<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
Annual Report Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
For the Fiscal Year Ended DECEMBER 31, 1998
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, CALIFORNIA 90211
Registrant's Telephone Number, Including Area Code (310) 278-2191
Securities Registered Pursuant to Section 12(b) or 12(g) of the Act:
NONE
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed with the Commission by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding twelve months (or such shorter period
that the registrant was required to file such reports), and (2) has been subject
to such filing requirements for the past 90 days.
Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]
<PAGE> 2
PART I.
ITEM 1. BUSINESS
Real Estate Associates Limited VI ("REAL VI" or the "Partnership") is a limited
partnership which was formed under the laws of the State of California on
October 12, 1982. On April 22, 1983, REAL VI offered 4,200 units consisting of
8,400 limited partnership interests and warrants to purchase a maximum of 8,400
additional limited partnership interests through a public offering managed by
E.F. Hutton Inc.
The general partners of REAL VI are National Partnership Investments Corp.
("NAPICO"), a California corporation, (the "Corporate General Partner"), and
National Partnership Investments Associates ("NAPIA"). NAPIA is a limited
partnership formed under the California Limited Partnership Act and consists of
Messrs. Nicholas G. Ciriello, an unrelated individual, as general partner, and
Mr. Charles H. Boxenbaum as limited partner. The business of REAL VI is
conducted primarily by NAPICO.
Prior to December 30, 1998, NAPICO was a wholly owned subsidiary of Casden
Investment Corporation ("CIC"), which is wholly owned by Alan I. Casden. On
December 30, 1998, Casden Properties Operating Partnership, L.P. (the "Operating
Partnership"), a majority owned subsidiary of Casden Properties Inc., a real
estate investment trust organized by Alan I. Casden, purchased a 95.25% economic
interest in NAPICO. The current members of NAPICO's Board of Directors are
Charles H. Boxenbaum, Bruce E. Nelson, Alan I. Casden and Henry C. Casden.
REAL VI holds limited partnership interests in 20 local limited partnerships.
REAL VI also holds a general partner interest in Real Estate Associates III
("REA III") which, in turn, holds limited partner interests in 3 local limited
partnerships. The other general partner of REA III is NAPICO. Therefore, REAL VI
currently holds interests either directly or indirectly in 23 local limited
partnerships. Each of the local partnerships owns a low income housing project
which is subsidized and/or has a mortgage note payable to or insured by agencies
of the federal or local government. In December 1998, the Partnership sold its
interests in 10 local limited partnerships and its general partner interest in
one local general partnership to the Operating Partnership.
In order to stimulate private investment in low income housing, the federal
government and certain state and local agencies have provided significant
ownership incentives, including among others, interest subsidies, rent
supplements, and mortgage insurance, with the intent of reducing certain market
risks and providing investors with certain tax benefits, plus limited cash
distributions and the possibility of long-term capital gains. There remain,
however, significant risks. The long-term nature of investments in government
assisted housing limits the ability of REAL VI to vary its portfolio in
`response to changing economic, financial and investment conditions; such
investments are also subject to changes in local economic circumstances and
housing patterns, as well as rising operating costs, vacancies, rent collection
difficulties, energy shortages and other factors which have an impact on real
estate values. These projects also require greater management expertise and may
have higher operating expenses than conventional housing projects.
Under recent 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 was generally the case
under existing HAP Contracts. The payments under the renewed HAP Contracts are
not expected to 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,
<PAGE> 3
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.
MAHRAA provides that properties begin the restructuring process in federal
fiscal year 1999 (beginning October 1, 1998). On September 11, 1998, HUD issued
interim regulations implementing MAHRAA and final regulations are expected to be
issued in 1999. With respect to the local limited partnerships' expiring HAP
Contracts, it is expected that the HAP payments will be reduced or terminated
pursuant to the terms of MAHRAA.
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.
The local partnerships in which REAL VI has invested were, at least initially,
organized by private developers who acquired the sites, or options thereon, and
applied for applicable mortgage insurance and subsidies. REAL VI became the
principal limited or general partner in these local partnerships pursuant to
arm's-length negotiations with these developers, or others, who normally act as
general partners. As a limited partner, REAL VI's liability for obligations of
the local limited partnership is limited to its investment. The local general
partner of the local limited partnership retains responsibility for developing,
constructing, maintaining, operating and managing the project. Under certain
circumstances of default, REAL VI has the right to replace the general partner
of the local limited partnerships. As discussed above, REAL VI is a general
partner in certain of the local partnerships, but otherwise does not have
control of sale or refinancing, etc.
Although each of the partnerships in which REAL VI has invested will generally
own a project which must compete in the marketplace for tenants, interest
subsidies and rent supplements from governmental agencies make it possible to
offer these dwelling units to eligible "low income" tenants at a cost
significantly below the market rate for comparable conventionally financed
dwelling units in the area.
<PAGE> 4
During 1998, projects in which REAL VI had invested were substantially rented.
The following is a schedule of the status, as of December 31, 1998, of the
projects owned by local partnerships in which REAL VI, either directly or
indirectly through REA III, has invested.
SCHEDULE OF PROJECTS OWNED BY LOCAL LIMITED
AND GENERAL PARTNERSHIPS
IN WHICH REAL VI HAS AN INVESTMENT
DECEMBER 31, 1998
<TABLE>
<CAPTION>
Units Authorized
For Rental
No. of Assistance Under Units Percentage of
Name & Location Units Section 8 Occupied Total Units
- --------------- ----- ----------------- ----------- ------------
<S> <C> <C> <C> <C>
Local Partnerships
Boynton Terrace 89 89 87 98%
Boynton Beach, FL
Cady Brook Apts. 40 None 40 100%
Charlton, MA
Cassidy Village 98 50 98 100%
Columbus, Ohio
Century Plaza 120 120 119 99%
Hampton, VA
Crockett Manor 38 38 34 89%
Trenton, TN
Eastridge Apts. 96 65 84 88%
Briston, VA
Filmore I 32 32 31 97%
Phoenix, AZ
Grant-Ko Enterprises 40 None 32 80%
Platteville, WI
Hummelstown Manor 51 50 50 98%
Hummelstown, PA
Kentucky Manor 48 None 46 96%
Oak Grove, KY
Lonsdale Housing 131 131 130 99%
Providence, RI
Marshall Plaza I 40 40 40 100%
Lorain, Ohio
</TABLE>
<PAGE> 5
SCHEDULE OF PROJECTS OWNED BY LOCAL LIMITED
AND GENERAL PARTNERSHIPS
IN WHICH REAL VI HAS AN INVESTMENT
DECEMBER 31, 1998
CONTINUED
<TABLE>
<CAPTION>
Units Authorized
For Rental
No. of Assistance Under Units Percentage of
Name & Location Units Section 8 Occupied Total Units
- --------------- ----- ----------------- ----------- ------------
<S> <C> <C> <C> <C>
Marshall Plaza II 50 48 50 100%
Lorain, Ohio
New-Bel-Mo 34 None 24 71%
New Glarus, Bellemont,
Monticello, WI
Oakridge Apts. II 48 None 48 100%
Biloxi, MS
Oakwood Manor 34 34 32 94%
Milan, TN
Park Place 126 125 120 95%
Ewing, NJ
Parkesedge Elderly Apts. 45 45 45 100%
Parkesedge, PA
Penneco II 76 76 69 91%
Johnstown, PA
Sauk-Ko Enterprises 30 None 24 80%
Baraboo, WI
Sol 413 12 12 12 100%
Old San Juan, PR
Valley Oaks Senior 50 None 49 98%
Gault, CA
Villas de Orocovix 41 41 41 100%
Orocovix, PR
----- ----- -----
TOTALS 1,369 996 1,305 95%
===== ===== =====
</TABLE>
<PAGE> 6
ITEM 2. PROPERTIES
The local limited partnerships in which REAL VI holds interests own various
multi-family rental properties. See Item 1 for information pertaining to these
properties.
ITEM 3. 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 Real
Estate Associates Limited VI (another affiliated partnership in which NAPICO is
the managing general partner) 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 the REIT organized by an
affiliate of NAPICO. The plaintiffs seek preliminary and permanent injunctive
relief and other equitable relief, as well as compensatory and punitive damages.
The managing general partner of such NAPICO managed partnerships and the other
defendants believe that the plaintiffs' claims are without merit and intend to
contest the action vigorously.
As of December 31, 1998, the Partnership's General Partner was a plaintiff or
defendant in several other lawsuits. None of these lawsuits were related to the
Partnership.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
In August 1998, a consent solicitation statement was sent to the limited
partners setting forth the terms and conditions of the purchase of the limited
partners' interests, held for investment by the Partnership, by a real estate
investment trust organized by an affiliate of NAPICO, together with certain
amendments to the Partnership Agreement and other disclosures of various
conflicts of interest in connection with the proposed transaction. Prior to the
sale of the partnership interests, the consents of the limited partners to the
sale and amendments to the Partnership Agreement were obtained.
PART II.
ITEM 5. MARKET FOR THE REGISTRANT'S PARTNERSHIP INTERESTS AND RELATED SECURITY
HOLDER MATTERS
The Limited Partnership Interests are not traded on a public exchange but were
sold through a public offering managed by E. F. Hutton Inc. It is not
anticipated that any public market will develop for the purchase and sale of any
partnership interests. Limited Partnership Interests may be transferred only if
certain requirements are satisfied. At December 31, 1998, there were 3,446
registered holders of units in REAL VI. Distributions have not been made from
the inception of the Partnership to December 31, 1998. The Partnership has
invested in certain government assisted projects under programs which in many
instances restrict the cash return available to project owners. The Partnership
was not designed to provide cash distributions to investors in circumstances
other than refinancing or disposition of its investments in limited
partnerships. In March 1999, the Partnership made distributions of $2,769,110 to
the limited partners and $27,971 to the general partners, which included using
proceeds from the sale of the partnership interests.
