<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
Quarterly Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the Quarterly Period Ended SEPTEMBER 30, 2000
Commission File Number 0-13112
REAL ESTATE ASSOCIATES LIMITED VI
(A California Limited Partnership)
I.R.S. Employer Identification No. 95-3778627
9090 WILSHIRE BLVD., SUITE 201
BEVERLY HILLS, CA. 90211
Registrant's Telephone Number,
Including Area Code (310) 278-2191
Indicate by check mark whether the registrant (1) has filed all documents and
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding twelve months (or for such shorter period that
the registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes [X] No [ ]
<PAGE> 2
REAL ESTATE ASSOCIATES LIMITED VI
(A CALIFORNIA LIMITED PARTNERSHIP)
INDEX TO FORM 10-Q
FOR THE QUARTER ENDED SEPTEMBER 30, 2000
PART I. FINANCIAL INFORMATION
<TABLE>
<S> <C>
Item 1. Financial Statements
Consolidated Balance Sheets,
September 30, 2000 and December 31, 1999 .............................. 1
Consolidated Statements of Operations,
Nine and Three Months Ended, September 30, 2000 and 1999 .............. 2
Consolidated Statement of Partners' Equity (Deficiency)
Nine Months Ended September 30, 2000 .................................. 3
Consolidated Statements of Cash Flows
Nine Months Ended September 30, 2000 and 1999 ......................... 4
Notes to Consolidated Financial Statements .................................. 5
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operation .......................................... 13
PART II. OTHER INFORMATION
Item 1. Legal Proceedings .............................................................. 16
Item 6. Exhibits and Reports on Form 8-K ............................................... 16
Signatures .............................................................................. 17
</TABLE>
<PAGE> 3
REAL ESTATE ASSOCIATES LIMITED VI
(A CALIFORNIA LIMITED PARTNERSHIP)
BALANCE SHEETS
SEPTEMBER 30, 2000 AND DECEMBER 31, 1999
ASSETS
<TABLE>
<CAPTION>
2000
(Unaudited) 1999
--------------- ---------------
<S> <C> <C>
INVESTMENTS IN LIMITED PARTNERSHIPS (Note 2) $ 651,730 $ 509,999
CASH AND CASH EQUIVALENTS (Note 1) 3,270,908 3,312,395
DUE FROM NAPICO -- 239,770
--------------- ---------------
TOTAL ASSETS $ 3,922,638 $ 4,062,164
=============== ===============
LIABILITIES AND PARTNERS' EQUITY
LIABILITIES:
Notes payable and amounts due for partnership
interests (Notes 3 and 6) $ 1,765,000 $ 1,765,000
Accrued interest payable (Notes 3 and 6) 2,045,200 1,957,734
Accounts payable 12,937 6,905
--------------- ---------------
3,823,137 3,729,639
--------------- ---------------
COMMITMENTS AND CONTINGENCIES (Notes 4 and 5)
PARTNERS' EQUITY (DEFICIENCY):
General partners (350,194) (347,864)
Limited partners 449,695 680,389
--------------- ---------------
99,501 332,525
--------------- ---------------
TOTAL LIABILITIES AND PARTNERS' DEFICIENCY $ 3,922,638 $ 4,062,164
=============== ===============
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
1
<PAGE> 4
REAL ESTATE ASSOCIATES LIMITED VI
(A CALIFORNIA LIMITED PARTNERSHIP)
CONSOLIDATED STATEMENTS OF OPERATIONS
NINE AND THREE MONTHS ENDED SEPTEMBER 30, 2000 AND 1999
(Unaudited)
<TABLE>
<CAPTION>
Nine months Three months Nine months Three months
ended ended ended ended
Sept 30, 2000 Sept 30, 2000 Sept 30, 1999 Sept 30, 1999
-------------- -------------- ------------- -------------
<S> <C> <C> <C> <C>
PARTNERSHIP OPERATIONS:
Interest income 135,342 53,720 97,398 39,019
--------- --------- --------- ---------
Expenses:
Management fees - general partner (Note 4) 154,825 51,875 332,946 110,982
General and administrative (Notes 2 and 4) 161,718 30,482 268,028 47,670
Interest 102,600 34,200 102,600 34,200
--------- --------- --------- ---------
419,143 116,557 703,574 192,852
--------- --------- --------- ---------
LOSS FROM PARTNERSHIP OPERATIONS (283,801) (62,837) (606,176) (153,833)
--------- --------- --------- ---------
EQUITY IN INCOME OF LIMITED
PARTNERSHIPS AND AMORTIZATION
OF ACQUISITION COSTS 36,000 12,000 39,000 13,000
DISTRIBUTIONS FROM LIMITED
PARTNERSHIPS RECOGNIZED AS
INCOME (Note 2) 14,777 -- 51,057 5,444
--------- --------- --------- ---------
NET LOSS $(233,024) $ (50,837) $(516,119) $(135,389)
========= ========= ========= =========
NET LOSS PER LIMITED PARTNERSHIP
INTEREST (Note 1) $ (14) $ (3) $ (31) $ (8)
========= ========= ========= =========
</TABLE>
The accompanying notes are an integral part of
these consolidated financial statements.
