-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, KLtS0JvbeZbz5Wyh4ux4IkDpBmG8v9gtXgiFGsdhxB2wPpfsTgR7R2Dp4xEVbeQy HWPVT7lKjhjfzPHV0f+8Fw== /in/edgar/work/0000950148-00-002354/0000950148-00-002354.txt : 20001115 0000950148-00-002354.hdr.sgml : 20001115 ACCESSION NUMBER: 0000950148-00-002354 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20000930 FILED AS OF DATE: 20001114 FILER: COMPANY DATA: COMPANY CONFORMED NAME: REAL ESTATE ASSOCIATES LTD VI CENTRAL INDEX KEY: 0000715578 STANDARD INDUSTRIAL CLASSIFICATION: [6500 ] IRS NUMBER: 953778627 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-13112 FILM NUMBER: 765646 BUSINESS ADDRESS: STREET 1: 9090 WILSHIRE BLVD STE 201 CITY: BEVERLY HILLS STATE: CA ZIP: 90211 BUSINESS PHONE: 3102782191 MAIL ADDRESS: STREET 1: 9090 WILSHIRE BLVD SUITE 201 CITY: BEVERLY HILLS STATE: CA ZIP: 90211 10-Q 1 v67026e10-q.txt FORM 10-Q 1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the Quarterly Period Ended SEPTEMBER 30, 2000 Commission File Number 0-13112 REAL ESTATE ASSOCIATES LIMITED VI (A California Limited Partnership) I.R.S. Employer Identification No. 95-3778627 9090 WILSHIRE BLVD., SUITE 201 BEVERLY HILLS, CA. 90211 Registrant's Telephone Number, Including Area Code (310) 278-2191 Indicate by check mark whether the registrant (1) has filed all documents and reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding twelve 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 [ ] 2 REAL ESTATE ASSOCIATES LIMITED VI (A CALIFORNIA LIMITED PARTNERSHIP) INDEX TO FORM 10-Q FOR THE QUARTER ENDED SEPTEMBER 30, 2000 PART I. FINANCIAL INFORMATION Item 1. Financial Statements Consolidated Balance Sheets, September 30, 2000 and December 31, 1999 .............................. 1 Consolidated Statements of Operations, Nine and Three Months Ended, September 30, 2000 and 1999 .............. 2 Consolidated Statement of Partners' Equity (Deficiency) Nine Months Ended September 30, 2000 .................................. 3 Consolidated Statements of Cash Flows Nine Months Ended September 30, 2000 and 1999 ......................... 4 Notes to Consolidated Financial Statements .................................. 5 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operation .......................................... 13 PART II. OTHER INFORMATION Item 1. Legal Proceedings .............................................................. 16 Item 6. Exhibits and Reports on Form 8-K ............................................... 16 Signatures .............................................................................. 17
3 REAL ESTATE ASSOCIATES LIMITED VI (A CALIFORNIA LIMITED PARTNERSHIP) BALANCE SHEETS SEPTEMBER 30, 2000 AND DECEMBER 31, 1999 ASSETS
2000 (Unaudited) 1999 --------------- --------------- INVESTMENTS IN LIMITED PARTNERSHIPS (Note 2) $ 651,730 $ 509,999 CASH AND CASH EQUIVALENTS (Note 1) 3,270,908 3,312,395 DUE FROM NAPICO -- 239,770 --------------- --------------- TOTAL ASSETS $ 3,922,638 $ 4,062,164 =============== =============== LIABILITIES AND PARTNERS' EQUITY LIABILITIES: Notes payable and amounts due for partnership interests (Notes 3 and 6) $ 1,765,000 $ 1,765,000 Accrued interest payable (Notes 3 and 6) 2,045,200 1,957,734 Accounts payable 12,937 6,905 --------------- --------------- 3,823,137 3,729,639 --------------- --------------- COMMITMENTS AND CONTINGENCIES (Notes 4 and 5) PARTNERS' EQUITY (DEFICIENCY): General partners (350,194) (347,864) Limited partners 449,695 680,389 --------------- --------------- 99,501 332,525 --------------- --------------- TOTAL LIABILITIES AND PARTNERS' DEFICIENCY $ 3,922,638 $ 4,062,164 =============== ===============
The accompanying notes are an integral part of these consolidated financial statements. 1 4 REAL ESTATE ASSOCIATES LIMITED VI (A CALIFORNIA LIMITED PARTNERSHIP) CONSOLIDATED STATEMENTS OF OPERATIONS NINE AND THREE MONTHS ENDED SEPTEMBER 30, 2000 AND 1999 (Unaudited)
Nine months Three months Nine months Three months ended ended ended ended Sept 30, 2000 Sept 30, 2000 Sept 30, 1999 Sept 30, 1999 -------------- -------------- ------------- ------------- PARTNERSHIP OPERATIONS: Interest income 135,342 53,720 97,398 39,019 --------- --------- --------- --------- Expenses: Management fees - general partner (Note 4) 154,825 51,875 332,946 110,982 General and administrative (Notes 2 and 4) 161,718 30,482 268,028 47,670 Interest 102,600 34,200 102,600 34,200 --------- --------- --------- --------- 419,143 116,557 703,574 192,852 --------- --------- --------- --------- LOSS FROM PARTNERSHIP OPERATIONS (283,801) (62,837) (606,176) (153,833) --------- --------- --------- --------- EQUITY IN INCOME OF LIMITED PARTNERSHIPS AND AMORTIZATION OF ACQUISITION COSTS 36,000 12,000 39,000 13,000 DISTRIBUTIONS FROM LIMITED PARTNERSHIPS RECOGNIZED AS INCOME (Note 2) 14,777 -- 51,057 5,444 --------- --------- --------- --------- NET LOSS $(233,024) $ (50,837) $(516,119) $(135,389) ========= ========= ========= ========= NET LOSS PER LIMITED PARTNERSHIP INTEREST (Note 1) $ (14) $ (3) $ (31) $ (8) ========= ========= ========= =========
