FORM 10-QSB--QUARTERLY OR TRANSITIONAL REPORT 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/A
(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, 1999
[ ] 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 (I.R.S. Employer
incorporation or organization) Identification No.)
55 Beattie Place, 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
(This document amends the Form 10-QSB for the quarter ended June 30, 1999, due
to an accounting change related to a casualty which occurred during the fiscal
year ended December 31, 1998 and for which proceeds were received and
replacements were made during the six months ended June 30, 1999. This document
also amends the presentation of the equity in net income of the tenant-in-common
property for the quarter ended June 30, 1998.)
ITEM 1. FINANCIAL STATEMENTS
a)
NATIONAL PROPERTY INVESTORS 6
BALANCE SHEET
(Unaudited)
(in thousands, except unit data)
June 30, 1999
Assets
Cash and cash equivalents $ 1,760
Receivables and deposits 873
Restricted escrows 698
Other assets 765
Investment properties:
Land $ 4,349
Buildings and related personal property 63,773
68,122
Less accumulated depreciation (45,545) 22,577
$ 26,673
Liabilities and Partners' Deficit
Liabilities
Accounts payable $ 216
Tenant security deposit liabilities 210
Accrued property taxes 190
Payable to affiliate 916
Other liabilities 413
Mortgage notes payable 26,135
Partners' Deficit
Limited partners' (109,600 units issued and
outstanding) $ (845)
General partner's (562) (1,407)
$ 26,673
See Accompanying Notes to Financial Statements
b)
NATIONAL PROPERTY INVESTORS 6
STATEMENTS OF OPERATIONS
(Unaudited)
(in thousands, except unit data)
Three Months Ended Six Months Ended
June 30, June 30,
1999 1998 1999 1998
Revenues:
Rental income $ 2,574 $ 2,453 $ 5,119 $ 4,885
Other income 172 203 332 438
Casualty gain -- -- 273 --
Total revenues 2,746 2,656 5,724 5,323
Expenses:
Operating 1,068 1,208 2,129 2,228
Interest 514 511 1,029 1,026
Depreciation 699 676 1,414 1,353
General and administrative 65 154 158 253
Property taxes 125 116 271 235
Incentive compensation fee -- 916 -- 916
Total expenses 2,471 3,581 5,001 6,011
Equity in net income of
tenant-in-common property -- 15,206 -- 15,266
Income before extraordinary
item 275 14,281 723 14,578
Extraordinary loss on early
extinguishment of tenant-in-
common debt -- (638) -- (638)
Net income $ 275 $13,643 $ 723 $13,940
Net income allocated
to general partner (1%) $ 3 $ 136 $ 7 $ 139
Net income allocated to
Limited partners (99%) 272 13,507 716 13,801
$ 275 $13,643 $ 723 $13,940
Net income per limited
partnership unit $ 2.48 $123.24 $ 6.53 $125.92
Distribution per limited
partnership unit $ -- $ 6.22 $ -- $ 6.22
See Accompanying Notes to Financial Statements
c)
NATIONAL PROPERTY INVESTORS 6
STATEMENT OF CHANGES IN PARTNERS' 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 at
December 31, 1998 109,600 $ (569) $ (1,561) $ (2,130)
Net income for the six
months ended June 30, 1999 -- 7 716 723
Partners' deficit at
June 30, 1999 109,600 $ (562) $ (845) $ (1,407)
</TABLE>
See Accompanying Notes to Financial Statements
d)
NATIONAL PROPERTY INVESTORS 6
STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
Six Months Ended
June 30,
1999 1998
Cash flows from operating activities:
Net income $ 723 $ 13,940
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation 1,414 1,353
Amortization of loan costs 71 68
Casualty gain (273) --
Loss on disposal of property -- 15
Equity in net income of tenant-in-common property -- (14,628)
Change in accounts:
Receivables and deposits (358) (154)
Other assets 19 136
Accounts payable (236) 132
Tenant security deposit liabilities 3 5
Accrued property taxes 60 28
Payable to affiliate -- 916
Other liabilities 67 19
Net cash provided by operating activities 1,490 1,830
Cash flows from investing activities:
Property improvements and replacements (1,845) (689)
Net receipts from restricted escrows 271 176
Net insurance proceeds received 343 --
Net cash used in investing activities (1,231) (513)
Cash flows used in financing activities:
Distributions to partners -- (689)
Net increase in cash and cash equivalents 259 628
Cash and cash equivalents at beginning of period 1,501 2,329
Cash and cash equivalents at end of period $ 1,760 $ 2,957
Supplemental disclosure of cash flow information:
Cash paid for interest $ 958 $ 958
See Accompanying Notes to Financial Statements
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 six month periods ended June 30, 1999, are not necessarily indicative
of the results that may be expected for the fiscal year ending December 31,
1999. 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, 1998.
