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 SEPTEMBER 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 94-2838890 - -------------------------------------------------------------------------------- (State or other jurisdiction of incorporation or organization) (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 September 30, 1995: 21,585 PART I - FINANCIAL INFORMATION Item 1. Financial Statements PROPERTY RESOURCES FUND VI (A CALIFORNIA LIMITED PARTNERSHIP) BALANCE SHEETS SEPTEMBER 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 7,168 7,124 Furnishings and equipment 997 951 - -------------------------------------------------------------------------------- 11,152 11,062 Less: accumulated depreciation 4,055 3,841 - -------------------------------------------------------------------------------- 7,097 7,221 Cash and cash equivalents 232 131 Note receivable 408 493 Other assets 33 115 - -------------------------------------------------------------------------------- Total assets $ 7,770 $ 7,960 ================================================================================ LIABILITIES AND PARTNERS' CAPITAL (DEFICIT) ------------------------------------------- Notes payable $ 5,333 $ 5,639 Note payable to affiliate 1,714 1,724 Due to General Partner 575 805 Accrued interest due to General Partner 481 435 Tenants' deposits and other liabilities 191 246 - -------------------------------------------------------------------------------- Total liabilities 8,294 8,849 - -------------------------------------------------------------------------------- Partners' capital (deficit): Limited partners, 21,585 units issued and outstanding (41) (388) General Partner (483) (501) - -------------------------------------------------------------------------------- Total partners' capital (deficit) (524) (889) - -------------------------------------------------------------------------------- Total liabilities and partners' capital (deficit) $ 7,770 $ 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 SEPTEMBER 30, 1995 AND 1994 ------------------------------------------------------------- (Unaudited) (Dollars in 000's except per share amounts) 1995 1994 ---- ---- Revenue: Rent $479 $613 Interest and dividends 9 15 Other - - - -------------------------------------------------------------------------------- Total revenue 488 628 - -------------------------------------------------------------------------------- Expenses: Interest - 107 Depreciation and amortization 72 72 Operating 254 304 Related party 94 96 General and administrative - 2 - -------------------------------------------------------------------------------- Total expenses 420 581 - -------------------------------------------------------------------------------- Net income $ 68 $ 47 ================================================================================ Net income allocable to limited partners $ 65 $ 45 ================================================================================ Net income allocable to General Partner $ 3 $ 2 ================================================================================ Net income per $500 limited partnership unit- based on 21,585 units outstanding $ 3.01 $ 2.08 ================================================================================ See notes to financial statements. Item 1. Financial Statements (continued) PROPERTY RESOURCES FUND VI (A CALIFORNIA LIMITED PARTNERSHIP) STATEMENTS OF OPERATIONS FOR THE NINE MONTH PERIODS ENDED SEPTEMBER 30, 1995 AND 1994 ------------------------------------------------------------ (Unaudited) (Dollars in 000's except per share amounts) 1995 1994 ---- ---- Revenue: Rent $1,647 $1,752 Interest and dividends 31 39 Other - 30 - -------------------------------------------------------------------------------- Total revenue 1,678 1,821 - -------------------------------------------------------------------------------- Expenses: Interest - 398 Depreciation and amortization 220 235 Operating 791 868 Related party 287 283 General and administrative 15 33 - -------------------------------------------------------------------------------- Total expenses 1,313 1,817 - -------------------------------------------------------------------------------- Net income $ 365 $ 4 ================================================================================ Net income allocable to limited partners $ 347 $ 4 ================================================================================ Net income allocable to General Partner $ 18 - ================================================================================ Net income per $500 limited partnership unit- based on 21,585 units outstanding $ 16.08 $ .19 ================================================================================ 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 NINE MONTH PERIOD ENDED SEPTEMBER 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 - 347 18 365 - -------------------------------------------------------------------------------- Balance, end of period 21,585 $(41) $(483) $(524) ================================================================================ See notes to financial statements. Item 1. Financial Statements (continued) PROPERTY RESOURCES FUND VI (A CALIFORNIA LIMITED PARTNERSHIP) STATEMENTS OF CASH FLOWS FOR THE NINE MONTH PERIODS ENDED SEPTEMBER 30, 1995 AND 1994 ------------------------------------------------------------ (Unaudited) (Dollars in 000's) 1995 1994 ---- ---- Cash flows from operating activities: Net income $365 $4 - -------------------------------------------------------------------------------- Adjustments to reconcile net loss to net cash used in operating activities: Depreciation and amortization 220 235 Amortization of capitalized interest on debt restructuring - (210) Increase in accrued interest 46 220 Increase (decrease) in other