<PAGE> 7
ITEM 6. SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
Year Ended December 31,
--------------------------------------------------------------------------------
1998 1997 1996 1995 1994
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Loss from Rental
Operations $ 45,723 $ (20,071) $ (175,242) $ (246,036) $ (238,520)
Loss from Partnership
Operations (1,436,418) (1,132,951) (1,129,499) (1,307,251) (1,110,060)
Gain on Sale of Limited
Partnership Interests
and Rental Property 7,497,969 -- 1,902,022 -- --
Equity in (Loss) Income of
Limited Partnerships
and Amortization of
Acquisition Costs (1,437,536) 625,025 603,934 415,526 433,356
Distribution from
Limited Partnerships
Recognized as Income 123,291 499,540 597,425 347,163 500,498
------------ ------------ ------------ ------------ ------------
Net Income (Loss) $ 4,793,029 $ (28,457) $ 1,798,640 $ (790,598) $ (414,726)
============ ============ ============ ============ ============
Net Income (Loss) per
Limited Partnership
Interest $ 285 $ (2) $ 107 $ (47) $ (24)
============ ============ ============ ============ ============
Total Assets $ 7,426,779 $ 15,726,187 $ 15,286,368 $ 18,337,139 $ 18,725,681
============ ============ ============ ============ ============
Investments in
Limited
Partnerships $ 500,744 $ 5,885,699 $ 6,051,522 $ 5,619,146 $ 5,213,864
============ ============ ============ ============ ============
Rental Property $ -- $ 3,016,049 $ 3,158,470 $ 7,285,002 $ 7,638,829
============ ============ ============ ============ ============
Mortgage
Notes Payable $ -- $ 4,828,404 $ 4,886,300 $ 9,890,564 $ 9,993,001
============ ============ ============ ============ ============
Notes Payable and
Amounts Due for
Partnership
Interests $ 1,765,000 $ 5,795,000 $ 5,795,000 $ 5,795,000 $ 5,795,000
============ ============ ============ ============ ============
</TABLE>
<PAGE> 8
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
LIQUIDITY
The Partnership's primary sources of funds include interest income on money
market funds and certificates of deposit and distributions from local
partnership in which the Partnership has invested. It is not expected that any
of the local partnerships in which the Partnership has invested will generate
cash flow sufficient to provide for distributions to the Partnership's limited
partners in any material amount. The Partnership made a cash distribution to
investors in March 1999 using proceeds from the disposition of its investments
in certain limited partnerships.
The financial statements of the two general partnerships in which REAL VI is the
majority general partner, have been consolidated in the accompanying financial
statements. One of these partnerships is a local operating partnership which
owns and operates an apartment building. The units are leased primarily on a
month-to-month basis. These partnerships' primary source of funds are the rental
payments from tenants. Expenditures primarily include normal operating expenses
and debt service.
CAPITAL RESOURCES
REAL VI received $42,000,000 in subscriptions for units of limited partnership
interests (at $5,000 per unit) during the period April 22, l983, to March 31,
1984, pursuant to a registration statement on Form S-11.
RESULTS OF OPERATIONS
The Partnership was formed to provide various benefits to its partners as
discussed in Item 1. It is anticipated that the local limited partnerships in
which REAL VI has invested could produce tax losses for as long as 20 years. Tax
benefits will decline over time as the advantages of accelerated depreciation
are greatest in the earlier years, as deductions for interest expense will
decrease as mortgage principal is amortized and as the Tax Reform Act of 1986
limits the deductions available.
On February 2, 1996, one of the consolidated general partnerships (Drexel Park)
sold its property for $6,300,000. After payment of closings costs, the
Partnership realized a gain of approximately $1,902,000 and received cash of
$830,000. The sale of this property reduced rental operations in 1998 and 1997
as compared to 1996.
At December 31, 1998, the Partnership has investments in 23 limited
partnerships, all of which own housing projects that were substantially all
rented. The Partnership, as a limited partner, is entitled to 90% to 99% of the
profits and losses of the local limited partnerships. 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. Equity in losses of limited
partnerships are recognized in the financial statements until the limited
partnership investment account is reduced to a zero balance. Losses incurred
after the limited partnership investment account is reduced to zero are not
recognized. Limited partners are not liable for losses beyond their contributed
capital.
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.
The total losses from the 33 local limited partnerships that were allocated to
the Partnership were $1,799,000, $1,933,000 and $1,869,000 for the years ended
December 31, 1998, 1997 and 1996, respectively. However, because losses incurred
after the investment account is reduced to a zero balance are not recognized,
the Partnership recognized equity in (loss) income of limited partnerships of
$(1,437,536), $625,025 and $603,934
<PAGE> 9
for the years ended December 31, 1998, 1997 and 1996, respectively. The loss in
1998 is the result of an impairment of approximately $2,076,000 to the carrying
values of the investments in certain local limited partnerships. The capital
contributions for 1998 and 1997 were $67,912 and $32,912, respectively, for each
year. The cumulative amount of the unrecognized equity in losses of certain
limited partnerships was approximately $9,686,000 and $29,631,000 as of December
31, 1998 and 1997, respectively.
Distributions from the local limited partnerships in which the Partnership did
not have a positive investment balance were $123,291, $499,540 and $597,425 for
the years ended December 31, 1998, 1997 and 1996, respectively. These amounts
were recognized as income on the accompanying statements of operations, in
accordance with the equity method of accounting.
As of December 31, 1998, 1997 and 1996, the Partnership has cash and cash
equivalents of $5,477,969, $6,611,690 and $5,849,983, respectively. These
amounts are on deposit primarily with two high credit quality financial
institutions, earning interest. As a result of changing financial institutions
in 1997 where the cash and cash equivalents are on deposit, the interest rate
earned on such deposits in 1998 and 1997 was significantly greater than in 1996.
This resulted in the Partnership earning $291,598, 299,009 and $165,591 in
interest income for the years ended December 31, 1998, 1997 and 1996,
respectively. The amount of interest income varies with market rates available
and with the amount of funds available for investment. Cash equivalents can be
converted to cash to meet obligations of the Partnership as they arise. The
Partnership intends to continue investing available funds in this manner.
A recurring partnership expense is the annual management fee. The fee is payable
to the Corporate General Partner of the Partnership and is calculated at .4
percent of the Partnership's invested assets. The management fee is paid to the
Corporate General Partner for its continuing management of partnership affairs.
The fee is payable beginning with the month following the Partnership's initial
investment in a local limited partnership. Management fees were $502,224,
$501,660 and $513,393 for the years ended December 31, 1998, 1997 and 1996,
respectively. The fees have decreased due to the sales of properties owned by
local partnerships, which reduced the invested assets.
Under recent 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 was generally the case
under existing HAP Contracts. The payments under the renewed HAP Contracts are
not expected to 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.
MAHRAA provides that properties begin the restructuring process in federal
fiscal year 1999 (beginning October 1, 1998). On September 11, 1998, HUD issued
interim regulations implementing MAHRAA and final regulations are expected to be
issued in 1999. With respect to the local limited partnerships' expiring HAP
Contracts, it is expected that the HAP payments will be reduced or terminated
pursuant to the terms of MAHRAA.
<PAGE> 10
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.
As a result of the foregoing, the Partnership in 1997 undertook an extensive
review of disposition, refinancing or re-engineering alternatives for the
properties in which the limited partnerships have invested and are subject to
HUD mortgage and rental subsidy programs. The Partnership has incurred expenses
in connection with this review by various third party professionals, including
accounting, legal, valuation, structural and engineering costs, which amounted
to $393,072 and $127,514 for the years ended December 31, 1998 and 1997,
respectively, and are included in general administrative expenses.
On December 30, 1998, the Partnership sold its limited partnership interests in
10 local limited partnerships, with a total carrying value of $3,878,866, and
its general partner interest in one local general partnership, with a partner
deficit of $1,507,828, to the Operating Partnership. The sale resulted in
proceeds to the Partnership of a $1,397,081 and a net gain of $7,497,969, after
being relieved of notes and interest payable of $8,712,920 and incurring selling
expenses of $240,994. In March 1999, the Partnership made cash distributions of
$2,769,110 to the limited partners and $27,971 to the general partners, which
included using proceeds from the sale of the partnership interests.
The Operating Partnership purchased such limited partner interests for cash,
which it raised in connection with a private placement of its equity securities.
The purchase was subject to, among other things, (i) the purchase of the general
partner interests in the local limited partnerships by the Operating
Partnership; (iii) the approval of HUD and certain state housing finance
agencies; and (iii) the consent of the limited partners to the sale of the local
limited partnership interests held for investment by the Partnership.
In August 1998, a consent solicitation statement was sent to the limited
partners setting forth the terms and conditions of the purchase of the limited
partners' interests held for investment by the Partnership, together with
certain amendments to the Partnership Agreement and other disclosures of various
conflicts of interest in connection with the proposed transaction. Prior to the
sale of the partnership interests, the consents of the limited partners to the
sale and amendments to the Partnership Agreement were obtained.
General and administrative expenses were generally consistent for the three
years presented. General and administrative expenses were $692,092, $396,600 and
$262,047 for the years ended December 31, 1998, 1997 and 1996, respectively.
Included in general and administrative expenses are reimbursements to NAPICO for
certain expenses, which totaled $51,491, $51,487 and $47,231 for the years ended
December 31, 1998, 1997 and 1996, respectively. Also included in partnership
general and administrative expenses for 1998 and 1997 is $393,072 and $127,514,
respectively, related to the aforementioned third-party review of the properties
owned by the local partnerships.
At December 31, 1998, 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 Partnership was
relieved of notes payable in the amount of $4,030,000 in connection with the
sale of the partnership interests to the Operating Partnership. The notes and
related interest are payable from cash flow generated from operations of the
related rental 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. Since the Partnership was not
relieved of any notes until the end of 1998 in connection with the sale of the
limited partnership interests, interest expense has remained fairly constant at
$533,700, $533,700 and $519,650 for 1998, 1997 and 1996, respectively.
<PAGE> 11
The results of operations of the local limited partnerships were fairly constant
during the years ended December 31, 1998, 1997 and 1996. Contributing to the
relative stability of operations at the local partnerships is the fact that
substantially all of the local partnerships are operating apartment projects
which are subsidized and have mortgage notes payable to or insured by agencies
of the federal or local government.
Total revenue for the 22 local partnerships has remained fairly constant, and
was $21,200,000, $20,921,000 and $21,246,000 for the years ended December 31,
1998, 1997 and 1996, respectively.
Total expenses for the 22 local partnerships remained fairly consistent, and
were $23,021,000, $22,866,000 and $23,123,000 for the years ended December 31,
1998, 1997 and 1996, respectively.