Certain reclassifications have been made to the 1998 information to conform to
the 1999 presentation.
NOTE B - TRANSFER OF CONTROL
Pursuant to a series of transactions which closed on October 1, 1998 and
February 26, 1999, Insignia Financial Group, Inc. and Insignia Properties Trust
merged into Apartment Investment and Management Company ("AIMCO"), a publicly
traded real estate investment trust, with AIMCO being the surviving corporation
(the "Insignia Merger"). As a result, AIMCO acquired 100% ownership interest in
the Managing General Partner. The Managing General Partner does not believe that
this transaction will have a material effect on the affairs and operations of
the Partnership.
NOTE C - 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.
The following transactions with affiliates of the Managing General Partner were
incurred during the six month periods ended June 30, 1999 and 1998:
1999 1998
(in thousands)
Property management fees (included in operating
expenses) $274 $265
Reimbursement for services of affiliates, (included
in investment properties, and operating and
general and administrative expenses) 185 203
Non-accountable reimbursement (included in general
and administrative expense) -- 61
Incentive management fee -- 916
During the six months ended June 30, 1999 and 1998, affiliates of the Managing
General Partner were entitled to receive 5% of gross receipts from all of the
Partnership's properties for providing property management services. The
Partnership paid to such affiliates approximately $274,000 and $265,000 for the
six months ended June 30, 1999 and 1998 respectively.
Affiliates of the Managing General Partner received reimbursement of accountable
administrative expenses amounting to approximately $185,000 and $203,000 for the
six months ended June 30, 1999 and 1998, respectively, including approximately
$70,000 and $51,000 of construction services reimbursements in 1999 and 1998,
respectively.
In addition, approximately $916,000 of incentive management fees resulting from
the sale of The Village Apartments in June 1998 were accrued and are included on
the balance sheet as "payable to affiliate". These fees are payable to the
Managing General Partner but are subordinate to the limited partners receiving a
preferred return specified in the Partnership Agreement.
Also, for services relating to the administration of the Partnership and
operation of the 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 1998. The Managing General Partner earned and received
approximately $61,000 during the second quarter of 1998. No such reimbursements
were earned during the six months ended June 30, 1999.
On June 9, 1999, AIMCO Properties, L.P., an affiliate of the Managing General
Partner commenced a tender offer to purchase up to 27,921.53 (25.48% of the
total outstanding units) units of limited partnership interest in the
Partnership for a purchase price of $76 per unit. The offer expired on July 14,
1999. Pursuant to the offer, AIMCO Properties, L.P. acquired 1,558.00 units.
As a result, AIMCO and its affiliates currently own 49,591 units of limited
partnership interest in the Partnership representing 45.25% of the total
outstanding units. It is possible that AIMCO or its affiliate will make one or
more additional offers to acquire additional limited partnership interests in
the Partnership for cash or in exchange for units in the operating partnership
of AIMCO.
NOTE D - TENANT-IN-COMMON PROPERTY
The Partnership owned The Village 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 was accounted for under the equity method of accounting.
On June 30, 1998, The Village, located in Voorhees Township, New Jersey, was
sold to an unaffiliated party for an adjusted sales price of approximately
$30,102,000. After repayment of the mortgage note payable and closing expenses,
the net proceeds from the sale were approximately $18,211,000. The sale resulted
in a gain of approximately $19,946,000 for the tenant-in-common joint venture
and an extraordinary loss on early extinguishment of debt of approximately
$840,000, representing prepayment penalties and the write off of the remaining
unamortized loan costs.