2
<PAGE> 5
REAL ESTATE ASSOCIATES LIMITED VI
(A CALIFORNIA LIMITED PARTNERSHIP)
CONSOLIDATED STATEMENTS OF PARTNERS' EQUITY
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2000
(Unaudited)
<TABLE>
<CAPTION>
General Limited
Partners Partners Total
--------- --------- ---------
<S> <C> <C> <C>
PARTNERSHIP INTERESTS 16,810
=========
DEFICIENCY,
January 1, 2000 $(347,864) $ 680,389 $ 332,525
Net loss for the nine months
ended September 30, 2000 (2,330) (230,694) (233,024)
--------- --------- ---------
DEFICIENCY,
September 30, 2000 $(350,194) $ 449,695 $ 99,501
========= ========= =========
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
3
<PAGE> 6
REAL ESTATE ASSOCIATES LIMITED VI
(A CALIFORNIA LIMITED PARTNERSHIP)
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2000 AND 1999
(Unaudited)
<TABLE>
<CAPTION>
2000 1999
----------- -----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (233,024) $ (516,119)
Adjustments to reconcile net loss to net
cash used in operating activities:
Equity in income of limited partnerships
and amortization of acquisition costs (36,000) (39,000)
Depreciation and amortization -- --
Decrease (increase) in other assets 239,770 (20,100)
Increase in accrued interest payable 87,466 102,600
Increase (decrease) in accounts payable 6,032 (206,922)
----------- -----------
Net cash provided by (used in) operating activities 64,244 (679,541)
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital contribution (120,411) --
Distributions from limited partnerships recognized
as a return of capital 14,680 38,414
Sales proceeds -- 1,397,081
----------- -----------
Net cash (used in) provided by investing activities (105,731) 1,435,495
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Distributions to partners -- (2,797,081)
----------- -----------
NET DECREASE IN CASH AND CASH EQUIVALENTS (41,487) (2,041,127)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 3,312,395 5,477,969
----------- -----------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 3,270,908 $ 3,436,842
=========== ===========
SUPPLEMENTAL DISCLOSURE OF
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid during the period for interest $ 15,134 $ --
=========== ===========
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
4
<PAGE> 7
REAL ESTATE ASSOCIATES LIMITED VI
(A CALIFORNIA LIMITED PARTNERSHIP)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2000
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
GENERAL
The information contained in the following notes to the financial
statements is condensed from that which would appear in the audited
annual financial statements; accordingly, the financial statements
included herein should be reviewed in conjunction with the financial
statements and related notes thereto contained in the annual report for
the year ended December 31, 1999 prepared by Real Estate Associates
Limited VI and Subsidiaries (the "Partnership"). Accounting measurements
at interim dates inherently involve greater reliance on estimates than
at year end. The results of operations for the interim periods presented
are not necessarily indicative of the results for the entire year.
