FORM 10-QSB.--QUARTERLY REPORT OR TRANSITIONAL
UNDER SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
QUARTERLY OR TRANSITIONAL REPORT
U.S. Securities and Exchange Commission
Washington, D.C. 20549
FORM 10-QSB
(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
[ ] 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 0-11864
NATIONAL PROPERTY INVESTORS 6
(Exact name of small business issuer as specified in its charter)
California 13-3140364
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
One Insignia Financial Plaza, P.O. Box 1089
Greenville, South Carolina 29602
(Address of principal executive offices)
(864) 239-1000
(Issuer's telephone number)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 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
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
a) NATIONAL PROPERTY INVESTORS 6
BALANCE SHEET
(Unaudited)
(in thousands, except unit data)
September 30, 1997
Assets
Cash and cash equivalents $ 4,492
Receivables and deposits 2,593
Other assets 1,285
Investment properties:
Land $ 5,366
Buildings and related personal property 75,027
80,393
Less accumulated depreciation (49,504) 30,889
$ 39,259
Liabilities and Partners' Capital (Deficit)
Liabilities
Accounts payable $ 539
Tenant security deposits 270
Accrued property taxes 237
Other liabilities 482
Mortgages notes payable 34,452
Partners' Capital (Deficit)
Limited partners' (109,600 units issued and
outstanding) $ 3,794
General partner's (515) 3,279
$ 39,259
See Accompanying Notes to Financial Statements
b) NATIONAL PROPERTY INVESTORS 6
STATEMENTS OF OPERATIONS
(Unaudited)
(in thousands, except unit data)
Three Months Ended Nine Months Ended
September 30, September 30,
1997 1996 1997 1996
Revenues:
Rental income $ 3,303 $ 3,244 $ 9,698 $ 9,732
Other income 260 284 782 786
Total revenues 3,563 3,528 10,480 10,518
Expenses:
Operating 2,457 1,825 5,837 5,147
Interest 702 600 2,108 1,800
Depreciation 849 804 2,450 2,385
General and administrative 75 90 222 266
Loss on disposal of property 152 -- 152 --
Total expenses 4,235 3,319 10,769 9,598
(Loss) income before
extraordinary loss (672) 209 (289) 920
Extraordinary loss on
debt refinancing -- (355) -- (355)
Net (loss) income $ (672) $ (146) $ (289) $ 565
Net (loss) income allocated
to general partner (1%) $ (7) $ (1) $ (3) $ 6
Net (loss) income allocated
to limited partners (99%) (665) (145) (286) 559
$ (672) $ (146) $ (289) $ 565
Net (loss) income per limited
partnership unit:
(Loss) income before
extraordinary loss $ (6.07) $ 1.89 $ (2.61) $ 8.31
Extraordinary loss on
debt refinancing -- (3.21) -- (3.21)
Net (loss) income per limited
partnership unit $ (6.07) $ (1.32) $ (2.61) $ 5.10
See Accompanying Notes to Financial Statements
c) NATIONAL PROPERTY INVESTORS 6
STATEMENT OF CHANGES IN PARTNERS' CAPITAL (DEFICIT)
(Unaudited)
(in thousands, except unit data)
<TABLE>
<CAPTION>
Limited
Partnership General Limited
Units Partner's Partners' Total
<S> <C> <C> <C> <C>
Original capital contributions 109,600 $ 1 $ 54,800 $ 54,801
Partners' (deficit) capital
at December 31, 1996 109,600 $ (512) $ 4,080 $ 3,568
Net loss for the nine months
ended September 30, 1997 -- (3) (286) (289)
Partners' (deficit) capital at
September 30, 1997 109,600 $ (515) $ 3,794 $ 3,279
<FN>
See Accompanying Notes to Financial Statements
</FN>
</TABLE>
d) NATIONAL PROPERTY INVESTORS 6
STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
1997 1996
<S> <C> <C>
Cash flows from operating activities:
Net (loss) income $ (289) $ 565
Adjustments to reconcile net (loss) income to net
cash provided by operating activities:
Depreciation 2,450 2,385
Amortization of loan costs 138 78
Extraordinary loss on debt refinancing -- 355
Loss on disposal of property 152 --
Change in accounts:
Receivables and deposits (55) (216)
Other assets (108) (44)
Accounts payable (52) (11)
Tenant security deposit liabilities (43) (73)
Accrued property taxes 198 119
Other liabilities (67) (8)
Net cash provided by operating activities 2,324 3,150
Cash flows from investing activities:
Property improvements and replacements (2,362) (806)
Deposits to restricted escrows (351) (886)
Receipts from restricted escrows 190 --
Net cash used in investing activities (2,523) (1,692)
Cash flows from financing activities:
Mortgage principal payments (84) (271)
Repayment of mortgage notes payable -- (16,030)
Proceeds from refinancing of debt -- 27,150
Loan costs (54) (820)
Debt extinguishment costs -- (274)
Distributions paid (10,621) --
Net cash (used in) provided by financing
activities (10,759) 9,755
Net (decrease) increase in cash and
cash equivalents (10,958) 11,213
Cash and cash equivalents at beginning of period 15,450 5,450
Cash and cash equivalents at end of period $ 4,492 $16,663
Supplemental information:
Cash paid for interest $ 1,970 $ 1,916
Supplemental disclosure of non-cash activity:
Accounts payable was adjusted approximately $138,000 at September 30, 1997,
for non-cash amounts in connection with property improvements and
replacements.
