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 January 31, 1996
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 0-13261
SHELTER PROPERTIES VI LIMITED PARTNERSHIP
(Exact name of small business issuer as specified in its charter)
South Carolina 57-0755618
(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 (864) 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 VI LIMITED PARTNERSHIP
BALANCE SHEET
(Unaudited)
January 31, 1996
Assets
Cash:
Unrestricted $ 2,764,400
Restricted--tenant security 194,680
Accounts receivable 17,656
Escrow for taxes 366,704
Restricted escrows 1,538,462
Other assets 649,406
Investment properties:
Land $ 4,949,503
Buildings and related personal 45,506,088
50,455,591
Less accumulated depreciation (21,465,313) 28,990,278
$34,521,586
Liabilities and Partners' Capital (Deficit)
Liabilities
Accounts payable $ 208,903
Tenant security deposits 184,907
Accrued taxes 489,356
Other liabilities 320,971
Mortgage notes payable 27,776,492
Partners' Capital (Deficit)
General partners $ (302,703)
Limited partners (42,324 units
issued and outstanding) 5,843,660 5,540,957
$34,521,586
See Accompanying Notes to Financial Statements
b) SHELTER PROPERTIES VI LIMITED PARTNERSHIP
STATEMENTS OF OPERATIONS
(Unaudited)
Three Months Ended January 31,
1996 1995
Revenues:
Rental income $ 2,312,276 $ 2,517,856
Other income 155,625 141,083
Total revenues 2,467,901 2,658,939
Expenses:
Operating 558,227 625,268
General and administrative 54,393 57,379
Property management fees 122,776 132,426
Maintenance 339,379 362,870
Depreciation 480,526 533,637
Interest 633,806 717,443
Property taxes 220,259 231,185
Total expenses 2,409,366 2,660,208
Loss on disposal of property (3,626) (6,467)
Casualty gain (1,047) --
Net income (loss) $ 53,862 $ (7,736)
Net income (loss) allocated to
general partner (1%) $ 539 $ (77)
Net income (loss) allocated to
limited partners (99%) 53,323 (7,659)
$ 53,862 $ (7,736)
Net income (loss) per limited partnership unit $ 1.26 $ (.18)
<FN>
See Accompanying Notes to Financial Statements
c) SHELTER PROPERTIES VI LIMITED PARTNERSHIP
STATEMENT OF CHANGES IN PARTNERS' CAPITAL (DEFICIT)
(Unaudited)
Limited
Partnership General Limited
Units Partners Partners Total
Original capital
contributions 42,324 $ 2,000 $42,324,000 $42,326,000
Partners' capital (deficit)
at October 31, 1995 42,324 $(303,242) $ 5,790,337 $ 5,487,095
Net income for the three
months ended January 31, 1996 -- 539 53,323 53,862
Partners' capital (deficit)
at January 31, 1996 42,324 $(302,703) $ 5,843,660 $ 5,540,957
<FN>
See Accompanying Notes to Financial Statements
d) SHELTER PROPERTIES VI LIMITED PARTNERSHIP
STATEMENTS OF CASH FLOWS
(Unaudited)
Three Months Ended January 31,
1996 1995
Cash flows from operating activities:
Net income (loss) $ 53,862 $ (7,736)
Adjustments to reconcile net income (loss) to
net cash provided by operating activities:
Depreciation 480,526 533,637
Amortization of discounts and loan costs 73,462 79,289
Loss on disposal of property 3,626 6,467
Casualty loss 1,047 --
Change in accounts:
Restricted cash 550 (2,572)
Accounts receivable (1,089) (15,447)
Escrows for taxes 33,435 47,006
Other assets 31,885 28,107
Accounts payable (78,427) (109,066)
Tenant security deposit liabilities (184) 607
Accrued taxes (77,053) (87,724)
Other liabilities (43,270) (23,239)
Net cash provided by operating activities 478,370 449,329
Cash flows from investing activities:
Property improvements and replacements (281,806) (226,062)
Deposits to restricted escrows (12,828) (35,858)
Receipts from restricted escrows 14,390 931
Net insurance proceeds from property damages 35,586 --
Net cash used in investing activities (244,658) (260,989)
Cash flows from financing activities:
Payments on mortgage notes payable (178,870) (184,545)
Partners' distributions (1,000,000) --
Net cash used in financing activities (1,178,870) (184,545)
Net (decrease) increase in cash (945,158) 3,795
Cash at beginning of period 3,709,558 1,035,305
Cash at end of period $ 2,764,400 $1,039,100
Supplemental disclosure of cash flow information:
Cash paid for interest $ 560,346 $ 638,154
<FN>
See Accompanying Notes to Financial Statements
e) SHELTER PROPERTIES VI 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 month
period ended January 31, 1996, are not necessarily indicative of the results
that may be expected for the fiscal year ending October 31, 1996. 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 October 31,
1995.
Cash and Cash Equivalents:
Unrestricted - Unrestricted cash includes cash on hand and in banks, money
market funds and Certificates of Deposit with original maturities less than 90
days. At certain times, the amount of cash deposited at a bank may exceed the
limit on insured deposits.
Restricted cash - tenant security deposits - The Partnership requires
security deposits from lessees for the duration of the lease and such deposits
are considered restricted cash. Deposits are refunded when the tenant vacates,
provided the tenant has not damaged its space and is current on its rental
payments.