In the opinion of the Partnership, the accompanying unaudited financial
statements contain all adjustments (consisting primarily of normal
recurring accruals) necessary to present fairly the financial position
of the Partnership at September 30, 2000 and the results of operations
for the nine and three months then ended and changes in cash flows for
the nine months then ended.
The general partners have a 1 percent interest in profits and losses of
the Partnership. The limited partners have the remaining 99 percent
interest which is allocated in proportion to their respective individual
investments. National Partnership Investments Corp. (NAPICO) is the
corporate general partner of the Partnership. Casden Properties Inc.
owns a 95.25% economic interest in NAPICO, with the balance owned by
Casden Investment Corporation ("CIC"). CIC, which is wholly owned by
Alan I. Casden, owns 95% of the voting common stock of NAPICO.
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.
BASIS OF PRESENTATION
The accompanying financial statements have been prepared in conformity
with accounting principles generally in the United States of America.
5
<PAGE> 8
REAL ESTATE ASSOCIATES LIMITED VI
(A CALIFORNIA LIMITED PARTNERSHIP)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
SEPTEMBER 30, 2000
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of Real
Estate Associates Limited VI and its majority-owned general partnership.
All significant intercompany accounts and transactions have been
eliminated in consolidation.
METHOD OF ACCOUNTING FOR INVESTMENT IN THE UNCONSOLIDATED LIMITED
PARTNERSHIPS
The investments in unconsolidated limited partnerships are accounted for
on the equity method. Acquisition, selection and other costs related to
the acquisition of the projects are capitalized as part of the
investment account and are being amortized on a straight line basis over
the estimated lives of the underlying assets, which is generally 30
years.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents consist of unrestricted cash and bank
certificates of deposit with maturities of three months or less.
Restricted cash consist of tenants' security and escrow deposits and
mortgage impounds. 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.
NET LOSS PER LIMITED PARTNERSHIP INTEREST
Net loss per limited partnership interest was computed by dividing the
limited partners' share of net loss by the number of limited partnership
interests outstanding during the year. The number of limited partnership
interests was 16,810 for the periods presented.
INCOME TAXES
No provision has been made for income taxes in the accompanying
financial statements since such taxes, if any, are the liability of the
individual partners.
6
<PAGE> 9
REAL ESTATE ASSOCIATES LIMITED VI
(A CALIFORNIA LIMITED PARTNERSHIP)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
SEPTEMBER 30, 2000
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
IMPAIRMENT OF LONG-LIVED ASSETS
The Partnership reviews long-lived assets to determine if there has been
any permanent impairment whenever events or changes in circumstances
indicate that the carrying amount of the asset may not be recoverable.
If the sum of the expected future cash flows is less than the carrying
amount of the assets, the Partnership recognizes an impairment loss.
NOTE 2 - INVESTMENTS IN LIMITED PARTNERSHIPS
The Partnership holds limited partnership interests in 20 limited
partnerships as of September 30, 2000, after selling its interests in 10
limited partnerships. In addition, the Partnership holds a general
partner interest in REA III, which in turn, holds limited partner
interests in 3 additional limited partnerships. In total, therefore, the
Partnership holds interests, either directly or indirectly through REA
III, in 23 partnerships which owned as of September 30, 2000,
residential low income rental projects consisting of 1,369 apartment
units. The mortgage loans of these projects are payable to or insured by
various governmental agencies.
The Partnership, as a limited partner, is entitled to between 90 percent
and 99 percent of the profits and losses of the limited partnerships it
has invested in directly. The Partnership is also entitled to 99.9
percent of the profits and losses of REA III. REA III holds a 99 percent
interest in each of the limited partnerships in which it has invested.
Equity in losses of unconsolidated limited partnerships is recognized in
the financial statements until the limited partnership investment
account is reduced to a zero balance or to a negative amount equal to
further capital contributions required. Losses incurred after the
limited partnership investment account is reduced to zero are not
recognized.
Distributions from the unconsolidated limited partnerships are accounted
for as a return of capital until the investment balance is reduced to
zero. Subsequent distributions received are recognized as income.