<FN>
See Accompanying Notes to Financial Statements
</FN>
</TABLE>
e) NATIONAL PROPERTY INVESTORS 6
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
NOTE A - BASIS OF PRESENTATION
The accompanying unaudited financial statements of National Property Investors 6
(the "Partnership") have been prepared in accordance with generally accepted
accounting principles for interim financial information and with the
instructions to Form 10-QSB and Item 310(b) of Regulation S-B. Accordingly,
they do not include all of the information and footnotes required by generally
accepted accounting principles for complete financial statements. In the
opinion of NPI Equity Investments, Inc. ("NPI Equity" or the "Managing General
Partner"), all adjustments (consisting of normal recurring accruals) considered
necessary for a fair presentation have been included. Operating results for the
three and nine month periods ended September 30, 1997, are not necessarily
indicative of the results that may be expected for the fiscal year ending
December 31, 1997. For further information, refer to the financial statements
and footnotes thereto included in the Partnership's annual report on Form 10-KSB
for the year ended December 31, 1996.
Certain reclassifications have been made to the 1996 information to conform to
the 1997 presentation.
NOTE B - TRANSACTIONS WITH AFFILIATED PARTIES
The Partnership has no employees and is dependent on the Managing General
Partner and its affiliates for the management and administration of all
partnership activities. The Partnership Agreement provides for payments to
affiliates for services and as reimbursement of certain expenses incurred by
affiliates on behalf of the Partnership.
Pursuant to a series of transactions which closed during 1996, affiliates of
Insignia Financial Group, Inc. ("Insignia") acquired all of the issued and
outstanding shares of stock of NPI Equity and National Property Investors, Inc.
("NPI"). NPI Equity is a wholly-owned subsidiary of NPI. In connection with
these transactions, affiliates of Insignia appointed new officers and directors
of NPI Equity and NPI.
The following transactions with affiliates of Insignia, NPI, and affiliates of
NPI were incurred in the nine months ended September 30, 1997 and 1996 (in
thousands):
1997 1996
Property management fees (included in operating
expenses) $507 $516
Reimbursement for services of affiliates, including
$154,000 and $19,000 of construction services
reimbursements in 1997 and 1996 (included in general
and administrative and operating expenses, and
investment properties) 334 228
During the nine months ended September 30, 1996, the Partnership paid
approximately $284,000 to an affiliate of the Managing General Partner for
brokerage fees incurred in connection with the September 30, 1996, refinancing
of all of the Partnership's properties except The Village (see "Note D"). These
charges have been capitalized as loan costs, and will be amortized over the life
of the loans.
For services relating to the administration of the Partnership and operation of
partnership properties, the Managing General Partner is entitled to receive
payment for non-accountable expenses up to a maximum of $150,000 per year, based
upon the number of Partnership units sold, subject to certain limitations. The
Managing General Partner was entitled to receive $150,000 in 1996. The
Partnership accrued such fees in 1996 and paid these fees in January 1997.
For the period of January 19, 1996, to August 31, 1997, the Partnership insured
its properties under a master policy through an agency and insurer unaffiliated
with the Managing General Partner. An affiliate of the Managing General Partner
acquired, in the acquisition of a business, certain financial obligations from
an insurance agency which was later acquired by the agent who placed the current
year's master policy. The current agent assumed the financial obligations to the
affiliate of the Managing General Partner who received payments on these
obligations from the agent. The amount of the Partnership's insurance premiums
accruing to the benefit of the affiliate of the Managing General Partner by
virtue of the agent's obligations is not significant.