The Village tenant-in-common joint venture with NPI 5 was terminated in 1998
after the distribution from the proceeds from the sale.
The condensed statement of operations of The Village for the six month period
ended June 30, 1998 is as follows (in thousands):
Six months ended
June 30, 1998
Revenue:
Rental income $ 2,181
Other income 118
Gain on sale of property 19,946
Total revenues 22,245
Expenses:
Operating and other expenses 1,192
Depreciation 395
Mortgage interest 485
Total expenses 2,072
Net income before extraordinary loss 20,173
Extraordinary loss on early
extinguishment of debt (840)
Net income $ 19,333
NOTE E - CASUALTY EVENTS
In November 1998, a fire at Fairway View I caused an estimated $96,000 of damage
to the property of which approximately $91,000 is covered by insurance.
Approximately $76,000 of insurance proceeds relating to this event have been
received during 1999. In January 1999, a second fire at Fairway View I caused an
estimated $323,000 of damage to the property of which approximately $318,000 is
covered by insurance. As of June 30, 1999, approximately $267,000 of insurance
proceeds relating to this event have been received. These fires damaged 19
units and construction to rebuild the units has begun. In relation to the two
fires, approximately $70,000 has been written off for undepreciated assets that
were damaged. The reconstruction of these units is expected to be completed by
the end of the third quarter 1999.
NOTE F - DISTRIBUTIONS
No distributions were made during the six month period ending June 30, 1999. A
cash distribution from operations of approximately $689,000 (approximately
$682,000 to the limited partners) ($6.22 per limited partnership unit) was paid
during the second quarter of 1998.
NOTE G - SEGMENT REPORTING
Description of the types of products and services from which the reportable
segment derives its revenues:
The Partnership has one reportable segment: residential properties. The
Partnership's residential property segment consists of six apartment complexes
in Alabama, Louisiana and Maryland. The Partnership rents apartment units to
tenants for terms that are typically twelve months or less.
Measurement of segment profit or loss:
The Partnership evaluates performance based on net income. The accounting
policies of the reportable segment are the same as those of the Partnership as
described in the Partnership's Annual Report on Form 10-KSB for the year ended
December 31, 1998.
Factors management used to identify the enterprise's reportable segment:
The Partnership's reportable segment consists of investment properties that
offer similar products and services. Although each of the investment properties
is managed separately, they have been aggregated into one segment as they
provide services with similar types of products and customers.
Segment information for the six months ended June 30, 1999 and 1998, is shown in
the tables below (in thousands). The "Other" column includes partnership
administration related items and income and expense not allocated to the
reportable segment.
1999 Residential Other Totals
Rental income $ 5,119 $ -- $ 5,119
Other income 317 15 332
Interest expense 1,029 -- 1,029
Depreciation 1,414 -- 1,414
General and administrative expense -- 158 158
Casualty gain 273 -- 273
Segment profit (loss) 866 (143) 723
Total assets 26,543 130 26,673
Capital expenditures for investment
properties 1,845 -- 1,845
1998 Residential Other Totals
Rental income $ 4,885 $ -- $ 4,885
Other income 364 74 438
Interest expense 1,026 -- 1,026
Depreciation 1,353 -- 1,353
General and administrative expense -- 253 253
Equity in income of tenant-in-common -- 14,628 14,628
Segment profit 407 13,533 13,940
Total assets 10,576 32,178 42,754
Capital expenditures for investment
properties 689 -- 689
NOTE H - LEGAL PROCEEDINGS
In March 1998, several putative unit holders of limited partnership units of the
Partnership commenced an action entitled Rosalie Nuanes, et al. v. Insignia
Financial Group, Inc., et al. in the Superior Court of the State of California
for the County of San Mateo. The plaintiffs named as defendants, among others,
the Partnership, the Managing General Partner and several of their affiliated
partnerships and corporate entities. The complaint purports to assert claims on
behalf of a class of limited partners and derivatively on behalf of a number of
limited partnerships (including the Partnership) which are named as nominal
defendants, challenging the acquisition by Insignia and entities which were, at
the time, affiliates of Insignia ("Insignia Affiliates") of interests in certain
general partner entities, past tender offers by Insignia Affiliates as well as a
recently announced agreement between Insignia and AIMCO. The complaint seeks
monetary damages and equitable relief, including judicial dissolution of the
Partnership. On June 25, 1998, the Managing General Partner filed a motion
seeking dismissal of the action. In lieu of responding to the motion, the
plaintiffs filed an amended complaint. The Managing General Partner has filed
demurrers to the amended complaint which were heard during February 1999. No
ruling on such demurrers has been received. The Managing General Partner does
not anticipate that costs associated with this case, if any, will be material to
the Partnership's overall operations.