The total net loss for the 22 local partnerships for 1998, 1997 and 1996
aggregated $1,821,000, $1,945,000 and $1,877,000, respectively. The losses
allocable to the Partnership were $1,799,000, $1,933,000 and $1,869,000 for
1998, 1997 and 1996, respectively.
During the year ended December 31, 1997, the local limited partnership that owns
Drexel III consummated the sale of the apartment complex. The Partnership
received distributions of $670,245 of which $597,601 was recognized as a return
of capital and $72,644 was recognized as distributions to income. The
Partnership financial statements reflect no investment in the Drexel III Local
Partnership.
The Partnership, as a limited or general partner in the local partnerships in
which it has invested, is subject to the risks incident to the construction,
management, and ownership of improved real estate. The Partnership investments
are also subject to adverse general economic conditions and accordingly, the
status of the national economy, including substantial unemployment, concurrent
inflation and changing legislation, could increase vacancy levels, rental
payment defaults, and operating expenses, which in turn, could substantially
increase the risk of operating losses for the projects.
The Partnership has assessed the potential impact of the Year 2000 computer
systems issue on its operations. The Partnership believes that no significant
actions are required to be taken by the Partnership to address the issue and
that the impact of the Year 2000 computer systems issue will not materially
affect the Partnership's future operating results or financial condition.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The Financial Statements and Supplementary Data are listed under Item 14.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
<PAGE> 12
REAL ESTATE ASSOCIATES LIMITED VI AND SUBSIDIARIES
(A California limited partnership)
FINANCIAL STATEMENTS,
FINANCIAL STATEMENT SCHEDULES
AND INDEPENDENT PUBLIC ACCOUNTANTS' REPORT
DECEMBER 31, 1998
<PAGE> 13
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Partners of
Real Estate Associates Limited VI
(A California limited partnership)
We have audited the accompanying balance sheets of Real Estate Associates
Limited VI (a California limited partnership) as of December 31, 1998 and 1997,
and the related statements of operations, partners' deficiency and cash flows
for each of the three years in the period ended December 31, 1998. Our audits
also included the financial statement schedules listed in the index in item 14.
These financial statements and financial statement schedules are the
responsibility of the management of the Partnership. Our responsibility is to
express an opinion on these financial statements and financial statement
schedules based on our audits. We did not audit the financial statements of
certain limited partnerships, the investments in which are reflected in the
accompanying financial statements using the equity method of accounting. The
investments in these limited partnerships represent 35 percent and 35 percent of
total assets as of December 31, 1998 and 1997, respectively, and the equity in
income of these limited partnerships represents 17 percent, 17 percent and 12
percent of the total net income of the Partnership for the years ended December
31, 1998, 1997 and 1996, respectively, and represent a substantial portion of
the investee information in Note 2 and the financial statement schedules. The
financial statements of these limited partnerships are audited by other
auditors. Their reports have been furnished to us and our opinion, insofar as it
relates to the amounts included for these limited partnerships, is based solely
on the reports of the other auditors.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe our audits and the reports of other auditors provide a reasonable
basis for our opinion.
In our opinion, based on our audits and the reports of other auditors, the
financial statements referred to above present fairly, in all material respects,
the financial position of Real Estate Associates Limited VI as of December 31,
1998 and 1997, and the results of its operations and its cash flows for each of
the three years in the period ended December 31, 1998 in conformity with
generally accepted accounting principles. Also, in our opinion, based on our
audits and the reports of other auditors, such financial statement schedules,
when considered in relation to the basic financial statements taken as a whole,
present fairly in all material respects the information set forth therein.
DELOITTE & TOUCHE LLP
Los Angeles, California
April 6, 1999
<PAGE> 14
REAL ESTATE ASSOCIATES LIMITED VI
(A CALIFORNIA LIMITED PARTNERSHIP)
BALANCE SHEETS
DECEMBER 31, 1998 AND 1997
ASSETS
<TABLE>
<CAPTION>
1998 1997
------------ ------------
<S> <C> <C>
INVESTMENTS IN LIMITED PARTNERSHIPS (Note 2) $ 500,744 $ 5,885,699
RENTAL PROPERTY, net of accumulated depreciation (Note 1) -- 3,016,049
CASH AND CASH EQUIVALENTS (Note 1) 5,477,969 6,611,690
CASH, restricted (Note 3) -- 38,465
CASH DUE FROM ESCROW (Note 2) 1,397,081 --
OTHER ASSETS 50,985 174,284
------------ ------------
TOTAL ASSETS $ 7,426,779 $ 15,726,187
============ ============
LIABILITIES AND PARTNERS' EQUITY (DEFICIENCY)
LIABILITIES:
Mortgage notes payable related to properties (Notes 4 and 9) $ -- $ 4,828,404
Notes payable and amounts due for partnership
interests (Notes 5 and 9) 1,765,000 5,795,000
Accrued interest payable (Notes 5 and 9) 1,817,184 6,103,244
Accounts payable 208,460 117,968
Other liabilities -- 38,465
------------ ------------
3,790,644 16,883,081
------------ ------------
COMMITMENTS AND CONTINGENCIES (Notes 2, 6 and 7)
PARTNERS' EQUITY (DEFICIENCY):
General partners (314,828) (362,758)
Limited partners 3,950,963 (794,136)
------------ ------------
3,636,135 (1,156,894)
------------ ------------
TOTAL LIABILITIES AND PARTNERS' EQUITY
(DEFICIENCY) $ 7,426,779 $ 15,726,187
============ ============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
<PAGE> 15
REAL ESTATE ASSOCIATES LIMITED VI
(A CALIFORNIA LIMITED PARTNERSHIP)
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1998
<TABLE>
<CAPTION>
1998 1997 1996
------------ ------------ ------------
<S> <C> <C> <C>
RENTAL OPERATIONS:
Revenues $ 1,138,743 $ 1,070,895 $ 1,211,516
------------ ------------ ------------
Expenses:
General and administrative 148,874 84,870 162,929
Operating 310,249 369,779 395,170
Management fees - affiliate (Note 6) 55,985 53,500 76,862
Depreciation and amortization 156,480 156,480 210,414
Interest 421,432 426,337 541,383
------------ ------------ ------------
1,093,020 1,090,966 1,386,758
------------ ------------ ------------
LOSS FROM RENTAL OPERATIONS 45,723 (20,071) (175,242)
------------ ------------ ------------
PARTNERSHIP OPERATIONS:
Interest and other income 291,598 299,009 165,591
------------ ------------ ------------
Expenses:
Management fees - general partner (Note 6) 502,224 501,660 513,393
General and administrative 692,092 396,600 262,047
Interest 533,700 533,700 519,650
------------ ------------ ------------
1,728,016 1,431,960 1,295,090
------------ ------------ ------------
LOSS FROM PARTNERSHIP
OPERATIONS (1,436,418) (1,132,951) (1,129,499)
------------ ------------ ------------
GAIN ON SALE OF LIMITED PARTNERSHIP
INTERESTS AND RENTAL PROPERTY
(Notes 1 and 2) 7,497,969 -- 1,902,022
EQUITY IN INCOME OF LIMITED
PARTNERSHIPS AND AMORTIZATION
OF ACQUISITION COSTS (1,437,536) 625,025 603,934
DISTRIBUTIONS FROM LIMITED
PARTNERSHIPS RECOGNIZED AS
INCOME (Note 2) 123,291 499,540 597,425
------------ ------------ ------------
NET INCOME (LOSS) $ 4,793,029 $ (28,457) $ 1,798,640
============ ============ ============
NET INCOME (LOSS) PER LIMITED
PARTNERSHIP INTEREST (Note 1) $ 285 $ (2) $ 107
============ ============ ============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
<PAGE> 16
REAL ESTATE ASSOCIATES LIMITED VI
(A CALIFORNIA LIMITED PARTNERSHIP)
CONSOLIDATED STATEMENTS OF PARTNERS' EQUITY (DEFICIENCY)
FOR THE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
<TABLE>
<CAPTION>
General Limited
Partners Partners Total
----------- ----------- -----------
<S> <C> <C> <C>
DEFICIENCY, January 1, 1996 $ (380,460) $(2,546,617) $(2,927,077)
Net income, 1996 17,986 1,780,654 1,798,640
----------- ----------- -----------
DEFICIENCY, December 31, 1996 (362,474) (765,963) (1,128,437)
Net loss, 1997 (285) (28,172) (28,457)
----------- ----------- -----------
DEFICIENCY, December 31, 1997 (362,758) (794,136) (1,156,894)
Net loss, 1998 47,930 4,745,099 4,793,029
----------- ----------- -----------
(DEFICIENCY) EQUITY, December 31, 1998 $ (314,828) $ 3,950,963 $ 3,636,135
=========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
<PAGE> 17
REAL ESTATE ASSOCIATES LIMITED VI
(A CALIFORNIA LIMITED PARTNERSHIP)
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
<TABLE>
<CAPTION>
1998 1997 1996
------------ ------------ ------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 4,793,029 $ (28,457) $ 1,798,640
Adjustments to reconcile net income (loss) to net
cash provided by (used in) operating activities:
Gain on sale of rental property (7,497,969) -- (1,902,022)
Equity in loss (income) of limited partnerships
and amortization of acquisition costs 1,437,536 (625,025) (603,934)
Depreciation and amortization 156,480 156,480 210,414
(Increase) decrease in receivables from limited partnerships -- -- 1,000
Decrease in other assets 123,299 2,296 136,670
Increase in accrued interest payable 432,227 452,861 396,403
(Decrease) increase in accounts payable 90,482 70,596 (146,129)
(Decrease) increase in other liabilities (38,465) 2,715 (95,421)
------------ ------------ ------------
Net cash provided by (used in) operating activities (503,381) 31,466 (204,379)
------------ ------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Distributions to limited partnerships recognized as
as a return of capital 136,465 823,764 176,852
Decrease in restricted cash 38,465 (2,715) 48,588
Decrease in short term investments -- -- 125,000
Capital contribution to investee limited partnership (67,912) (32,912) (5,294)
Proceeds from sale of rental property -- -- 5,818,140
Costs related to sale of partnership interests (240,994)
Cash transferred in connection with sale of partnership
interest (433,175) -- --
------------ ------------ ------------
Net cash provided by investing activities (567,151) 788,137 6,163,286
------------ ------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payment of mortgages (63,189) (57,896) (5,004,264)
------------ ------------ ------------
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS (1,133,721) 761,707 954,643
CASH AND CASH EQUIVALENTS,
BEGINNING OF YEAR 6,611,690 5,849,983 4,895,340
------------ ------------ ------------
CASH AND CASH EQUIVALENTS,
END OF YEAR $ 5,477,969 $ 6,611,690 $ 5,849,983
============ ============ ============
SUPPLEMENTAL DISCLOSURE OF
CASH FLOW INFORMATION:
Cash paid during the year for interest $ 518,335 $ 507,176 $ 664,630
============ ============ ============
SUPPLEMENTAL SCHEDULE OF NON-CASH
INVESTING AND FINANCING ACTIVITIES
See Note 2 and Note 4 to financial statements regarding
notes, interest and mortgage payable
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
<PAGE> 18
REAL ESTATE ASSOCIATES LIMITED VI AND SUBSIDIARIES
(a California limited partnership)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION
Real Estate Associates Limited VI (the "Partnership"), was formed under
the California Limited Partnership Act on October 12, 1982. The
Partnership was formed to invest primarily in other limited
partnerships or joint ventures which own and operate primarily federal,
state or local government-assisted housing projects and to acquire,
lease, sell or mortgage real or personal property. The general partners
are National Partnership Investments Associates (NAPIA), a limited
partnership, and National Partnership Investments Corp. (NAPICO). Prior
to December 30, 1998, NAPICO was a wholly owned subsidiary of Casden
Investment Corporation ("CIC"), which is wholly owned by Alan I.
