partners' distributions (252,036) (999,795)
Net cash used in financing activities (808,698) (1,848,162)
Net (decrease) increase in cash (321,495) 392,089
Cash at beginning of period 1,357,647 700,547
Cash at end of period $ 1,036,152 $ 1,092,636
Supplemental disclosure of cash flow information:
Cash paid for interest $ 1,952,566 $ 2,031,766
[FN]
See Accompanying Notes to Financial Statements
d) SHELTER PROPERTIES V LIMITED PARTNERSHIP
CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)
SUPPLEMENTAL DISCLOSURE OF NON-CASH ACTIVITY
Property Damage
Accounts receivable and accounts payable were adjusted by $72,331 and $48,708,
respectively, as of August 31, 1995 for non-cash amounts in connection with
property damage.
Loan Costs
Upon the refinancing of Foxfire's outstanding mortgage in 1994, $55,000 was
reclassified from prepaid expenses to loan costs resulting in a non-cash
transaction.
See Accompanying Notes to Financial Statements
e) SHELTER PROPERTIES V LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
Note A - Basis of Presentation
The accompanying unaudited financial statements 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. 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 August 31, 1995, are not necessarily indicative of the
results that may be expected for the fiscal year ending November 30, 1995. 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, 1994.
Certain reclassifications have been made to the 1994 information to conform
to the 1995 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.
For the Nine Months Ended
August 31,
1995 1994
Net cash provided by operating activities $ 2,537,894 $ 1,819,101
Payments on mortgage notes payable (556,662) (520,092)
Property improvements and replacements (1,479,936) (1,101,884)
Changes in reserves for net operating
liabilities (487,730) 44,208
Change in restricted escrows, net 488 (59,885)
Insurance proceeds from property damage 73,056 89,472
Mortgage repayment with cash reserves -- (349,365)
Additional reserves (250,000) --
Net cash used in operations $ (162,890) $ (78,445)
In 1995 the General Partner believed it to be in the best interest of the
Partnership to reserve an additional $250,000 to fund continuing capital
improvements at the seven 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 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 affiliates were charged to expense in 1995
and 1994:
For the Nine Months Ended
August 31,
1995 1994
Property management fees $459,002 $439,162
Data processing services 36,717 36,717
Marketing services 5,897 8,847
Reimbursement for services of affiliates 109,377 86,432
The Partnership insures its properties under a master policy through an
agency and 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 current year's master policy. The current
agent assumed the financial obligations to the affiliate of the Corporate
General Partner, who receives payments 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
is not significant.
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 August 31, 1995 and 1994:
Occupancy for the nine months ended
August 31, 1995 August 31, 1994
Foxfire Apartments 96% 96%
Atlanta, Georgia
Old Salem Apartments 89% 89%
Charlottesville, Virginia
Woodland Village Apartments 95% 96%
Columbia, South Carolina
Lake Johnson Mews 97% 97%
Raleigh, North Carolina
The Lexington Apartments 94% 91%
Sarasota, Florida
Millhopper Village Apartments 98% 98%
Gainesville, Florida
Tar River Estates 88% 89%
Greenville, North Carolina
The Corporate General Partner attributes the increase in occupancy at The
Lexington Apartments to an increase in population in the area and a change in
management at the property. The increase in population is due to the continuing
trend of people moving to Florida from other areas of the country due to the
climate and economic factors.
The Partnership's net loss for the nine months ended August 31, 1995, was
$14,404 with the third quarter having a loss of $299,366. The Partnership had
net losses of $344,577 and $263,244 for the corresponding periods of 1994. The
decrease in net loss in 1995 is primarily attributable to increased apartment
revenues as a result of monthly rental rate increases at all properties as well
as an increase in other income. Other income increased due to an increase in
various tenant charges resulting from high tenant turnovers at all properties
along with a leasing incentive bonus for the renewal of a laundry vending
contract at Old Salem Apartments. Also contributing to the decrease in net loss
were casualty gains of $213,794 as a result of two fires, one at Woodland
Village and one at Old Salem. Both fires were covered by insurance.
