-----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, OOIqnJ2+3pLTKIqen9xSww6CnouZIfFWVGNV1CU1rxF1OmGsi060gMxUfqqqKCqF m1vzOuIopS2JLN+WrlRBvQ== 0000950148-01-500740.txt : 20010516 0000950148-01-500740.hdr.sgml : 20010516 ACCESSION NUMBER: 0000950148-01-500740 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20010331 FILED AS OF DATE: 20010515 FILER: COMPANY DATA: COMPANY CONFORMED NAME: REAL ESTATE ASSOCIATES LTD VI CENTRAL INDEX KEY: 0000715578 STANDARD INDUSTRIAL CLASSIFICATION: REAL ESTATE [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: 1637122 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 v72680e10-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 MARCH 31, 2001 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 MARCH 31, 2001 PART I. FINANCIAL INFORMATION Item 1. Financial Statements Consolidated Balance Sheets, March 31, 2001 and December 31, 2000 ............................. 1 Consolidated Statements of Operations, Three Months Ended, March 31, 2001 and 2000....................... 2 Consolidated Statement of Partners' Deficiency Three Months Ended March 31, 2001 ................................ 3 Consolidated Statements of Cash Flows Three Months Ended March 31, 2001 and 2000 ....................... 4 Notes to Consolidated Financial Statements ............................. 5 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operation ............................... 11 PART II. OTHER INFORMATION Item 1. Legal Proceedings ...................................................... 13 Item 6. Exhibits and Reports on Form 8-K ....................................... 13 Signatures ...................................................................... 14
3 REAL ESTATE ASSOCIATES LIMITED VI (A CALIFORNIA LIMITED PARTNERSHIP) BALANCE SHEETS MARCH 31, 2001 AND DECEMBER 31, 2000 ASSETS
2001 2000 (Unaudited) (Audited) ----------- ----------- INVESTMENTS IN LIMITED PARTNERSHIPS (Note 2) $ 553,072 $ 541,072 CASH AND CASH EQUIVALENTS (Note 1) 3,013,759 3,197,380 ----------- ----------- TOTAL ASSETS $ 3,566,831 $ 3,738,452 =========== =========== LIABILITIES AND PARTNERS' DEFICIENCY 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) 2,099,001 2,064,801 Accounts payable 17,253 16,429 ----------- ----------- 3,881,254 3,846,230 ----------- ----------- COMMITMENTS AND CONTINGENCIES (Notes 2, 4 and 5) PARTNERS' EQUITY (DEFICIENCY): General partners (354,333) (352,267) Limited partners 39,910 244,489 ----------- ----------- (314,423) (107,778) ----------- ----------- TOTAL LIABILITIES AND PARTNERS' DEFICIENCY $ 3,566,831 $ 3,738,452 =========== ===========
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 FOR THE THREE MONTHS ENDED MARCH 31, 2001 AND 2000 (Unaudited)
2001 2000 --------- --------- INTEREST AND OTHER INCOME $ 40,738 $ 38,285 --------- --------- OPERATING EXPENSES: Management fees - general partner (Note 4) 51,608 51,608 General and administrative (Note 4) 41,647 57,707 Interest (Note 3) 34,200 34,200 --------- --------- 127,455 143,515 --------- --------- LOSS FROM PARTNERSHIP OPERATIONS (86,717) (105,230) --------- --------- EQUITY IN INCOME OF LIMITED PARTNERSHIPS AND AMORTIZATION OF ACQUISITION COSTS (Note 2) 12,000 12,000 WRITE-OFF OF ADVANCES TO PARTNERSHIPS (Note 2) (131,928) -- --------- --------- NET LOSS $(206,645) $ (93,230) ========= ========= NET LOSS PER LIMITED PARTNERSHIP INTEREST (Note 1) $ (12) $ (6) ========= =========
The accompanying notes are an integral part of these consolidated financial statements. 2 5 REAL ESTATE ASSOCIATES LIMITED VI AND SUBSIDIARIES (A CALIFORNIA LIMITED PARTNERSHIP) CONSOLIDATED STATEMENTS OF PARTNERS' DEFICIENCY FOR THE THREE MONTHS ENDED MARCH 31, 2001 (Unaudited)
General Limited Partners Partners Total --------- --------- --------- PARTNERSHIP INTERESTS 16,810 ========= EQUITY (DEFICIENCY), January 1, 2001 $(352,267) $ 244,489 $(107,778) Net loss for the three months ended March 31, 2001 (2,066) (204,579) (206,645) --------- --------- --------- EQUITY (DEFICIENCY), March 31, 2001 $(354,333) $ 39,910 $(314,423) ========= ========= =========
The accompanying notes are an integral part of these consolidated financial statements. 3 6 REAL ESTATE ASSOCIATES LIMITED VI AND SUBSIDIARIES (A CALIFORNIA LIMITED PARTNERSHIP) CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE THREE MONTHS ENDED MARCH 31, 2001 AND 2000 (Unaudited)