Casden. On December 30, 1998, Casden Properties Operating Partnership,
L.P., (the "Operating Partnership") a majority owned subsidiary of
Casden Properties Inc., a real estate investment trust organized by
Alan I. Casden, purchased a 95.25% economic interest in NAPICO. The
business of REAL VI is conducted primarily by NAPICO.
The consolidated financial statements include the accounts of Real
Estate Associates Limited VI and its majority-owned general
partnerships. All significant intercompany accounts and transactions
have been eliminated in consolidation. Losses in excess of the minority
interest in equity that would otherwise be attributed to the minority
interest are being allocated to the Partnership.
The Partnership offered and issued 4,200 units of limited partner
interests through a public offering. Each unit was comprised of two
limited partner interests and a warrant granting the investor the right
to purchase two additional limited partner interests. An additional
8,410 interests were issued from the exercise of warrants and the sale
of interests associated with warrants not exercised. The general
partners have a 1 percent interest in operating profits and losses of
the Partnership. The limited partners have the remaining 99 percent
interest in proportion to their respective investments.
The Partnership shall be dissolved only upon the expiration of 50
complete calendar years (December 31, 2032) from the date of the
formation of the partnership or the occurrence of various other events
as specified in the Partnership agreement.
Upon total or partial liquidation of the Partnership or the disposition
or partial disposition of a project or project interest and
distribution of the proceeds, the general partners will be entitled to
a liquidation fee as stipulated in the Partnership agreement. The
limited partners will have a priority return equal to their invested
capital attributable to the project(s) or project interest(s) sold and
shall receive from the sale of the project(s) or project interest(s) an
amount sufficient to pay state and federal income taxes, if any,
calculated at the maximum rate then in effect. The general partner's
liquidation fee may accrue but shall not be paid until the limited
partners have received distributions equal to 100 percent of their
capital contributions.
On December 30, 1998, the Partnership sold its interests in 10 local
limited partnerships and its general partner interest in one local
general partnership for net proceeds of $1,397,081 to the Operating
Partnership.
5
<PAGE> 19
REAL ESTATE ASSOCIATES LIMITED VI AND SUBSIDIARIES
(a California limited partnership)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles 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.
METHOD OF ACCOUNTING FOR INVESTMENTS IN LIMITED PARTNERSHIPS
The investments in limited partnerships are accounted for on the equity
method. Acquisition, selection and other costs related to the
acquisition of the projects have been 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.
RENTAL PROPERTY AND DEPRECIATION
Rental property is stated at cost. Depreciation is provided on the
straight-line and accelerated methods over the estimated useful lives
of the buildings and equipment. Pursuant to a purchase agreement in
which the Partnership acquired its interest from independent
withdrawing general partners, certain rental property was revalued to
reflect the purchase price.
Substantially all of the apartment units are leased on a month-to-month
basis.
The costs of rental property and estimated useful lives for
depreciation are as follows:
<TABLE>
<CAPTION>
Estimated
Useful
Lives 1998 1997
------------- ---- ----------
<S> <C> <C> <C>
Land $ -- $1,557,180
Buildings 25 years -- 3,283,659
Equipment 3 to 5 years -- 824,580
---- ----------
-- 5,665,419
Less-Accumulated Depreciation
and Amortization -- 2,649,370
---- ----------
$ -- $3,016,049
==== ==========
</TABLE>
On February 2, 1996, one of the consolidated general partnerships
(Drexel Park) sold its property for $6,300,000. After payment of
closings costs, the Partnership realized a gain of approximately
$1,902,000 in 1996.
On December 30, 1998, the Partnership sold its remaining consolidated
general partnership interest (Peppertree Associates).
6
<PAGE> 20
REAL ESTATE ASSOCIATES LIMITED VI AND SUBSIDIARIES
(a California limited partnership)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
NET INCOME (LOSS) PER LIMITED PARTNERSHIP INTEREST
Net income (loss) per limited partnership interest was computed by
dividing the limited partners' share of net income (loss) by the number
of limited partnership interests outstanding during the year. The
number of limited partnership interests was 16,810 for all years
presented.
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 primarily with
two high credit quality financial institutions Such cash and cash
equivalents are in excess of the FDIC insurance limit.
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. During 1998, the Partnership recognized an impairment
loss of approximately $2,076,000 related to certain investments in
local limited partnerships, which has been included in equity in loss
of limited partnerships.
2. INVESTMENTS IN LIMITED PARTNERSHIPS
The Partnership holds limited partnership interests in 20 limited
partnerships. In addition, REAL VI holds a general partner interest in
Real Estate Associates III ("REA III"), a California general
partnership. NAPICO is also a general partner in REA III. REA III, in
turn, holds limited partner interests in 3 limited partnerships. In
total, therefore, the Partnership holds interests, either directly or
indirectly through REA III, in 23 limited partnerships and one general
partnership, which own 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 are 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
7
<PAGE> 21
REAL ESTATE ASSOCIATES LIMITED VI AND SUBSIDIARIES
(a California limited partnership)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998
2. INVESTMENTS IN LIMITED PARTNERSHIPS (CONTINUED)
unconsolidated limited partnerships was approximately $9,686,000 and
$29,631,000 as of December 31, 1998 and 1997, 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.
The following is a summary of the investments in unconsolidated limited
partnerships and reconciliation to the limited partnership accounts:
<TABLE>
<CAPTION>
1998 1997
------------ ------------
<S> <C> <C>
Investment balance, beginning of year $ 5,885,699 $ 6,051,522
Equity in (loss) income of limited partnerships (1,319,585) 742,980
Investment balance in partnership interests sold (3,878,866) --
Amortization of capitalized acquisition costs and fees (117,951) (117,951)
Capital contributions 67,912 32,912
Distributions recognized as a return of capital (136,465) (823,764)
------------ ------------
Investment balance, end of year $ 500,744 $ 5,885,699
============ ============
</TABLE>
The difference between the investment per the accompanying balance
sheets at December 31, 1998 and 1997, and the deficiency per the
limited partnerships' combined financial statements is due primarily to
cumulative unrecognized equity in losses of limited partnerships,
additional basis and costs capitalized to the investment account,
cumulative distributions recognized as income and impairment losses.
Selected financial information from the combined financial statements
at December 31, 1998 and 1997 and for each of the three years in the
period ended December 31, 1998, of the limited partnerships in which
the Partnership has invested directly or indirectly, is as follows:
Balance Sheets
<TABLE>
<CAPTION>
1998 1997
-------- --------
(in thousands)
<S> <C> <C>
Land and buildings, net $ 23,969 $ 49,936
======== ========
Total assets $ 32,650 $ 67,970
======== ========
Mortgage loans payable $ 34,448 $ 67,569
======== ========
Total liabilities $ 41,289 $ 98,879
======== ========
Deficiency of the Real Estate Associates Limited VI $ (8,771) $(29,604)
======== ========
Equity (deficiency) of other partners $ 132 $ (1,306)
======== ========
</TABLE>
8
<PAGE> 22
REAL ESTATE ASSOCIATES LIMITED VI AND SUBSIDIARIES
(a California limited partnership)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998
2. INVESTMENTS IN LIMITED PARTNERSHIPS (CONTINUED)
Statements of Operations
<TABLE>
<CAPTION>
1998 1997 1996
-------- -------- --------
(in thousands)
<S> <C> <C> <C>
Total revenue $ 21,200 $ 20,921 $ 21,246
======== ======== ========
Interest expense $ 4,989 $ 5,155 $ 5,561
======== ======== ========
Depreciation $ 3,321 $ 3,592 $ 3,597
======== ======== ========
Total expenses $ 23,021 $ 22,866 $ 23,123
======== ======== ========
Net loss $ (1,821) $ (1,945) $ (1,877)
======== ======== ========
Net loss allocable to the Partnership $ (1,799) $ (1,933) $ (1,869)
======== ======== ========
</TABLE>
Land and buildings above have been adjusted for the amount by which the
investments in the limited partnerships exceed the Partnership's share
of the net book value of the underlying net assets of the investee
which are recorded at historical costs. Depreciation on the adjustment
is provided for over the estimated remaining useful lives of the
properties.