NOTE C - TENANT-IN-COMMON PROPERTY
The Partnership currently owns The Village Apartments, as a tenant-in-common
with National Property Investors 5 ("NPI 5"), an affiliated public limited
partnership. NPI 5 acquired a 24.028% undivided interest with the Partnership
owning the remaining 75.972%. The property is accounted for using the
proportionate consolidation method. The financial statements and supplementary
data reflect the Partnership's 75.972% proportionate share of historical cost of
this property.
The condensed, combined balance sheet of The Village Apartments and the
Partnership's proportionate share of assets, liabilities and equity at September
30, 1997, and the condensed, combined statements of operations of The Village
Apartments and the Partnership's proportionate share of revenues and expenses
for the nine and three month periods ended September 30, 1997 and 1996, are
summarized as follows (in thousands):
<TABLE>
<CAPTION>
PROPORTIONATE
COMBINED SHARE
September 30, September 30,
1997 1997
<S> <C> <C>
Total assets, primarily real estate $12,097 $9,250
Liabilities, primarily a mortgage payable $11,187 $8,499
Equity 910 751
Total liabilities and equity $12,097 $9,250
</TABLE>
<TABLE>
<CAPTION>
COMBINED PROPORTIONATE SHARE
Nine Months Ended Nine Months Ended
September 30, September 30,
1997 1996 1997 1996
<S> <C> <C> <C> <C>
Total revenues $ 3,510 $ 3,419 $ 2,666 $ 2,597
Operating and other expenses $ 1,934 $ 1,879 $ 1,470 $ 1,428
Depreciation 581 553 441 420
Mortgage interest 743 752 564 571
Total expenses 3,258 3,184 2,475 2,419
Net income $ 252 $ 235 $ 191 $ 178
</TABLE>
<TABLE>
<CAPTION>
COMBINED PROPORTIONATE SHARE
Three Months Ended Three Months Ended
September 30, September 30,
1997 1996 1997 1996
<S> <C> <C> <C> <C>
Total revenues $ 1,207 $ 1,179 $ 916 $ 895
Operating and other expenses $ 744 $ 665 $ 566 $ 505
Depreciation 199 189 151 144
Mortgage interest 247 251 187 190
Total expenses 1,190 1,105 904 839
Net income $ 17 $ 74 $ 12 $ 56
</TABLE>
NOTE D - REFINANCING AND EXTRAORDINARY LOSS
On September 30, 1996, the Managing General Partner refinanced the mortgages on
all of the Partnership's properties except The Village on an interim basis. The
mortgages were refinanced into short-term temporary loans at 8% interest.
During the fourth quarter of 1996, the Partnership entered into permanent
refinancing effective November 1, 1996, with an interest rate equal to 7.33%.
Payments of interest only are due on the first day of each month until the loans
mature on November 1, 2003. Total capitalized loan costs were approximately
$820,000 at September 30, 1996. The Partnership recognized an extraordinary
loss on early extinguishment of debt in the amount of approximately $355,000 due
to the write off of unamortized loan costs and prepayment premiums.
The refinancing of Rocky Ridge Apartments replaced indebtedness of approximately
$1,496,000 with a new mortgage in the amount of $1,450,000. The Partnership
paid a prepayment premium of approximately $15,000 and wrote off unamortized
loan costs of approximately $18,000 resulting in an extraordinary loss on
refinancing of approximately $33,000.
The refinancing of Place du Plantier replaced indebtedness of approximately
$2,358,000 with a new mortgage in the amount of $3,800,000. The Partnership
paid a prepayment premium of approximately $24,000 and wrote off unamortized
loan costs of approximately $2,000 resulting in an extraordinary loss on
refinancing of approximately $26,000.
The refinancing of Fairway View I replaced indebtedness of approximately
$2,357,000 with a new mortgage in the amount of $4,000,000. The Partnership
paid a prepayment premium of approximately $24,000 and wrote off loan costs of
approximately $2,000 resulting in an extraordinary loss on refinancing of
approximately $26,000.