7
<PAGE> 10
REAL ESTATE ASSOCIATES LIMITED VI
(A CALIFORNIA LIMITED PARTNERSHIP)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
SEPTEMBER 30, 2000
NOTE 2 - INVESTMENTS IN LIMITED PARTNERSHIP (CONTINUED)
The following is a summary of the investment in unconsolidated limited
partnerships for the nine months ended September 30, 2000:
<TABLE>
<S> <C>
Balance, beginning of period $ 509,999
Capital contribution 120,411
Equity in income of limited partnerships 39,000
Distribution recognized as a return of capital (14,680)
Amortization of acquisition costs (3,000)
---------
$ 651,730
Balance, end of period =========
</TABLE>
The following are unaudited combined estimated statements of operations
for the nine and three months ended September 30, 2000 and 1999 of the
unconsolidated limited partnerships in which the Partnership has
investments:
<TABLE>
<CAPTION>
Nine months Three months Nine months Three months
ended ended ended ended
Sept. 30, 2000 Sept. 30, 2000 Sept. 30, 1999 Sept. 30, 1999
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
REVENUES:
Rental and other $ 7,446,000 $ 2,482,000 $ 7,434,000 $ 2,478,000
----------- ----------- ----------- -----------
EXPENSES:
Depreciation 1,202,000 401,000 1,476,000 492,000
Interest 2,006,000 669,000 2,058,000 686,000
Operating expenses 4,558,000 1,519,000 4,344,000 1,448,000
----------- ----------- ----------- -----------
Total expenses 7,766,000 2,589,000 7,878,000 2,626,000
----------- ----------- ----------- -----------
Net loss $ (320,000) $ (107,000) $ (444,000) $ (148,000)
=========== =========== =========== ===========
</TABLE>
8
<PAGE> 11
REAL ESTATE ASSOCIATES LIMITED VI
(A CALIFORNIA LIMITED PARTNERSHIP)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
SEPTEMBER 30, 2000
NOTE 2 - INVESTMENTS IN LIMITED PARTNERSHIP (CONTINUED)
NAPICO, or one of its affiliates, is the general partner and property
management agent for certain of the limited partnerships included above.
Under recently adopted law and policy, the United States Department of
Housing and Urban Development ("HUD") has determined not to renew the
Housing Assistance Payment ("HAP") Contracts on a long term basis under
the existing terms. In connection with renewals of the HAP Contracts
under such new law and policy, the amount of rental assistance payments
under renewed HAP Contracts will be based on market rentals instead of
above market rentals, which may be the case under existing HAP
Contracts. The payments under the renewed HAP Contracts may not be in an
amount that would provide sufficient cash flow to permit owners of
properties subject to HAP Contracts to meet the debt service
requirements of existing loans insured by the Federal Housing
Administration of HUD ("FHA") unless such mortgage loans are
restructured. In order to address the reduction in payments under HAP
Contracts as a result of this new policy, the Multi-family Assisted
Housing Reform and Affordability Act of 1997 ("MAHRAA"), which was
adopted in October 1997, provides for the restructuring of mortgage
loans insured by the FHA with respect to properties subject to the
Section 8 program. Under MAHRAA, an FHA-insured mortgage loan can be
restructured into a first mortgage loan which will be amortized on a
current basis and a low interest second mortgage loan payable to FHA
which will only be payable on maturity of the first mortgage loan. This
restructuring results in a reduction in annual debt service payable by
the owner of the FHA-insured mortgage loan and is expected to result in
an insurance payment from FHA to the holder of the FHA-insured loan due
to the reduction in the principal amount. MAHRAA also phases out
project-based subsidies on selected properties serving families not
located in rental markets with limited supply, converting such subsidies
to a tenant-based subsidy.
When the HAP Contracts are subject to renewal, there can be no assurance
that the local limited partnerships in which the Partnership has an
investment will be permitted to restructure its mortgage indebtedness
under MAHRAA. In addition, the economic impact on the Partnership of the
combination of the reduced payments under the HAP Contracts and the
restructuring of the existing FHA-insured mortgage loans under MAHRAA is
uncertain.