Prior to the sale of certain partnership interests on December 30,
1998, an affiliate of NAPICO was the general partner in 10 of the
limited partnerships included above, and another affiliate received
property management fees ranging from 5 percent to 7 percent of the
revenue from four of these partnerships. The affiliate received
property management fees of $67,409, $63,742 and $85,735 in 1998,
1997 and 1996, respectively. The following sets forth the significant
data for the partnerships in which an affiliate of NAPICO was the
general partner prior to the sale referred to above, reflected in the
accompanying financial statements using the equity method of
accounting:
<TABLE>
<CAPTION>
1998 1997 1996
-------- -------- ------
(in thousands)
<S> <C> <C> <C>
Total assets $ 6,102 $ 9,443
======== ========
Total liabilities $ 8,147 $ 13,178
======== ========
Deficiency of Real Estate Associates Limited VI $ (1,961) $ (3,633)
======== ========
Deficiency of other partners $ (84) $ (102)
======== ========
Total revenue $ 2,629 $ 2,629 $3,213
======== ======== ======
Net loss $ (307) $ (383) $ (340)
======== ======== ======
</TABLE>
9
<PAGE> 23
REAL ESTATE ASSOCIATES LIMITED VI AND SUBSIDIARIES
(a California limited partnership)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998
2. INVESTMENTS IN LIMITED PARTNERSHIPS (CONTINUED)
Subsequent to the sale of certain partnership interests, NAPICO is the
general partner in 6 of the limited partnerships, and another affiliate
manages 2 of the limited partnership's properties.
During the year ended December 31, 1997, the local limited partnership
that owns Drexel III consummated the sale of the apartment complex. The
Partnership received distributions of $670,245 of which $597,601 was
recognized as a return of capital and $72,644 was recognized as
distributions to income. The Partnership financial statements reflect
no investment in the Drexel III Local Partnership.
Under recent 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 was generally the case under existing HAP
Contracts. The payments under the renewed HAP Contracts are not
expected to 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.
MAHRAA provides that properties begin the restructuring process in
federal fiscal year 1999 (beginning October 1, 1998). On September 11,
1998, HUD issued interim regulations implementing MAHRAA and final
regulations are expected to be issued in 1999. With respect to the
local limited partnerships' expiring HAP Contracts, it is expected that
the HAP payments will be reduced or terminated pursuant to the terms of
MAHRAA.
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.
As a result of the foregoing, the Partnership in 1997 undertook an
extensive review of disposition, refinancing or re-engineering
alternatives for the properties in which the limited partnerships have
10
<PAGE> 24
REAL ESTATE ASSOCIATES LIMITED VI AND SUBSIDIARIES
(a California limited partnership)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998
2. INVESTMENTS IN LIMITED PARTNERSHIPS (CONTINUED)
invested and are subject to HUD mortgage and rental subsidy programs.
The Partnership has incurred expenses in connection with this review by
various third party professionals, including accounting, legal,
valuation, structural and engineering costs, which amounted to $393,072
and $127,514 for the years ended December 31, 1998 and 1997,
respectively, and are included in general and administrative expenses.
On December 30, 1998, the Partnership sold its limited partnership
interests in 10 local limited partnerships, with a total carrying value
of $3,878,866, and its general partner interest in one local general
partnership, with a partner deficit of $1,507,828, to the Operating
Partnership. The sale resulted in cash proceeds to the Partnership of a
$1,397,081 and a net gain of $7,497,969, after being relieved of notes
and interest payable of $8,712,920 and incurring selling expenses of
$240,994. The cash proceeds were held in escrow at December 31, 1998
and were 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, which included using
proceeds from the sale of the partnership interests.
The Operating Partnership purchased such limited partner interests for
cash, which it raised in connection with a private placement of its
equity securities. The purchase was subject to, among other things, (i)
the purchase of the general partner interests in the local limited
partnerships by the Operating Partnership; (iii) the approval of HUD
and certain state housing finance agencies; and (iii) the consent of
the limited partners to the sale of the local limited partnership
interests held for investment by the Partnership.
In August 1998, a consent solicitation statement was sent to the
limited partners setting forth the terms and conditions of the purchase
of the limited partners' interests held for investment by the
Partnership, together with certain amendments to the Partnership
Agreement and other disclosures of various conflicts of interest in
connection with the proposed transaction. Prior to the sale of the
partnership interests, the consents of the limited partners to the sale
and amendments to the Partnership Agreement were obtained.
3. CASH, RESTRICTED
Restricted cash at December 31, 1997 consists of tenants' security
deposits.
4. MORTGAGE NOTE PAYABLE RELATED TO PROPERTY
Mortgage note payable related to property consists of the following at
December 31, 1997:
<TABLE>
<CAPTION>
1997
----------
<S> <C>
Mortgage note bears interest at 8.78 percent per annum, with monthly
principal and interest payments of $40,385, due September 10, 2006. $4,828,404
==========
</TABLE>
11
<PAGE> 25
REAL ESTATE ASSOCIATES LIMITED VI AND SUBSIDIARIES
(a California limited partnership)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998
4. MORTGAGE NOTE PAYABLE RELATED TO PROPERTY (CONTINUED)
The note was collateralized by the rental properties and assumed by the
buyer in connection with the sale of the partnership interest.
5. NOTES PAYABLE AND AMOUNTS DUE FOR PARTNERSHIP INTERESTS
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 partnership was relieved of
notes payable in the amount of $4,030,000 in connection with the sale
of the partnership interests to the Operating Partnership.
The notes and related interest are payable from cash flow generated
from operations of the related rental 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 of the notes payable and related accrued interest are as
follows:
<TABLE>
<CAPTION>
Accrued
Years Ending December 31, Notes Interest
------------------------- ---------- ----------
<S> <C> <C>
1999 $ 520,000 $ 699,588
2000
2001
2002
2003
Thereafter 920,000 1,117,596
---------- ----------
$1,440,000 $1,817,184
========== ==========
</TABLE>
6. FEES AND EXPENSES DUE TO GENERAL PARTNER AND AFFILIATE
Under the terms of the Restated Certificate and Agreement of Limited
Partnership, the Partnership is obligated to NAPICO for an annual
management fee equal to .4 percent of the original invested assets of
the partnerships. Invested assets is 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.
12
<PAGE> 26
REAL ESTATE ASSOCIATES LIMITED VI AND SUBSIDIARIES
(a California limited partnership)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998
6. FEES AND EXPENSES DUE TO GENERAL PARTNER AND AFFILIATE (CONTINUED)
For one of the properties owned by the Partnership in 1996, an
affiliate of NAPICO received a management fee of 5 percent of its gross
revenues plus reimbursement of certain expenses. The Partnership paid
management fees to the affiliate of approximately $12,000 in 1996. An
affiliate of the minority general partner of a general partnership that
is consolidated, manages the property owned by that partnership. The
fee is calculated based on five percent of gross collections plus
reimbursement of certain expenses. The Partnership paid management fees
to the affiliate of approximately $58,000, $60,000 and $65,000 in 1998,
1997 and 1996, respectively.
The Partnership reimburses NAPICO for certain expenses. The
reimbursement to NAPICO was $51,491, $51,487 and $47,231 in 1998, 1997
and 1996, respectively, and is included in general and administrative
expenses.
7. 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 Real Estate Associates Limited VI
(another affiliated partnership in which NAPICO is the managing general
partner) 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 the Operating Partnership organized by an
affiliate of NAPICO. The plaintiffs seek preliminary and permanent
injunctive relief and other equitable relief, as well as compensatory
and punitive damages. The managing general partner of such NAPICO
managed partnerships and the other defendants believe that the
plaintiffs' claims are without merit and intend to contest the action
vigorously.
The corporate general partner of the Partnership is a plaintiff in
various lawsuits and has also been named a defendant 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.
The Partnership has assessed the potential impact of the Year 2000
computer systems issue on its operations. The Partnership believes that
no significant actions are required to be taken by the Partnership to
address the issue and that the impact of the Year 2000 computer systems
issue will not materially affect the Partnership's future operating
results or financial condition.
13
<PAGE> 27
REAL ESTATE ASSOCIATES LIMITED VI AND SUBSIDIARIES
(a California limited partnership)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998
8. 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. The major differences in tax and financial
reporting result from the use of different bases and depreciation
methods for the properties held by the limited partnerships.
Differences in tax and financial reporting also arise as losses are not
recognized for financial reporting purposes when the investment balance
has been reduced to zero or to a negative amount equal to further
capital contributions required.
9. 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 operations generated
by the properties 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 notes payable
and related accrued interest. The carrying amount of other assets and
liabilities reported on the balance sheets that require such disclosure
approximates fair value due to their short-term maturity.
10. FOURTH-QUARTER ADJUSTMENT
The Partnership's policy is to record its equity in the loss of limited
partnerships on a quarterly basis using estimated financial information
furnished by the various local operating general partners. The equity
in income (loss) of limited partnerships reflected in the accompanying
annual consolidated financial statements is based primarily upon
audited financial statements of the investee limited partnerships. The
increase of approximately $1,984,000, between the estimated nine-month
equity in income and the actual 1998 year end equity in loss, has been
recorded in the fourth quarter.
14
<PAGE> 28
SCHEDULE
REAL ESTATE ASSOCIATES LIMITED VI
INVESTMENTS IN LIMITED PARTNERSHIPS
FOR THE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
<TABLE>
<CAPTION>
Year Ended December 31, 1998
-------------------------------------------------------------------------------------------
Cash From
Distri-
Balance butions/ Equity in Balance
January 1, Capital Sale Income/ December 31,
Limited Partnerships 1998 Contributions Received (Loss) Sale 1998
---------- ------------- --------- ----------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
Boynton Terrace $ $ $ $ $ $
Cady Brook Apts. 389,264 (4,775) (384,489)
Cassidy Village 250,619 (9,233) (12,273) 229,113
City Heights*
Crockett Manor 10,000 (10,000)
Denny Place*
Eastridge Apts.
EchoValley Apts.* 65,987 121,911 (187,898)
Filmore I
Grant-Ko Enterprises
Hudson Gardens* 402,727 (19,947) 89,041 (471,821)
Hummelstown Manor
Kentucky Manor
Lakewind East Apts.
Lonsdale Elderly 1,012,101 (34,371) (977,730)
Mariner's Cove*
Marshall Plaza I
Marshall Plaza II
Menlo Estates*
Mulberry Towers* 2,905,355 (55,252) 221,312 (3,071,415)
New-Bel-Mo Enterprises (25,500) 25,500
Oakridge Apts.
Oakwood Manor 173,705 (5,444) (168,261)
Park Place Apts., TX*
Park Place Apts., NJ 375,202 (7,443) (96,128) 271,631
Parkesedge Elderly Apts. 234,385 (234,385)
Paula Maria Apts. (Century Plaza)
Penneco II (25,000) 25,000
Sauk-Ko Enterprises
SOL 413 (22,000) 57,912 (35,912)
Valley Oak Apts.