Additionally, interest expense decreased due to the refinancing of Foxfire
Apartments and the pay-off of the second mortgage on Millhopper Village during
1994. Maintenance expenses have decreased due to a decrease in required repairs
to various properties within the Partnership in 1995 as these repairs were
performed in 1994.
Partially offsetting the decrease in net loss was an increase in general and
administrative expenses as a result of increased professional fees incurred as a
result of the tender offers.
During the first nine months of 1995, the Partnership recorded a casualty gain
resulting from a fire at Woodland Village Apartments to the roof and interiors
of four units. The damage resulted in a gain of $31,761 arising from proceeds
from the Partnership's insurance carrier of $75,525 which exceeded the basis of
the property plus expenses to replace the roof and interiors damaged. The
Partnership also recorded a casualty gain at Old Salem Apartments resulting
from a fire in the basement and interiors of nine units located within the same
building. The damage resulted in a gain of $182,033 arising from proceeds
receivable from the Partnership's insurance carrier of $284,743 which exceeded
the basis of the property plus expenses to replace the interiors of the building
damaged.
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.
At August 31, 1995, the Partnership had unrestricted cash of $1,036,152
compared to $1,092,636 at August 31, 1994. Net cash provided by operating
activities increased primarily as a result of the decrease in net loss as
previously discussed. Escrows for taxes and insurance, other assets and
accounts payable contributed to the increase in net cash provided by
operations. Net cash used in investing activities increased as a result of
an increase in cash invested in short-term investments in 1995 as compared to
1994. Net cash used in financing activities decreased due to the Partnership
refinancing Foxfire Apartments in 1994 and a decrease in partners'
distributions in 1995.
The Partnership has scheduled a major rehabilitation program which began in
April of 1995 at Woodland Village Apartments. The renovations consist of
exterior siding, painting, and roof replacements for approximately half of the
property at an estimated cost of $490,000. The capital project will be funded
from property operations if available. The Partnership has no other material
capital programs scheduled to be performed in 1995, although certain routine
capital expenditures and maintenance expenses have been budgeted. These capital
expenditures and maintenance expenses will be incurred only if cash is available
from operations or is received from the capital reserve account.
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 $29,166,880, net of discount, is amortized over varying periods
with required balloon payments ranging from January 1, 1997, to November 15,
2002, at which time the properties will either be refinanced or sold. Future
cash distributions will depend on the levels of net cash generated from
operations, property sales, and the availability of cash reserves. During the
first nine months of 1995 and 1994, the Partnership made distributions of
$252,036 and $999,795, respectively.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The general partner responsible for management of the Partnership's business
is Shelter Realty V Corporation, a South Carolina corporation (the "Corporate
General Partner"). The only other general partner of the Partnership, N. Barton
Tuck, Jr., is effectively prohibited by the Partnership's partnership agreement
(the "Partnership Agreement") from participating in the management of the
Partnership. The Corporate General Partner is an indirect subsidiary of
Insignia Financial Group, Inc. ("Insignia"). The directors and officers of the
Corporate General Partner also serve as executive officers of Insignia.
The Corporate General Partner owns 100 Limited Partnership Units ("Units").
On May 27, 1995, an affiliate of the Corporate General Partner (the "Affiliated
Purchaser") acquired 13,228 Units at a price of $350.00 per Unit pursuant to a
tender offer (the "Affiliate Offer") described below. The Corporate General
Partner and the Affiliated Purchaser are, therefore, entitled to participate in
cash distributions made by the Partnership to its Unit holders. The Partnership
made a distribution to the Unit holders during the first quarter of 1995. The
Corporate General Partner presently expects that the Partnership will seek to
make further distributions in the future.
The Corporate General Partner is also entitled to certain cash distributions
in respect of its general partner interest.