The accompanying notes are an integral part of these consolidated financial statements. 2 5 REAL ESTATE ASSOCIATES LIMITED VI (A CALIFORNIA LIMITED PARTNERSHIP) CONSOLIDATED STATEMENTS OF PARTNERS' EQUITY FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2000 (Unaudited)
General Limited Partners Partners Total --------- --------- --------- PARTNERSHIP INTERESTS 16,810 ========= DEFICIENCY, January 1, 2000 $(347,864) $ 680,389 $ 332,525 Net loss for the nine months ended September 30, 2000 (2,330) (230,694) (233,024) --------- --------- --------- DEFICIENCY, September 30, 2000 $(350,194) $ 449,695 $ 99,501 ========= ========= =========
The accompanying notes are an integral part of these consolidated financial statements. 3 6 REAL ESTATE ASSOCIATES LIMITED VI (A CALIFORNIA LIMITED PARTNERSHIP) CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2000 AND 1999 (Unaudited)
2000 1999 ----------- ----------- CASH FLOWS FROM OPERATING ACTIVITIES: Net loss $ (233,024) $ (516,119) Adjustments to reconcile net loss to net cash used in operating activities: Equity in income of limited partnerships and amortization of acquisition costs (36,000) (39,000) Depreciation and amortization -- -- Decrease (increase) in other assets 239,770 (20,100) Increase in accrued interest payable 87,466 102,600 Increase (decrease) in accounts payable 6,032 (206,922) ----------- ----------- Net cash provided by (used in) operating activities 64,244 (679,541) ----------- ----------- CASH FLOWS FROM INVESTING ACTIVITIES: Capital contribution (120,411) -- Distributions from limited partnerships recognized as a return of capital 14,680 38,414 Sales proceeds -- 1,397,081 ----------- ----------- Net cash (used in) provided by investing activities (105,731) 1,435,495 ----------- ----------- CASH FLOWS FROM FINANCING ACTIVITIES: Distributions to partners -- (2,797,081) ----------- ----------- NET DECREASE IN CASH AND CASH EQUIVALENTS (41,487) (2,041,127) CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 3,312,395 5,477,969 ----------- ----------- CASH AND CASH EQUIVALENTS, END OF PERIOD $ 3,270,908 $ 3,436,842 =========== =========== SUPPLEMENTAL DISCLOSURE OF SUPPLEMENTAL CASH FLOW INFORMATION: Cash paid during the period for interest $ 15,134 $ -- =========== ===========
The accompanying notes are an integral part of these consolidated financial statements. 4 7 REAL ESTATE ASSOCIATES LIMITED VI (A CALIFORNIA LIMITED PARTNERSHIP) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS SEPTEMBER 30, 2000 NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES GENERAL The information contained in the following notes to the financial statements is condensed from that which would appear in the audited annual financial statements; accordingly, the financial statements included herein should be reviewed in conjunction with the financial statements and related notes thereto contained in the annual report for the year ended December 31, 1999 prepared by Real Estate Associates Limited VI and Subsidiaries (the "Partnership"). Accounting measurements at interim dates inherently involve greater reliance on estimates than at year end. The results of operations for the interim periods presented are not necessarily indicative of the results for the entire year. In the opinion of the Partnership, the accompanying unaudited financial statements contain all adjustments (consisting primarily of normal recurring accruals) necessary to present fairly the financial position of the Partnership at September 30, 2000 and the results of operations for the nine and three months then ended and changes in cash flows for the nine months then ended. The general partners have a 1 percent interest in profits and losses of the Partnership. The limited partners have the remaining 99 percent interest which is allocated in proportion to their respective individual investments. National Partnership Investments Corp. (NAPICO) is the corporate general partner of the Partnership. Casden Properties Inc. owns a 95.25% economic interest in NAPICO, with the balance owned by Casden Investment Corporation ("CIC"). CIC, which is wholly owned by Alan I. Casden, owns 95% of the voting common stock of NAPICO. USE OF ESTIMATES The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. BASIS OF PRESENTATION The accompanying financial statements have been prepared in conformity with accounting principles generally in the United States of America. 