Certain reclassifications have been made to the 1995 information to conform
to the 1996 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.
Three Months Ended
January 31,
1996 1995
Net cash provided by operating activities $ 478,370 $ 449,329
Payments on mortgage notes payable (178,870) (184,545)
Property improvements and replacements (281,806) (226,062)
Deposits to (from) operations to
restricted escrows, net 1,562 (34,927)
Changes in reserves for net operating
liabilities 134,153 162,328
Additional reserves (155,000) (237,000)
Net cash used in operations $ (1,591) $ (70,877)
The Corporate General Partner reserved an additional $155,000 on January 31,
1996, to fund capital improvements and repairs at the properties. On January
31, 1995, the General Partner reserved $237,000 due to the funding requirements
of the Reserve Escrow having not been met.
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 the reimbursement of certain expenses incurred by
affiliates on behalf of the Partnership. Balances and other transactions with
Insignia Financial Group, Inc. and affiliates in 1996 and 1995 are as follows:
For the Three Months Ended
January 31,
1996 1995
Property management fees $122,776 $132,426
Reimbursement for services of affiliates 32,493 34,760
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 six apartment
complexes. The following table sets forth the average occupancy of the
properties for the three months ended January 31, 1996 and 1995:
Average Occupancy
Property 1996 1995
Rocky Creek
Augusta, Georgia 77% 88%
Carriage House
Gastonia, North 97% 97%
Nottingham Square
Des Moines, Iowa 95% 92%
Foxfire/Barcelona
Durham, North Carolina 98% 98%
River Reach
Jacksonville, Florida 98% 99%
Village Gardens
Fort Collins, Colorado 93% 96%
The Corporate General Partner attributes the decrease in occupancy at Rocky
Creek to an increase in the number of tenants purchasing homes as mortgage rates
are lower than in the prior year. Also contributing to the decrease was the
downsizing of the employment base with lay-offs in the region. Occupancy also
decreased at Village Gardens due to competition from several new apartment
complexes in the area. Occupancy increased at Nottingham Square as a result of
capital improvements completed in 1995 making the property more attractive while
maintaining lower average rental rates as compared to the competition in the
region.
The Partnership's net income for the three months ended January 31, 1996,
was $53,862. The Partnership reported net loss of $7,736 for the corresponding
period of 1995. The increase in net income is primarily due to the reduction of
expenses as a result of the sale of Marble Hills and an increase in other income
as a result of increased tenant charges and interest income at the remaining
properties. Tenant charges increased due to an increase in parking and deposit
forfeitures and application fees at Foxfire. Interest income increased due to
an increase in the restricted escrow balances and higher interest rates during
the quarter. In addition, revenues and expenses have decreased due to the sale
of Marble Hills in the fourth quarter of 1995.
During the first quarter of 1996, the Partnership recorded a casualty loss
resulting from a fire which destroyed 3 units at Nottingham Square. Although,
the damage was covered by insurance, the damage resulted in a loss of $1,047,
arising from proceeds received of $43,141 which were less than the basis of the
property plus expenses to replace the interiors 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
expense. 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 January 31, 1996, the Partnership reported unrestricted cash of $2,764,400
versus $1,039,100 for the same period of 1995. Net cash provided by operations
increased primarily due to the increase in net income as discussed above. Also
contributing to the change was a decrease in cash used by accounts payable due
to the timing of payments. Net cash used in investing activities decreased
primarily due to insurance proceeds received as a result of the fire discussed
above. Offsetting the decrease in net cash used in investing activities was an
increase in property improvements and replacements. Net cash used in financing
activities increased due to a distribution made to partners during the first
quarter of 1996.
The Partnership has no material capital programs scheduled to be performed in
1996, 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 $27,776,492, net of discount, is amortized over 257 months with
a balloon payment of $23,007,741 due on November 15, 2002, at which time the
properties will either be refinanced or sold. On September 29, 1995, the
Partnership sold Marble Hills Apartments to an unaffiliated party. The buyer
assumed the mortgages, payable to Bank of America. The total outstanding
balance on the mortgage notes payable, including interest, was $3,352,538. The
Partnership received net proceeds of $2,412,138 after payment of closing costs.
This disposition resulted in a gain of $1,296,229. No cash distributions were
paid in 1995. However, at October 31, 1995, distributions of proceeds from
the sale of Marble Hills of $1,000,000 had been declared which were paid in the
first quarter of 1996. Future cash distributions will depend on the levels of
net cash generated from operations, refinancing, property sales and cash
reserves. Distributions may also be restricted by the requirement to deposit
net operating income (as defined in the mortgage note) into the Reserve Account
until the $1,000 per apartment unit is funded for each respective property.
PART II - OTHER INFORMATION
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 January 31, 1996:
None.
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
SHELTER PROPERTIES VI LIMITED PARTNERSHIP
By: Shelter Realty VI Corporation
Corporate General Partner
By:/s/ William H. Jarrard, Jr.
William H. Jarrard, Jr.
President and Director
By:/s/ Ronald Uretta
Ronald Uretta
Treasurer
(Principal Financial Officer
and Principal Accounting Officer)
Date: March 12, 1996