As a result of the Affiliated Purchaser's acquisition of 25.2% of the
outstanding Units, the Affiliated Purchaser, an affiliate of the Corporate
General Partner and Insignia, may be in a position to significantly influence
any vote of the Unit holders. The Partnership has paid Insignia Management
Group, L.P. ("IMG"), an affiliate of the Corporate General Partner, property
management fees equal to 5% of the Partnership's apartment revenues for property
management services in each of the three years in the period ended November 30,
1994, pursuant to property management agreements. Property management fees paid
to IMG amounted to $553,800, $563,339, and $592,076, respectively, for the three
years ended November 30, 1992, 1993, and 1994 and the Partnership paid IMG
property management fees equal to $459,002 during the first three quarters of
fiscal 1995. Insignia and its affiliates do not receive any fees from the
Partnership for the asset management or partnership administration services they
provide, although Insignia and its affiliates are reimbursed by the Partnership
for the expenses they incur in connection with providing those services. The
Partnership Agreement also provides for reimbursement to the Corporate General
Partner and its affiliates for costs incurred in connection with administration
of the Partnership's activities. Pursuant to these provisions and in addition
to the property management fees referred to above, the Partnership paid the
Corporate General Partner and its affiliates (including the reimbursements to
Insignia and its affiliates in connection with asset management and partnership
administration services) an aggregate of $110,759, $122,979, and $119,720,
respectively, for the three years ended November 30, 1992, 1993, and 1994 and
$109,377 during the first three quarters of fiscal 1995. In 1992, an affiliate
of Insignia assisted an unaffiliated third party engaged by the Partnership in
connection with refinancings of the Partnership's properties, and received
$90,500 from the third party for providing such assistance. In addition, an
affiliate of the Corporate General Partner received $56,200 as compensation
related to the refinancing of Old Salem, one of the Partnership's properties.
In addition, at various times during the past three fiscal years an affiliate of
Insignia has held a promissory note or preferred stock issued by an unaffiliated
company that provides insurance brokerage services to the Partnership.
The terms of the Affiliated Purchaser's financing of the Affiliate Offer may
result in future potential conflicts of interest. The Affiliated Purchaser paid
for the Units it purchased pursuant to the Affiliate Offer with funds provided
by Insignia, and Insignia, in turn, obtained these funds from its working
capital. It is possible, however, that in connection with its future financing
activities, Insignia may cause or request the Affiliated Purchaser to pledge its
Units as collateral for loans, or otherwise agree to terms which provide
Insignia and the Affiliated Purchaser with incentives to generate substantial
near-term cash flow from the Affiliated Purchaser's investment in the Units. In
such a situation, the Corporate General Partner may experience a conflict of
interest in seeking to reconcile the best interests of the Partnership with the
need of its affiliates for cash flow from the Partnership's activities.
On April 27, 1995, the Affiliated Purchaser commenced the Affiliate Offer for
up to 30% of the Units at a price of $350.00 per Unit. The Affiliate Offer
expired on May 26, 1995. On May 27, 1995, an affiliate of the Corporate General
Partner, the Affiliated Purchaser, acquired 13,228 Units at a price of $350.00
per Unit pursuant to the Affiliate Offer. During the Affiliate Offer, Carl C.
Icahn and certain of his associates contacted Insignia about pursuing a variety
of possible transactions on a joint venture basis. During those discussions,
representatives of Insignia advised Mr. Icahn and his representatives that
Insignia did not wish to discourage or prevent any transaction which would
produce additional value for Unit holders. During those conversations, Mr.
Icahn and his representatives expressed a desire to make an equity investment in
the Affiliated Purchaser with a view to sharing in the economic benefits, if
any, to be derived by the Affiliated Purchaser from the Affiliate Offer. The
representatives of Insignia declined to agree to such an arrangement.
Following those discussions, at approximately 6:45 p.m. on Monday, May 22,
1995, the Corporate General Partner received a letter from High River ("High
River") which stated that High River was commencing, by public announcement, a
cash tender offer for up to approximately 30% of the outstanding Units at a
price of $402.50 per Unit (the "High River Offer"). High River sent similar
letters to the Insignia affiliated corporate general partners of five other
limited partnerships. On May 23, 1995, Insignia issued a press release which
announced receipt of the letters.