Victory Square* 148,854 (1,122) (147,732)
Villas de Orocovix
Willow Wood*
---------- ------- --------- ----------- ----------- --------
$5,885,699 $67,912 $(136,465) $(1,437,536) $(3,878,866) $500,744
========== ======= ========= =========== =========== ========
</TABLE>
* The property was sold to the Operating Partnership in 1998.
<PAGE> 29
SCHEDULE
(CONTINUED)
REAL ESTATE ASSOCIATES LIMITED VI
INVESTMENTS IN LIMITED PARTNERSHIPS
FOR THE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
<TABLE>
<CAPTION>
Year Ended December 31, 1997
------------------------------------------------------------------------------------
Cash From
Distri-
Balance butions/ Equity in Balance Future
January 1, Capital Sale Income/ December 31, Capital
Limited Partnerships 1997 Contributions Received (Loss) 1997 Contributions
- ----------------------------------- ---------- ------------- ---------- --------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C>
Boynton Terrace $ $ $ $ $ $
Cady Brook Apts. 335,451 (4,777) 58,590 389,264
Cassidy Village 264,704 (957) (13,128) 250,619
City Heights
Crockett Manor 7,000 (7,000)
Denny Place 15,000 (15,000)
Drexel Park III 597,601 3,118 (600,719)
Eastridge Apts.
EchoValley Apts. 22,392 (9,490) 53,085 65,987
Filmore I
Grant-Ko Enterprises
Hudson Gardens 350,946 (19,855) 71,636 402,727
Hummelstown Manor
Kentucky Manor
Lakewind East Apts.
Lonsdale Elderly 883,427 (70,635) 199,309 1,012,101
Mariner's Cove
Marshall Plaza I
Marshall Plaza II
Menlo Estates
Mulberry Towers 2,800,336 (55,252) 160,271 2,905,355
New-Bel-Mo Enterprises (25,500) (25,500) 25,500
Oakridge Apts.
Oakwood Manor 173,689 (15,697) 15,713 173,705
Park Place Apts., TX
Park Place Apts., NJ 305,027 (40,825) 111,000 375,202
Parkesedge Elderly Apts. 214,016 20,369 234,385 18,000
Paula Maria Apts. (Century Plaza) 5,294 (5,294)
Penneco II (25,000) (25,000) 25,000
Sauk-Ko Enterprises
SOL 413 (22,000) 2,500 (2,500) (22,000) 22,000
Valley Oak Apts.
Victory Square 176,433 (263) (27,316) 148,854
Villas de Orocovix
Willow Wood
---------- ------- --------- -------- ---------- -------
$6,051,522 $32,912 $(823,764) $625,029 $5,885,699 $90,500
========== ======= ========= ======== ========== =======
</TABLE>
<PAGE> 30
SCHEDULE
(CONTINUED)
REAL ESTATE ASSOCIATES LIMITED VI
INVESTMENTS IN LIMITED PARTNERSHIPS
FOR THE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
<TABLE>
<CAPTION>
Year Ended December 31, 1996
------------------------------------------------------------------------------------------
Cash From
Distri-
Balance butions/ Equity in Balance Future
January 1, Capital Sale Income/ December 31, Capital
Limited Partnerships 1996 Contributions Received (Loss) 1996 Contributions
- ------------------------ ---------- ------------- ---------- --------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Boynton Terrace $ $ $ $ $
Cady Brook Apts. 298,129 (4,778) 42,100 335,451
Cassidy Village 308,841 (2,397) (41,740) 264,704
City Heights
Crockett Manor
Denny Place
Drexel Park III 572,502 (16,035) 41,134 597,601
Eastridge Apts.
EchoValley Apts. 22,392 22,392
Filmore I
Grant-Ko Enterprises
Hudson Gardens 293,015 (19,747) 77,678 350,946
Hummelstown Manor
Kentucky Manor
Lakewind East Apts.
Lonsdale Elderly 769,348 (34,597) 148,676 883,427
Mariner's Cove
Marshall Plaza I
Marshall Plaza II
Menlo Estates
Mulberry Towers 2,662,471 (55,252) 193,117 2,800,336
New-Bel-Mo Enterprises (25,500) (25,500) 25,500
Oakridge Apts.
Oakwood Manor 166,065 (5,390) 13,014 173,689
Park Place Apts., TX
Park Place Apts., NJ 230,507 (33,362) 107,882 305,027
Parkesedge Elderly Apts. 196,044 17,972 214,016 18,000
Paula Maria Apts. 5,294 (5,294)
Penneco II (25,000) (25,000) 25,000
Sauk-Ko Enterprises
SOL 413 (22,000) (22,000) 22,000
Valley Oak Apts.
Victory Square 194,724 (18,291) 176,433
Villas de Orocovix
Willow Wood
---------- ------ --------- -------- ---------- -------
$5,619,146 $5,294 $(176,852) $603,934 $6,051,522 $90,500
========== ====== ========= ======== ========== =======
</TABLE>
<PAGE> 31
SCHEDULE
(CONTINUED)
REAL ESTATE ASSOCIATES LIMITED VI
INVESTMENTS IN LIMITED PARTNERSHIPS
FOR THE YEARS ENDED
DECEMBER 31, 1998, 1997 AND 1996
NOTES: 1. Equity in losses represents the Partnership's allocable share of the
net loss from the limited partnerships for the year. Equity in
losses of the limited partnerships will be recognized until the
investment balance is reduced to zero or below zero to an amount
equal to future capital contributions to be made by the Partnership.
2. Cash distributions from the limited partnerships will be treated as
a return of the investment and will reduce the investment balance
until such time as the investment is reduced to an amount equal to
additional contributions. Distributions subsequently received will
be recognized as income.
<PAGE> 32
SCHEDULE III
REAL ESTATE ASSOCIATES LIMITED VI
REAL ESTATE AND ACCUMULATED DEPRECIATION
OF PROPERTY HELD BY LOCAL LIMITED PARTNERSHIPS
IN WHICH REAL VI HAS INVESTMENTS
DECEMBER 31, 1998
<TABLE>
<CAPTION>
BUILDINGS,
FURNISHINGS
& EQUIPMENT TOTAL
AMOUNT LAND
NUMBER OUTSTANDING CARRIED BUILDINGS,
OF MORTGAGE AT CLOSE OF FURNISHINGS ACCUMULATED CONSTRUCTION
PARTNERSHIP/LOCATION UNITS LOAN LAND PERIOD & EQUIPMENT DEPRECIATION PERIOD
- -------------------- ------ ----------- ----------- ------------ ----------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Boynton Terrace 89 $ 4,925,000 $ 208,001 $ 4,124,446 $ 4,332,447 $ 2,117,842 1983-1984
Boyton Beach, FL
Cadybrook 40 1,019,760 89,225 1,827,237 1,916,462 634,506 (A)
Charlton, MA
Crockett Manor 38 1,022,439 10,000 1,259,214 1,269,214 679,205 (A)
Trenton, TN
Eastridge Apts 96 571,893 101,500 1,573,351 1,674,851 1,438,984 (A)
Bristol, VA
Filmore I 32 1,187,775 115,000 1,312,495 1,427,495 717,861 (A)
Phoenix, AZ
Grant-Ko Enterprises 40 1,233,087 100,000 1,414,043 1,514,043 725,622 (A)
Platteville, WS
Hummelstown Manor 51 1,736,464 96,839 1,746,828 1,843,667 1,688,008 1983
Hummelstown, PA
Kentucky Manor 48 1,395,503 100,696 1,442,829 1,543,525 944,986 (A)
Oak Grove, KY
Lonsdale Housing 131 2,586,921 214,833 6,362,322 6,577,155 4,102,522 (A)
Providence, RI
New-Bel-Mo Enterprises 34 988,158 78,078 1,153,214 1,231,292 579,323 (A)
New Glarus, Belleville,
Monticello, WS
Oakridge Apts 48 1,197,463 55,000 1,509,252 1,564,252 1,370,577 (A)
Biloxi, MS
Oakwood 34 636,880 61,538 777,542 839,080 315,483 (A)
Milan, TN
Park Place 126 5,656,390 312,418 7,364,112 7,676,530 2,890,742 1983-1984
Ewing, NJ
Parkesedge Elderly Apts 45 1,473,661 160,000 1,833,070 1,993,070 764,614 (A)
Parkesedge, PA
Penneco II 76 1,861,356 79,627 2,795,927 2,875,554 1,563,793 (A)
Johnstown, PA
Sauk-Ko Enterprises 30 794,226 60,000 1,170,803 1,230,803 588,650 (A)
Baraboo, WS
SOL - 413 12 362,900 50,000 412,379 462,379 211,774 (A)
Old San Juan, PR
Valley Oaks Senior 50 1,771,000 121,464 1,913,903 2,035,367 1,100,527 (A)
Galt, CA
Villas de Orocovix 41 1,415,081 59,550 1,722,330 1,781,880 968,295 (A)
Orocovix, PR
Cassidy Village 98 1,057,957 156,850 2,021,621 2,178,471 971,496 (A)
Columbus, OH
Marshall Plaza I 40 220,932 68,414 709,014 777,428 340,723 (A)
Loraine, OH
Marshall Plaza II 50 290,039 78,901 919,854 998,755 442,044 (A)
Loraine, OH
Paula Maria I 120 1,043,396 215,730 2,832,932 3,048,662 1,689,767 (A)
Hampton, VA
Additional basis of XX 0 8,971 160,708 169,679 145,611
real estate due to
REAL VI's capital
contribution to limited
partnership not recorded
by investee limited
partnership
----- ----------- ----------- ----------- ----------- -----------
1,369 $34,448,281 $ 2,602,635 $48,359,426 $50,962,061 $26,992,955
----- ----------- ----------- ----------- ----------- -----------
</TABLE>
(A) This project was completed when REAL VI entered the Partnership.
<PAGE> 33
SCHEDULE III
REAL ESTATE ASSOCIATES LIMITED VI
REAL ESTATE AND ACCUMULATED DEPRECIATION OF PROPERTY
HELD BY LOCAL LIMITED PARTNERSHIPS
IN WHICH REAL VI HAS INVESTMENTS
DECEMBER 31, 1998
NOTES: 1. Each local partnership has developed, owns and operates the housing
project. Substantially all project costs, including construction
period interest expense, were capitalized by the local partnerships.