5 8 REAL ESTATE ASSOCIATES LIMITED VI (A CALIFORNIA LIMITED PARTNERSHIP) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) SEPTEMBER 30, 2000 NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) PRINCIPLES OF CONSOLIDATION The consolidated financial statements include the accounts of Real Estate Associates Limited VI and its majority-owned general partnership. All significant intercompany accounts and transactions have been eliminated in consolidation. METHOD OF ACCOUNTING FOR INVESTMENT IN THE UNCONSOLIDATED LIMITED PARTNERSHIPS The investments in unconsolidated limited partnerships are accounted for on the equity method. Acquisition, selection and other costs related to the acquisition of the projects are capitalized as part of the investment account and are being amortized on a straight line basis over the estimated lives of the underlying assets, which is generally 30 years. CASH AND CASH EQUIVALENTS Cash and cash equivalents consist of unrestricted cash and bank certificates of deposit with maturities of three months or less. Restricted cash consist of tenants' security and escrow deposits and mortgage impounds. The Partnership has its cash and cash equivalents on deposit primarily with two high credit quality financial institutions. Such cash and cash equivalents are in excess of the FDIC insurance limit. NET LOSS PER LIMITED PARTNERSHIP INTEREST Net loss per limited partnership interest was computed by dividing the limited partners' share of net loss by the number of limited partnership interests outstanding during the year. The number of limited partnership interests was 16,810 for the periods presented. INCOME TAXES No provision has been made for income taxes in the accompanying financial statements since such taxes, if any, are the liability of the individual partners. 6 9 REAL ESTATE ASSOCIATES LIMITED VI (A CALIFORNIA LIMITED PARTNERSHIP) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) SEPTEMBER 30, 2000 NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) IMPAIRMENT OF LONG-LIVED ASSETS The Partnership reviews long-lived assets to determine if there has been any permanent impairment whenever events or changes in circumstances indicate that the carrying amount of the asset may not be recoverable. If the sum of the expected future cash flows is less than the carrying amount of the assets, the Partnership recognizes an impairment loss. NOTE 2 - INVESTMENTS IN LIMITED PARTNERSHIPS The Partnership holds limited partnership interests in 20 limited partnerships as of September 30, 2000, after selling its interests in 10 limited partnerships. In addition, the Partnership holds a general partner interest in REA III, which in turn, holds limited partner interests in 3 additional limited partnerships. In total, therefore, the Partnership holds interests, either directly or indirectly through REA III, in 23 partnerships which owned as of September 30, 2000, residential low income rental projects consisting of 1,369 apartment units. The mortgage loans of these projects are payable to or insured by various governmental agencies. The Partnership, as a limited partner, is entitled to between 90 percent and 99 percent of the profits and losses of the limited partnerships it has invested in directly. The Partnership is also entitled to 99.9 percent of the profits and losses of REA III. REA III holds a 99 percent interest in each of the limited partnerships in which it has invested. Equity in losses of unconsolidated limited partnerships is recognized in the financial statements until the limited partnership investment account is reduced to a zero balance or to a negative amount equal to further capital contributions required. Losses incurred after the limited partnership investment account is reduced to zero are not recognized. Distributions from the unconsolidated limited partnerships are accounted for as a return of capital until the investment balance is reduced to zero. Subsequent distributions received are recognized as income. 7 10 REAL ESTATE ASSOCIATES LIMITED VI (A CALIFORNIA LIMITED PARTNERSHIP) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) SEPTEMBER 30, 2000 NOTE 2 - INVESTMENTS IN LIMITED PARTNERSHIP (CONTINUED) The following is a summary of the investment in unconsolidated limited partnerships for the nine months ended September 30, 2000: Balance, beginning of period $ 509,999 Capital contribution 120,411 Equity in income of limited partnerships 39,000 Distribution recognized as a return of capital (14,680) Amortization of acquisition costs (3,000) --------- $ 651,730 Balance, end of period =========