The refinancing of Colony at Kenilworth replaced indebtedness of approximately
$7,924,000 with a short-term loan in the amount of $9,000,000. The permanent
refinancing for Colony at Kenilworth was for $7,985,000. The Partnership paid a
prepayment premium of approximately $193,000 and wrote off loan costs of
approximately $36,000 resulting in an extraordinary loss on refinancing of
approximately $229,000.
The refinancing of Alpine Village replaced indebtedness of approximately
$1,895,000 with a new mortgage of $2,100,000. The Partnership paid a prepayment
premium of approximately $19,000 and wrote off unamortized loan costs of
approximately $22,000 resulting in an extraordinary loss on refinancing of
approximately $41,000.
The Managing General Partner secured a mortgage for Ski Lodge Apartments in the
amount of $6,800,000.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS
The Partnership's investment properties consist of seven apartment complexes.
The following table sets forth the average occupancy of the properties for the
nine months ended September 30, 1997 and 1996:
Average
Occupancy
Property 1997 1996
Ski Lodge Apartments
Montgomery, Alabama 92% 93%
Panarama Terrace II
(formerly Rocky Ridge Apartments)
Birmingham, Alabama 89% 91%
Place du Plantier Apartments
Baton Rouge, Louisiana 91% 91%
Fairway View Phase I Apartments
Baton Rouge, Louisiana 93% 96%
Colony at Kenilworth Apartments
Towson, Maryland 84% 90%
Alpine Village Apartments
Birmingham, Alabama 93% 94%
The Village Apartments (1)
Voorhees, New Jersey 94% 94%
(1) This property was purchased as a tenancy in common with National Property
Investors 5, an affiliated public partnership, which acquired a 24.028%
undivided interest, with the Partnership owning the remaining 75.972%.
The Managing General Partner attributes the decrease in occupancy at Colony at
Kenilworth to a period of several months during which the property's staff
underwent many changes. The current staff has been in place for two months, and
management is currently evaluating a long term rehabilitation plan that will
make the property more competitive in the local market. In addition, occupancy
is still recovering from the loss of corporate units that were leased to
visiting faculty of nearby University of Towson. Occupancy decreased at Fairway
View I due to increased competition resulting from the addition of new units in
the property's sub-market. However, extensive exterior improvements are
currently being done at the property to increase its appeal in an effort to
combat the increased competition.
The Partnership's net loss for the nine months ended September 30, 1997, was
approximately $289,000 compared to net income of approximately $565,000 for the
corresponding period of 1996. The net loss for the three months ended September
30, 1997, was approximately $672,000 compared to a net loss of approximately
$146,000 for the three months ended September 30, 1996. Loss before
extraordinary loss for the nine months ended September 30, 1997, was
approximately $289,000 compared to income before extraordinary loss of
approximately $920,000 for the corresponding period of 1996. For the three
months ended September 30, 1997, the Partnership incurred a loss before
extraordinary loss of approximately $672,000 compared to income before
extraordinary loss of approximately $209,000 for the three months ended
September 30, 1996. The extraordinary loss of $355,000 is a result of the
refinancing as discussed in "Item 1, Note D - Refinancing and Extraordinary
Loss."
The increase in net loss for the three and nine month periods ended September
30, 1997, is primarily due to increased operating expenses, interest expense and
loss on disposal of property while revenues remained relatively constant.
Included in operating expense for the nine months ended September 30, 1997, is
approximately $609,000 of major repairs and maintenance compared to
approximately $238,000 for the nine months ended September 30, 1996. The
increase in major repairs and maintenance, of which substantially the entire
change occurred in the third quarter, is the primary cause of the increase in
operating expenses. The increase in major repairs and maintenance is due to
various rehabilitation projects at Ski Lodge, Place du Plantier, Colony at
Kenilworth and Alpine Village. At Ski Lodge, the increase was due to a 1997
exterior painting project of approximately $227,000 and parking lot repairs of
approximately $31,000. At Place du Plantier, the exterior painting portion of
an extensive rehabilitation project accounted for approximately $30,000 of
increased expenses. At Colony at Kenilworth, exterior painting costing
approximately $29,000 and parking lot repairs totaling approximately $39,000
contributed to the increase. At Alpine Village, $14,000 was spent on swimming
pool repairs. Also contributing to the increase in operating expenses were
increased property related expenses at Colony at Kenilworth, where marketing and
referral fees increased approximately $36,000, as the property attempted to
improve its occupancy. Corporate unit expenses increased approximately $39,000
due to the larger than usual number of corporate units temporarily leased as
discussed above. Interest expense increased as a result of the financing of Ski
Lodge Apartments in 1996, the proceeds of which were distributed to the
partners. Prior to the financing the property did not have any debt encumbering
the property. General and administrative expenses decreased primarily due to
increased expense reimbursements in 1996, related to the costs incurred in
connection with the transition and relocation of the administrative offices
during the first half of 1996. The loss on disposal of property resulted from
the write-off of the remaining basis of roofs replaced at Paranama Terrace,
Place du Plantier, Fairway View, Colony at Kenilworth and Alpine Village.
