1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
Quarterly Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the Quarterly Period Ended JUNE 30, 2001
Commission File Number 0-13112
REAL ESTATE ASSOCIATES LIMITED VI
(A California Limited Partnership)
I.R.S. Employer Identification No. 95-3778627
9090 WILSHIRE BLVD., SUITE 201
BEVERLY HILLS, CA. 90211
Registrant's Telephone Number,
Including Area Code (310) 278-2191
Indicate by check mark whether the registrant (1) has filed all documents and
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding twelve 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[ ]
2
REAL ESTATE ASSOCIATES LIMITED VI
(A CALIFORNIA LIMITED PARTNERSHIP)
INDEX TO FORM 10-Q
FOR THE QUARTER ENDED JUNE 30, 2001
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets,
June 30, 2001 and December 31, 2000 ...........................1
Consolidated Statements of Operations,
Six and Three Months Ended, June 30, 2001 and 2000.............2
Consolidated Statement of Partners' Equity (Deficiency)
Six Months Ended June 30, 2001 ................................3
Consolidated Statements of Cash Flows
Six Months Ended June 30, 2001 and 2000 .......................4
Notes to Consolidated Financial Statements .......................5
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operation ..............................14
PART II. OTHER INFORMATION
Item 1. Legal Proceedings..................................................16
Item 6. Exhibits and Reports on Form 8-K ..................................16
Signatures .................................................................17
3
REAL ESTATE ASSOCIATES LIMITED VI
(a California limited partnership)
BALANCE SHEETS
JUNE 30, 2001 AND DECEMBER 31, 2000
ASSETS
2001
(Unaudited) 2000
----------- -----------
INVESTMENTS IN LIMITED PARTNERSHIPS (Note 2) $ 523,507 $ 541,072
CASH AND CASH EQUIVALENTS (Note 1) 2,784,597 3,197,380
----------- -----------
TOTAL ASSETS $ 3,308,104 $ 3,738,452
=========== ===========
LIABILITIES AND PARTNERS' DEFICIENCY
LIABILITIES:
Notes payable and amounts due for partnership
interests (Notes 3 and 6) $ 1,765,000 $ 1,765,000
Accrued interest payable (Notes 3 and 6) 2,133,200 2,064,801
Accounts payable 26,454 16,429
----------- -----------
3,924,654 3,846,230
----------- -----------
COMMITMENTS AND CONTINGENCIES (Notes 4 and 5)
PARTNERS' (DEFICIENCY) EQUITY:
General partners (357,355) (352,267)
Limited partners (259,195) 244,489
----------- -----------
(616,550) (107,778)
----------- -----------
TOTAL LIABILITIES AND PARTNERS' (DEFICIENCY) EQUITY $ 3,308,104 $ 3,738,452
=========== ===========
The accompanying notes are an integral part of these
consolidated financial statements.
1
4
REAL ESTATE ASSOCIATES LIMITED VI
(a California limited partnership)
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE SIX AND THREE MONTHS ENDED JUNE 30, 2001 AND 2000
(Unaudited)
Six months Three months Six months Three months
ended ended ended ended
June 30, 2001 June 30, 2001 June 30, 2000 June 30, 2000
------------- ------------- ------------- -------------
REVENUE:
Interest income $ 64,513 $ 20,501 $ 81,622 43,337
--------- --------- --------- ---------
Operating expenses:
Management fees - general partner (Note 4) 103,217 51,609 102,950 51,342
General and administrative (Note 4) 79,343 37,696 131,236 73,530
Interest (Note 3) 68,400 34,200 68,400 34,200
--------- --------- --------- ---------
256,136 123,505 302,586 159,072
--------- --------- --------- ---------
LOSS FROM OPERATIONS (191,623) (103,004) (220,964) (115,735)
--------- --------- --------- ---------
EQUITY IN INCOME (LOSS) OF LIMITED
PARTNERSHIPS AND AMORTIZATION
OF ACQUISITION COSTS (Note 2) (326,413) (108,470) 24,000 12,000
DISTRIBUTIONS FROM LIMITED
PARTNERSHIPS RECOGNIZED AS
INCOME (Note 2) 9,264 141,192 14,778 14,778
--------- --------- --------- ---------
NET LOSS $(508,772) $ (70,282) $(182,186) $ (88,957)
========= ========= ========= =========
NET LOSS PER LIMITED PARTNERSHIP
INTEREST (Note 1) $ (30) $ (4) $ (11) $ (5)
========= ========= ========= =========
The accompanying notes are an integral
part of these consolidated financial statements.
