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, 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 _____________________________
Commission file number 2-77330
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PROPERTY RESOURCES FUND VI
(Exact name of registrant as specified in its charter)
CALIFORNIA 94-2838890
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(State or other jurisdiction (I.R.S. Employer
of 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
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Limited Partnership Units Outstanding as of September 30, 1997: 21,585
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
PROPERTY RESOURCES FUND VI
(A CALIFORNIA LIMITED PARTNERSHIP)
BALANCE SHEETS
SEPTEMBER 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 7,328 7,174
Furnishings and equipment 1,050 1,041
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11,398 11,217
Less: accumulated depreciation 4,636 4,420
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6,762 6,797
Cash and cash equivalents 305 279
Note receivable 261 320
Other assets 337 413
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Total assets $7,665 $7,809
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LIABILITIES AND STOCKHOLDERS' EQUITY:
Note payable $6,666 $6,986
Advances from General Partner - 153
Accrued interest due to General Partner 527 524
Deposits and other liabilities 244 275
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Total liabilities 7,437 7,938
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Partners' capital (deficit):
Limited partners, 21,585 units
issued and outstanding 673 334
General Partner (445) (463)
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Total partners' capital (deficit) 228 (129)
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Total liabilities and partners' capital (deficit) $7,665 $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 NINE MONTHS ENDED
SEPTEMBER September SEPTEMBER September
30 30 30 30
(Dollars in thousands,
except per unit amounts) 1997 1996 1997 1996
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REVENUE:
Rent $528 $513 $1,564 $1,487
Interest and dividends 5 8 23 28
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Total revenue 533 521 1,587 1,515
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EXPENSES:
Interest, other than
related party 55 35 157 36
Depreciation 72 73 217 219
Operating 253 274 744 786
Related party 30 57 95 222
General and administrative 4 1 17 12
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Total expenses 414 440 1,230 1,275
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NET INCOME $119 $81 $357 $240
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Net income allocable
to limited partners $113 $77 $339 $228
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Net income allocable
to General Partner $6 $4 $18 $12
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Net income per $500 limited
partnership unit- based on
21,585 units outstanding $5.24 $3.57 $15.71 $10.56
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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 NINE MONTH PERIODS ENDED SEPTEMBER 30, 1997 AND 1996
(Unaudited)
(Dollars in thousands) 1997 1996
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Cash flows from operating activities:
Net income $357 $240
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Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 226 228
(Increase) decrease in other assets 66 (325)
Increase in accrued interest 3 26
Decrease in deposits and other liabilities (31) 21
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264 (50)
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Net cash provided by operating activities 621 190
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Cash flow from investing activities:
Improvements to rental property (181) (30)
Principal received on note receivable 59 48
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Net cash (used in) provided by investing activities (122) 18
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Origination of note payable - 2,167
Principal payments on notes payable (320) (307)
Principal payments to General Partner (153) (1,918)
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Net cash used in financing activities (473) (58)
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Net increase in cash and cash equivalents 26 150
Cash and cash equivalents, beginning of period 279 251
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Cash and cash equivalents, end of period $305 $401
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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
SEPTEMBER 30, 1997
NOTE 1 - BASIS OF PRESENTATION
The accompanying unaudited interim financial statements of Property Resources
Fund VI (the "Partnership") have been prepared in accordance with the
instructions to Form 10-Q pursuant to the rules and regulations of the
Securities and Exchange Commission. 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. In the opinion of management, all appropriate adjustments
necessary to a fair presentation of the results of operations have been made for
the periods shown. All adjustments are of a normal recurring nature. Certain
prior year amounts have been reclassified to conform to current year
presentations. These financial statements should be read in conjunction with the
Partnership's audited financial statements for the year ended December 31, 1996.
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 THREE- AND NINE-MONTH PERIODS ENDED SEPTEMBER 30, 1997 AND
1996
Net income for the three- and nine-month periods ended September 30, 1997
increased $38,000, or 47%, and $117,000, or 49%, respectively, when compared to
1996 primarily as a result of the increase in rental revenue and a decrease in
operating expense and related party expense.
Total revenue for the three- and nine-month periods ended September 30, 1997
increased $12,000, or 2% and $72,000, or 5%, respectively, when compared to 1996
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
nine-month periods ended September 30, 1997 and 1996 the average occupancy rate
at Grouse Run Apartments was 94% and 92%, respectively.
Total expenses for the three- and nine-month periods ended September 30, 1997
decreased $26,000, or 6%, and $45,000, or 4%, respectively, when compared to
1996 as a result of decreases in operating expense of $21,000, and $42,000,
respectively, by the Partnership's two remaining properties reflecting decreases
in utilities and repairs and maintenance expenses. The decrease in related party
expense of $27,000 and $127,000 and increase in interest expense of $20,000 and
$121,000 for the three- and nine-months periods ended September 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 September 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 September 30, 1997, cash and cash equivalents totaled $305,000. As of
September 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 nine month period ended
September 30, 1997 was $621,000, or $431,000 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 nine month period ended
September 30, 1997, decreased $140,000 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 September 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: NOVEMBER 13, 1997