From 12:00 noon on Tuesday, May 23 through late in the evening of Wednesday,
May 24, the Affiliated Purchaser, Insignia, and High River and their respective
counsel had a series of meetings and telephone conversations to explore a
possible joint venture relationship with respect to various real estate related
investment opportunities, including the Affiliate Offer. Representatives of
High River terminated the discussions. No agreement was reached with respect to
the Affiliated Offer or any other matter.
On the afternoon of Thursday, May 25, 1995, the Corporate General Partner
received a second letter from High River stating that High River had initiated a
tender offer for up to 40% of the outstanding Units at a price of $508.20 per
Unit. High River also issued a press release announcing the High River Offer
and that High River was commencing similar tender offers for units of limited
partnership interest in five other partnerships in which other Insignia
affiliates are the corporate general partners. Upon receiving the letter from
High River, Insignia issued its own press release announcing the terms of the
six High River offers.
Also on May 25, 1995, the Corporate General Partner received a copy of a
Complaint (the "High River Complaint") seeking, among other things, an order
from the United States District Court for the District of Delaware enjoining the
closing of the Affiliate Offer. The High River Complaint related to the
Affiliate Offer and to five other tender offers made by affiliates of Insignia
for units of limited partnership interests in other limited partnerships in
which other affiliates of Insignia are general partners. The High River
Complaint named as defendants the Affiliated Purchaser and each of the Insignia
affiliates making the five other tender offers; the Corporate General Partner
and the five other Insignia-affiliated general partners; and Insignia. The High
River Complaint contained allegations that, among other things, the Affiliated
Purchaser sought to acquire Units at highly inadequate prices, and that the
Affiliate Offer contained numerous false and misleading statements and omissions
of material facts. The alleged misstatements and omissions concerned, among
other things, the true value of the units; the true financial conditions of the
Partnership; the factors affecting the likelihood that properties owned by the
Partnership will be sold or liquidated in the near future; the liquidity and
value of the Units; the limited secondary market for Units; and the true nature
of the market for underlying assets. The High River Complaint also alleged that
the Affiliated Purchaser failed to comply with the requirements of Rule 13e-4
under the Securities Exchange Act of 1934.
On Friday, May 26, 1995, the United States District Court for the District of
Delaware denied High River's motion for a temporary restraining order to
postpone the closing of the Affiliate Offer. On May 26, 1995, Insignia issued a
press release announcing the Court's decision. High River subsequently
voluntarily withdrew the High River Complaint without prejudice.
On May 26, 1995, High River filed a Schedule 14D-1 relating to the High River
Offer and containing an Offer to Purchase and a related Assignment of
Partnership Interest. The Affiliate Offer expired as scheduled at midnight on
May 26, 1995. As filed on May 26, 1995, the High River Offer was conditioned
upon the Affiliate Offer being extended by at least 10 business days. High
River issued a press release, dated May 26, 1995, announcing that the extension
of the Affiliate Offer for 10 business days would be eliminated as a condition
to the High River Offer. Also on May 26, the Chairman and Chief Executive
Officer of Insignia received a letter from Mr. Icahn. In the letter, Mr. Icahn
accused Insignia of disregarding its "fiduciary responsibilities."
On Friday June 2, the High River Offer to Purchase and the related Assignment
of Partnership Interests were mailed to Unit holders. On Monday, June 5, the
Corporate General Partner delivered a letter to High River which requested that
High River cure certain alleged critical omissions, misstatements, and
deficiencies in the High River Offer by June 7, 1995. On June 7, the Corporate
General Partner received a letter from Mr. Icahn in which Mr. Icahn states that
High River does not agree with the positions taken in the Corporate General
Partner's June 5 letter.
On June 8, 1995, the Corporate General Partner commenced an action against
High River and Carl C. Icahn in the United States District Court for the
District of South Carolina. The complaint alleges that the High River Offer
misleads Unit holders and violates federal securities laws. The Partnership
seeks relief from High River's and Mr. Icahn's actions in the form of an
injunction against the High River Offer, a judgment declaring that the untrue
statements in and omissions from the High River Offer constitute violations of
the federal securities laws, and an order requiring High River to make
appropriate disclosures to correct all of the false and misleading statements in
and omissions from the High River Offer.
