SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q (Mark One) (x) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 1995 OR ( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE CHANGE ACT OF 1934 For the transition period from to Commission file number 2-77330 Property Resources Fund VI (Exact name of registrant as specified in its charter) California (State or other jurisdiction of incorporation or organization) 94-2838890 (I.R.S. Employer Identification No.) P. O. Box 7777, San Mateo, California 94403-7777 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code (415) 312-2000 N/A Former name, former address and former fiscal year, if changed since last report Indicate by check mark whether the registrant (1) has 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 Limited Partnership Units Outstanding as of June 30, 1995: 21,585 PART I - FINANCIAL INFORMATION Item 1. Financial Statements PROPERTY RESOURCES FUND VI (A CALIFORNIA LIMITED PARTNERSHIP) BALANCE SHEETS JUNE 30, 1995 AND DECEMBER 31, 1994 (Dollars in 000's) (Unaudited) (Audited) 1995 1994 ---- ---- ASSETS Rental property: Land $ 2,239 $ 2,239 Land improvements 748 748 Buildings and improvements 7,145 7,124 Furnishings and equipment 976 951 11,108 11,062 Less: accumulated depreciation 3,983 3,841 7,125 7,221 Cash and cash equivalents 238 131 Note receivable 427 493 Other assets 44 115 Total assets $ 7,834 $ 7,960 LIABILITIES AND PARTNERS' CAPITAL (DEFICIT) Notes payable $ 5,435 $5,639 Note payable to affiliate 1,718 1,724 Due to General Partner 644 805 Accrued interest due to General Partner 467 435 Tenants' deposits and other liabilities 162 246 Total liabilities 8,426 8,849 Partners' capital (deficit): Limited partners, 21,585 units issued and outstanding (106) (388) General Partner (486) (501) Total partners' capital (deficit) (592) (889) Total liabilities and partners' capital (deficit) $ 7,834 $ 7,960 See notes to financial statements. Item 1. Financial Statements (continued) PROPERTY RESOURCES FUND VI (A CALIFORNIA LIMITED PARTNERSHIP) STATEMENTS OF OPERATIONS FOR THE THREE MONTH PERIODS ENDED JUNE 30, 1995 AND 1994 (Unaudited) (Dollars in 000's except per share amounts) 1995 1994 Revenue: Rent $569 $571 Interest 12 12 Other - 30 Total revenue 581 613 Expenses: Interest - 139 Depreciation and amortization 74 80 Operating 273 280 Related party 94 95 General and administrative 5 8 Total expenses 446 602 Net income $135 $ 11 Net income allocable to limited partners $ 128 $ 10 Net income allocable to General Partner $ 7 $ 1 Net income per $500 limited partnership unit- based on 21,585 units outstanding $ 5.93 $ .46 See notes to financial statements. Item 1. Financial Statements (continued) PROPERTY RESOURCES FUND VI (A CALIFORNIA LIMITED PARTNERSHIP) STATEMENTS OF OPERATIONS FOR THE SIX MONTH PERIODS ENDED JUNE 30, 1995 AND 1994 (Unaudited) (Dollars in 000's except per share amounts) 1995 1994 Revenue: Rent $1,168 $1,139 Interest 22 24 Other - 30 Total revenue 1,190 1,193 Expenses: Interest - 291 Depreciation and amortization 148 163 Operating 537 564 Related party 193 187 General and administrative 15 31 Total expenses 893 1,236 Net income (loss) $ 297 $(43) Net income (loss) allocable to limited partners $ 282 $(41) Net income (loss) allocable to General Partner $ 15 $ (2) Net income (loss) per $500 limited partnership unit- based on 21,585 units outstanding $ 13.06 $ (1.90) See notes to financial statements. Item 1. Financial Statements (continued) PROPERTY RESOURCES FUND VI (A CALIFORNIA LIMITED PARTNERSHIP) STATEMENT OF PARTNERS' CAPITAL (DEFICIT) FOR THE SIX MONTH PERIOD ENDED JUNE 30, 1995 (Unaudited) (Dollars in 000's) Limited Partners General Units Amount Partner Total Balance, beginning of period 21,585 $(388) $(501) $(889) Net Income - 282 15 297 Balance, end of period 21,585 $(106) $(486) $(592) See notes to financial statements. Item 1. Financial Statements (continued) PROPERTY RESOURCES FUND VI (A CALIFORNIA LIMITED PARTNERSHIP) STATEMENTS OF CASH FLOWS FOR THE SIX MONTH PERIODS ENDED JUNE 30, 1995 AND 1994 (Unaudited) (Dollars in 000's) 1995 1994 Cash flows from operating activities: Net income (loss) $297 $(43) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation and amortization 148 163 Amortization of capitalized interest on debt restructuring - (139) Increase in accrued interest 32 144 Decrease in other assets 