The following are unaudited combined estimated statements of operations for the nine and three months ended September 30, 2000 and 1999 of the unconsolidated limited partnerships in which the Partnership has investments:
Nine months Three months Nine months Three months ended ended ended ended Sept. 30, 2000 Sept. 30, 2000 Sept. 30, 1999 Sept. 30, 1999 -------------- -------------- -------------- -------------- REVENUES: Rental and other $ 7,446,000 $ 2,482,000 $ 7,434,000 $ 2,478,000 ----------- ----------- ----------- ----------- EXPENSES: Depreciation 1,202,000 401,000 1,476,000 492,000 Interest 2,006,000 669,000 2,058,000 686,000 Operating expenses 4,558,000 1,519,000 4,344,000 1,448,000 ----------- ----------- ----------- ----------- Total expenses 7,766,000 2,589,000 7,878,000 2,626,000 ----------- ----------- ----------- ----------- Net loss $ (320,000) $ (107,000) $ (444,000) $ (148,000) =========== =========== =========== ===========
8 11 REAL ESTATE ASSOCIATES LIMITED VI (A CALIFORNIA LIMITED PARTNERSHIP) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) SEPTEMBER 30, 2000 NOTE 2 - INVESTMENTS IN LIMITED PARTNERSHIP (CONTINUED) NAPICO, or one of its affiliates, is the general partner and property management agent for certain of the limited partnerships included above. Under recently adopted law and policy, the United States Department of Housing and Urban Development ("HUD") has determined not to renew the Housing Assistance Payment ("HAP") Contracts on a long term basis under the existing terms. In connection with renewals of the HAP Contracts under such new law and policy, the amount of rental assistance payments under renewed HAP Contracts will be based on market rentals instead of above market rentals, which may be the case under existing HAP Contracts. The payments under the renewed HAP Contracts may not be in an amount that would provide sufficient cash flow to permit owners of properties subject to HAP Contracts to meet the debt service requirements of existing loans insured by the Federal Housing Administration of HUD ("FHA") unless such mortgage loans are restructured. In order to address the reduction in payments under HAP Contracts as a result of this new policy, the Multi-family Assisted Housing Reform and Affordability Act of 1997 ("MAHRAA"), which was adopted in October 1997, provides for the restructuring of mortgage loans insured by the FHA with respect to properties subject to the Section 8 program. Under MAHRAA, an FHA-insured mortgage loan can be restructured into a first mortgage loan which will be amortized on a current basis and a low interest second mortgage loan payable to FHA which will only be payable on maturity of the first mortgage loan. This restructuring results in a reduction in annual debt service payable by the owner of the FHA-insured mortgage loan and is expected to result in an insurance payment from FHA to the holder of the FHA-insured loan due to the reduction in the principal amount. MAHRAA also phases out project-based subsidies on selected properties serving families not located in rental markets with limited supply, converting such subsidies to a tenant-based subsidy. When the HAP Contracts are subject to renewal, there can be no assurance that the local limited partnerships in which the Partnership has an investment will be permitted to restructure its mortgage indebtedness under MAHRAA. In addition, the economic impact on the Partnership of the combination of the reduced payments under the HAP Contracts and the restructuring of the existing FHA-insured mortgage loans under MAHRAA is uncertain. 9 12 REAL ESTATE ASSOCIATES LIMITED VI (A CALIFORNIA LIMITED PARTNERSHIP) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) SEPTEMBER 30, 2000 NOTE 2 - INVESTMENTS IN LIMITED PARTNERSHIP (CONTINUED) On December 30, 1998, after obtaining the consents of the limited partners, the Partnership sold its limited partnership interests in 10 local limited partnerships and its general partner interest in one local general partnership to subsidiaries of Casden Properties Inc. The sale resulted in cash proceeds to the Partnership of $1,397,081 which was collected in 1999. In March 1999, the Partnership made cash distributions of $2,769,110 to the limited partners and $27,971 to the general partners, primarily using proceeds from the sale of the partnership interests. NOTE 3 - NOTES PAYABLE Certain of the Partnership's investments involved purchases of partnership interests from partners who subsequently withdrew from the operating partnership. The purchase of these interests provides for additional cash payments