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, 1996
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OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ---------- to ----------------------
Commission file number 2-77330
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PROPERTY RESOURCES FUND VI
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(Exact name of registrant as specified in its charter)
CALIFORNIA 94-2838890
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(State or other jurisdiction of incorporation or organization) (I.R.S.
Employer
Identification
No.)
P. O. BOX 7777, SAN MATEO, CALIFORNIA 94403-7777
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (415) 312-2000
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N/A
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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 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, 1996: 21,585
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
PROPERTY RESOURCES FUND VI
(A CALIFORNIA LIMITED PARTNERSHIP)
BALANCE SHEETS
JUNE 30, 1996 AND DECEMBER 31, 1995
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(Unaudited)
(Dollars in thousands, except per share amounts) 1996 1995
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ASSETS:
Rental property:
Land $ 2,239 $ 2,239
Land improvements 748 748
Buildings and improvements 7,167 7,167
Furnishings and equipment 1,028 1,005
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11,182 11,159
Less: accumulated depreciation 4,274 4,128
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6,908 7,031
Cash and cash equivalents 128 251
Note receivable 355 382
Other assets 97 32
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Total assets $7,488 $7,696
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LIABILITIES AND STOCKHOLDERS' EQUITY:
Note payable $5,027 $5,231
Note payable to affiliate 1,704 1,711
Due to General Partner 368 506
Accrued interest due to General Partner 512 493
Tenants' deposits and other liabilities 177 214
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Total liabilities 7,788 8,155
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Partners' capital (deficit):
Limited partners, 21,585 units issued
and outstanding 172 21
General Partner (472) (480)
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Total partners' capital (deficit) (300) (459)
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Total liabilities and partners'
capital (deficit) $7,488 $7,696
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The accompanying notes are an integral part of these financial statements.
PROPERTY RESOURCES FUND VI
(A CALIFORNIA LIMITED PARTNERSHIP)
STATEMENTS OF OPERATIONS
(Unaudited)
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30 JUNE 30 JUNE 30 JUNE 30
(Dollars in thousands, except per
share amounts) 1996 1995 1996 1995
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REVENUE:
Rent $494 $569 $974 $1,168
Interest 9 12 19 22
Dividends 1 - 1 -
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Total revenue 504 581 994 1,190
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EXPENSES:
Depreciation and amortization 73 74 147 148
Operating 254 273 512 537
Related party 82 94 165 193
General and administrative 5 5 11 15
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Total expenses 414 446 835 893
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NET INCOME $90 $135 $159 $297
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Net income allocable to limited $86 $128 $151 $282
partners
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Net income allocable to General $4 $7 $8 $15
Partner
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Net income per $500 limited
partnership unit- based on
21,585 units outstanding $3.98 $5.93 $7.00 $13.06
===================================== =============== ============== =============== =============
The accompanying notes are an integral part of these financial statements.
PROPERTY RESOURCES FUND VI
(A CALIFORNIA LIMITED PARTNERSHIP)
STATEMENT OF PARTNERS' CAPITAL (DEFICIT)
FOR THE SIX MONTH PERIOD ENDED JUNE 30, 1996
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(Unaudited)
Limited Partners
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General
(Dollars in thousands) Units Amount Partner Total
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Balance, beginning of period 21,585 $21 $(480) $(459)
Net income - 151 8 159
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Balance, end of period 21,585 $172 $(472) $(300)
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The accompanying notes are an integral part of these financial statements.
PROPERTY RESOURCES FUND VI
(A CALIFORNIA LIMITED PARTNERSHIP)
STATEMENTS OF CASH FLOWS
FOR THE SIX MONTH PERIODS ENDED JUNE 30, 1996 AND 1995
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(Unaudited)
(Dollars in thousands) 1996 1995
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Cash flows from operating activities:
Net income $159 $297
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Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 147 148
Increase (decrease) in other assets (66) 65
Increase in accrued interest 19 32
Decrease in tenants' deposits and other liabilities (37) (84)
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63 161
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Net cash provided by operating activities 222 458
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Cash flow from investing activities:
Improvements to rental property (23) (46)
Principal received on note receivable 27 66
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Net cash provided by investing activities 4 20
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Cash flow from financing activities:
Principal payments on notes payable (204) (210)
Principal payments to General Partner (145) (161)
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Net cash used in financing activities (349) (371)
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Net increase (decrease) in cash and cash equivalents (123) 107
Cash and cash equivalents,
beginning of period 251 131
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Cash and cash equivalents,
end of period $128 $238
======================================================================================
The accompanying notes are an integral part of these financial statements.