65 24 Decrease in tenants' deposits and other liabilities (84) (46) Total adjustments 161 146 Net cash provided by operating activities 458 103 Cash flow from investing activities: Improvements to rental property (46) (18) Proceeds from sale of rental property - 265 Principal received on note receivable 66 50 Net cash provided by investing activities 20 297 Cash flows from financing activities: Principal payments on notes payable (210) (21) Principal payments to General Partner (161) - Net cash used in financing activities (371) (21) Net increase in cash and cash equivalents 107 379 Cash and cash equivalents, beginning of period 131 116 Cash and cash equivalents, end of period $238 $495 See notes to financial statements. Item 1. Financial Statements (continued) PROPERTY RESOURCES FUND VI (A CALIFORNIA LIMITED PARTNERSHIP) NOTES TO FINANCIAL STATEMENTS JUNE 30, 1995 NOTE 1 - BASIS OF PRESENTATION The accompanying unaudited financial statements contain all adjustments (consisting of normal recurring accruals) which are necessary, in the opinion of management, for a fair presentation. The statements, which do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements, should be read in conjunction with the Partnership's financial statements for the year ended December 31, 1994. NOTE 2 - TRANSACTIONS WITH GENERAL PARTNER AND AFFILIATES Under the partnership agreement, the General Partner and its affiliates may receive compensation for services rendered to the Partnership and may receive reimbursement for certain expenses incurred on behalf of the Partnership. During the six month period ended June 30, 1995, the Partnership made or accrued the following payments to the General Partner or affiliates: Property management fees, charged to related party expense $48,000 Reimbursement of data processing expenses, charged to related party expense 22,000 Interest on advances from the General Partner, based on the prime rate, charged to related party expense 33,000 Interest on Promissory note, collateralized by Interest on advances from the General Partner, based on the prime rate, charged to related party the property Clearlake Village Apartments, charged to related party expense 90,000 $193,000 NOTE 3 - NOTE RECEIVABLE On November 15, 1994, the promissory note receivable in the amount of $515,000, collateralized by a second deed of trust against 1600 Dell Avenue Office complex, was amended for a principal paydown of $15,000 and an agreement to pay an additional $35,000 on or before January 31, 1995. Fully amortized principal and interest payments are due monthly in the amount of $9,863 commencing on December 15, 1994 until maturity on November 15, 1999. As of June 30, 1995, the outstanding balance of the note was $427,000. Item 1. Financial Statements (continued) PROPERTY RESOURCES FUND VI (A CALIFORNIA LIMITED PARTNERSHIP) NOTES TO FINANCIAL STATEMENTS JUNE 30, 1995 NOTE 4 - Grouse Run Apartments On October 1, 1994, the Grouse Run note payable was amended. The amendment provides for fixed interest at 9.96%, amortized on a 30-year schedule. A principal payment of $800,000 was made by the Partnership concurrent with the effective date of the amendment. The note's maturity date was extended to October 1, 1999. As of June 30, 1995, the amended note's face value principal balance was $3,862,000. The amended note payable is classified as a troubled debt restructuring and, in accordance with Statement of Financial Accounting Standards No. 15, the Partnership is carrying the amended note equal to the total future cash payments payable and is not recognizing interest expense between the restructuring and the maturity of the amended note. NOTE 5- SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION For the six month period ended June 30, 1995, the Partnership paid interest on the note payable to affiliate of $90,000. PART I - FINANCIAL INFORMATION Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Results of Operations Comparison of the six month periods ended June 30, 1995 and 1994 Net income for the six month period ended June 30, 1995 amounted to $297,000, an increase of $340,000 as compared to net loss of $43,000 in 1994. The increase is due to the following factors: an increase in rental revenue of $29,000; a decrease in interest and dividends of $2,000; a decrease in other revenue of $30,000; a decrease in interest