The Partnership is unaware of any other pending or outstanding litigation that
is not of a routine nature arising in the ordinary course of business.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS
The matters discussed in this Form 10-QSB contain certain forward-looking
statements and involve risks and uncertainties (including changing market
conditions, competitive and regulatory matters, etc.) detailed in the
disclosures contained in this Form 10-QSB and the other filings with the
Securities and Exchange Commission made by the Registrant from time to time.
The discussion of the Registrant's business and results of operations, including
forward-looking statements pertaining to such matters, does not take into
account the effects of any changes to the Registrant's business and results of
operation. Accordingly, actual results could differ materially from those
projected in the forward-looking statements as a result of a number of factors,
including those identified herein.
The Partnership's investment properties consist of six apartment complexes. The
following table sets forth the average occupancy of the properties for the six
months ended June 30, 1999 and 1998:
Average Occupancy
Property 1999 1998
Ski Lodge Apartments
Montgomery, Alabama 94% 94%
Panorama Terrace II Apartments
Birmingham, Alabama (1) 95% 88%
Place du Plantier Apartments
Baton Rouge, Louisiana (2) 93% 90%
Fairway View I Apartments
Baton Rouge, Louisiana (3) 98% 94%
Colony at Kenilworth Apartments
Towson, Maryland (4) 90% 87%
Alpine Village Apartments
Birmingham, Alabama (5) 96% 92%
(1) The Managing General Partner attributes the increase in occupancy at
Panorama Terrace II Apartments to increased marketing efforts and
concessions.
(2) The Managing General Partner attributes the increase in occupancy at Place
du Plantier Apartments to improved marketing efforts.
(3) The Managing General Partner attributes the increase in occupancy at
Fairway View I Apartments to a major employer in the area using the
property for their summer intern students.
(4) The Managing General Partner attributes the increase in occupancy at Colony
of Kenilworth to improved marketing efforts and a strong local economy.
(5) The Managing General Partner attributes the increase in occupancy at Alpine
Village Apartments to improved marketing efforts.
Results of Operations
The Partnership's net income for the six months ended June 30, 1999, was
approximately $723,000 compared to net income of approximately $13,940,000 for
the six months ended June 30, 1998. The Partnership's net income for the three
months ended June 30, 1999, was approximately $275,000 compared to net income of
approximately $13,643,000 for the three months ended June 30, 1998. The
decrease in net income for the six months ended June 30, 1999, as compared to
the corresponding periods of 1998, is primarily attributable to the decrease in
the Partnership's share of the net income of the tenant-in-common property, as a
result of the gain recognized on the sale of The Village on June 30, 1998.
Excluding the results of the sale, the Partnership realized a net loss for the
three and six months ended June 30, 1998, of approximately $925,000 and $688,000
respectively. The increase in net income for the three and six months ended
June 30, 1999, is due to an increase in total revenue and a decrease in total
expenses. The increase in total revenue is due to an increase in rental income
and recognition of a casualty gain in 1999 (see discussion below). Rental
income increased as a result of increased occupancy and increased rental rates
at most of the Partnership's properties. The decrease in total expenses is
primarily a result of a decrease in general and administrative expenses and
incentive compensation fees. General and administrative expenses decreased as a
result of a decrease in reimbursements to the Managing General Partner.
Incentive compensation fees decreased as a result of fees associated with the
sale of The Village on June 30, 1998.