2
5
REAL ESTATE ASSOCIATES LIMITED VI
(a California limited partnership)
CONSOLIDATED STATEMENT OF PARTNERS' EQUITY (DEFICIENCY)
FOR THE SIX MONTHS ENDED JUNE 30, 2001
(Unaudited)
General Limited
Partners Partners Total
--------- --------- ----------
PARTNERSHIP INTERESTS 16,810
=========
DEFICIENCY,
January 1, 2001 $(352,267) $ 244,489 $(107,778)
Net loss for the six months
ended June 30, 2001 (5,088) (503,684) (508,772)
--------- --------- ---------
DEFICIENCY,
June 30, 2001 $(357,355) $(259,195) $(616,550)
========= ========= =========
The accompanying notes are an integral part of these
consolidated financial statements.
3
6
REAL ESTATE ASSOCIATES LIMITED VI
(a California limited partnership)
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 2001 AND 2000
(Unaudited)
2001 2000
----------- -----------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (508,772) $ (182,186)
Adjustments to reconcile net loss to net
cash (used in) provided by operating activities:
Equity in loss (income) of limited partnerships 326,413 (24,000)
Decrease in due from NAPICO - 239,770
Increase in accrued interest payable 68,399 53,266
Increase in accounts payable 10,025 12,597
----------- -----------
Net cash (used in) provided by operating activities (103,935) 99,447
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Distributions from limited partnerships recognized as 40,440
as a return of capital -
Advances to limited partnerships (349,288) (76,910)
----------- -----------
Net cash used in investing activities (308,848) (76,910)
----------- -----------
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS (412,783) 22,537
CASH AND CASH EQUIVALENTS, beginning of period 3,197,380 3,312,395
----------- -----------
CASH AND CASH EQUIVALENTS, end of period $ 2,784,597 $ 3,334,932
=========== ===========
The accompanying notes are an integral part of these
consolidated financial statements.
4
7
REAL ESTATE ASSOCIATES LIMITED VI
(A CALIFORNIA LIMITED PARTNERSHIP)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2001
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
GENERAL
The information contained in the following notes to the financial
statements is condensed from that which would appear in the audited
annual financial statements; accordingly, the financial statements
included herein should be reviewed in conjunction with the financial
statements and related notes thereto contained in the annual report for
the year ended December 31, 2000 prepared by Real Estate Associates
Limited VI and Subsidiaries (the "Partnership"). Accounting
measurements at interim dates inherently involve greater reliance on
estimates than at year end. The results of operations for the interim
periods presented are not necessarily indicative of the results for the
entire year.
In the opinion of the Partnership, the accompanying unaudited financial
statements contain all adjustments (consisting primarily of normal
recurring accruals) necessary to present fairly the financial position
of the Partnership at June 30, 2001 and the results of operations and
changes in cash flows for the six and three months then ended.
The general partners have a 1 percent interest in profits and losses of
the Partnership. The limited partners have the remaining 99 percent
interest which is allocated in proportion to their respective
individual investments. National Partnership Investments Corp. (NAPICO)
is the managing general partner of the Partnership. Casden Properties
Inc. owns a 95.25% economic interest in NAPICO, with the balance owned
by Casden Investment Corporation ("CIC"). CIC, which is wholly owned by
Alan I. Casden, owns 95% of the voting common stock of NAPICO.
BASIS OF PRESENTATION
The accompanying financial statements have been prepared in conformity
with accounting principles generally accepted in the United States of
America.
USE OF ESTIMATES
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets
and liabilities at the date of the financial statements and reported
amounts of revenues and expenses during the reporting period. Actual
results could differ from those estimates.