PROPERTY RESOURCES FUND VI
(A CALIFORNIA LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1996
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NOTE 1 - BASIS OF PRESENTATION
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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, 1995.
NOTE 2 - TRANSACTIONS WITH GENERAL PARTNER AND AFFILIATES
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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, 1996, the Partnership made or accrued the
following payments to the General Partner or affiliates:
Property management fees, charged to related party expense $49,000
Reimbursement of data processing expenses,
charged to related party expense 8,000
Interest on advances from the General Partner,
based on the prime rate, charged to related party expense 18,000
Interest on Promissory note, collateralized
by the property Clearlake Village Apartments,
charged to related party expense 90,000
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$165,000
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NOTE 3 - NOTE RECEIVABLE
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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, 1996, the
outstanding balance of the note was $355,000.
NOTE 4 - GROUSE RUN APARTMENTS
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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, 1996, the amended note's face value principal
balance was $3,834,000.
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
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For the six month period ended June 30, 1996, the Partnership paid interest on
the note payable to affiliate of $90,000.
PROPERTY RESOURCES FUND VI
(A CALIFORNIA LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1996
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NOTE 6 - SUBSEQUENT EVENT
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On August 12, 1996, the loan collateralized by the property Clearlake Village
Apartments and payable to Franklin Resources, Inc. an affiliate of the General
Partner (the "Previous Loan") was refinanced and replaced with a new loan (the
"Replacement Loan") from an unaffiliated third party, First Union National Bank
of North Carolina ( the "Lender"). As a condition for the refinance, the Lender
required that the Property be held in an entity which owns only one substantial
asset. To meet this condition, the Property was contributed to a new entity,
Property Resources Fund VI Subsidiary, L.P. (the "Subsidiary"). The sole limited
partner of the Subsidiary is the Partnership and the general partner is Property
Resources, Inc. The formation of the Subsidiary should have no material effect
in cash or profit and loss allocations between the Partnership and the General
Partner, nor is the amount of any fees payable to the General Partner increased
thereby.
The amount of the Replacement Loan is $2,167,000, the term is 10 years and the
interest rate is 8.875%. Principal and interest payments of $17,571 are due
monthly until maturity of the loan when the remaining unpaid principal and
accrued interest balances will become due. The Replacement Loan which is
collateralized by the property Clearlake Village Apartments is non-recourse to
the Partnership, but is recourse to the General Partner, but only under certain
conditions including losses resulting from the presence of hazardous substances
and from fraud. The cash proceeds from the loan were used to pay off the
Previous Loan, to fund escrow accounts for property taxes, insurance and capital
improvements, and to pay Lender fees and costs as well as unaffiliated mortgage
broker commissions. The remaining funds were added to the reserves of the
Partnership.
PROPERTY RESOURCES FUND VI
(A CALIFORNIA LIMITED PARTNERSHIP)
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
INTRODUCTION
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Management's discussion and analysis of financial condition and results of
operations should be read in conjunction with the Financial Statements and Notes
thereto.
RESULTS OF OPERATIONS
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COMPARISON OF THE SIX MONTH PERIODS ENDED JUNE 30, 1996 AND 1995
Net income for the six month period ended June 30, 1996 decreased $138,000, or
46%, compared to 1995 primarily as a result of the discontinuance of operations
at Space Savers One and Three.
