FORM 10-QSB--QUARTERLY OR TRANSITIONAL 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 July 31, 1997
[ ] TRANSITION REPORT PURSUANT TO 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
For the transition period from.........to.........
Commission file number 0-13261
SHELTER PROPERTIES VI 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)
(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 VI LIMITED PARTNERSHIP
BALANCE SHEET
(Unaudited)
(in thousands, except unit data)
July 31, 1997
Assets
Cash and cash equivalents:
Unrestricted $ 3,629
Restricted--tenant security deposits 201
Accounts receivable 28
Escrows for taxes 561
Restricted escrows 1,541
Other assets 901
Investment properties:
Land $ 4,950
Buildings and related personal property 46,744
51,694
Less accumulated depreciation (24,084) 27,610
$34,471
Liabilities and Partners' Capital
Liabilities
Accounts payable $ 264
Tenant security deposits 201
Accrued taxes 768
Other liabilities 238
Mortgage notes payable 26,940
Partners' (Deficit) Capital
General partners $ (298)
Limited partners (42,324 units
issued and outstanding) 6,358 6,060
$34,471
See Accompanying Notes to Financial Statements
b) SHELTER PROPERTIES VI LIMITED PARTNERSHIP
STATEMENTS OF OPERATIONS
(Unaudited)
Three Months Ended Nine Months Ended
July 31, July 31,
1997 1996 1997 1996
Revenues:
Rental income $ 2,469 $ 2,352 $ 7,235 $ 7,000
Other income 183 173 516 500
Total revenues 2,652 2,525 7,751 7,500
Expenses:
Operating 751 770 2,200 2,164
General and administrative 72 74 213 244
Maintenance 409 431 1,000 1,057
Depreciation 510 496 1,490 1,466
Interest 617 625 1,858 1,889
Property taxes 241 225 698 663
Total expenses 2,600 2,621 7,459 7,483
Net casualty gain (loss) 74 -- 342 (1)
Net income (loss) $ 126 $ (96) $ 634 $ 16
Net income (loss) allocated
to general partners (1%) $ 1 $ (1) $ 6 $ --
Net income (loss) allocated
to limited partners (99%) 125 (95) 628 16
Net income (loss) $ 126 $ (96) $ 634 $ 16
Net income (loss) per limited
partnership unit $ 2.95 $ (2.24) $ 14.84 $ .38
See Accompanying Notes to Financial Statements
c)
SHELTER PROPERTIES VI LIMITED PARTNERSHIP
STATEMENT OF CHANGES IN PARTNERS' (DEFICIT) CAPITAL
(Unaudited)
(in thousands, except unit data)
Limited
Partnership General Limited
Units Partners Partners Total
Original capital contributions 42,324 $ 2 $42,324 $42,326
Partners' (deficit) capital
at October 31, 1996 42,324 $ (304) $ 5,730 $ 5,426
Net income for the nine months
ended July 31, 1997 -- 6 628 634
Partners' (deficit) capital
at July 31, 1997 42,324 $ (298) $ 6,358 $ 6,060
See Accompanying Notes to Financial Statements
d)
SHELTER PROPERTIES VI LIMITED PARTNERSHIP
STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
Nine Months Ended
July 31,
1997 1996
Cash flows from operating activities:
Net income $ 634 $ 16
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation 1,490 1,466
Amortization of discounts and loan costs 230 222
Net casualty (gain) loss (342) 1
Change in accounts:
Restricted cash (2) (9)
Accounts receivable (6) 3
Escrows for taxes (123) (206)
Other assets (28) (56)
Accounts payable (172) (244)
Tenant security deposit liabilities 4 12
Accrued taxes 158 147
Other liabilities (115) 12
Net cash provided by operating activities 1,728 1,364
Cash flows from investing activities:
Property improvements and replacements (795) (702)
Deposits to restricted escrows (46) (46)
Receipts from restricted escrows 14 68
Net insurance proceeds from property damages 214 35
Net cash used in investing activities (613) (645)
Cash flows from financing activities:
Payments on mortgage notes payable (590) (547)
Partners' distributions -- (1,000)
Net cash used in financing activities (590) (1,547)
Net increase (decrease) in unrestricted cash and
cash equivalents 525 (828)
Unrestricted cash and cash equivalents at beginning
of period 3,104 3,710
Unrestricted cash and cash equivalents at end of period $ 3,629 $ 2,882
Supplemental disclosure of cash flow information:
Cash paid for interest $ 1,628 $ 1,671
Supplemental disclosure of non-cash activity:
Other assets and accounts payable were adjusted by approximately $211,000 and
$183,000, respectively, for non-cash amounts in connection with the recording of
the casualty items.