The Partnership and the Corporate General Partner recommended that the Unit
holders reject the High River Offer and not tender their Units pursuant to the
High River Offer, but stated that they may reconsider. The Partnership and the
Corporate General Partner may reconsider their recommendation if High River
makes additional disclosures to the Unit holders as the Corporate General
Partner has requested. For further information, see the Partnership's
Solicitation/Recommendation Statement on Schedule 14D-9 which was filed with the
Securities and Exchange Commission on June 9, 1995.
On June 12, 1995, High River filed an amendment to its Schedule 14D-1
containing a Supplement to its Offer to Purchase. The Supplement amends the
High River Offer to increase the number of Units being sought to all of the
outstanding Units and amends certain disclosures in the Offer to Purchase.
Persons claiming to own Units filed a purported class action and derivative
suit in the United States District Court for the District of South Carolina
seeking, among other things, an order enjoining the Affiliate Offer. On
Thursday, May 18, 1995, the Court denied plaintiffs' motion for a temporary
restraining order postponing the closing of the Affiliate Offer, which expired
as scheduled on May 26, 1995. Counsel for the parties are engaged in settlement
discussions and may continue such discussions.
The Complaint applies to the Affiliate Offer and to five other tender offers
being made by affiliates of Insignia for units of limited partnership interests
in other limited partnerships in which other affiliates of Insignia serve as
general partners. The Complaint names as defendants the Affiliated Purchaser
and each of the Insignia affiliates, including the five other tender offerors;
the Corporate General Partner and five other Insignia-affiliated general
partners; and four individuals who are officers and/or directors of Insignia,
the Corporate General Partner and/or the Affiliated Purchaser. The Complaint
contains allegations that, among other things, the defendants have intentionally
mismanaged the Partnership and the five other Partnerships (collectively the
"Partnerships") and acted contrary to the limited partners' best interests in
order to prolong the lives of the Partnerships and thus continue the revenues
derived by Insignia from the Partnerships while at the same time reducing the
demand for the Partnerships' units in the limited resale market for the units by
artificially depressing the trading prices for the units, in order to create a
favorable environment for the Affiliate Offer and the five other tender offers.
In the Complaint the plaintiffs also allege that in the Affiliate Offer and the
five other tender offers, the Affiliated Purchaser will acquire effective voting
control over the Partnerships at highly inadequate prices, and that the offers
to purchase and related tender offer documents contain numerous false and
misleading statements and omissions of material facts. The alleged
misstatements and omissions concern, among other things, the advantages to Unit
holders of tendering Units pursuant to the Affiliate Offer; the true value of
the Units; the true financial condition of the Partnerships; the factors
affecting the likelihood that properties owned by the Partnerships will be sold
or liquidated in the near future; the liquidity and value of the Units; the
limited secondary market for Units; and the true nature of the market for
underlying assets.
On Friday, June 16, plaintiffs filed an amended complaint which contained
allegations that, among other things, the defendants engaged in a plan by which
they misappropriated the Partnerships' assets and fraudulently induced limited
partners to sell units to the defendants at highly inadequate prices by causing
the Partnerships to take actions that artificially depressed the prices
available for units and by knowingly disseminating false and misleading
statements and omissions of material facts. The plaintiffs alleged that the
defendants breached fiduciary duties and violated federal securities law by
closing the Affiliate Offer and the five other tender offers made by affiliates
of Insignia for units in the other Partnerships with the knowledge that the
limited partners were not aware of the High River Offer. The plaintiffs further
alleged that the defendants, since the close of the Affiliate Offer, had caused
the Partnerships to enter into several wasteful transactions that had no
business purpose or benefit to the Partnerships solely in order to entrench
themselves in their positions of control over the Partnerships, with the effect
of impeding and possibly preventing nonaffiliated entities from making tender
offers that offer higher value to unit holders than defendants paid.
