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, 1997
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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
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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 (I.R.S. Employer
incorporation or organization) 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 (650) 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, 1997: 21,585
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
PROPERTY RESOURCES FUND VI
(A CALIFORNIA LIMITED PARTNERSHIP)
BALANCE SHEETS
JUNE 30, 1997 AND DECEMBER 31, 1996
(Unaudited)
(Dollars in thousands) 1997 1996
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ASSETS:
Rental property:
Land $2,239 $2,239
Land improvements 781 763
Buildings and improvements 7,231 7,174
Furnishings and equipment 1,043 1,041
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11,294 11,217
Less: accumulated depreciation 4,565 4,420
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6,729 6,797
Cash and cash equivalents 296 279
Note receivable 284 320
Other assets 318 413
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Total assets $7,627 $7,809
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LIABILITIES AND STOCKHOLDERS' EQUITY:
Note payable $6,773 $6,986
Advances from General Partner - 153
Accrued interest due to General Partner 527 524
Deposits and other liabilities 218 275
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Total liabilities 7,518 7,938
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Partners' capital (deficit):
Limited partners, 21,585 units issued
and outstanding 560 334
General Partner (451) (463)
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Total partners' capital (deficit) 109 (129)
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Total liabilities and partners'
capital (deficit) $7,627 $7,809
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The accompanying notes are an intregal 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 unit amounts) 1997 1996 1997 1996
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REVENUE:
Rent $529 $494 $1,036 $974
Interest and dividends 8 10 18 20
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Total revenue 537 504 1,054 994
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EXPENSES:
Interest, other than
related party 51 - 102 -
Depreciation 73 73 145 147
Operating 250 254 491 512
Related party 32 82 65 165
General and administrative 5 5 13 11
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Total expenses 411 414 816 835
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NET INCOME $126 $90 $238 $159
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Net income allocable to limited
partners $120 $86 $226 $151
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Net income allocable to General
Partner $6 $4 $12 $8
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Net income per $500 limited
partnership unit-based on
21,585 units outstanding $5.56 $3.98 $10.47 $7.00
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The accompanying notes are an intregal 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, 1997 AND 1996
(Unaudited)
(Dollars in thousands) 1997 1996
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Cash flows from operating activities:
Net income $238 $159
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Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 152 147
(Decrease) increase in other assets 88 (66)
Increase in accrued interest 3 19
Decrease in deposits and other liabilities (57) (37)
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186 63
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Net cash provided by operating activities 424 222
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Cash flow from investing activities:
Improvements to rental property (77) (23)
Principal received on note receivable 36 27
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Net cash (used in) provided by investing activities (41) 4
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Principal payments on notes payable (213) (204)
Principal payments to General Partner (153) (145)
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Net cash used in financing activities (366) (349)
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Net increase (decrease) in cash and
cash equivalents 17 (123)
Cash and cash equivalents,
beginning of period 279 251
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Cash and cash equivalents,
end of period $296 $128
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The accompanying notes are an intregal part of these financial statements.
PROPERTY RESOURCES FUND VI
(A CALIFORNIA LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1997
NOTE 1 - BASIS OF PRESENTATION
The accompanying financial statements of Property Resources Fund VI (the
`Partnership') have been prepared in accordance with generally accepted
accounting principles applicable to interim financial information and
pursuant to the rules and regulations of the Securities and Exchange
Commission. Accordingly, certain information and footnote disclosures
normally included in financial statements prepared in accordance with
generally accepted accounting principles have been condensed or omitted
pursuant to such rules and regulations. However, in the opinion of
management, all adjustments, consisting only of normal recurring adjustments,
necessary for a fair presentation have been included. The Company presumes
that users of the interim financial information herein have read or have
access to the audited financial statements for the preceding fiscal year and
that the adequacy of additional disclosure needed for a fair presentation may
be determined in that context. Accordingly, footnote disclosure which would
substantially duplicate the disclosure contained in the Partnership's 1996
10-K has been omitted
NOTE 2 - CLEARLAKE VILLAGE APARTMENTS
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, which is collateralized by the property
Clearlake Village Apartment, 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
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
COMPARISON OF THE SIX MONTH PERIODS ENDED JUNE 30, 1997 AND 1996
Net income for the six month period ended June 30, 1997 increased $79,000, or
50%, compared to 1996 primarily as a result of the increase in rental revenue
and a decrease in operating expense.
Total revenue for the six month period ended June 30, 1997 increased $60,000,
or 6%, primarily as a result of an increase in rental revenue at the Grouse
Run Apartments. The increase in rental revenue was attributable to an
increase in the average occupancy and rental rates at the Grouse Run
Apartments. For the six month periods ended June 30, 1997 and 1996 the
average occupancy rate at Grouse Run Apartments was 94% and 92%, respectively.
Total expenses decreased $19,000, or 2%, from $835,000 in 1996 to $816,000.
The decrease in total expenses was primarily attributable to a decrease in
operating expense of $21,000 by the Partnership's two remaining properties
reflecting decreases in utilities and repairs and maintenance expenses. The
decrease in related party expense of $100,000 and increase in interest
expense of $102,000 for the six months ended June 30, 1997, when compared to
the period in 1996 is due to the loan payable to related party being replaced
with a new loan from an unaffiliated third party in August, 1996.
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, 1997, 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 or
the Subsidiary, as herein after defined, in fee. All Partnership properties
are subject to mortgages.
As of June 30, 1997, cash and cash equivalents totaled $296,000. As of June
30, 1997, accrued interest due to General Partner amounted to $527,000. 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)
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, 1997 was $424,000, or $202,000 more than the same period in 1996. The
increase was primarily due to an to an increase in net income as described
under "Results of Operations" and to a decrease in other assets.
Net cash provided by investing activities for the six month period ended June
30, 1997, decreased $45,000 when compared to the same period in 1996. The
decrease was due to an increase in improvements to rental property.
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.
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, 1997.
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 13, 1997