5
8
REAL ESTATE ASSOCIATES LIMITED VI
(A CALIFORNIA LIMITED PARTNERSHIP)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 2001
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of Real
Estate Associates Limited VI and its majority-owned general
partnership. All significant intercompany accounts and transactions
have been eliminated in consolidation.
METHOD OF ACCOUNTING FOR INVESTMENT IN THE UNCONSOLIDATED LIMITED
PARTNERSHIPS
The investments in unconsolidated limited partnerships are accounted
for on the equity method. Acquisition, selection and other costs
related to the acquisition of the projects are capitalized as part of
the investment account and are being amortized on a straight line basis
over the estimated lives of the underlying assets, which is generally
30 years.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents consist of unrestricted cash and bank
certificates of deposit with maturities of three months or less. The
Partnership has its cash and cash equivalents on deposit with high
credit quality financial institutions. Such cash and cash equivalents
are in excess of the FDIC insurance limit.
NET LOSS PER LIMITED PARTNERSHIP INTEREST
Net loss per limited partnership interest was computed by dividing the
limited partners' share of net loss by the number of limited
partnership interests outstanding during the year. The number of
limited partnership interests was 16,810 for the periods presented.
INCOME TAXES
No provision has been made for income taxes in the accompanying
financial statements since such taxes, if any, are the liability of the
individual partners.
6
9
REAL ESTATE ASSOCIATES LIMITED VI
(A CALIFORNIA LIMITED PARTNERSHIP)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 2001
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
IMPAIRMENT OF LONG-LIVED ASSETS
The Partnership reviews long-lived assets to determine if there has
been any permanent impairment whenever events or changes in
circumstances indicate that the carrying amount of the asset may not be
recoverable. If the sum of the expected future cash flows is less than
the carrying amount of the assets, the Partnership recognizes an
impairment loss.
NOTE 2 - INVESTMENTS IN LIMITED PARTNERSHIPS
The Partnership holds limited partnership interests in 20 limited
partnerships as of June 30, 2001. In addition, the Partnership holds a
general partner interest in REA III, which in turn, holds limited
partner interests in 3 additional limited partnerships. In total,
therefore, the Partnership holds interests, either directly or
indirectly through REA III, in 23 partnerships, located in 13 different
states, which owned as of June 30, 2001, residential low income rental
projects consisting of 1,369 apartment units. The mortgage loans of
these projects are payable to or insured by various governmental
agencies.
The Partnership, as a limited partner, is entitled to between 90
percent and 99 percent of the profits and losses of the limited
partnerships it has invested in directly. The Partnership is also
entitled to 99.9 percent of the profits and losses of REA III. REA III
holds a 99 percent interest in each of the limited partnerships in
which it has invested.
Equity in losses of unconsolidated limited partnerships is recognized
in the financial statements until the limited partnership investment
account is reduced to a zero balance or to a negative amount equal to
further capital contributions required. Losses incurred after the
limited partnership investment account is reduced to zero are not
recognized. The cumulative amount of the unrecognized equity in losses
of unconsolidated limited partnerships was in the aggregate
approximately $11,612,000 and $11,357,000 as of June 30, 2001 and
December 31, 2000, respectively.
Distributions from the unconsolidated limited partnerships are
accounted for as a return of capital until the investment balance is
reduced to zero. Subsequent distributions received are recognized as
income.