9
<PAGE> 12
REAL ESTATE ASSOCIATES LIMITED VI
(A CALIFORNIA LIMITED PARTNERSHIP)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
SEPTEMBER 30, 2000
NOTE 2 - INVESTMENTS IN LIMITED PARTNERSHIP (CONTINUED)
On December 30, 1998, after obtaining the consents of the limited
partners, the Partnership sold its limited partnership interests in 10
local limited partnerships and its general partner interest in one local
general partnership to subsidiaries of Casden Properties Inc. The sale
resulted in cash proceeds to the Partnership of $1,397,081 which was
collected in 1999. In March 1999, the Partnership made cash
distributions of $2,769,110 to the limited partners and $27,971 to the
general partners, primarily using proceeds from the sale of the
partnership interests.
NOTE 3 - NOTES PAYABLE
Certain of the Partnership's investments involved purchases of
partnership interests from partners who subsequently withdrew from the
operating partnership. The purchase of these interests provides for
additional cash payments of approximately $325,000 based upon specified
events as outlined in the purchase agreements. Such amounts have been
recorded as liabilities. In addition, the Partnership is obligated on
non-recourse notes payable of $1,440,000 which bear interest at 9.5
percent per annum and have principal maturities ranging from December
1999 to December 2012.
The notes and related interest are payable from cash flow generated from
operations of the related rented properties as defined in the notes.
These obligations are collateralized by the Partnership's investments in
the limited partnerships. Unpaid interest is due at maturity of the
notes.
A note and the related accrued interest payable, aggregating $1,306,038
became payable in 1999.
Management is in the process of attempting to negotiate an extension of
the maturity date on the past due note payable.
10
<PAGE> 13
REAL ESTATE ASSOCIATES LIMITED VI
(A CALIFORNIA LIMITED PARTNERSHIP)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
SEPTEMBER 30, 2000
NOTE 4 - MANAGEMENT FEES AND EXPENSES DUE TO GENERAL PARTNER
Under the terms of the Restated Certificate and Agreement of Limited
Partnership, the Partnership is obligated to NAPICO for an annual
management fee of approximately .4 percent of the original invested
assets of the limited partnerships. Invested assets are defined as the
costs of acquiring project interests, including the proportionate amount
of the mortgage loans related to the Partnership's interests in the
capital accounts of the respective partnerships. This fee was
approximately $155,000 and $333,000 for the nine months ended September
30, 2000 and 1999, respectively.
The Partnership reimburses NAPICO for certain expenses. The
reimbursement to NAPICO was approximately $16,000 and $31,000 for the
nine months ended September 30, 2000 and 1999, respectively, and is
included in general and administrative expenses.
NOTE 5 - CONTINGENCIES
On August 27, 1998, two investors holding an aggregate of eight units of
limited partnership interests in Real Estate Associates Limited III (an
affiliated partnership in which NAPICO is the managing general partner)
and two investors holding an aggregate of five units of limited
partnership interest in the Partnership commenced an action in the
United States District Court for the Central District of California
against the Partnership, NAPICO and certain other affiliated entities.
The complaint alleges that the defendants breached their fiduciary duty
to the limited partners of certain NAPICO managed partnerships and made
materially false and misleading statements in the consent solicitation
statements sent to the limited partners of such partnerships relating to
approval of the transfer of partnership interests in limited
partnerships, owning certain of the properties, to subsidiaries of
Casden Properties Inc. The plaintiffs seek equitable relief, as well as
compensatory damages and litigation related costs. On August 4, 1999,
one investor holding one unit of limited partnership interest in Housing
Programs Limited (another affiliate partnership in which NAPICO is the
managing general partner) commenced a virtually identical action in the
United States District Court for the Central District of California
against the Partnership, NAPICO and certain other affiliated entities.
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 actions vigorously.
11
<PAGE> 14
REAL ESTATE ASSOCIATES LIMITED VI
(A CALIFORNIA LIMITED PARTNERSHIP)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
SEPTEMBER 30, 2000
NOTE 5 - CONTINGENCIES (CONTINUED)
The corporate general partner of the Partnership is involved in various
lawsuits and have also been named defendants in other lawsuits arising
from transactions in the ordinary course of business. In the opinion of
management and the corporate general partner, the claims will not result
in any material liability to the Partnership.