Included in general and administrative expenses for the six months ended June
30, 1999 and 1998, are reimbursements to the Managing General Partner allowed
under the Partnership Agreement associated with its management of the
Partnership. In addition, costs associated with the quarterly and annual
communications with investors and regulatory agencies and the annual audit
required by the Partnership Agreement are also included.
In November 1998, a fire at Fairway View I caused an estimated $96,000 of damage
to the property of which approximately $91,000 is covered by insurance. As of
June 30, 1999, approximately $76,000 of insurance proceeds relating to this
event have been received. In January 1999, a second fire at Fairway View I
caused an estimated $323,000 of damage to the property of which approximately
$318,000 is covered by insurance. As of June 30, 1999, approximately $267,000
of insurance proceeds relating to this event have been received. These fires
damaged 19 units and construction to rebuild the units has begun. In relation to
the two fires, approximately $70,000 has been written off for undepreciated
assets that were damaged. The reconstruction of these units is expected to be
completed by the end of the third quarter 1999.
In addition, Panorama Terrace II and Ski Lodge incurred storm damage in late
1998. The costs of both casualty events are covered by insurance and repairs are
currently being made. Approximately $38,000 has been received from the
insurance company as of June 30, 1999.
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 rents, 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.
Capital Resources and Liquidity
At June 30, 1999, the Partnership had cash and cash equivalents of approximately
$1,760,000, as compared to approximately $2,957,000 at June 30, 1998. For the
six months ended June 30, 1999, cash and cash equivalents increased
approximately $259,000 from the Partnership's year ended December 31, 1998. The
increase in cash and cash equivalents is due to approximately $1,490,000 of cash
provided by operating activities partially offset by approximately $1,231,000 of
cash used in investing activities. Cash used in investing activities primarily
consists of property improvements and replacements partially offset by net
receipts from restricted escrows maintained by mortgage lenders and net
insurance proceeds. The Partnership invests its working capital reserves in a
money market account.
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 and 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 and to comply with
Federal, state and local legal and regulatory requirements. Capital
improvements for each of the Partnership's properties are detailed below.
Ski Lodge Apartments
During the six months ended June 30, 1999, the Partnership completed
approximately $72,000 of capital improvement projects at Ski Lodge Apartments
consisting primarily of floor covering and appliance replacements. These
improvements were funded from replacement reserves. Based on a report received
from an independent third party consultant analyzing necessary exterior
improvements and estimates made by the Managing General Partner on interior
improvements, it is estimated that the property requires approximately $203,000
of capital improvements over the next few years. The Partnership has budget but
is not limited to capital improvements of approximately $322,000 for 1999 at
this property which include certain of the required improvements and consist of
parking lot repairs, recreational facility improvements, pool repairs, roof
replacements, structural improvements, grounds lighting, appliances and floor
covering replacements, and electrical and air conditioning upgrades.
Panorama Terrace II Apartments
During the six months ended June 30, 1999, the Partnership completed
approximately $10,000 of capital improvement projects at Panorama Terrace II
consisting primarily of floor covering replacements, plumbing replacements and
building improvements. These improvements were funded from operating cash flow.
Based on a report received from an independent third party consultant analyzing
necessary exterior improvements and estimates made by the Managing General
Partner on interior improvements, it is estimated that the property requires
approximately $110,000 of capital improvements over the next few years. The
Partnership has budget but is not limited to capital improvements of
approximately $116,000 for 1999 at this property which include certain of the
required improvements and consist of roof replacements, appliances upgrades,
plumbing repairs, building improvements and carpet and vinyl replacement.
Place du Plantier Apartments
During the six months ended June 30, 1999, the Partnership completed
approximately $236,000 of capital improvement projects at Place du Plantier
Apartments, consisting primarily of floor covering replacements, air
conditioning upgrades, parking lot improvements, and roof replacements. These
improvements were funded from replacement reserves and operating cash flow.
Based on a report received from an independent third party consultant analyzing
necessary exterior improvements and estimates made by the Managing General
Partner on interior improvements, it is estimated that the property requires
approximately $376,000 of capital improvements over the next few years. The
Partnership has budget but is not limited to capital improvements of
approximately $425,000 for 1999 at this property which include certain of the
required improvements and consist of plumbing upgrades, roof replacements,
parking lot improvements, landscaping, appliances, interior decoration upgrades,
air conditioning upgrades and floor covering replacements.