7
10
REAL ESTATE ASSOCIATES LIMITED VI
(A CALIFORNIA LIMITED PARTNERSHIP)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 2001
NOTE 2 - INVESTMENTS IN LIMITED PARTNERSHIP (CONTINUED)
The following is a summary of the investment in unconsolidated limited
partnerships for the six months ended June 30, 2001:
Balance, beginning of period $541,072
Equity in loss of limited partnerships (326,413)
Advances to limited partnerships 349,288
Distribution recognized as a return of capital (40,440)
--------
Balance, end of period $523,507
========
The following are unaudited combined estimated statements of operations
for the six and three months ended June 30, 2001 and 2000 of the
unconsolidated limited partnerships in which the Partnership has
investments:
Six months Three months Six months Three months
ended ended ended ended
June 30, 2001 June 30, 2001 June 30, 2000 June 30, 2000
------------- ------------- ------------- -------------
REVENUES:
Rental and other $4,948,000 $2,474,000 $ 4,964,000 $2,482,000
---------- ---------- ----------- ----------
EXPENSES:
Depreciation 806,000 403,000 802,000 401,000
Interest 1,294,000 647,000 1,338,000 669,000
Operating expenses 3,068,000 1,534,000 3,038,000 1,519,000
----------- ----------- ----------- ----------
Total expenses 5,168,000 2,584,000 5,178,000 2,589,000
----------- ----------- ----------- ----------
Net loss $ (220,000) $ (110,000) $ (214,000) $ (107,000)
=========== =========== =========== ==========
NAPICO, or one of its affiliates, is the general partner and property
management agent for certain of the limited partnerships included
above. The Local Partnerships pay the affiliate property management
fees in the amount of 5 percent of their gross rental revenues and data
processing fees. The amounts paid were approximately $61,613 for the
six months ended June 30, 2001.
8
11
REAL ESTATE ASSOCIATES LIMITED VI
(A CALIFORNIA LIMITED PARTNERSHIP)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 2001
NOTE 2 - INVESTMENTS IN LIMITED PARTNERSHIP (CONTINUED)
Under recently adopted law and policy, the United States Department of
Housing and Urban Development ("HUD") has determined not to renew the
Housing Assistance Payment ("HAP") Contracts on a long term basis on
the existing terms. In connection with renewals of the HAP Contracts
under such new law and policy, the amount of rental assistance payments
under renewed HAP Contracts will be based on market rentals instead of
above market rentals, which may be the case under existing HAP
Contracts. The payments under the renewed HAP Contracts may not be in
an amount that would provide sufficient cash flow to permit owners of
properties subject to HAP Contracts to meet the debt service
requirements of existing loans insured by the Federal Housing
Administration of HUD ("FHA") unless such mortgage loans are
restructured. In order to address the reduction in payments under HAP
Contracts as a result of this new policy, the Multi-family Assisted
Housing Reform and Affordability Act of 1997 ("MAHRAA"), which was
adopted in October 1997, provides for the restructuring of mortgage
loans insured by the FHA with respect to properties subject to the
Section 8 program. Under MAHRAA, an FHA-insured mortgage loan can be
restructured into a first mortgage loan which will be amortized on a
current basis and a low interest second mortgage loan payable to FHA
which will only be payable on maturity of the first mortgage loan. This
restructuring results in a reduction in annual debt service payable by
the owner of the FHA-insured mortgage loan and is expected to result in
an insurance payment from FHA to the holder of the FHA-insured loan due
to the reduction in the principal amount. MAHRAA also phases out
project-based subsidies on selected properties serving families not
located in rental markets with limited supply, converting such
subsidies to a tenant-based subsidy.
When the HAP Contracts are subject to renewal, there can be no
assurance that the local limited partnerships in which the Partnership
has an investment will be permitted to restructure its mortgage
indebtedness under MAHRAA. In addition, the economic impact on the
Partnership of the combination of the reduced payments under the HAP
Contracts and the restructuring of the existing FHA-insured mortgage
loans under MAHRAA is uncertain.
On December 30, 1998, after obtaining the consent of the limited
partners, the Partnership sold its limited partnership interests in 10
local limited partnerships and its general partner interest in one
local general partnership to subsidiaries of Casden Properties Inc. The
sale resulted in cash proceeds to the Partnership of $1,397,081 which
was collected in 1999. In March 1999, the Partnership made cash
distributions of $2,769,110 to the limited partners and $27,971 to the
general partners, primarily using proceeds from the sale of the
partnership interests.