See Accompanying Notes to Financial Statements
SHELTER PROPERTIES VI LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
NOTE A - BASIS OF PRESENTATION
The accompanying unaudited financial statements of Shelter Properties VI Limited
Partnership (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.
In the opinion of Shelter Realty VI Corporation (the "Corporate General Partner"
or "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 months ended July 31, 1997, are not necessarily
indicative of the results that may be expected for the fiscal year ending
October 31, 1997. For further information, refer to the financial statements
and footnotes thereto included in the Partnership's annual report on Form 10-KSB
for the fiscal year ended October 31, 1996.
Certain reclassifications have been made to the 1996 information to conform to
the 1997 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.
Nine Months Ended
July 31,
(in thousands)
1997 1996
Net cash provided by operating activities $ 1,798 $ 1,364
Payments on mortgage notes payable (590) (547)
Property improvements and replacements (795) (702)
Change in restricted escrows, net (32) 22
Changes in reserves for net operating
liabilities 284 341
Additional reserves (666) (479)
Net cash used in operations $ (1) $ (1)
The Corporate General Partner believed it to be in the best interest of the
Partnership to reserve net cash from operations of approximately $666,000 and
$479,000 at July 31, 1997 and 1996, respectively, to fund continuing capital
improvements at the Partnership's six investment 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 the reimbursement of certain expenses incurred by
affiliates on behalf of the Partnership. The following expenses were paid or
accrued to an affiliate of the Corporate General Partner during the nine months
ended July 31, 1997 and 1996:
1997 1996
(in thousands)
Property management fees
(included in operating expenses) $ 380 $ 370
Reimbursements for services of affiliates
(included in general and administrative
expenses) 134 109
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.
NOTE D - CASUALTY GAINS AND LOSSES
During the nine months ended July 31, 1997, the Partnership recorded the
following casualty gains and losses. A casualty gain of approximately $232,000
resulted from the insurance proceeds from hail and wind storm damage at
Nottingham Square Apartments that occurred in the second quarter of 1996.
Approximately $27,000 of these proceeds were received during the second quarter
of 1997 and the remaining $205,000 was received during the third quarter of
1997. In November 1996, a fire occurred at Carriage House Apartments which
damaged one unit and caused smoke damage to two additional units and the common
area. The estimated costs to repair the units exceeded the insurance proceeds
received and thus resulted in a casualty loss of approximately $8,000. In March
1997, a fire occurred at Village Gardens Apartments which destroyed one unit and
caused smoke and water damage to additional units. The estimated costs to
repair the units exceeded the insurance proceeds expected to be received and
thus resulted in a casualty loss of approximately $9,000. In April 1997, a fire
occurred at Foxfire/Barcelona Apartments which destroyed an entire building,
consisting of eight units. A casualty gain of approximately $139,000 resulted
from the expected insurance proceeds exceeding the basis of the units destroyed,
plus the total estimated non-capitalized costs to replace the assets. In May
1997, a tornado caused damage to River Reach Apartments resulting in uprooted
trees, minor damage to the parking lot and roofs of two units. A casualty loss
of approximately $12,000 resulted. The combination of these casualty events
resulted in a casualty gain of approximately $342,000 for the nine months ended
July 31, 1997.
During the first quarter of 1996, the Partnership recorded a casualty loss
resulting from a fire which destroyed the interiors of three units at Nottingham
Square Apartments. Although the damage was covered by insurance, the damage
resulted in a loss of approximately $1,000. The loss resulted from gross
proceeds received of approximately $43,000, which were less than the basis of
the property plus expenses to replace the damaged interiors.
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 nine
months ended July 31, 1997 and 1996:
Average
Occupancy
Property 1997 1996
Rocky Creek Apartments
Augusta, Georgia 89% 84%
Carriage House Apartments
Gastonia, North Carolina 92% 97%
Nottingham Square Apartments
Des Moines, Iowa 92% 94%
Foxfire/Barcelona Apartments
Durham, North Carolina 95% 98%
River Reach Apartments
Jacksonville, Florida 98% 98%
Village Gardens Apartments
Fort Collins, Colorado 95% 94%
The Corporate General Partner attributes the increase in occupancy at Rocky
Creek Apartments to an increase in corporate and tenant referrals. The decrease
in occupancy at Carriage House Apartments is attributable to an overall softness
in apartment rentals and an increase in new apartment construction in the
Gastonia area. The decrease in occupancy at Foxfire/Barcelona Apartments is
attributable to tenants moving out of the complex as a result of a fire in April
1997 and the subsequent construction at the property.