NOTE 6 - FAIR VALUE OF FINANCIAL INSTRUMENTS
Statement of Financial Accounting Standards No. 107, "Disclosure about
Fair Value of Financial Instruments," requires disclosure of fair value
information about financial instruments, when it is practicable to
estimate that value. The notes payable are collateralized by the
Partnership's investments in investee limited partnerships and are
payable only out of cash distributions from the investee partnerships.
The operations generated by the property and investee limited
partnerships are subject to various government rules, regulations and
restrictions which make it impracticable to estimate the fair value of
the 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.
12
<PAGE> 15
REAL ESTATE ASSOCIATES LIMITED VI
(A CALIFORNIA LIMITED PARTNERSHIP)
SEPTEMBER 30, 2000
ITEM 2. MANAGEMENT'S ANALYSIS AND DISCUSSION OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES
The Partnership's primary sources of funds include interest income on
short term investments and distributions from limited partnerships in
which the Partnership has invested. It is not expected that any of the
local limited partnerships in which the Partnership has invested will
generate cash flow sufficient to provide for distributions to limited
partners in any material amount. The Partnership made a distribution to
investors on March 12, 1999, using proceeds from the disposition of its
investments in certain limited partnerships.
RESULTS OF OPERATIONS
Rental operations consist primarily of rental income and depreciation
expense, debt service, and normal operating expenses to maintain the
properties. Variances in rental operations from the prior year to the
current year relate to the sale of the Drexel Property.
Partnership revenues consist primarily of interest income earned on
certificates of deposit and other temporary investment of funds not
required for investment in local partnerships.
Operating expenses consist primarily of recurring general and
administrative expenses and professional fees for services rendered to
the Partnership. In addition, an annual Partnership management fee in an
amount equal to .4 percent of invested assets is payable to the
corporate general partner.
The Partnership accounts for its investments in the local limited
partnerships on the equity method, thereby adjusting its investment
balance by its proportionate share of the income or loss of the local
limited partnerships. Losses incurred after the limited partnership
investment account is reduced to zero are not recognized in accordance
with the equity accounting method.
Distributions received from limited partnerships are recognized as
return of capital until the investment balance has been reduced to zero
or to a negative amount equal to future capital contributions required.
Subsequent distributions received are recognized as income.
Except for certificates of deposit and money market funds, the
Partnership's investments are entirely from interests in other limited
and general partnerships owning government assisted
13
<PAGE> 16
REAL ESTATE ASSOCIATES LIMITED VI
(A CALIFORNIA LIMITED PARTNERSHIP)
SEPTEMBER 30, 2000
ITEM 2. MANAGEMENT'S ANALYSIS AND DISCUSSION OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (CONTINUED)
RESULTS OF OPERATIONS (CONTINUED)
projects. Available cash is invested in these funds earning interest
income as reflected in the statement of operations. These funds can be
converted to cash to meet obligations as they arise.
Under recently adopted law and policy, the United States Department of
Housing and Urban Development ("HUD") has determined not to renew the
Housing Assistance Payment ("HAP") Contracts on a long term basis under
the existing terms. In connection with renewals of the HAP Contracts
under such new law and policy, the amount of rental assistance payments
under renewed HAP Contracts will be based on market rentals instead of
above market rentals, which may be the case under existing HAP
Contracts. The payments under the renewed HAP Contracts may not be in an
amount that would provide sufficient cash flow to permit owners of
properties subject to HAP Contracts to meet the debt service
requirements of existing loans insured by the Federal Housing
Administration of HUD ("FHA") unless such mortgage loans are
restructured. In order to address the reduction in payments under HAP
Contracts as a result of this new policy, the Multi-family Assisted
Housing Reform and Affordability Act of 1997 ("MAHRAA"), which was
adopted in October 1997, provides for the restructuring of mortgage
loans insured by the FHA with respect to properties subject to the
Section 8 program. Under MAHRAA, an FHA-insured mortgage loan can be
restructured into a first mortgage loan which will be amortized on a
current basis and a low interest second mortgage loan payable to FHA
which will only be payable on maturity of the first mortgage loan. This
restructuring results in a reduction in annual debt service payable by
the owner of the FHA-insured mortgage loan and is expected to result in
an insurance payment from FHA to the holder of the FHA-insured loan due
to the reduction in the principal amount. MAHRAA also phases out
project-based subsidies on selected properties serving families not
located in rental markets with limited supply, converting such subsidies
to a tenant-based subsidy.