9
12
REAL ESTATE ASSOCIATES LIMITED VI
(A CALIFORNIA LIMITED PARTNERSHIP)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 2001
NOTE 3 - NOTES PAYABLE
Certain of the Partnership's investments involved purchases of
partnership interests from partners who subsequently withdrew from the
operating partnership. The purchase of these interests provides for
additional cash payments of approximately $325,000 based upon specified
events as outlined in the purchase agreements. Such amounts have been
recorded as liabilities. In addition, the Partnership is obligated on
non-recourse notes payable of $1,440,000 which bear interest at 9.5
percent per annum and have principal maturities ranging from December
1999 to December 2012.
The notes and related interest are payable from cash flow generated
from operations of the related rented properties as defined in the
notes. These obligations are collateralized by the Partnership's
investments in the limited partnerships. Unpaid interest is due at
maturity of the notes.
Maturity dates on the notes and related accrued interest payable are as
follows:
Year Ending Accrued
December 31, Notes Interest
------------ ----------- -----------
2001 $ 520,000 $ 823,087
2002
2003
2004
2005 750,000 947,334
Thereafter 170,000 362,779
---------- ----------
$1,440,000 $2,133,200
========== ==========
Note and related accrued interest payable, aggregating $1,343,087 as of
June 30, 2001 became payable in 1999.
Management is in the process of attempting to negotiate an extension of
the maturity date on the past due note payable.
10
13
REAL ESTATE ASSOCIATES LIMITED VI
(A CALIFORNIA LIMITED PARTNERSHIP)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 2001
NOTE 4 - MANAGEMENT FEES AND EXPENSES DUE TO GENERAL PARTNER
Under the terms of the Restated Certificate and Agreement of Limited
Partnership, the Partnership is obligated to NAPICO for an annual
management fee of approximately .4 percent of the original invested
assets of the limited partnerships. Invested assets are defined as the
costs of acquiring project interests, including the proportionate
amount of the mortgage loans related to the Partnership's interests in
the capital accounts of the respective partnerships. This fee was
approximately $103,217 and $131,000 for the six months ended June 30,
2001 and 2000, respectively.
The Partnership reimburses NAPICO for certain expenses. The
reimbursement to NAPICO was approximately $11,370 and $20,600 for the
six months ended June 30, 2001 and 2000, respectively, and is included
in general and administrative expenses.
NOTE 5 - CONTINGENCIES
On August 27, 1998, two investors holding an aggregate of eight units
of limited partnership interests in Real Estate Associates Limited III
(an affiliated partnership in which NAPICO is the managing general
partner) and two investors holding an aggregate of five units of
limited partnership interest in the Partnership commenced an action in
the United States District Court for the Central District of California
against the Partnership, NAPICO and certain other affiliated entities.
The complaint alleges that the defendants breached their fiduciary duty
to the limited partners of certain NAPICO managed partnerships and made
materially false and misleading statements in the consent solicitation
statements sent to the limited partners of such partnerships relating
to approval of the transfer of partnership interests in limited
partnerships, owning certain of the properties, to Casden Properties
Inc., which was organized by an affiliate of NAPICO. The plaintiffs
seek equitable relief, as well as compensatory damages and litigation
related costs. On August 4, 1999, one investor holding one unit of
limited partnership interest in Housing Programs Limited (another
affiliated partnership in which NAPICO is the managing general partner)
commenced a virtually identical action in the United States District
Court for the Central District of California against the Partnership,
NAPICO and certain other affiliated entities. NAPICO, the managing
general partner of such partnerships, and the other defendants believe
that the plaintiffs' claims are without merit and are contesting the
actions vigorously.
11
14
REAL ESTATE ASSOCIATES LIMITED VI
(A CALIFORNIA LIMITED PARTNERSHIP)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 2001
NOTE 5 -- CONTINGENCIES (CONTINUED)
The managing general partner of the Partnership is involved in various
lawsuits and have also been named defendants in other lawsuits arising
from transactions in the ordinary course of business. In the opinion of
management and the corporate general partner, the claims will not
result in any material liability to the Partnership.