The Partnership realized net income of approximately $634,000 and $16,000 for
the nine months ended July 31, 1997 and 1996 respectively. During the three
months ended July 31, 1997 and 1996, the Partnership realized net income of
$126,000 and a net loss of $96,000, respectively. The increase in net income
for the three and nine months ended July 31, 1997, is largely attributable to
the net casualty gains, as discussed below, and rental rate increases at all of
the Partnership's investment properties. Also contributing to the increase in
net income for the three and nine months ended July 31, 1997, was a decrease in
general and administrative and maintenance expenses. The decrease in general
and administrative expenses for the three and nine months ended July 31, 1997,
is due to decreased printing and mailing costs and due to decreased audit and
appraisal fees. The decrease in maintenance expense is primarily the result of
gutter replacements and exterior painting at Foxfire/Barcelona Apartments during
the nine months ended July 31, 1996. This decrease was partially offset by an
increase in maintenance expense at River Reach Apartments, which resulted from
exterior building improvements and exterior painting as part of a project to
enhance the appearance of the property.
During the nine months ended July 31, 1997, the Partnership recorded the
following casualty gains and losses. A casualty gain of approximately $232,000
resulted from the insurance proceeds from hail and wind storm damage at
Nottingham Square Apartments that occurred in the second quarter of 1996.
Approximately $27,000 of these proceeds were received during the second quarter
of 1997 and the remaining $205,000 was received during the third quarter of
1997. In November 1996, a fire occurred at Carriage House Apartments which
damaged one unit and caused smoke damage to two additional units and the common
area. The estimated costs to repair the units exceeded the insurance proceeds
received and thus resulted in a casualty loss of approximately $8,000. In March
1997, a fire occurred at Village Gardens Apartments which destroyed one unit and
caused smoke and water damage to additional units. The estimated costs to
repair the units exceeded the insurance proceeds expected to be received and
thus resulted in a casualty loss of approximately $9,000. In April 1997, a fire
occurred at Foxfire/Barcelona Apartments which destroyed an entire building,
consisting of eight units. A casualty gain of approximately $139,000 resulted
from the expected insurance proceeds exceeding the basis of the units destroyed
plus the total estimated non-capitalized costs to replace the assets. In May
1997, a tornado caused damage to River Reach Apartments resulting in uprooted
trees, minor damage to the parking lot and roofs of two units. A casualty loss
of approximately $12,000 resulted. The combination of these casualty events
resulted in a casualty gain of approximately $342,000 for the nine months ended
July 31, 1997.
During the first quarter of 1996, the Partnership recorded a casualty loss
resulting from a fire which destroyed the interiors of three units at Nottingham
Square Apartments. Although the damage was covered by insurance, the damage
resulted in a loss of approximately $1,000. The loss resulted from gross
proceeds received of approximately $43,000, which were less than the basis of
the property plus expenses to replace the damaged interiors.
Included in maintenance expense is approximately $209,000 of major repairs and
maintenance comprised of major landscaping, exterior building improvements and
exterior painting for the nine months ended July 31, 1997. For the nine months
ended July 31, 1996, approximately $235,000 comprised primarily of gutter
repairs, exterior building improvements, exterior painting, major landscaping
and swimming pool repairs were included in maintenance expense.
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 July 31, 1997 the Partnership had unrestricted cash and cash equivalents of
approximately $3,629,000, compared to approximately $2,882,000 at July 31, 1996.
Net cash provided by operating activities increased as a result of increased
rental income and decreased maintenance expenses, as discussed above. The
increase is also attributable to the timing of payments of accounts payable,
partially offset by a decrease in other liabilities. Net cash used in investing
activities remained consistent primarily due to increased property improvements
and replacements at the investment properties, offset by increased net insurance
proceeds from property damages (See "Note D"). Net cash used in financing
activities decreased due to approximately $1,000,000 of distributions to
partners 1996. No distributions were made during the nine months ended July 31,
1997.
The sufficiency of existing liquid assets to meet future liquidity and capital
expenditure requirements is directly related to the level of capital
expenditures required at the investment properties to adequately maintain the
physical assets and other operating needs of the Partnership. Such assets are
currently thought to be sufficient for any near-term needs of the Partnership.
The mortgage indebtedness of approximately $26,940,000, net of discount, is
being amortized over 257 months with balloon payments of approximately
$23,008,000 due on November 15, 2002, at which time the properties are expected
to either be refinanced or sold. As mentioned previously, no cash distributions
were paid during the first three quarters of 1997. Distributions of the
proceeds from the sale of Marble Hills Apartments of $1,000,000 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. The Corporate General Partner is currently evaluating the economic
position of the Partnership and the Partnership's ability to make a distribution
during fiscal year ended October 31, 1997.
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 July 31, 1997:
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
Principal Financial Officer
and Principal Accounting Officer
Date: September 15, 1997