2. Depreciation is provided for by various methods over the estimated
useful lives of the projects. The estimated composite useful lives
of the buildings are generally from 25 to 40 years.
3. Investments in property and equipment - limited partnerships:
<TABLE>
<CAPTION>
Buildings,
Furnishings,
And
Land Equipment Total
----------- ------------- -------------
<S> <C> <C> <C>
Balance, January 1, 1996 $ 4,561,545 $ 100,290,845 $ 104,852,390
Net additions, 1996 19,721 846,147 865,868
----------- ------------- -------------
Balance, December 31, 1996 4,581,266 101,136,992 105,718,258
Net deletions, 1997 (77,442) (2,397,906) (2,475,348)
----------- ------------- -------------
Balance, December 31, 1997 4,503,824 98,739,086 103,242,910
Net additions, 1998 21,014 1,411,930 1,432,944
Sale of Properties (1,922,203) (51,791,590) (53,713,793)
----------- ------------- -------------
Balance, December 31, 1998 $ 2,602,635 $ 48,359,426 $ 50,962,061
=========== ============= =============
</TABLE>
<PAGE> 34
SCHEDULE III
(CONTINUED)
REAL ESTATE ASSOCIATES LIMITED VI
REAL ESTATE AND ACCUMULATED DEPRECIATION
OF PROPERTY HELD BY CONSOLIDATED LOCAL GENERAL
PARTNERSHIP IN WHICH REAL VI HAS AN INVESTMENT
DECEMBER 31, 1996
<TABLE>
<CAPTION>
TOTAL LAND,
BUILDINGS, BUILDINGS,
FURNISHINGS FURNISHINGS
PARTNERSHIP - NUMBER OF OUTSTANDING AND AND ACCUMULATED CONSTRUCTION
LOCATION UNITS MORTGAGE LAND EQUIPMENT EQUIPMENT DEPRECIATION PERIOD
- ----------------- --------- ----------- ---------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Peppertree
Cypress, CA 136 4,886,300 1,557,180 4,108,239 5,665,419 2,506,949 (A)
---- ----------- ---------- ------------ ------------ -----------
TOTAL 2832 $75,906,803 $6,138,446 $105,245,231 $111,383,677 $54,095,081
==== =========== ========== ============ ============ ===========
</TABLE>
(A) This project was completed when REAL VI entered the Partnership.
<PAGE> 35
SCHEDULE III
(CONTINUED)
REAL ESTATE ASSOCIATES LIMITED VI
REAL ESTATE AND ACCUMULATED DEPRECIATION OF PROPERTY
HELD BY LOCAL LIMITED PARTNERSHIPS
IN WHICH REAL VI HAS INVESTMENTS
DECEMBER 31, 1998
<TABLE>
<CAPTION>
Buildings,
Furnishings
And
Equipment
------------
<S> <C>
Balance at January 1, 1996 $ 48,128,260
Net additions for 1996 3,459,872
------------
Balance at December 31, 1996 51,588,132
Net additions for 1997 1,718,961
------------
Balance at December 31, 1997 53,307,093
Net additions for 1998 4,166,622
Sale of Properties (30,480,760)
------------
Balance at December 31, 1998 $ 26,992,955
============
</TABLE>
<PAGE> 36
SCHEDULE III
(CONTINUED)
REAL ESTATE ASSOCIATES LIMITED VI
REAL ESTATE AND ACCUMULATED DEPRECIATION OF PROPERTY
HELD BY CONSOLIDATED LOCAL PARTNERSHIPS
IN WHICH REAL VI HAS INVESTMENTS
DECEMBER 31, 1998
Investments in property and equipment - general partnerships (continued):
The total cost of land, buildings, and equipment for federal income tax purposes
at December 31, 1998 is approximately $5,665,419.
<TABLE>
<CAPTION>
Buildings
Furnishings,
And
Land Equipment Total
----------- ------------ ------------
<S> <C> <C> <C>
Balance, January 1, 1996 $ 1,935,839 $ 10,141,782 $ 12,077,621
Deletions during 1996 (378,659) (6,033,543) (6,412,202)
----------- ------------ ------------
Balance, December 31, 1996 1,557,180 4,108,239 5,665,419
Activity during 1997 -- -- --
----------- ------------ ------------
Balance, December 31, 1997 1,557,180 4,108,239 5,665,419
Sales of Properties (1,557,180) (4,108,239) (5,665,419)
----------- ------------ ------------
Balance, December 31, 1998 $ -- $ -- $ --
=========== ============ ============
</TABLE>
<PAGE> 37
SCHEDULE III
(CONTINUED)
REAL ESTATE ASSOCIATES LIMITED VI
REAL ESTATE AND ACCUMULATED DEPRECIATION OF PROPERTY
HELD BY CONSOLIDATED LOCAL PARTNERSHIPS
IN WHICH REAL VI HAS INVESTMENTS
DECEMBER 31, 1998
<TABLE>
<CAPTION>
Buildings,
Furnishings,
And
Equipment
-----------
<S> <C>
ACCUMULATED DEPRECIATION:
Balance at January 1, 1996 $ 4,792,619
Net additions for 1996 198,237
Sale of Property (2,483,907)
-----------
Balance at December 31, 1996 2,506,949
Net additions for 1997 142,421
-----------
Balance at December 31, 1997 2,649,370
Net additions for 1998 142,421
Sale of Property (2,791,791)
-----------
Balance at December 31, 1998 $ --
===========
</TABLE>
<PAGE> 38
PART III.
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT:
REAL ESTATE ASSOCIATES LIMITED VI (the "Partnership") has no directors or
executive officers of its own.
Prior to December 30, 1998, NAPICO was a wholly owned subsidiary of Casden
Investment Corporation ("CIC"), which is wholly owned by Alan I. Casden. On
December 30, 1998, Casden Properties Operating Partnership, L.P. (the "Operating
Partnership"), a majority owned subsidiary of Casden Properties Inc., a real
estate investment trust organized by Alan I. Casden, purchased a 95.25% economic
interest in NAPICO. The following biographical information is presented for the
directors and executive officers of NAPICO with principal responsibility for the
Partnership's affairs.
CHARLES H. BOXENBAUM, 69, Chairman of the Board of Directors and Chief Executive
Officer of NAPICO.
Mr. Boxenbaum has been associated with NAPICO since its inception. He has been
active in the real estate industry since 1960, and prior to joining NAPICO was a
real estate broker with the Beverly Hills firm of Carl Rhodes Company.
Mr. Boxenbaum has been a guest lecturer at national and state realty
conventions, certified properties exchanger's seminars, Los Angeles Town Hall,
National Association of Home Builders, International Council of Shopping
Centers, Society of Conventional Appraisers, California Real Estate Association,
National Institute of Real Estate Brokers, Appraisal Institute, various mortgage
banking seminars, and the North American Property Forum held in London, England.
In 1963, he was the winner of the Snyder Award, the highest annual award offered
by the National Association of Real Estate Boards for Best Exchange. He is one
of the founders and a past director of the First Los Angeles Bank, organized in
November 1974. Mr. Boxenbaum was a member of the Board of Directors of the
National Housing Council. Mr. Boxenbaum received his Bachelor of Arts degree
from the University of Chicago.
BRUCE E. NELSON, 47, President and a director of NAPICO.
Mr. Nelson joined NAPICO in 1980 and became President in February 1989. He is
responsible for the operations of all NAPICO sponsored limited partnerships.
Prior to that he was primarily responsible for the securities aspects of the
publicly offered real estate investment programs. Mr. Nelson is also involved in
the identification, analysis, and negotiation of real estate investments.
From February 1979 to October 1980, Mr. Nelson held the position of Associate
General Counsel at Western Consulting Group, Inc., private residential and
commercial real estate syndicators. Prior to that time, Mr. Nelson was engaged
in the private practice of law in Los Angeles. Mr. Nelson received his Bachelor
of Arts degree from the University of Wisconsin and is a graduate of the
University of Colorado School of Law. He is a member of the State Bar of
California and is a licensed real estate broker in California and Texas.
ALAN I. CASDEN, 53, Chairman of Casden Properties Inc. and The Casden Company,
an affiliate of Casden Properties (formerly CoastFed Properties), a director and
member of the audit committee of NAPICO, and chairman of the Executive Committee
of NAPICO.
Mr. Casden is Chairman of the Board, Chief Executive Officer and sole
shareholder of The Casden Company and Casden Investment Company. He also became
the Chairman of the Board of Casden Properties Inc. in 1998. Previously, he was
the president and chairman of Mayer Group, Inc., which he joined in 1975. He is
also chairman of Mayer Management, Inc., a real estate management firm. Mr.
Casden has been involved in
<PAGE> 39
approximately $3 billion of real estate financings and sales and has been
responsible for the development and construction of more than 12,000 apartment
units and 5,000 single-family homes and condominiums.
Mr. Casden is a member of the American Institute of Certified Public Accountants
and of the California Society of Certified Public Accountants. Mr. Casden is a
member of the advisory board of the National Multi-Family Housing Conference,
the Multi-Family Housing Council, and the President's Council of the California
Building Industry Association. He also serves on the advisory board to the
School of Accounting of the University of Southern California. He holds a
Bachelor of Science degree and a Masters in Business Administration degree from
the University of Southern California.
HENRY C. CASDEN, 55, President, Chief Operating Officer and Secretary of The
Casden Company and a director and secretary of NAPICO.
Mr. Casden has been President and Chief Operating Officer of The Casden Company,
as well as a director of NAPICO since February 1988. He became secretary of both
companies in late 1994. He also became the President of Casden Properties Inc.
in 1998. From 1982 to 1988, Mr. Casden was of counsel and a partner in the Los
Angeles law firm of Troy, Casden & Gould. From 1978 to 1981, he was of counsel
and a partner in the Los Angeles law firm of Loeb & Loeb. From 1972 to 1978, Mr.
Casden was a member of the Beverly Hills law firm of Fink & Casden, Professional
Corporation.
Mr. Casden received his Bachelor of Arts degree from the University of
California at Los Angeles, and is a graduate of the University of San Diego Law
School. Mr. Casden is a member of the State Bar of California and has numerous
professional affiliations.