expense of $291,000; a decrease in depreciation and amortization of $15,000; a decrease in operating expenses of $27,000; an increase in related party of $6,000, and a decrease in general and administrative expense of $16,000. Rental revenue from the Partnership's properties amounted to $1,168,000 and $1,139,000 for the six month periods ended June 30, 1995 and 1994, respectively. The increase in rental revenue of $29,000 for the six month period ended June 30, 1995 when compared to the same period in 1994 is attributable to an increase in the average occupancy rate at Clearlake Village Apartments. For the six month periods ended June 30, 1995 and 1994 the average occupancy rate at Clearlake Village Apartments was 94% and 89%, respectively. Interest revenue decreased $2,000, due to the reduced balance of the note receivable. Other revenue decreased $30,000, due to the sale of Space Savers One and Three in June, 1994. Total expenses decreased by $343,000, or 28%, from $1,236,000 in 1994 to $893,000. The decrease in total expenses is attributable to the following factors: a decrease in interest expense of $291,000, or 100%; a decrease in depreciation and amortization of $15,000, or 9%; a decrease in operating expenses of $27,000, or 5%; an increase in related party expense of $6,000, or 3%; and a decrease in general and administrative expense of $16,000, or 52%. Interest expense decreased $291,000, due to the sale of Space Savers One and Three in June, 1994 and to the amended Grouse Run note payable in October, 1994. The amended Grouse Run note payable is classified as a troubled debt restructuring and, in accordance with Statement of Financial Accounting Standards No. 15, the Partnership is carrying the amended note equal to the total future cash payments payable and is not recognizing interest expense between the restructuring and the maturity of the amended note. Depreciation and amortization expense decreased $15,000, as a result of the sale of Space Savers One and Three in the second quarter of 1994. Operating expenses decreased $27,000, as a result of a decrease in property taxes, payroll and utility expenses. PART I - FINANCIAL INFORMATION Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Liquidity and Capital Resources In July, 1983, the Partnership completed a public offering of its limited partnership units with total proceeds of $10,795,500 from the sale of 21,585 limited partnership units. The Partnership acquired five properties with an aggregate cost of $23,526,000. As of June 30, 1995, the Partnership had two operating properties: Clearlake Village Apartments and Grouse Run Apartments. The buildings and the land upon which the buildings are located are owned directly by the Partnership in fee. All Partnership properties are subject to mortgages. As of June 30, 1995, cash and cash equivalents totaled $238,000. As of June 30, 1995, the General Partner had advanced, $644,000 plus accrued interest of $467,000, to the Partnership to pay for various capital improvements and to support operating cash flow deficits. The General Partner presently intends to continue to make such advances to the Partnership as necessary. Consequently, management believes that the Partnership's current sources of funds will be adequate to meet both its short-term and long-term capital commitments and operating requirements. The Partnership presently believes that funds available from improved operations and from its note receivable due in 1999 will permit it to repay advances owed to the General Partner. The Partnership also believes that the present trend toward improved operations at its properties will permit it to repay the Grouse Run note payable due in 1999 either from the sale of a property or a loan refinancing. Impact of Inflation The Partnership's management believes that inflation may have a positive effect on the Partnership's property portfolio, but this effect generally will not be fully realized until such properties are sold or exchanged. PART II - OTHER INFORMATION Item 6. Exhibits and Reports an Form 8-K (a) Not applicable (b) Reports on Form 8-K No reports on Form 8-K were filed by the Registrant during the quarter ended June 30, 1995. SIGNATURE 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. PROPERTY RESOURCES FUND VI By: /S/ David P. Goss David P. Goss Chief Executive Officer Date: August 12, 1995