Fairway View I Apartments
During the six months ended June 30, 1999, the Partnership completed
approximately $468,000 of capital improvement projects at Fairway View II,
consisting primarily of roof replacements, which are substantially completed,
landscaping, appliance upgrades, floor covering replacements and reconstruction
costs related to the November 1998 and January 1999 fires at the property.
These improvements were funded from operating cash flow and insurance proceeds.
Based on a report received from an independent third party consultant analyzing
necessary exterior improvements and estimates made by the Managing General
Partner on interior improvements, it is estimated that the property requires
approximately $455,000 of capital improvements over the next few years. The
Partnership has budget but is not limited to capital improvements of
approximately $401,000 for 1999 at this property which include certain of the
required improvements and consist of parking lot repairs, roof replacements,
appliance upgrades, recreational facility improvements, landscaping and fencing
and floor covering replacements.
Colony of Kenilworth
During the six months ended June 30, 1999, the Partnership completed
approximately $1,015,000 of capital improvement projects at Colony of
Kenilworth, consisting primarily of exterior painting, which is approximately
60% completed, roof replacements, HVAC upgrades, electrical upgrades, appliance
replacements, floor covering replacements, and other improvements, which are
approximately 50% complete. These improvements were funded from replacement
reserves and operating cash flow. Based on a report received from an independent
third party consultant analyzing necessary exterior improvements and estimates
made by the Managing General Partner on interior improvements, it is estimated
that the property requires approximately $2,840,000 of capital improvements over
the next few years. The Partnership has budget but is not limited to capital
improvements of approximately $1,184,000 for 1999 at this property which include
certain of the required improvements and consist of building improvements,
exterior painting, roof replacements, HVAC upgrades, electrical upgrades, carpet
and vinyl replacements, and parking lot repairs.
Alpine Apartments
During the six months ended June 30, 1999, the Partnership completed
approximately $44,000 of capital improvement projects at Alpine Apartments,
consisting primarily of plumbing, parking lot improvements, floor covering
replacements, appliances and electrical upgrades. These improvements were
funded from replacement reserves. Based on a report received from an independent
third party consultant analyzing necessary exterior improvements and estimates
made by the Managing General Partner on interior improvements, it is estimated
that the property requires approximately $96,000 of capital improvements over
the next few years. The Partnership has budget but is not limited to capital
improvements of approximately $115,000 for 1999 at this property which include
certain of the required improvements and consist of building improvements,
plumbing upgrades, electrical upgrades, air conditioning upgrades, appliance
replacements, and floor covering replacements.
The additional capital expenditures will be incurred only if cash is available
from operations or from Partnership reserves. To the extent that such budgeted
capital improvements are completed, the Partnership's distributable cash flow,
if any, may be adversely affected at least in the short term.
The Partnership's current assets are thought to be sufficient for any near-term
needs (exclusive of capital improvements) of the Partnership. The mortgage
indebtedness of $26,135,000 requires interest payments only with the full
payment of principal due in November 2003. The Managing General Partner will
attempt to refinance such remaining indebtedness and/or sell the properties
prior to such maturity date. If the properties cannot be refinanced or sold for
a sufficient amount, the Partnership may risk losing such properties through
foreclosure.
No distributions were made during the six month period ending June 30, 1999. A
cash distribution from operations of approximately $689,000 (approximately
$682.00 to the limited partners, $6.22 per limited partnership unit) was paid
during the second quarter of 1998. The Partnership's distribution policy is
reviewed on a quarterly basis. Future cash distributions will depend on the
levels of net cash generated from operations, the availability of cash reserves,
and the timing of the debt maturity, refinancing and/or property sale. There
can be no assurance, however, that the Partnership will generate sufficient
funds from operations after required capital improvements to permit
distributions to its partners in 1999 or subsequent periods.