of approximately $325,000 based upon specified events as outlined in the purchase agreements. Such amounts have been recorded as liabilities. In addition, the Partnership is obligated on non-recourse notes payable of $1,440,000 which bear interest at 9.5 percent per annum and have principal maturities ranging from December 1999 to December 2012. The notes and related interest are payable from cash flow generated from operations of the related rented properties as defined in the notes. These obligations are collateralized by the Partnership's investments in the limited partnerships. Unpaid interest is due at maturity of the notes. A note and the related accrued interest payable, aggregating $1,306,038 became payable in 1999. Management is in the process of attempting to negotiate an extension of the maturity date on the past due note payable. 10 13 REAL ESTATE ASSOCIATES LIMITED VI (A CALIFORNIA LIMITED PARTNERSHIP) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) SEPTEMBER 30, 2000 NOTE 4 - MANAGEMENT FEES AND EXPENSES DUE TO GENERAL PARTNER Under the terms of the Restated Certificate and Agreement of Limited Partnership, the Partnership is obligated to NAPICO for an annual management fee of approximately .4 percent of the original invested assets of the limited partnerships. Invested assets are defined as the costs of acquiring project interests, including the proportionate amount of the mortgage loans related to the Partnership's interests in the capital accounts of the respective partnerships. This fee was approximately $155,000 and $333,000 for the nine months ended September 30, 2000 and 1999, respectively. The Partnership reimburses NAPICO for certain expenses. The reimbursement to NAPICO was approximately $16,000 and $31,000 for the nine months ended September 30, 2000 and 1999, respectively, and is included in general and administrative expenses. NOTE 5 - CONTINGENCIES On August 27, 1998, two investors holding an aggregate of eight units of limited partnership interests in Real Estate Associates Limited III (an affiliated partnership in which NAPICO is the managing general partner) and two investors holding an aggregate of five units of limited partnership interest in the Partnership commenced an action in the United States District Court for the Central District of California against the Partnership, NAPICO and certain other affiliated entities. The complaint alleges that the defendants breached their fiduciary duty to the limited partners of certain NAPICO managed partnerships and made materially false and misleading statements in the consent solicitation statements sent to the limited partners of such partnerships relating to approval of the transfer of partnership interests in limited partnerships, owning certain of the properties, to subsidiaries of Casden Properties Inc. The plaintiffs seek equitable relief, as well as compensatory damages and litigation related costs. On August 4, 1999, one investor holding one unit of limited partnership interest in Housing Programs Limited (another affiliate partnership in which NAPICO is the managing general partner) commenced a virtually identical action in the United States District Court for the Central District of California against the Partnership, NAPICO and certain other affiliated entities. The managing general partner of such NAPICO managed partnerships and the other defendants believe that the plaintiffs' claims are without merit and intend to contest the actions vigorously. 11 14 REAL ESTATE ASSOCIATES LIMITED VI (A CALIFORNIA LIMITED PARTNERSHIP) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) SEPTEMBER 30, 2000 NOTE 5 - CONTINGENCIES (CONTINUED) The corporate general partner of the Partnership is involved in various lawsuits and have also been named defendants in other lawsuits arising from transactions in the ordinary course of business. In the opinion of management and the corporate general partner, the claims will not result in any material liability to the Partnership. NOTE 6 - FAIR VALUE OF FINANCIAL INSTRUMENTS Statement of Financial Accounting Standards No. 107, "Disclosure about Fair Value of Financial Instruments," requires disclosure of fair value information about financial instruments, when it is practicable to estimate that value. The notes payable are collateralized by the Partnership's investments in investee limited partnerships and are payable only out of cash distributions from the investee partnerships. The operations generated by the property and investee limited partnerships are subject to various government rules, regulations and restrictions which make it impracticable to estimate the fair value of the notes payable and related accrued interest. The carrying amount of other assets and liabilities reported on the balance sheets that require such disclosure approximates fair value due to their short-term maturity. 