<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 JUNE 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 JUNE 30, 2000
PART I. FINANCIAL INFORMATION
<TABLE>
Item 1. Financial Statements
<S> <C> <C>
Consolidated Balance Sheets,
June 30, 2000 and December 31, 1999 ................................1
Consolidated Statements of Operations,
Six and Three Months Ended, June 30, 2000 and 1999..................2
Consolidated Statement of Partners' Equity (Deficiency)
Six Months Ended June 30, 2000 .....................................3
Consolidated Statements of Cash Flows
Six Months Ended June 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.....................................14
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
JUNE 30, 2000 AND DECEMBER 31, 1999
ASSETS
<TABLE>
<CAPTION>
2000
(Unaudited) 1999
------------ -----------
<S> <C> <C>
INVESTMENTS IN LIMITED PARTNERSHIPS (Note 2) $ 610,909 $ 509,999
CASH AND CASH EQUIVALENTS (Note 1) 3,334,932 3,312,395
DUE FROM NAPICO (Note 4) - 239,770
----------- -----------
TOTAL ASSETS $ 3,945,841 $ 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) 2,011,000 1,957,734
Accounts payable 19,502 6,905
----------- -----------
3,795,502 3,729,639
----------- -----------
COMMITMENTS AND CONTINGENCIES (Notes 4 and 5)
PARTNERS' EQUITY (DEFICIENCY):
General partners (349,686) (347,864)
Limited partners 500,025 680,389
----------- -----------
150,339 332,525
----------- -----------
TOTAL LIABILITIES AND PARTNERS' EQUITY $ 3,945,841 $ 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
FOR THE SIX AND THREE MONTHS ENDED JUNE 30, 2000 AND 1999
(Unaudited)
<TABLE>
<CAPTION>
Six months Three months Six months Three months
ended ended ended ended
June 30, 2000 June 30, 2000 June 30, 1999 June 30, 1999
-------------- -------------- ------------- -------------
<S> <C> <C> <C> <C>
REVENUE:
Interest income 81,622 43,337 58,378 37,406
--------- --------- --------- ---------
Operating expenses:
Management fees - general partner (Note 4) 102,950 51,342 221,964 110,982
General and administrative (Notes 2 and 4) 131,236 73,530 220,358 86,153
Interest 68,400 34,200 68,400 34,200
--------- --------- --------- ---------
302,586 159,072 510,722 231,335
--------- --------- --------- ---------
LOSS FROM OPERATIONS (220,964) (115,735) (452,344) (193,929)
--------- --------- --------- ---------
EQUITY IN INCOME OF LIMITED
PARTNERSHIPS AND AMORTIZATION
OF ACQUISITION COSTS 24,000 12,000 26,000 13,000
DISTRIBUTIONS FROM LIMITED
PARTNERSHIPS RECOGNIZED AS
INCOME (Note 2) 14,778 14,778 45,613 58,117
--------- --------- --------- ---------
NET LOSS $(182,186) $ (88,957) $(380,731) $(122,812)
========= ========= ========= =========
NET LOSS PER LIMITED PARTNERSHIP
INTEREST (Note 1) $ (11) $ (5) $ (23) $ (7)
========= ========= ========= =========
</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 (DEFICIENCY)
FOR THE SIX MONTHS ENDED JUNE 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 six months
ended June 30, 2000 (1,822) (180,364) (182,186)
--------- --------- ---------
DEFICIENCY,
June 30, 2000 $(349,686) $ 500,025 $ 150,339
========= ========= =========
</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 SIX MONTHS ENDED JUNE 30, 2000 AND 1999
(Unaudited)
<TABLE>
<CAPTION>
2000 1999
----------- -----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (182,186) $ (380,731)
Adjustments to reconcile net loss to net
cash used in operating activities:
Equity in income of limited partnerships
and amortization of acquisition costs (24,000) (26,000)
Decrease in due from NAPICO 239,770 -
Increase in other assets - (6,100)
Increase in accrued interest payable 53,266 68,400
Increase (decrease) in accounts payable 12,597 (205,496)
----------- -----------
Net cash provided by (used in) operating activities 99,447 (549,927)
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Distributions to limited partnerships recognized as
as a return of capital - 38,414
Advances to limited partnerships (76,910) -
Sales proceeds - 1,397,081
----------- -----------
Net cash (used in) provided by investing activities (76,910) 1,435,495
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Distributions to partners - (2,797,081)
----------- -----------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 22,537 (1,911,513)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 3,312,395 5,477,969
----------- -----------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 3,334,932 $ 3,566,456
=========== ===========
SUPPLEMENTAL DISCLOSURE OF
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid during the period for interest $ 15,134 $ 198,450
=========== ===========
</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
JUNE 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 June 30, 2000 and the results of operations and
changes in cash flows for the six and three months then ended.
The general partners have a 1 percent interest in profits and losses of
the Partnership. The limited partners have the remaining 99 percent
interest which is allocated in proportion to their respective individual
investments. National Partnership Investments Corp. (NAPICO) is the
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 accounting
principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and reported amounts
of revenues and expenses during the reporting period. Actual results
could differ from those estimates.