Tender Offer
On June 9, 1999, AIMCO Properties, L.P., an affiliate of the Managing General
Partner commenced a tender offer to purchase up to 27,921.53 (25.48% of the
total outstanding units) units of limited partnership interest in the
Partnership for a purchase price of $76 per unit. The offer expired on July 14,
1999. Pursuant to the offer, AIMCO Properties, L.P. acquired 1,558.00 units.
As a result, AIMCO and its affiliates currently own 49,591 units of limited
partnership interest in the Partnership representing 45.25% of the total
outstanding units. It is possible that AIMCO or its affiliate will make one or
more additional offers to acquire additional limited partnership interests in
the Partnership for cash or in exchange for units in the operating partnership
of AIMCO.
Year 2000 Compliance
General Description of the Year 2000 Issue and the Nature and Effects of the
Year 2000 on Information Technology (IT) and Non-IT Systems
The Year 2000 issue is the result of computer programs being written using two
digits rather than four digits to define the applicable year. The Partnership
is dependent upon the Managing General Partner and its affiliates for management
and administrative services ("Managing Agent"). Any of the computer programs or
hardware that have date-sensitive software or embedded chips may recognize a
date using "00" as the year 1900 rather than the year 2000. This could result
in a system failure or miscalculations causing disruptions of operations,
including, among other things, a temporary inability to process transactions,
send invoices, or engage in similar normal business activities.
Over the past two years, the Managing Agent has determined that it will be
required to modify or replace significant portions of its software and certain
hardware so that those systems will properly utilize dates beyond December 31,
1999. The Managing Agent presently believes that with modifications or
replacements of existing software and certain hardware, the Year 2000 issue can
be mitigated. However, if such modifications and replacements are not made, or
not completed in time, the Year 2000 issue could have a material impact on the
operations of the Partnership.
The Managing Agent's plan to resolve Year 2000 issues involves four phases:
assessment, remediation, testing, and implementation. To date, the Managing
Agent has fully completed its assessment of all the information systems that
could be significantly affected by the Year 2000, and has begun the remediation,
testing and implementation phases on both hardware and software systems.
Assessments are continuing in regards to embedded systems. The status of each
is detailed below.
Status of Progress in Becoming Year 2000 Compliant, Including Timetable for
Completion of Each Remaining Phase
Computer Hardware:
During 1997 and 1998, the Managing Agent identified all of the computer systems
at risk and formulated a plan to repair or replace each of the affected systems.
In August 1998, the main computer system used by the Managing Agent became fully
functional. In addition to the main computer system, PC-based network servers,
routers and desktop PCs were analyzed for compliance. The Managing Agent has
begun to replace each of the non-compliant network connections and desktop PCs
and, as of June 30, 1999, had completed approximately 90% of this effort.
The total cost to the Managing Agent to replace the PC-based network servers,
routers and desktop PCs is expected to be approximately $1.5 million of which
$1.3 million has been incurred to date. The remaining network connections and
desktop PCs are expected to be upgraded to Year 2000 compliant systems by
September 30, 1999. The completion of this process is scheduled to coincide
with the release of a compliant version of the Managing Agent's operating
system.
Computer Software:
The Managing Agent utilizes a combination of off-the-shelf, commercially
available software programs as well as custom-written programs that are designed
to fit specific needs. Both of these types of programs were studied, and
implementation plans written and executed with the intent of repairing or
replacing any non-compliant software programs.
In April, 1999 the Managing Agent embarked on a data center consolidation
project that unifies its core financial systems under its Year 2000 compliant
system. The estimated completion date for this project is October, 1999.
During 1998, the Managing Agent began converting the existing property
management and rent collection systems to its management properties Year 2000
compliant systems. The estimated additional costs to convert such systems at all
properties, is $200,000, and the implementation and testing process was
completed in June, 1999.
The final software area is the office software and server operating systems.
The Managing Agent has upgraded all non-compliant office software systems on
each PC and has upgraded 90% of the server operating systems. The remaining
server operating systems are planned to be upgraded to be Year 2000 compliant by
September, 1999. The completion of this process is scheduled to coincide with
the release of a compliant version of the Managing Agent's operating system.