assets 76 (696) Increase (decrease) in tenants' deposits and other liabilities (55) 1 - -------------------------------------------------------------------------------- Total adjustments 287 (450) - -------------------------------------------------------------------------------- Net cash provided by (used in) operating activities 652 (446) - -------------------------------------------------------------------------------- Cash flow from investing activities: Improvements to rental property (90) (48) Proceeds from sale of rental property - 265 Principal received on note receivable 85 50 - -------------------------------------------------------------------------------- Net cash provided by (used in) investing activities (5) 267 - -------------------------------------------------------------------------------- Cash flows from financing activities: Principal payments on notes payable (316) (32) Principal payments to General Partner (230) - Advances from General Partner - 140 - -------------------------------------------------------------------------------- Net cash provided by (used in) financing activities (546) 108 - -------------------------------------------------------------------------------- Net increase (decrease) in cash and cash equivalents 101 (71) Cash and cash equivalents, beginning of period 131 116 - -------------------------------------------------------------------------------- Cash and cash equivalents, end of period $232 $ 45 ================================================================================ See notes to financial statements. Item 1. Financial Statements (continued) PROPERTY RESOURCES FUND VI (A CALIFORNIA LIMITED PARTNERSHIP) NOTES TO FINANCIAL STATEMENTS SEPTEMBER 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 nine month period ended September 30, 1995, the Partnership made or accrued the following payments to the General Partner or affiliates: Property management fees, charged to related party expense $72,000 Reimbursement of data processing expenses, charged to related party expense 33,000 Interest on advances from the General Partner, based on the prime rate, charged to related party expense 47,000 Interest on Promissory note, collateralized by the property Clearlake Village Apartments, charged to related party expense 135,000 ----------- $287,000 =========== 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 September 30, 1995, the outstanding balance of the note was $408,000. Item 1. Financial Statements (continued) PROPERTY RESOURCES FUND VI (A CALIFORNIA LIMITED PARTNERSHIP) NOTES TO FINANCIAL STATEMENTS SEPTEMBER 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 September 30, 1995, the amended note's face value principal balance was $3,854,000. 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 nine month period ended September 30, 1995, the Partnership paid interest on the note payable to affiliate in the amount of $135,000. PART I - FINANCIAL INFORMATION Item 2. Management's Discussion and Analysis of Financial Condition AND RESULTS OF OPERATIONS ---------------------------------------- RESULTS OF OPERATIONS COMPARISON OF THE NINE MONTH PERIODS ENDED SEPTEMBER 30, 1995 AND 1994 Net income for the nine month period ended September 30, 1995 amounted to $365,000, an increase of $361,000 as compared to net income of $4,000 in 1994. The increase is due to the following factors: a decrease in rental revenue of $105,000; a decrease in interest and dividends of $8,000; a decrease in other revenue of $30,000; a decrease in interest expense of $398,000; a decrease in depreciation and amortization of $15,000; a decrease in operating expenses of $77,000; an increase in related party of $4,000, and a decrease in general and administrative expense of $18,000. Rental revenue from the Partnership's properties amounted to $1,647,000 and $1,752,000 for the nine month periods ended September 30, 1995 and 1994, respectively. The decrease in rental revenue of $105,000 for the nine month period ended September 30, 1995 when compared to the same period in 1994 is due to the end of the leaseback period of Space Savers One and Three on June 6, 1995. Interest revenue decreased $8,000, due to the reduced balance of the note receivable. Other revenue decreased $30,000, as a result of the sale of Space Savers One and Three in June, 1994. Total expenses decreased by $504,000, or 28%, from $1,817,000 in 1994 to $1,313,000. The decrease in total expenses is attributable to the following factors: a decrease in interest expense of $398,000, or 100%; a decrease in depreciation and amortization of $15,000, or 6%; a decrease in operating expenses of $77,000, or 9%; an increase in related party expense of $4,000, or 1%; and a decrease in general and administrative expense of $18,000, or 56%. Interest expense decreased $398,000, 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 $77,000, as a result of the end of the leaseback period of Space Savers One and Three on June 6, 1995. Related Party expense increased $4,000, as a result of an increase in the prime rate of interest charged on advances from the General Partner. General and administrative expense decreased $18,000, due to a decrease in consulting and outside fees and services. 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. PART I - FINANCIAL INFORMATION Item 2. Management's Discussion and Analysis of Financial Condition AND RESULTS OF OPERATIONS --------------------------------------- LIQUIDITY AND CAPITAL RESOURCES (Continued) As of September 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 September 30, 1995, cash and cash equivalents totaled $232,000. As of September 30, 1995, the General Partner had advanced, $575,000 plus accrued interest of $481,000, 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 September 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: NOVEMBER 10, 1995