5
<PAGE> 8
REAL ESTATE ASSOCIATES LIMITED VI
(A CALIFORNIA LIMITED PARTNERSHIP)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
JUNE 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. 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)
JUNE 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 June 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 June 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)
JUNE 30, 2000
NOTE 2 - INVESTMENTS IN LIMITED PARTNERSHIP (CONTINUED)
The following is a summary of the investment in unconsolidated limited
partnerships for the six months ended June 30, 2000:
<TABLE>
<S> <C>
Balance, beginning of period $509,999
Equity in income of limited partnerships 26,000
Advances to limited partnerships 76,910
Amortization of acquisition costs (2,000)
--------
Balance, end of period $610,909
========
</TABLE>
The following are unaudited combined estimated statements of operations
for the six and three months ended June 30, 2000 and 1999 of the
unconsolidated limited partnerships in which the Partnership has
investments:
<TABLE>
<CAPTION>
Six months Three months Six months Three months
ended ended ended ended
June 30, 2000 June 30, 2000 June 30, 1999 June 30, 1999
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Revenues:
Rental and other $ 4,964,000 $ 2,482,000 $ 4,956,000 $ 2,478,000
----------- ----------- ----------- -----------
Expenses:
Depreciation 802,000 401,000 984,000 492,000
Interest 1,338,000 669,000 1,372,000 686,000
Operating expenses 3,038,000 1,519,000 2,896,000 1,448,000
----------- ----------- ----------- -----------
Total expenses 5,178,000 2,589,000 5,252,000 2,626,000
----------- ----------- ----------- -----------
Net loss $ (214,000) $ (107,000) $ (296,000) $ (148,000)
=========== =========== =========== ===========
</TABLE>
NAPICO, or one of its affiliates, is the general partner and property
management agent for certain of the limited partnerships included above.
8
<PAGE> 11
REAL ESTATE ASSOCIATES LIMITED VI
(A CALIFORNIA LIMITED PARTNERSHIP)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 2000
NOTE 2 - INVESTMENTS IN LIMITED PARTNERSHIP (CONTINUED)
Under recently adopted law and policy, the United States Department of
Housing and Urban Development ("HUD") has determined not to renew the
Housing Assistance Payment ("HAP") Contracts on a long term basis on the
existing terms. In connection with renewals of the HAP Contracts under
such new law and policy, the amount of rental assistance payments under
renewed HAP Contracts will be based on market rentals instead of above
market rentals, which 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.
On September 11, 1998, HUD issued interim regulations implementing MAHRAA
and final regulations are expected to be issued in 2000.
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)
JUNE 30, 2000
NOTE 2 - INVESTMENTS IN LIMITED PARTNERSHIP (CONTINUED)
On December 30, 1998, after obtaining the consent of the limited
partners, the Partnership sold its limited partnership interests in 10
local limited partnerships and its general partner interest in one local
general partnership to subsidiaries of Casden Properties Inc. The sale
resulted in cash proceeds to the Partnership of $1,397,081 which was
collected in 1999. In March 1999, the Partnership made cash distributions
of $2,769,110 to the limited partners and $27,971 to the general
partners, primarily using proceeds from the sale of the partnership
interests.
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.
Note and related accrued interest payable, aggregating $1,293,688 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.
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
10
<PAGE> 13
REAL ESTATE ASSOCIATES LIMITED VI
(A CALIFORNIA LIMITED PARTNERSHIP)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 2000
NOTE 4 - MANAGEMENT FEES AND EXPENSES DUE TO GENERAL PARTNER (CONTINUED)
fee was approximately $131,000 and $220,000 for the six months ended June
30, 2000 and 1999, respectively.
The Partnership reimburses NAPICO for certain expenses. The reimbursement
to NAPICO was approximately $20,600 and $25,700 for the six months ended
June 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 Casden Properties Inc., which was organized by an
affiliate of NAPICO. The plaintiffs seek equitable relief, as well as
compensatory damages and litigation related costs. On August 4, 1999, one
investor holding one unit of limited partnership interest in Housing
Programs Limited (another affiliated partnership in which NAPICO is the
managing general partner) commenced a virtually identical action in the
United States District Court for the Central District of California
against the Partnership, NAPICO and certain other affiliated entities.
The managing general partner of such NAPICO managed partnerships and the
other defendants believe that the plaintiffs' claims are without merit
and are contesting the actions vigorously.
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.