As part of the ongoing business plan of the Partnership, the Managing General
Partner monitors the rental market environment of each of its investment
properties to assess the feasibility of increasing rent, maintaining or
increasing occupancy levels and protecting the Partnership from increases in
expense. As part of this plan, the Managing General Partner attempts to protect
the Partnership from the burden of inflation-related increases in expenses by
increasing rents and maintaining a high overall occupancy level. However, due
to changing market conditions, which can result in the use of rental concessions
and rental reductions to offset softening market conditions, there is no
guarantee that the Managing General Partner will be able to sustain such a plan.
At September 30, 1997, the Partnership had cash and cash equivalents of
$4,492,000, as compared to $16,663,000 at September 30, 1996. The net cash
provided by operating activities decreased primarily as a result of increased
operating and interest costs, as discussed above. The increase in cash used in
investing activities is due to increased property improvements and replacements
resulting from property renovation programs established at the properties
refinanced in 1996. The increase in cash used in financing activities is
primarily due to the $10,621,000 distribution to partners which was declared in
1996 and paid in January 1997, as opposed to the approximately $10,000,000 net
proceeds from the debt refinancing in 1996.
The Managing General Partner has extended to the Partnership a $500,000 line of
credit. At the present time, the Partnership has no outstanding amounts due
under this line of credit. Based on present plans, the Managing General Partner
does not anticipate the need to borrow in the near future. Other than cash and
cash equivalents, the line of credit is the Partnership's only unused source of
liquidity.
The sufficiency of existing liquid assets to meet future liquidity and capital
expenditure requirements is directly related to the level of capital
expenditures required at the various properties to adequately maintain the
physical assets and other operating needs of the Partnership. Such assets are
currently thought to be sufficient for any near-term needs of the Partnership.
The mortgage indebtedness of $34,452,000 matures at various times with balloon
payments due at maturity at which time the properties will either be refinanced
or sold. Future cash distributions will depend on the levels of net cash
generated from operations, property sales, refinancings, and the availability of
cash reserves. In January 1997, the Partnership distributed $10,621,000. This
distribution was declared in December 1996 and it primarily represented net
proceeds received from property refinancings in 1996. The distribution also
included some cash from operations. No other distributions were made in 1996 or
1997. Currently, the Managing General Partner does not anticipate making a cash
distribution in the fourth quarter of 1997.
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a) Exhibit 27, Financial Data Schedule, is filed as an exhibit to this
report.
b) Reports on Form 8-K: None filed during the quarter ended September 30,
1997.
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.
NATIONAL PROPERTY INVESTORS 6
By: NPI EQUITY INVESTMENTS, INC.
Its Managing General Partner
By: /s/William H. Jarrard, Jr.
William H. Jarrard, Jr.
President and Director
By: /s/Ronald Uretta
Ronald Uretta
Vice President and
Treasurer
Date: November 4, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from National
Property Investors 6 1997 Third Quarter 10-QSB and is qualified in its entirety
by reference to such 10-QSB filing.
</LEGEND>
<CIK> 0000708870
<NAME> NATIONAL PROPERTY INVESTORS 6
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> SEP-30-1997
<CASH> 4,492
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0<F1>
<PP&E> 80,393
<DEPRECIATION> 49,504
<TOTAL-ASSETS> 39,259
<CURRENT-LIABILITIES> 0<F1>
<BONDS> 34,452
0
0
<COMMON> 0
<OTHER-SE> 3,279
<TOTAL-LIABILITY-AND-EQUITY> 39,259
<SALES> 0
<TOTAL-REVENUES> 10,480
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 10,769
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,108
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (289)
<EPS-PRIMARY> (2.61)<F2>
<EPS-DILUTED> 0
<FN>
<F1>Registrant has an unclassified balance sheet.
<F2>Multiplier is 1.
</FN>
</TABLE>