Subsequent to the filing of the lawsuit by the Corporate General Partner
against High River and Carl C. Icahn, the Corporate General Partner and High
River began discussions in an attempt to settle the lawsuit. On Friday, June
16, 1995, High River issued a press release announcing that the expiration date
of the High River Offer was extended until 12:00 midnight, New York City time on
Wednesday, June 28, 1995, and that High River and the Corporate General Partner
were engaged in settlement discussions.
On Saturday, June 17, the Affiliated Purchaser and Insignia entered into an
agreement with Carl C. Icahn and High River (the "Agreement") and the Corporate
General Partner, among others, entered into a letter agreement with High River
(together with the Agreement, the "Agreements"). The Agreements provide
generally that Insignia would not, and will not cause or permit its affiliates
to, actively oppose the High River Offer, but rather would take a neutral stance
with respect to the High River Offer, except in the case of a competing third
party bid made prior to the expiration of the High River Offer or the occurrence
of any event materially adversely affecting High River Offer. The High River
Offer would proceed in accordance with its terms, as amended, and the Corporate
General Partner would cooperate to facilitate the admission of High River as a
substitute limited partner with respect to any Units High River purchases
pursuant to the High River Offer in accordance with the terms of the Partnership
Agreement and applicable law. The Agreements limit High River's ability to
amend or extend the High River Offer. Apart from purchases made by High River
pursuant to the High River Offer, neither High River nor Insignia nor any of
their respective affiliates would purchase any additional Units pursuant to a
tender offer and can only purchase additional Units from time to time under
certain conditions specified in the Agreements. High River would vote on
certain matters concerning the Partnership as directed by Insignia. In
addition, High River and its affiliates are prohibited from soliciting proxies
with respect to the Partnership or otherwise making proposals concerning the
Partnership directly to other Unit holders. High River and Insignia have
certain buy-sell rights with respect to the other's Units which may be exercised
18 months after the effective date of the Agreements and annually thereafter and
at earlier or later dates under other circumstances specified in the Agreements,
including the proposal of certain transactions otherwise protected by the
Agreements. The party selling Units pursuant to the buy-sell transaction must
sell or cause to be sold to the other party all Units beneficially owned by the
first party and its affiliates.
Litigation initiated by the Corporate General Partner concerning the High
River Offer and litigation initiated by High River concerning the Affiliate
Offer was dismissed with prejudice and mutual releases were exchanged. On June
20, High River issued a press release announcing that the expiration date of the
High River Offer was extended until 12:00 midnight, New York City time on
Monday, July 3, 1995.
On July 20, 1995, the Partnership mailed a letter to limited partners of the
Partnership who tendered limited partnership units to the Affiliated Purchaser
in the recent tender offer. The letter notifies the limited partners that the
Affiliated Purchaser has offered to increase the amount paid to such limited
partners by an additional 45%.
On September 27, 1995, the parties to the purported class action and
derivative suit described above, filed a stipulation to settle the matter. The
principal terms of the stipulation requires supplemental payments to tendering
limited partners aggregating approximately $6 million; waiver by the Corporate
General Partner and five other Insignia affiliated general partners of any right
to certain proceeds from a sale or refinancing of the Partnership's properties;
some restrictions on Insignia's ability to vote the limited partner interest it
acquired; payment of $1.25 million for plaintiffs' attorney fees and expenses in
the litigation; and general releases of all the defendants. Court approval of
the stipulation is required before it may be distributed to the class members
for review. If a certain number of class members opt out, the settlement may be
cancelled and no assurance can be given that this matter will be settled on the
terms set forth above or otherwise.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a) Exhibits: None
b) Reports on Form 8-K filed during the third quarter ended August 31, 1995:
Current report on Form 8-K dated July 20, 1995, as filed with the
Securities and Exchange Commission on July 25, 1995.
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
By:/s/ Ronald Uretta
Ronald Uretta
Principal Financial Officer
and Principal Accounting Officer
Date: October 12, 1995