12 15 REAL ESTATE ASSOCIATES LIMITED VI (A CALIFORNIA LIMITED PARTNERSHIP) SEPTEMBER 30, 2000 ITEM 2. MANAGEMENT'S ANALYSIS AND DISCUSSION OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS LIQUIDITY AND CAPITAL RESOURCES The Partnership's primary sources of funds include interest income on short term investments and distributions from limited partnerships in which the Partnership has invested. It is not expected that any of the local limited partnerships in which the Partnership has invested will generate cash flow sufficient to provide for distributions to limited partners in any material amount. The Partnership made a distribution to investors on March 12, 1999, using proceeds from the disposition of its investments in certain limited partnerships. RESULTS OF OPERATIONS Rental operations consist primarily of rental income and depreciation expense, debt service, and normal operating expenses to maintain the properties. Variances in rental operations from the prior year to the current year relate to the sale of the Drexel Property. Partnership revenues consist primarily of interest income earned on certificates of deposit and other temporary investment of funds not required for investment in local partnerships. Operating expenses consist primarily of recurring general and administrative expenses and professional fees for services rendered to the Partnership. In addition, an annual Partnership management fee in an amount equal to .4 percent of invested assets is payable to the corporate general partner. The Partnership accounts for its investments in the local limited partnerships on the equity method, thereby adjusting its investment balance by its proportionate share of the income or loss of the local limited partnerships. Losses incurred after the limited partnership investment account is reduced to zero are not recognized in accordance with the equity accounting method. Distributions received from limited partnerships are recognized as return of capital until the investment balance has been reduced to zero or to a negative amount equal to future capital contributions required. Subsequent distributions received are recognized as income. Except for certificates of deposit and money market funds, the Partnership's investments are entirely from interests in other limited and general partnerships owning government assisted 13 16 REAL ESTATE ASSOCIATES LIMITED VI (A CALIFORNIA LIMITED PARTNERSHIP) SEPTEMBER 30, 2000 ITEM 2. MANAGEMENT'S ANALYSIS AND DISCUSSION OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) RESULTS OF OPERATIONS (CONTINUED) projects. Available cash is invested in these funds earning interest income as reflected in the statement of operations. These funds can be converted to cash to meet obligations as they arise. Under recently adopted law and policy, the United States Department of Housing and Urban Development ("HUD") has determined not to renew the Housing Assistance Payment ("HAP") Contracts on a long term basis under the existing terms. In connection with renewals of the HAP Contracts under such new law and policy, the amount of rental assistance payments under renewed HAP Contracts will be based on market rentals instead of above market rentals, which may be the case under existing HAP Contracts. The payments under the renewed HAP Contracts may not be in an amount that would provide sufficient cash flow to permit owners of properties subject to HAP Contracts to meet the debt service requirements of existing loans insured by the Federal Housing Administration of HUD ("FHA") unless such mortgage loans are restructured. In order to address the reduction in payments under HAP Contracts as a result of this new policy, the Multi-family Assisted Housing Reform and Affordability Act of 1997 ("MAHRAA"), which was adopted in October 1997, provides for the restructuring of mortgage loans insured by the FHA with respect to properties subject to the Section 8 program. Under MAHRAA, an FHA-insured mortgage loan can be restructured into a first mortgage loan which will be amortized on a current basis and a low interest second mortgage loan payable to FHA which will only be payable on maturity of the first mortgage loan. This restructuring results in a reduction in annual debt service payable by the owner of the FHA-insured mortgage loan and is expected to result in an insurance payment from FHA to the holder of the FHA-insured loan due to the reduction in the principal amount. MAHRAA also phases out project-based subsidies on selected properties serving families not located in rental markets with limited supply, converting such subsidies to a tenant-based subsidy. When the HAP Contracts are subject to renewal, there can be no assurance that the local limited partnerships in which the Partnership has an investment will be permitted to restructure its mortgage indebtedness under MAHRAA. In addition, the economic impact on the Partnership of the combination of the reduced payments under the HAP Contracts and the restructuring of the existing FHA-insured mortgage loans under MAHRAA is uncertain. 