NOTE 6 - FAIR VALUE OF FINANCIAL INSTRUMENTS
Statement of Financial Accounting Standards No. 107, "Disclosure about
Fair Value of Financial Instruments," requires disclosure of fair value
information about financial instruments, when it is practicable to
estimate that value. The mortgage notes payable are insured by HUD and
are collateralized by the rental properties. The notes payable are
collateralized by the Partnership's investments in investee limited
partnerships and are payable only out of cash distributions from the
investee partnerships. The operations generated by the property and
investee limited partnerships are subject to various government rules,
regulations and restrictions which make it impracticable to estimate
the fair value of the mortgage note payable and the notes payable and
related accrued interest. The carrying amounts of other assets and
liabilities reported on the balance sheets that require such disclosure
approximate fair value due to their short-term maturity.
12
15
REAL ESTATE ASSOCIATES LIMITED VI
(A CALIFORNIA LIMITED PARTNERSHIP)
JUNE 30, 2001
ITEM 2. MANAGEMENT'S ANALYSIS AND DISCUSSION OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES
The Partnership's primary sources of funds include interest income on
short term investments and distributions from limited partnerships in
which the Partnership has invested. It is not expected that any of the
local limited partnerships in which the Partnership has invested will
generate cash flow sufficient to provide for distributions to limited
partners in any material amount. The Partnership made a distribution to
investors in June 30, 2001, previously using proceeds from the
disposition of its investments in certain limited partnerships.
RESULTS OF OPERATIONS
Rental operations consist primarily of rental income and depreciation
expense, debt service, and normal operating expenses to maintain the
properties. Variances in rental operations from the prior year to the
current year relate to the sale of the Drexel Property.
Partnership revenues consist primarily of interest income earned on
certificates of deposit and other temporary investment of funds not
required for investment in local partnerships.
Operating expenses consist primarily of recurring general and
administrative expenses and professional fees for services rendered to
the Partnership. In addition, an annual Partnership management fee in
an amount equal to .4 percent of invested assets is payable to the
corporate general partner.
The Partnership accounts for its investments in the local limited
partnerships on the equity method, thereby adjusting its investment
balance by its proportionate share of the income or loss of the local
limited partnerships. Losses incurred after the limited partnership
investment account is reduced to zero are not recognized in accordance
with the equity accounting method.
Distributions received from limited partnerships are recognized as
return of capital until the investment balance has been reduced to zero
or to a negative amount equal to future capital contributions required.
Subsequent distributions received are recognized as income.
13
16
REAL ESTATE ASSOCIATES LIMITED VI
(A CALIFORNIA LIMITED PARTNERSHIP)
JUNE 30, 2001
ITEM 2. MANAGEMENT'S ANALYSIS AND DISCUSSION OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
RESULTS OF OPERATIONS (CONTINUED)
Except for certificates of deposit and money market funds, the
Partnership's investments are entirely from interests in other limited
and general partnerships owning government assisted projects. Available
cash is invested in these funds earning interest income as reflected in
the statement of operations. These funds can be converted to cash to
meet obligations as they arise.
Under recently adopted law and policy, the United States Department of
Housing and Urban Development ("HUD") has determined not to renew the
Housing Assistance Payment ("HAP") Contracts on a long term basis on
the existing terms. In connection with renewals of the HAP Contracts
under such new law and policy, the amount of rental assistance payments
under renewed HAP Contracts will be based on market rentals instead of
above market rentals, which may be the case under existing HAP
Contracts. The payments under the renewed HAP Contracts may not be in
an amount that would provide sufficient cash flow to permit owners of
properties subject to HAP Contracts to meet the debt service
requirements of existing loans insured by the Federal Housing
Administration of HUD ("FHA") unless such mortgage loans are
restructured. In order to address the reduction in payments under HAP
Contracts as a result of this new policy, the Multi-family Assisted
Housing Reform and Affordability Act of 1997 ("MAHRAA"), which was
adopted in October 1997, provides for the restructuring of mortgage
loans insured by the FHA with respect to properties subject to the
Section 8 program. Under MAHRAA, an FHA-insured mortgage loan can be
restructured into a first mortgage loan which will be amortized on a
current basis and a low interest second mortgage loan payable to FHA
which will only be payable on maturity of the first mortgage loan. This
restructuring results in a reduction in annual debt service payable by
the owner of the FHA-insured mortgage loan and is expected to result in
an insurance payment from FHA to the holder of the FHA-insured loan due
to the reduction in the principal amount. MAHRAA also phases out
project-based subsidies on selected properties serving families not
located in rental markets with limited supply, converting such
subsidies to a tenant-based subsidy.