PAUL PATIERNO, 42, Chief Financial Officer.
Mr. Patierno joined NAPICO in 1998 and is responsible for its financial affairs,
as well as the limited partnerships sponsored by it. From 1995 until joining
NAPICO in September 1998, Mr. Patierno was a senior manager in the affordable
housing group of Altschuler, Melvoin and Glasser LLP, a national public
accounting firm. From 1990 to 1995, he practiced public accounting with a firm
specializing in real estate syndication. Mr. Patierno received his bachelor of
science degree in accounting from California State University at Northridge, and
is a member of the American Institute of Certified Public Accountants and the
California Society of Certified Public Accountants.
PATRICIA W. TOY, 69, Senior Vice President - Communications and Assistant
Secretary.
Mrs. Toy joined NAPICO in 1977, following her receipt of an MBA from the
Graduate School of Management, UCLA. From 1952 to 1956, Mrs. Toy served as a
U.S. Naval Officer in communications and personnel assignments. She holds a
Bachelor of Arts Degree from the University of Nebraska.
MARK L. WALTHER, 38, Executive Vice President, General Counsel and Assistant
Secretary.
Mr. Walther joined NAPICO in 1987 and is responsible for the legal affairs of
the NAPICO sponsored limited partnerships. Prior to joining NAPICO, Mr. Walther
worked in the San Francisco law firm of Browne and Kahn which specialized in
construction litigation. Mr. Walther received his Bachelor of Arts Degree in
Political Science from the University of California, Santa Barbara and is a
graduate of the University of California, Davis, School of Law. He is a member
of the State Bar of Hawaii.
NAPICO and several of its officers, directors and affiliates, including Charles
H. Boxenbaum, Bruce E. Nelson and Alan I. Casden, consented to the entry, on
June 25, 1997, of an administrative cease and desist order by the U.S.
Securities and Exchange Commission (the "Commission"), without admitting or
denying any of the findings
<PAGE> 40
made by the Commission. The Commission found that NAPICO and others had violated
certain federal securities laws in connection with transactions unrelated to the
Partnership. The Commission's order did not impose any cost, burden or penalty
on any partnership managed by NAPICO and does not impact NAPICO's ability to
serve as the Partnership's Managing General Partner.
ITEM 11. MANAGEMENT REMUNERATION AND TRANSACTIONS
Real Estate Associates Limited VI has no officers, employees, or directors.
However, under the terms of the Restated Certificate and Agreement of Limited
Partnership, the Partnership is obligated to pay the Corporate General Partner
an annual management fee. The annual management fee is approximately equal to .5
percent of the invested assets, including the Partnership's allocable share of
the mortgages related to real estate properties held by local limited
partnerships. The fee is earned beginning in the month the Partnership makes its
initial contribution to the local partnership. In addition, the Partnership
reimburses the Corporate General Partner for certain expenses.
The Corporate General Partner received mortgage brokerage fees in connection
with the refinancing of certain limited partnerships' mortgages. In addition, an
affiliate of the Corporate General Partner is responsible for the on-site
property management for a property owned by the Partnership and for certain
properties owned by the limited partnerships in which the Partnership has
invested.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
(a) Security Ownership of Certain Beneficial Owners
The general partners own all of the outstanding general partnership
interests of REAL VI; no person is known to own beneficially in excess
of 5% of the outstanding limited partnership interests.
(b) With the exception of the initial limited partner, Bruce Nelson, who
is an officer of the corporate general partner, none of the officers
or directors of the corporate general partner own directly or
beneficially any limited partnership interests in REAL VI.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Partnership has no officers, directors or employees of its own. All of its
affairs are managed by the Corporate General Partner, National Partnership
Investments Corp. ("NAPICO"). The Partnership is obligated to NAPICO for an
annual management fee equal to .4 percent of the original invested assets of the
limited partnerships. Invested assets is defined as the costs of acquiring
project interests, including the proportionate amount of the mortgage loans
related to the Partnership's interest in the capital accounts of the respective
partnerships. Management fees were $502,224, $501,660 and $513,393 for the years
ended December 31, 1998, 1997 and 1996, respectively.
The Partnership reimburses NAPICO for certain expenses. The reimbursement to
NAPICO was $51,491, $51,487 and $47,231 in 1998, 1997 and 1996, respectively,
and is included in operating expenses.
For one of the properties owned by the Partnership in 1996, an affiliate of
NAPICO received a management fee of 5 percent of its gross revenues plus
reimbursement of certain expenses. The Partnership paid management fees to the
affiliate of approximately $12,000 in 1996. An affiliate of the minority general
partner of a general partnership that is consolidated, manages the property
owned by that partnership. The fee is calculated based
<PAGE> 41
on five percent of gross collections plus reimbursement of certain expenses. The
Partnership paid management fees to the affiliate of approximately $58,000,
$60,000 and $65,000 in 1998, 1997 and 1996, respectively.
Prior to the sale of certain partnership interests on December 30, 1998, an
affiliate of NAPICO was the general partner in 10 of the limited partnerships in
which the Partnership had an investment, and another affiliate received property
management fees of approximately 5 to 7 percent of revenue from four of these
partnerships. The affiliate received property management fees of $67,409,
$63,742 and $85,735 in 1998, 1997 and 1996, respectively.
Subsequent to the sale of certain partnership interests, NAPICO is the general
partner in 6 of the limited partnerships, and another affiliate manages 2 of the
limited partnership's properties.
On December 30, 1998, the Partnership sold its limited partnership interests in
10 local limited partnerships with a total carrying value of $3,878,866 and its
general partner interest in one local general partnership with a partner deficit
of $1,507,828 to the Operating Partnership. The sale resulted in net proceeds to
the Partnership of a $1,397,081 and a net gain of $7,497,969 after being
relieved of notes and interest payable of $8,712,920 and incurring selling
expenses of $240,994. In March 1999, the Partnership made cash distributions of
$2,769,110 to the limited partners and $27,971 to the general partners, which
included using proceeds from the sale of the partnership interests.
The Operating Partnership purchased such limited partner interests for cash,
which it raised in connection with a private placement of its equity securities.
The purchase was subject to, among other things, (i) the purchase of the general
partner interests in the local limited partnerships by the Operating
Partnership; (ii) the approval of HUD and certain state housing finance
agencies; and (iii) the consent of the limited partners to the sale of the local
limited partnership interests held for investment by the Partnership.
In August 1998, a consent solicitation statement was sent to the limited
partners setting forth the terms and conditions of the purchase of the limited
partners' interests held for investment by the Partnership, together with
certain amendments to the Partnership Agreement and other disclosures of various
conflicts of interest in connection with the proposed transaction. Prior to the
sale of the partnership interests, the consents of the limited partners to the
sale and amendments to the Partnership Agreement were obtained.
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K:
FINANCIAL STATEMENTS
Report of Independent Public Accountants.
Consolidated Balance Sheets as of December 31, 1998 and 1997.
Consolidated Statements of Operations for the years ended December 31, 1998,
1997 and 1996.
Consolidated Statements of Partners' Equity (Deficiency) for the years ended
December 31, 1998, 1997 and 1996.
Consolidated Statements of Cash Flows for the years ended December 31, 1998,
1997 and 1996.
Notes to Consolidated Financial Statements.
<PAGE> 42
FINANCIAL STATEMENT SCHEDULES
APPLICABLE TO REAL ESTATE ASSOCIATES LIMITED VI REAL ESTATE III AND THE LIMITED
PARTNERSHIPS:
Schedule - Investments in Limited Partnerships, December 31, 1998, 1997 and
1996.
Schedule III - Real Estate and Accumulated Depreciation, December 31, 1998.
The remaining schedules are omitted because any required information is included
in the financial statements and notes thereto.
EXHIBITS
(3) Articles of incorporation and bylaws: The registrant is not
incorporated. The Partnership Agreement was filed with Form S-11
#2-82090 incorporated herein by reference.
(10) Material contracts: The registrant is not party to any material
contracts, other than the Restated Certificate and Agreement of
Limited Partnership dated October 12, l982, and the forty contracts
representing the partnership investment in local limited and general
partnerships as previously filed at the Securities Exchange
Commission, File #2-282090 which is hereby incorporated by reference.
REPORTS ON FORM 8-K
A report on Form 8-K relating to an unsolicited offer to buy units of
limited partnership interests (the "Units"), as discussed below, was
filed with the Securities and Exchange Commission during the quarter
ended September 30, 1998.
On June 26, 1998, Bond Purchase, L.L.C. (the "Buyer") made an
unsolicited tender offer to buy a certain number of Units in the
Partnership for a price of $333 per Unit. The Buyer did not contact the
Corporate General Partner prior to commencing its tender offer. By
letter dated July 6, 1998, the Corporate General Partner advised
limited partners that it had determined not to take a position with
respect to the tender offer but cautioned limited partners to consider
certain items before determining whether to tender their Units to the
Buyer.
<PAGE> 43
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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 in the City of Los Angeles,
State of California.
REAL ESTATE ASSOCIATES LIMITED VI
By: NATIONAL PARTNERSHIP INVESTMENTS CORP.
General Partner
/s/ CHARLES H. BOXENBAUM
- ----------------------------------
Charles H. Boxenbaum
Chairman of the Board of Directors
and Chief Executive Officer
/s/ BRUCE E. NELSON
- ----------------------------------
Bruce E. Nelson
Director and President
/s/ ALAN I. CASDEN
- ----------------------------------
Alan I. Casden
Director
/s/ HENRY C. CASDEN
- ----------------------------------
Henry C. Casden
Director
/s/ PAUL PATIERNO
- ----------------------------------
Paul Patierno
Chief Financial Officer
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
PARTNERSHIP'S STATEMENTS OF EARNINGS AND BALANCE SHEETS AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> DEC-31-1998
<CASH> 5,477,969
<SECURITIES> 0
<RECEIVABLES> 1,397,081
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 6,875,050
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 7,426,779
<CURRENT-LIABILITIES> 208,460
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 7,426,779
<SALES> 0
<TOTAL-REVENUES> 7,614,065
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 1,865,904
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 955,132
<INCOME-PRETAX> 4,793,029
<INCOME-TAX> 0
<INCOME-CONTINUING> 4,793,029
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,793,029
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