When the HAP Contracts are subject to renewal, there can be no assurance
that the local limited partnerships in which the Partnership has an
investment will be permitted to restructure its mortgage indebtedness
under MAHRAA. In addition, the economic impact on the Partnership of the
combination of the reduced payments under the HAP Contracts and the
restructuring of the existing FHA-insured mortgage loans under MAHRAA is
uncertain.
14
<PAGE> 17
REAL ESTATE ASSOCIATES LIMITED VI
(A CALIFORNIA LIMITED PARTNERSHIP)
SEPTEMBER 30, 2000
ITEM 2. MANAGEMENT'S ANALYSIS AND DISCUSSION OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (CONTINUED)
RESULTS OF OPERATIONS (CONTINUED)
On December 30, 1998, after obtaining the consents of the limited
partners, the Partnership sold its limited partnership interests in 10
local limited partnerships and its general partner interest in one local
general partnership to subsidiaries of Casden Properties Inc. The sale
resulted in cash proceeds to the Partnership of $1,397,081 which was
collected in 1999. In March 1999, the Partnership made cash
distributions of $2,769,110 to the limited partners and $27,971 to the
general partners, primarily using proceeds from the sale of the
partnership interests.
A note and the related accrued interest payable, aggregating $1,306,038
became payable in 1999.
Management is in the process of attempting to negotiate an extension of
the maturity date on the past due note payable.
15
<PAGE> 18
REAL ESTATE ASSOCIATES LIMITED VI
(A CALIFORNIA LIMITED PARTNERSHIP)
SEPTEMBER 30, 2000
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
On August 27, 1998, two investors holding an aggregate of eight units of limited
partnership interests in Real Estate Associates Limited III (an affiliated
partnership in which NAPICO is the managing general partner) and two investors
holding an aggregate of five units of limited partnership interest in the
Partnership commenced an action in the United States District Court for the
Central District of California against the Partnership, NAPICO and certain other
affiliated entities. The complaint alleges that the defendants breached their
fiduciary duty to the limited partners of certain NAPICO managed partnerships
and made materially false and misleading statements in the consent solicitation
statements sent to the limited partners of such partnerships relating to
approval of the transfer of partnership interests in limited partnerships,
owning certain of the properties, to CPI Affiliates. The plaintiffs seek
equitable relief, as well as compensatory damages and litigation related costs.
On August 4, 1999, one investor holding one unit of limited partnership interest
in Housing Programs Limited (another affiliated partnership in which NAPICO is
the managing general partner) commenced a virtually identical action in the
United States District Court for the Central District of California against the
Partnership, NAPICO and certain other affiliated entities. 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 actions
vigorously.
The Partnership's general partner is involved in various lawsuits. None of these
lawsuits are related to the Partnership.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) No exhibits are required per the provision of Item 6 of
regulation S-K and no reports on Form 8-K were filed during the
quarter ended September 30, 2000.
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<PAGE> 19
REAL ESTATE ASSOCIATES LIMITED VI
(A LIMITED PARTNERSHIP)
SEPTEMBER 30, 2000
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
REAL ESTATE ASSOCIATES LIMITED VI AND
SUBSIDIARIES (a California limited partnership)
By: National Partnership Investments Corp.,
its General Partner
By: /s/ BRUCE NELSON
--------------------------------------
Bruce Nelson
President
Date: November 14, 2000
------------------------------------
By: /s/ BRIAN H. SHUMAN
--------------------------------------
Brian H. Shuman
Chief Financial Officer
Date: November 14, 2000
------------------------------------
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