14
17
REAL ESTATE ASSOCIATES LIMITED VI
(A CALIFORNIA LIMITED PARTNERSHIP)
JUNE 30, 2001
ITEM 2. MANAGEMENT'S ANALYSIS AND DISCUSSION OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
RESULTS OF OPERATIONS (CONTINUED)
When the HAP Contracts are subject to renewal, there can be no
assurance that the local limited partnerships in which the Partnership
has an investment will be permitted to restructure its mortgage
indebtedness under MAHRAA. In addition, the economic impact on the
Partnership of the combination of the reduced payments under the HAP
Contracts and the restructuring of the existing FHA-insured mortgage
loans under MAHRAA is uncertain.
On December 30, 1998, the Partnership sold its limited partnership
interests in 10 local limited partnerships and its general partner
interest in one local general partnership to subsidiaries of Casden
Properties Inc. The sale resulted in cash proceeds to the Partnership
of $1,397,081 which was collected subsequent to year-end. In March
1999, the Partnership made cash distributions of $2,769,110 to the
limited partners and $27,971 to the general partners, primarily using
proceeds from the sale of the partnership interests.
Note and related accrued interest payable, aggregating $1,343,087 as of
June 30, 2001 became payable in 1999.
Management is in the process of attempting to negotiate an extension of
the maturity date on the past due note payable.
15
18
REAL ESTATE ASSOCIATES LIMITED VI
(A CALIFORNIA LIMITED PARTNERSHIP)
JUNE 30, 2001
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
On August 27, 1998, two investors holding an aggregate of eight units of limited
partnership interests in Real Estate Associates Limited III (an affiliated
partnership in which NAPICO is the managing general partner) and two investors
holding an aggregate of five units of limited partnership interest in the
Partnership commenced an action in the United States District Court for the
Central District of California against the Partnership, NAPICO and certain other
affiliated entities. The complaint alleges that the defendants breached their
fiduciary duty to the limited partners of certain NAPICO managed partnerships
and made materially false and misleading statements in the consent solicitation
statements sent to the limited partners of such partnerships relating to
approval of the transfer of partnership interests in limited partnerships,
owning certain of the properties, to Casden Properties Inc., which was organized
by an affiliate of NAPICO. The plaintiffs seek equitable relief, as well as
compensatory damages and litigation related costs. On August 4, 1999, one
investor holding one unit of limited partnership interest in Housing Programs
Limited (another affiliated partnership in which NAPICO is the managing general
partner) commenced a virtually identical action in the United States District
Court for the Central District of California against the Partnership, NAPICO and
certain other affiliated entities. NAPICO, the managing general partner of such
partnerships, and the other defendants believe that the plaintiffs' claims are
without merit and are contesting the actions vigorously.
The Partnership's managing general partner is involved in various lawsuits. None
of these lawsuits are related to the Partnership.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) No exhibits are required per the provision of item 7 of
regulation S-K and no reports on Form 8-K were filed during
the quarter ended June 30, 2001.
16
19
REAL ESTATE ASSOCIATES LIMITED VI
(A LIMITED PARTNERSHIP)
JUNE 30, 2001
SIGNATURES
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.
REAL ESTATE ASSOCIATES LIMITED VI AND
SUBSIDIARIES (a California limited partnership)
By: National Partnership Investments
Corp., General Partner
/s/ BRUCE NELSON
---------------------------------------
Bruce Nelson
President
Date: August 14, 2001
---------------------------------------
/s/ BRIAN H. SHUMAN
---------------------------------------
Brian H. Shuman
Chief Financial Officer
Date: August 14, 2001
---------------------------------------
17