14 17 REAL ESTATE ASSOCIATES LIMITED VI (A CALIFORNIA LIMITED PARTNERSHIP) SEPTEMBER 30, 2000 ITEM 2. MANAGEMENT'S ANALYSIS AND DISCUSSION OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) RESULTS OF OPERATIONS (CONTINUED) On December 30, 1998, after obtaining the consents of the limited partners, the Partnership sold its limited partnership interests in 10 local limited partnerships and its general partner interest in one local general partnership to subsidiaries of Casden Properties Inc. The sale resulted in cash proceeds to the Partnership of $1,397,081 which was collected in 1999. In March 1999, the Partnership made cash distributions of $2,769,110 to the limited partners and $27,971 to the general partners, primarily using proceeds from the sale of the partnership interests. A note and the related accrued interest payable, aggregating $1,306,038 became payable in 1999. Management is in the process of attempting to negotiate an extension of the maturity date on the past due note payable. 15 18 REAL ESTATE ASSOCIATES LIMITED VI (A CALIFORNIA LIMITED PARTNERSHIP) SEPTEMBER 30, 2000 PART II. OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS On August 27, 1998, two investors holding an aggregate of eight units of limited partnership interests in Real Estate Associates Limited III (an affiliated partnership in which NAPICO is the managing general partner) and two investors holding an aggregate of five units of limited partnership interest in the Partnership commenced an action in the United States District Court for the Central District of California against the Partnership, NAPICO and certain other affiliated entities. The complaint alleges that the defendants breached their fiduciary duty to the limited partners of certain NAPICO managed partnerships and made materially false and misleading statements in the consent solicitation statements sent to the limited partners of such partnerships relating to approval of the transfer of partnership interests in limited partnerships, owning certain of the properties, to CPI Affiliates. The plaintiffs seek equitable relief, as well as compensatory damages and litigation related costs. On August 4, 1999, one investor holding one unit of limited partnership interest in Housing Programs Limited (another affiliated partnership in which NAPICO is the managing general partner) commenced a virtually identical action in the United States District Court for the Central District of California against the Partnership, NAPICO and certain other affiliated entities. The managing general partner of such NAPICO managed partnerships and the other defendants believe that the plaintiffs' claims are without merit and intend to contest the actions vigorously. The Partnership's general partner is involved in various lawsuits. None of these lawsuits are related to the Partnership. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) No exhibits are required per the provision of Item 6 of regulation S-K and no reports on Form 8-K were filed during the quarter ended September 30, 2000. 16 19 REAL ESTATE ASSOCIATES LIMITED VI (A LIMITED PARTNERSHIP) SEPTEMBER 30, 2000 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. REAL ESTATE ASSOCIATES LIMITED VI AND SUBSIDIARIES (a California limited partnership) By: National Partnership Investments Corp., its General Partner By: /s/ BRUCE NELSON -------------------------------------- Bruce Nelson President Date: November 14, 2000 ------------------------------------ By: /s/ BRIAN H. SHUMAN -------------------------------------- Brian H. Shuman Chief Financial Officer Date: November 14, 2000 ------------------------------------ 17 EX-27 2 v67026ex27.txt FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE PARTNERSHIP'S STATEMENTS OF EARNINGS AND BALANCE SHEETS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 9-MOS DEC-31-2000 JAN-01-2000 SEP-30-2000 3,270,908 0 0 0 0 3,270,908 0 0 3,922,638 12,937 0 0 0 0 99,501 3,922,638 0 186,119 0 0 316,543 0 102,600 (233,024) 0 (233,024) 0 0 0 (233,024) 0 0
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