2001 2000 ----------- ----------- CASH FLOWS FROM OPERATING ACTIVITIES: Net loss $ (206,645) $ (93,230) Adjustments to reconcile net loss to net cash used in operating activities: Equity in income of limited partnerships and amortization of acquisition costs (12,000) (12,000) Increase in accrued interest payable 34,200 19,066 Increase in due from NAPICO -- (20,408) Increase (decrease) in accounts payable 824 (1,128) ----------- ----------- Net cash used in operating activities (183,621) (107,700) ----------- ----------- CASH FLOWS FROM INVESTING ACTIVITIES: Capital contributions -- (22,010) ----------- ----------- Net cash used in invested activities -- (22,010) ----------- ----------- NET DECREASE IN CASH AND CASH EQUIVALENTS (183,621) (129,710) CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 3,197,380 3,312,395 ----------- ----------- CASH AND CASH EQUIVALENTS, END OF PERIOD $ 3,013,759 $ 3,182,685 =========== ===========
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 MARCH 31, 2001 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, 2000 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 March 31, 2001 and the results of operations and changes in cash flows for the three 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. BASIS OF PRESENTATION The accompanying financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America. USE OF ESTIMATES The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America 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. PRINCIPLES OF CONSOLIDATION The consolidated financial statements include the accounts of Real Estate Associates Limited VI and its majority-owned general partnerships. All significant intercompany accounts and transactions have been eliminated in consolidation. 5 8 REAL ESTATE ASSOCIATES LIMITED VI (A CALIFORNIA LIMITED PARTNERSHIP) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) MARCH 31, 2001 NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) 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. 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 period. The number of limited partnership interests was 16,810 for the periods presented. 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. 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. 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 As of March 31, 2001, the Partnership holds limited partnership interests in 20 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 March 31, 2001, 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. 6 9 REAL ESTATE ASSOCIATES LIMITED VI (A CALIFORNIA LIMITED PARTNERSHIP) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) MARCH 31, 2001 NOTE 2 - INVESTMENTS IN LIMITED PARTNERSHIP (CONTINUED) 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. The following is a summary of the investment in unconsolidated limited partnerships for the three months ended March 31, 2001: Balance, beginning of period $ 541,072 Equity in income of limited partnerships 13,000 Amortization of acquisition costs (1,000) --------- Balance, end of period $ 553,072 =========
The following are unaudited combined estimated statements of operations for the three months ended March 31, 2001 and 2000 of the unconsolidated limited partnerships in which the Partnership has investments:
Three months Three months ended ended March 31, 2001 March 31, 2000 -------------- -------------- Revenues: Rental and other $ 2,474,000 $ 2,482,000 ----------- ----------- Expenses: Depreciation 403,000 401,000 Interest 647,000 669,000 Operating expenses 1,534,000 1,519,000 ----------- ----------- Total expenses 2,584,000 2,589,000 ----------- ----------- Net loss $ (110,000) $ (107,000) =========== ===========
7 10 REAL ESTATE ASSOCIATES LIMITED VI (A CALIFORNIA LIMITED PARTNERSHIP) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) MARCH 31, 2001 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 recent 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 on 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 was generally 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. On December 30, 1998, after obtaining the consents of the limited partners, the Partnership sold its limited partnership interests in 10 local limited partnerships to affiliates 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. 8 11 REAL ESTATE ASSOCIATES LIMITED VI (A CALIFORNIA LIMITED PARTNERSHIP) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) MARCH 31, 2001 NOTE 3 - NOTES PAYABLE AND AMOUNTS DUE FOR PARTNERSHIP INTERESTS 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 or 10 percent per annum and have principal maturities ranging from December 1999 to December 2012. Notes payable and related accrued interest payable aggregating $1,330,738 became payable on December 31, 2000. Management is in process of attempting to negotiate extensions of the maturity dates on these notes payable. 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. Maturity dates of the notes payable and related accrued interest are as follows:
Accrued Years Ending December 31, Notes Interest ------------------------- ----------- ----------- 2001 $ 520,000 $ 810,738 2002 -- -- 2003 -- -- 2004 -- -- 2005 750,000 929,521 Thereafter 170,000 358,742 ----------- ----------- $ 1,440,000 $ 2,099,001 =========== ===========
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 $52,000 and $52,000 for the three months ended March 31, 2001 and 2000, respectively. The Partnership reimburses NAPICO for certain expenses. The reimbursement to NAPICO was approximately $5,700 and $10,000 for the three months ended March 31, 2001 and 2000, respectively, and is included in general and administrative expenses. 9 12 REAL ESTATE ASSOCIATES LIMITED VI (A CALIFORNIA LIMITED PARTNERSHIP) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) MARCH 31, 2001 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 affiliates of Casden Properties Inc., organized by an affiliate of NAPICO. 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 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 second action has been subsumed in the first action, which has been certified as a class action. 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 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 and amounts due for partnership interests are collateralized by the Partnership's investments in investee limited partnerships and are payable only out of cash distributions from investee partnerships. The operations generated by the investee limited partnerships, which account for the Partnership's primary source of revenues, are subject to various government rules, regulations and restrictions which make it impracticable to estimate the fair value of the notes and related accrued interest payable. 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. 10 13 REAL ESTATE ASSOCIATES LIMITED VI (A CALIFORNIA LIMITED PARTNERSHIP) MARCH 31, 2001 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 in March 31, 1999, previously using proceeds from the disposition of its investments in certain limited partnerships. RESULTS OF OPERATIONS 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 projects. Funds temporarily not required for such investments in projects are invested providing interest income as reflected in the statement of operations. These funds can be converted to cash to meet obligations as they arise. The Partnership intends to continue investing available funds in this manner. Under recent 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 on 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 was generally 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 11 14 REAL ESTATE ASSOCIATES LIMITED VI (A CALIFORNIA LIMITED PARTNERSHIP) MARCH 31, 2001 ITEM 2. MANAGEMENT'S ANALYSIS AND DISCUSSION OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) RESULTS OF OPERATIONS (CONTINUED) 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. On December 30, 1998, after obtaining the consents of the limited partners, the Partnership sold its limited partnership interests in 10 local limited partnerships to affiliates of Casden Properties Inc. The sale resulted in cash proceeds to the Partnership of $1,397,081, which was collected in 1999. In March 2000, 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. Notes payable and related accrued interest payable aggregating $1,330,738 became payable on December 31, 2000. Management is in process of attempting to negotiate extensions of the maturity dates on these notes payable. 12 15 REAL ESTATE ASSOCIATES LIMITED VI (A CALIFORNIA LIMITED PARTNERSHIP) MARCH 31, 2001 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 affiliates of Casden Properties Inc., organized by an affiliate of NAPICO. 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 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 second action has been subsumed in the first action, which has been certified as a class action. 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 March 31, 2001. 13 16 REAL ESTATE ASSOCIATES LIMITED VI (A CALIFORNIA LIMITED PARTNERSHIP) MARCH 31, 2001 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., General Partner /s/ BRUCE NELSON ---------------------------------------- Bruce Nelson President Date: MAY 15, 2001 ---------------------------------------- /s/ BRIAN H. SHUMAN ---------------------------------------- Brian H. Shuman Chief Financial Officer Date: MAY 15, 2001 ---------------------------------------- 14 -----END PRIVACY-ENHANCED MESSAGE-----