11
<PAGE> 14
REAL ESTATE ASSOCIATES LIMITED VI
(A CALIFORNIA LIMITED PARTNERSHIP)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 2000
NOTE 6 - FAIR VALUE OF FINANCIAL INSTRUMENTS
Statement of Financial Accounting Standards No. 107, "Disclosure about
Fair Value of Financial Instruments," requires disclosure of fair value
information about financial instruments, when it is practicable to
estimate that value. The mortgage notes payable are insured by HUD and
are collateralized by the rental properties. The notes payable are
collateralized by the Partnership's investments in investee limited
partnerships and are payable only out of cash distributions from the
investee partnerships. The operations generated by the property and
investee limited partnerships are subject to various government rules,
regulations and restrictions which make it impracticable to estimate the
fair value of the mortgage note payable and the notes payable and related
accrued interest. The carrying 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)
JUNE 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 distributions to
investors in June 30, 2000, previously using proceeds from the
disposition of its investments in certain limited partnerships.
RESULTS OF OPERATIONS
Rental operations consist primarily of rental income and depreciation
expense, debt service, and normal operating expenses to maintain the
properties. Variances in rental operations from the prior year to the
current year relate to the sale of the Drexel Property.
Partnership revenues consist primarily of interest income earned on
certificates of deposit and other temporary investment of funds not
required for investment in local partnerships.
Operating expenses consist primarily of recurring general and
administrative expenses and professional fees for services rendered to
the Partnership. In addition, an annual Partnership management fee in an
amount equal to .4 percent of invested assets is payable to the corporate
general partner.
The Partnership accounts for its investments in the local limited
partnerships on the equity method, thereby adjusting its investment
balance by its proportionate share of the income or loss of the local
limited partnerships. Losses incurred after the limited partnership
investment account is reduced to zero are not recognized in accordance
with the equity accounting method.
Distributions received from limited partnerships are recognized as return
of capital until the investment balance has been reduced to zero or to a
negative amount equal to future capital contributions required.
Subsequent distributions received are recognized as income.
13
<PAGE> 16
REAL ESTATE ASSOCIATES LIMITED VI
(A CALIFORNIA LIMITED PARTNERSHIP)
JUNE 30, 2000
ITEM 2. MANAGEMENT'S ANALYSIS AND DISCUSSION OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (CONTINUED)
RESULTS OF OPERATIONS (CONTINUED)
Except for certificates of deposit and money market funds, the
Partnership's investments are entirely from interests in other limited
and general partnerships owning government assisted projects. Available
cash is invested in these funds earning interest income as reflected in
the statement of operations. These funds can be converted to cash to meet
obligations as they arise.
Under recently adopted law and policy, the United States Department of
Housing and Urban Development ("HUD") has determined not to renew the
Housing Assistance Payment ("HAP") Contracts on a long term basis on the
existing terms. In connection with renewals of the HAP Contracts under
such new law and policy, the amount of rental assistance payments under
renewed HAP Contracts will be based on market rentals instead of above
market rentals, which 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.
On September 11, 1998, HUD issued interim regulations implementing MAHRAA
and final regulations are expected to be issued in 2000.
14
<PAGE> 17
REAL ESTATE ASSOCIATES LIMITED VI
(A CALIFORNIA LIMITED PARTNERSHIP)
JUNE 30, 2000
ITEM 2. MANAGEMENT'S ANALYSIS AND DISCUSSION OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (CONTINUED)
RESULTS OF OPERATIONS (CONTINUED)
When the HAP Contracts are subject to renewal, there can be no assurance
that the local limited partnerships in which the Partnership has an
investment will be permitted to restructure its mortgage indebtedness
under MAHRAA. In addition, the economic impact on the Partnership of the
combination of the reduced payments under the HAP Contracts and the
restructuring of the existing FHA-insured mortgage loans under MAHRAA is
uncertain.
On December 30, 1998, the Partnership sold its limited partnership
interests in 10 local limited partnerships and its general partner
interest in one local general partnership to subsidiaries of Casden
Properties Inc. The sale resulted in cash proceeds to the Partnership of
$1,397,081 which was collected subsequent to year-end. In March 1999, the
Partnership made cash distributions of $2,769,110 to the limited partners
and $27,971 to the general partners, primarily using proceeds from the
sale of the partnership interests.
Note and related accrued interest payable, aggregating $1,293,688 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)
JUNE 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 Casden Properties Inc., which was organized by an
affiliate of NAPICO. The plaintiffs seek equitable relief, as well as
compensatory damages and litigation related costs. On August 4, 1999, one
investor holding one unit of limited partnership interest in Housing
Programs Limited (another affiliated partnership in which NAPICO is the
managing general partner) commenced a virtually identical action in the
United States District Court for the Central District of California
against the Partnership, NAPICO and certain other affiliated entities.
The managing general partner of such NAPICO managed partnerships and the
other defendants believe that the plaintiffs' claims are without merit
and are contesting 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 7 of regulation
S-K and no reports on Form 8-K were filed during the quarter ended
June 30, 2000.
16
<PAGE> 19
REAL ESTATE ASSOCIATES LIMITED VI
(A LIMITED PARTNERSHIP)
JUNE 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., General Partner
/s/ BRUCE NELSON
----------------------------------------
Bruce Nelson
President
Date: August 21, 2000
----------------------------------------
/s/ PAUL PATIERNO
----------------------------------------
Paul Patierno
Chief Financial Officer
Date: August 21, 2000
----------------------------------------
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