Total revenue for the six month period ended June 30, 1996 decreased $196,000,
or 16%, primarily as a result of a decrease in rental revenue. Rental revenue
decreased $194,000, or 17%, primarily due to the end of the leaseback period of
Space Savers One and Three in June, 1995. The decrease in rental revenue from
Space Savers One and Three was partially offset by an increase in rental revenue
of $52,000 by the Partnership's two remaining properties. The increase in rental
revenue for the two remaining Partnership properties was attributable to an
increase in the average occupancy and rental rates at Clearlake Village
Apartments and at Grouse Run Apartments. For the six month periods ended June
30, 1996 and 1995 the average occupancy rate at Grouse Run Apartments was 92%
and 87%, respectively. The occupancy rate at the Clearlake Village Apartments
was 94% for both periods.
Total expenses decreased $58,000, or 6%, from $893,000 in 1995 to $835,000. The
decrease in total expenses was primarily due to a decrease in related party
expense, as a result of a decrease in data processing expenses and interest
expense on advances from the General Partner and to a decrease in operating
expenses of $25,000 primarily due to the end of the leaseback period of Space
Savers One and Three in June, 1995. The decrease in operating expense from Space
Savers One and Three of $76,000 was partially offset by an increase in operating
expense of $51,000 by the Partnership's two remaining properties reflecting
increases in maintenance and administrative property expenses.
LIQUIDITY AND CAPITAL RESOURCES
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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, 1996, 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, 1996, cash and cash equivalents totaled $128,000. As of June 30,
1996, the General Partner had advanced, $368,000 plus accrued interest of
$512,000, 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.
PROPERTY RESOURCES FUND VI
(A CALIFORNIA LIMITED PARTNERSHIP)
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES (CONTINUED)
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On August 12, 1996, the loan collateralized by the property Clearlake Village
Apartments and payable to Franklin Resources, Inc. an affiliate of the General
Partner (the "Previous Loan") was refinanced and replaced with a new loan (the
"Replacement Loan") from an unaffiliated third party, First Union National Bank
of North Carolina ( the "Lender"). As a condition for the refinance, the Lender
required that the Property be held in an entity which owns only one substantial
asset. To meet this condition, the Property was contributed to a new entity,
Property Resources Fund VI Subsidiary, L.P. (the "Subsidiary"). The sole limited
partner of the Subsidiary is the Partnership and the general partner is Property
Resources, Inc. The formation of the Subsidiary should have no material effect
in cash or profit and loss allocations between the Partnership and the General
Partner, nor is the amount of any fees payable to the General Partner increased
thereby.
The amount of the Replacement Loan is $2,167,000, the term is 10 years and the
interest rate is 8.875%. Principal and interest payments of $17,571 are due
monthly until maturity of the loan when the remaining unpaid principal and
accrued interest balances will become due. The Replacement Loan which is
collateralized by the property Clearlake Village Apartments is non-recourse to
the Partnership, but is recourse to the General Partner, but only under certain
conditions including losses resulting from the presence of hazardous substances
and from fraud. The cash proceeds from the loan were used to pay off the
Previous Loan, to fund escrow accounts for property taxes, insurance and capital
improvements, and to pay Lender fees and costs as well as unaffiliated mortgage
broker commissions. The remaining funds were added to the reserves of the
Partnership.
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.
Net cash provided by operating activities for the six month period ended June
30, 1996 was $222,000, or $236,000 less than the same period in 1995. The
decrease in cash flow is primarily attributable to the decrease in net income as
described under "Results of Operations".
Net cash provided by investing activities for the six month period ended June
30, 1996, decreased $16,000 when compared to the same period in 1995. The
decrease was due to a decrease in principal payments received from note
receivable which was partially offset by a decrease in improvements to rental
property.
Net cash used in financing activities for the six month period ended June 30,
1996, decreased $22,000 when compared to the same period in 1995. The decrease
was primarily due to a decrease in principal payments paid to the General
Partner.
IMPACT OF INFLATION
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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.
PROPERTY RESOURCES FUND VI
(A CALIFORNIA LIMITED PARTNERSHIP)
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON 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, 1996.
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 8, 1996