Operating Equipment:
The Managing Agent has operating equipment, primarily at the property sites,
which needed to be evaluated for Year 2000 compliance. In September 1997, the
Managing Agent began taking a census and inventory of embedded systems
(including those devices that use time to control systems and machines at
specific properties, for example elevators, heating, ventilating, and air
conditioning systems, security and alarm systems, etc.).
The Managing Agent has chosen to focus its attention mainly upon security
systems, elevators, heating, ventilating and air conditioning systems, telephone
systems and switches, and sprinkler systems. While this area is the most
difficult to fully research adequately, management has not yet found any major
non-compliance issues that put the Managing Agent at risk financially or
operationally.
A pre-assessment of the properties by the Managing Agent has indicated no Year
2000 issues. A complete, formal assessment of all the properties by the
Managing Agent is in process and will be completed in September, 1999. Any
operating equipment that is found non-compliant will be repaired or replaced.
The total cost incurred for all properties managed by the Managing Agent as of
June 30, 1999 to replace or repair the operating equipment was approximately
$75,000. The Managing Agent estimates the cost to replace or repair any
remaining operating equipment is approximately $125,000.
The Managing Agent continues to have "awareness campaigns" throughout the
organization designed to raise awareness and report any possible compliance
issues regarding operating equipment within its enterprise.
Nature and Level of Importance of Third Parties and Their Exposure to the Year
2000
The Managing Agent continues to conduct surveys of its banking and other vendor
relationships to assess risks regarding their Year 2000 readiness. The Managing
Agent has banking relationships with three major financial institutions, all of
which have indicated their compliance efforts will be complete before July,
1999. The Managing Agent has updated data transmission standards with all of the
financial institutions. The Managing Agent's contingency plan in this regard is
to move accounts from any institution that cannot be certified Year 2000
compliant by September 1, 1999.
The Partnership does not rely heavily on any single vendor for goods and
services, and does not have significant suppliers and subcontractors who share
information systems (external agent). To date the Partnership is not aware of
any external agent with a Year 2000 compliance issue that would materially
impact the Partnership's results of operations, liquidity, or capital resources.
However, the Partnership has no means of ensuring that external agents will be
Year 2000 compliant.
The Managing Agent does not believe that the inability of external agents to
complete their Year 2000 remediation process in a timely manner will have a
material impact on the financial position or results of operations of the
Partnership. However, the effect of non-compliance by external agents is not
readily determinable.
Costs to Address Year 2000
The total cost of the Year 2000 project to the Managing Agent is estimated at
$3.5 million and is being funded from operating cash flows. To date, the
Managing Agent has incurred approximately $2.9 million ($0.7 million expensed
and $2.2 million capitalized for new systems and equipment) related to all
phases of the Year 2000 project. Of the total remaining project costs,
approximately $0.5 million is attributable to the purchase of new software and
operating equipment, which will be capitalized. The remaining $0.2 million
relates to repair of hardware and software and will be expensed as incurred.
The Partnership's portion of these costs are not material.
Risks Associated with the Year 2000
The Managing Agent believes it has an effective program in place to resolve the
Year 2000 issue in a timely manner. As noted above, the Managing Agent has not
yet completed all necessary phases of the Year 2000 program. In the event that
the Managing Agent does not complete any additional phases, certain worst case
scenarios could occur. The worst case scenarios could include elevators,
security and heating, ventilating and air conditioning systems that read
incorrect dates and operate with incorrect schedules (e.g., elevators will
operate on Monday as if it were Sunday). Although such a change would be
annoying to residents, it is not business critical.
In addition, disruptions in the economy generally resulting from Year 2000
issues could also adversely affect the Partnership. The Partnership could be
subject to litigation for, among other things, computer system failures,
equipment shutdowns or failure to properly date business records. The amount of
potential liability and lost revenue cannot be reasonably estimated at this
time.
Contingency Plans Associated with the Year 2000
The Managing Agent has contingency plans for certain critical applications and
is working on such plans for others. These contingency plans involve, among
other actions, manual workarounds and selecting new relationships for such
activities as banking relationships and elevator operating systems.
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant 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/ Patrick J. Foye
Patrick J. Foye
Executive Vice President
By: /s/ Martha L. Long
Martha L. Long
Senior Vice President
and Controller
Date:
